Registration No. 33-
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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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OMNICOM GROUP INC.
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
New York 7311 13-1514814
(State or other jurisdiction of (Primary Standard (IRS Employer Ident. No.)
incorporation or organization) Industrial Classification
Code Number)
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437 Madison Avenue
New York, New York 10022
(212) 415-3600
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
BARRY J. WAGNER, ESQ.
Secretary
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
(212) 415-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
MICHAEL D. DITZIAN, ESQ. JAMES M. COTTER, ESQ.
Davis & Gilbert Simpson Thacher & Bartlett
1740 Broadway 425 Lexington Avenue
New York, New York 10019 New York, New York 10017
(212) 468-4800 (212) 455-2000
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Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective and all other
conditions to the purchase of assets pursuant to the Acquisition Agreement
described in the enclosed Prospectus/ Information Statement have been satisfied
or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, please check the following box: [X]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount maximum maximum Amount of
Title of securities to be offering price aggregate registration
being registered registered (1) per share (2) offering price (2) fee (2)
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Common Stock, $ .50 par value ........ 600,000 $57.875 $34,725,000 $11,974.14
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(1) Estimated maximum number of shares which may be issued by Omnicom Group
Inc. under the Acquisition Agreement described in this Registration
Statement.
(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(c), based on the average of the high and low prices of
the Common Stock of Omnicom on Tuesday, June 6, 1995, as reported by the
New York Stock Exchange.
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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 which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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OMNICOM GROUP INC.
Cross Reference Sheet Pursuant to Rule 404(a) of the Securities Act of
1933 and Item 501(b) of Regulation S-K, Showing the Location or Heading in the
Prospectus/Information Statement of the Information required by Part I of Form
S-4.
Location or Heading in
S-4 Item Number and Caption Prospectus/information Statement
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A. Information about the Transaction
Forepart of Registration Statement and Outside Front Cover Page of
Outside Front Cover Page of Prospectus Prospectus/Information Statement
Inside Front and Outside Back Cover Inside Front Cover Page of
Pages of Prospectus Prospectus/Information Statement;
Available Information
Risk Factors, Ratio of Earnings to Fixed Summary; Comparative Per Share Data;
Charges and Other Information Market Price Data
Terms of the Transaction The Transactions; The Acquisition
Agreement; The Advertising Stock
Sale Agreement; Proposed Amendment
of theHoldings Certificate; the Plan
of Liquidation; Federal Income Tax
Consequences of the Sales of Assets
and Dissolution and Liquidation;
Comparison of Shareholder Rights;
Description of Omnicom
Capital Stock
Pro Forma Financial Information *
Material Contacts with the Company Being The Transactions
Acquired
Additional Information Required for *
Reoffering by Persons and Parties Deemed
to Be Underwriters
Interests of Named Experts and Counsel *
Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
B. Information about the Registrant
Information with Respect to Incorporation of Certain Documents
S-3 Registrants by Reference; Business Information
Concerning Omnicom; Selected
Financial Data of Omnicom;
Description of Omnicom Capital Stock
Incorporation of Certain Information by Incorporation of Certain Information
Reference by Reference
Information with Respect to S-2 or S-3 *
Registrants
Incorporation of Certain Information by *
Reference
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Location or Heading in
S-4 Item Number and Caption Prospectus/information Statement
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Information with Respect to Registrants *
Other Than S-3 or S-2 Registrants
C. Information about the Company
Being Acquired
Information with Respect to S-3 Companies *
Information with Respect to S-2 or S-3 *
Companies
Information with Respect to Companies Business Information Concerning
Other Than S-3 or S-2 Companies Holdings; Selected Financial Data
of Holdings; Management's Discussion
and Analysis of Financial Condition
and Results of Operations of
Holdings; Description of Holdings
Capital Stock; Index to Holdings
Financial Statements
D. Voting and Management Information
Information if Proxies, Consents or *
Authorizations are to be Solicited
Information if Proxies, Consents or Incorporation of Certain Documents
Authorizations are not to be Solicited by Reference; The Special Meeting;
or in an Exchange Offer The Transactions; Description of
Holdings Capital Stock
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* Not applicable
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[Letterhead]
CHIAT/DAY HOLDINGS, INC.
[ ], 1995
Dear Shareholder:
You are cordially invited to attend a special meeting of stockholders of
Chiat/Day Holdings, Inc., a Delaware corporation ("Holdings"), on [ ],
1995, at [ ] a.m. at 180 Maiden Lane, New York, New York 10038 (the
"Special Meeting") to consider and vote upon the following proposals
(collectively, the "Holdings Vote Matters"): (a) the sale by Holdings and
Chiat/Day inc. Advertising, a Delaware corporation and a wholly-owned subsidiary
of Holdings ("Advertising"), of their assets and businesses, (i) to TBWA
International Inc., a Delaware corporation ("TBWA"), in exchange for shares of
Common Stock of Omnicom Group Inc., a New York corporation ("Omnicom"), and
TBWA's assumption of liabilities pursuant to an Asset Purchase Agreement (the
"Acquisition Agreement") dated May 11, 1995 among Omnicom, TBWA, Holdings and
Advertising and (ii) pursuant to a certain stock purchase agreement dated as of
May 11, 1995 between Holdings and Adelaide Horton (the "Advertising Stock Sale
Agreement"); (b) following the Closing under the Acquisition Agreement, the
amendment of the Certificate of Incorporation of Holdings (the "Holdings
Certificate"), to change the corporate name of Holdings to CDH Corporation; (c)
the approval and adoption of a Plan of Liquidation pursuant to which Holdings
will, among other things, (i) dissolve, (ii) establish a liquidating trust
pursuant to a liquidating trust agreement, with Thomas Patty and David C. Wiener
as trustees for the benefit of its stockholders, and (iii) distribute to its
stockholders and/or the liquidating trust all its remaining assets; and (d) such
other matters as may come before the Meeting.
Holders of record of Class A Common Stock and Class B Common Stock of
Holdings at the close of business on [ ,] 1995, will be entitled to
vote at the Special Meeting or any postponement or adjournment thereof.
The affirmative vote of the holders of a majority of the voting power
represented by the outstanding shares of Class A Common Stock and Class B Common
Stock (the "Holdings Common Stock"), voting together as a single class, is
necessary to approve the transactions contemplated by the Acquisition Agreement
and the Advertising Stock Sale Agreement, to approve the amendment to the
Holdings Certificate, and to approve and adopt the Plan of Liquidation.
Directors, officers and affiliates of Holdings as a group owning as of
[May 4, 1995] approximately [75.82%] of the Holdings Common Stock have expressed
an intention to vote in favor of the transactions contemplated herein.
None of the Holdings Vote Matters shall become effective unless all of the
proposals are adopted by the requisite vote of the Holdings Stockholders.
The Holdings Board of Directors believes that the foregoing transactions
are fair to, and in the best interests of, Holdings and the Holdings
stockholders and recommends that the Holdings stockholders vote FOR the approval
of the transactions contemplated by the Acquisition Agreement and the
Advertising Stock Sale Agreement, FOR the approval of the amendment of the
Holdings Certificate, and FOR the approval of the Plan of Liquidation.
The attached Prospectus/Information Statement describes the proposed
transactions more fully. Please give this information careful attention.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
Very truly yours,
JAY CHIAT
Chief Executive Officer
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CHIAT/DAY HOLDINGS, INC.
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
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To be Held on [ ], 1995
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of
stockholders of Chiat/Day Holdings, Inc., a Delaware corporation ("Holdings"),
will be held on ___________ 1995, at 180 Maiden Lane, New York, New York 10038,
commencing at [_____] a.m., to consider and vote upon the following matters
described in the accompanying Prospectus/Information Statement:
1. To consider and vote upon the transfer by Holdings and Chiat/Day
inc. Advertising, a Delaware corporation and a wholly-owned subsidiary of
Holdings ("Advertising"), of their assets and businesses (i) to TBWA
International Inc., a Delaware corporation ("TBWA"), in exchange for shares
of Common Stock, par value $.50 per share, of Omnicom Group Inc., a New
York corporation ("Omnicom"), and TBWA's assumption of liabilities pursuant
to an Asset Purchase Agreement (the "Acquisition Agreement") dated May 11,
1995, among Omnicom, TBWA, Holdings and Advertising and (ii) pursuant to a
certain stock purchase agreement dated as of May 11, 1995 between Holdings
and Adelaide Horton.
2. To consider and vote upon an amendment to the Certificate of
Incorporation of Holdings (the "Holdings Certificate") to change the name
of Holdings, following the Closing under the Acquisition Agreement, to CDH
Corporation.
3. To consider and vote upon the approval and adoption of a plan of
complete liquidation (the "Plan of Liquidation") pursuant to which Holdings
would (i) dissolve, (ii) establish a liquidating trust (the "Liquidating
Trust") pursuant to a liquidating trust agreement, with Thomas Patty and
David C. Wiener as trustees, for the benefit of its stockholders, and (iii)
distribute to its stockholders and/or the Liquidating Trust all its
remaining assets. Approval of the Plan of Liquidation requires the
acceptance by the Holdings stockholders of such trustees as their
collective agent under the terms of the Liquidating Trust, with such
trustees (a) to receive on their behalf certain liquidating distributions
from Holdings, (b) to act as their agent in connection with the
administration of an escrow agreement established in connection with the
Acquisition Agreement and more fully described herein (the "Escrow
Agreement"), (c) to respond to the assertion of any and all claims for
indemnification by TBWA, or to assert claims on behalf of the stockholders,
pursuant to the terms of the Acquisition Agreement and the Escrow
Agreement, and (d) to complete the winding up of the affairs of Holdings
and payment of its liabilities not assumed by TBWA pursuant to the
Acquisition Agreement from the assets of the Liquidating Trust.
4. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Only holders of record of Class A Common Stock, par value $.01 per share
("Class A Common Stock"), and Class B Common Stock, par value $.01 per share
("Class B Common Stock"), of Holdings at the close of business on [ ],
1995 will be entitled to vote at the Special Meeting and any adjournment or
postponement thereof.
The affirmative vote of the holders of a majority of the voting power
represented by the outstanding shares of Class A Common Stock and Class B Common
Stock (the "Holdings Common Stock"), voting together as a single class, is
necessary to approve the transactions contemplated by the Acquisition Agreement
and the Advertising Stock Sale Agreement, to approve the amendment to the
Holdings Certificate, and to approve and adopt the Plan of Liquidation.
Directors, officers and affiliates of Holdings as a group owning as of [May
4, 1995] approximately [75.82%] of Holdings Common Stock have expressed a
present intention to vote in favor of the transactions contemplated herein.
None of such matters shall become effective unless all of the proposals are
adopted by the requisite vote of the Holdings Stockholders.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
By Order of the Holdings Board of Directors
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SUBJECT TO COMPLETION
DATED JUNE 12, 1995
CHIAT/DAY HOLDINGS, INC.
INFORMATION STATEMENT
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OMNICOM GROUP INC.
PROSPECTUS
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This Prospectus/Information Statement is being furnished to holders of
Class A Common Stock, par value $.01 per share ("Class A Common Stock"), and
holders of Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), (collectively, "Holdings Common Stock") of Chiat/Day Holdings, Inc., a
Delaware corporation ("Holdings"), in connection with the special meeting of the
stockholders of Holdings to be held on [ ], 1995 at 180 Maiden Lane,
New York, New York 10038, commencing at [ ] a.m., local time, and at
any adjournment or postponement thereof (the "Special Meeting"). The purpose of
the Special Meeting is to consider and vote upon the following proposals (a) the
sale by Holdings and Chiat/Day inc. Advertising, a Delaware corporation and a
wholly-owned subsidiary of Holdings ("Advertising") of their assets and
businesses (i) to TBWA International Inc., a Delaware corporation ("TBWA"), in
exchange for shares of voting Common Stock, par value $.50 per share, of Omnicom
Group Inc., a New York corporation ("Omnicom") (such shares of Common Stock,
"Omnicom Common Stock") and TBWA's assumption of liabilities pursuant to an
Asset Purchase Agreement (the "Acquisition Agreement") dated May 11, 1995, among
Omnicom, TBWA, Holdings and Advertising (the transactions contemplated by the
Acquisition Agreement are herein called the "Acquisition") and (ii) pursuant to
a certain stock purchase agreement dated as of May 11, 1995 between Holdings and
Adelaide Horton (the "Advertising Stock Sale Agreement" and the sale thereunder
the "Advertising Stock Sale"), (b) following the Closing under the Acquisition
Agreement (the "Closing"), the amendment of the Certificate of Incorporation of
Holdings (the "Holdings Certificate") to change the name of Holdings to CDH
Corporation, and (c) the approval and adoption of a plan of complete liquidation
(the "Plan of Liquidation") pursuant to which Holdings will (i) dissolve, (ii)
establish a liquidating trust (the "Liquidating Trust") pursuant to a
liquidating trust agreement (the "Liquidating Trust Agreement"), between
Holdings and Thomas Patty and David C. Wiener, as trustees (the "Liquidating
Trustees"), for the benefit of its stockholders, and (iii) distribute to its
stockholders and/or the Liquidating Trust all its remaining assets (the
"Liquidation" and, together with the Acquisition, the Advertising Stock Sale and
the amendment to the Holdings Certificate, the "Transactions").
This Prospectus/Information Statement is also being furnished to holders of
Equity Appreciation Rights ("EARs") issued under the 1993 Equity Appreciation
Rights Plan of Holdings (the "EAR Plan") and of Equity Participation Units
("EPUs") issued under the 1988 Amended and Restated Equity Participation Plan of
Holdings (the "EPU Plan") (collectively, the "Rightsholders") who will receive
shares of Omnicom Common Stock as payment under such Plans subject to the same
terms and conditions as other stockholders of Holdings.
This Prospectus/Information Statement constitutes both an information
statement of Holdings with respect to the Meeting and a prospectus of Omnicom
with respect to up to 600,000 shares of Omnicom Common Stock, which may be
issued to Holdings and Advertising in connection with the Acquisition and
distributed to the holders of Holdings Common Stock and to the Rightsholders.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROSPECTUS/INFORMATION STATEMENT
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS/INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
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The date of this Prospectus/Information Statement is [ ], 1995.
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All information contained in this Prospectus/Information Statement
relating to Holdings and the Special Meeting (including, without limitation,
financial statements and other financial information regarding Holdings,
background of and Holdings' reasons for the transactions, descriptions of the
businesses, properties, assets, and the liabilities of holdings and advertising,
description of the federal income tax consequences of the sale of assets and
dissolution and liquidation, and descriptions of the Liquidating Trust, the Plan
of Liquidation, and the Liquidating Trust Escrow Fund have been supplied by
Holdings and are the sole responsibility of Holdings and Omnicom assumes no
responsibility therefor. All information contained in this
Prospectus/Information Statement relating to Omnicom (including, without
limitation, financial information regarding Omnicom, Omnicom's reasons for the
acquisition, and the description of the business of Omnicom) has been supplied
by Omnicom and is the sole responsibility of Omnicom and Holdings assumes no
responsibility therefor.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus/Information
Statement in connection with the Special Meeting or the offering of securities
made hereby and, if given or made, such information or representation must not
be relied upon as having been authorized by Omnicom, Holdings or any other
person. This Prospectus/Information Statement does not constitute an offer to
sell, or a solicitation of any offer to buy, any securities in any jurisdiction
to or from any person to whom it is not lawful to make any such offer or
solicitation. Neither the delivery of this Prospectus/Information Statement, nor
any distribution of securities made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of Omnicom or
Holdings since the date hereof or that the information contained herein is
correct as of any time subsequent to the date hereof.
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AVAILABLE INFORMATION
Omnicom is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). The reports, proxy statements
and other information filed by Omnicom with the SEC can be inspected and copied
at the public reference facilities maintained by the SEC at Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the SEC at 7 World Trade Center, 13th Floor, New York, New York
10048-1102 and Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material also can be obtained from
the Public Reference Section of the SEC, Washington, D.C. 20549 at prescribed
rates. In addition, material filed by Omnicom can be inspected at the offices of
the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New
York 10005, on which the Omnicom Common Stock is listed.
Omnicom has filed with the SEC a Registration Statement on Form S-4
(together with all amendments, exhibits, annexes and schedules thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Omnicom Common Stock to be
issued pursuant to the Acquisition. This Prospectus/Information Statement does
not contain all the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations of
the SEC. Such additional information may be obtained from the SEC's principal
office in Washington, D.C. Statements contained in this Prospectus/Information
Statement or in any document incorporated in this Prospectus/Information
Statement by reference as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC by Omnicom (File No. 1-10551)
pursuant to the Exchange Act are incorporated by reference in this
Prospectus/Information Statement:
1. Omnicom's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
2. Omnicom's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995;
3. Omnicom's Proxy Statement dated April 7, 1995, for the Annual
Meeting of Shareholders held on May 22, 1995; and
4. The description of Omnicom's Common Stock contained in Omnicom's
Registration Statement pursuant to the Exchange Act, together with all
amendments or reports filed for the purpose of updating such description.
All documents and reports subsequently filed by Omnicom pursuant to
Sections 13(a), 13(c), l4 or 15(d) of the Exchange Act after the date of this
Prospectus/Information Statement shall be deemed to be incorporated by reference
in this Prospectus/Information Statement and to be a part hereof from the date
of filing of such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus/Information Statement
to the extent that a statement contained herein or in any other subsequently
filed document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus/Information Statement.
This Prospectus/Information Statement incorporates documents relating to
Omnicom by reference that are not presented herein or delivered herewith. Such
documents (other than exhibits to such documents, unless such exhibits are
specifically incorporated herein by reference) are available to any person,
including any beneficial owner, to whom this Prospectus/Information Statement is
delivered, without charge, on written or oral request directed to Omnicom Group
Inc., 437 Madison Avenue, New York, New York 10022, Attention: Secretary
(telephone number (212) 415-3600). in order to ensure timely delivery of the
documents, any requests should be made by [ ], 1995.
This Prospectus/Information Statement incorporates documents relating to
Holdings by reference that are not presented herein or delivered herewith. Such
documents (other than exhibits to such documents, unless such exhibits are
specifically incorporated herein by reference) are available to any person,
including any beneficial owner, to whom this Prospectus/Information Statement is
delivered, without charge, on written or oral request directed to Chiat/Day
Holdings, Inc., 180 Maiden Lane, New York, New York 10038, Attention:
_____________ (telephone number (212) 804-1000). in order to ensure timely
delivery of the documents, any requests should be made by [ ], 1995.
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TABLE OF CONTENTS
AVAILABLE INFORMATION................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 3
SUMMARY................................................................. 6
COMPARATIVE PER SHARE DATA ............................................. 18
MARKET PRICE DATA ...................................................... 19
THE SPECIAL MEETING .................................................... 20
Date, Time and Place of Special Meeting ............................ 20
Business to Be Transacted at the Special Meeting ................... 20
Record Date, Voting Rights ......................................... 20
Voting Requirements ................................................ 20
Approval Under Holdings Certificate ................................ 20
Affiliate Ownership ................................................ 21
THE TRANSACTIONS ........................................................ 21
Background of and Holdings' Reasons for the Transaction;
Recommendation of the Holdings Board of Directors ................. 21
Omnicom's Reasons for the Acquisition ............................... 22
Interests of Certain Persons in the Transaction ..................... 23
Accounting Treatment ................................................ 24
Regulatory Approvals ................................................ 24
Resales of Omnicom Common Stock ..................................... 25
Resale Restrictions ................................................. 25
Stock Exchange Listing .............................................. 25
No Dissenters' Rights ............................................... 25
THE ACQUISITION AGREEMENT ............................................... 26
The Acquisition ..................................................... 26
Other Terms and Conditions of the Acquisition Agreement ............. 30
THE ADVERTISING STOCK SALE AGREEMENT .................................... 34
PROPOSED AMENDMENT OF THE HOLDINGS CERTIFICATE .......................... 34
THE PLAN OF LIQUIDATION ................................................. 35
General ............................................................. 35
Liquidating Distribution to Holdings Stockholders ................... 35
Liquidating Distribution to Rightsholders ........................... 36
Fractional Shares ................................................... 36
Operation of the Liquidating Trust .................................. 36
The Liquidating Trust Escrow ........................................ 37
FEDERAL INCOME TAX CONSEQUENCES OF THE SALES OF ASSETS AND
DISSOLUTION AND LIQUIDATION ............................................. 38
Corporate Tax ....................................................... 38
Holder Tax .......................................................... 38
Withholding Taxes ................................................... 41
BUSINESS INFORMATION CONCERNING OMNICOM ................................. 42
4
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SELECTED FINANCIAL DATA OF OMNICOM ...................................... 43
BUSINESS INFORMATION CONCERNING HOLDINGS ................................ 44
SELECTED FINANCIAL DATA OF HOLDINGS ..................................... 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF HOLDINGS ....................................... 47
Results of Operations ............................................... 47
Liquidity and Capital Resources ..................................... 48
DESCRIPTION OF OMNICOM CAPITAL STOCK .................................... 48
DESCRIPTION OF HOLDINGS CAPITAL STOCK ................................... 49
COMPARISON OF SHAREHOLDER RIGHTS ........................................ 52
LEGAL MATTERS ........................................................... 57
EXPERTS ................................................................. 58
5
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SUMMARY
(The following is a summary of certain information contained elsewhere in
this Prospectus/Information Statement and does not purport to be complete. This
summary is qualified in all respects by the remainder of this
Prospectus/Information Statement, which should be read in its entirety.)
The Companies
Omnicom Group Inc. .......... Omnicom, though its wholly and partially owned
companies, operates advertising agencies which
plan, create, produce and place advertising in
various media such as television, radio,
newspaper and magazines; and offers clients such
additional services as marketing consultation,
consumer market research, design and production
of merchandising and sales promotion programs
and materials, direct mail advertising,
corporate identification, and public relations.
According to the unaudited industry-wide figures
published in the trade journal, ADVERTISING AGE,
in 1994 Omnicom was ranked as the third largest
advertising agency group worldwide.
Omnicom operates three separate, independent
agency networks: the BBDO Worldwide Network, the
DDB Needham Worldwide Network and the TBWA
International Network. Omnicom also operates
independent agencies, Altschiller & Company and
Goodby, Silverstein & Partners, and certain
marketing service and specialty advertising
companies through Diversified Agency Services.
The principal executive offices of Omnicom are
located at 437 Madison Avenue, New York, New
York 10022, telephone number (212) 415-3600.
TBWA International Inc. ...... TBWA International Inc., is the holding company
for that portion of the TBWA International
Network operating in the United States.
Chiat/Day Holdings, Inc. and
Chiat/Day inc. Advertising ... Holdings, primarily through its wholly owned
subsidiary Chiat/Day inc. Advertising, is
engaged in the business of planning and creating
advertising campaigns for clients, purchasing
various media spots (television, radio,
newspapers and magazines), and providing
marketing consultation, market research and
production services. In 1994, Holdings was the
16th largest advertising agency in the U.S. and
27th largest in the world according to the
unaudited industry-wide figures published in
Advertising Age.
The principal executive offices of Holdings are
located at 180 Maiden Lane, New York, New York
10038, telephone number (212) 804-1000.
THE SPECIAL MEETING
Meeting Time, Date
and Place .................... The Special Meeting will be held at [ ] am.,
local time, on [ ] 1995, at 180 Maiden
Lane, New York, New York 10038, and at any
adjournment or postponement thereof.
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Record Date; Shares
Entitled To Vote ............. Holders of record of shares of Class A Common
Stock and Class B Common Stock of Holdings
(collectively, "Holdings Stockholders") at the
close of business on [ ] 1995 (the
"Record Date"), are entitled to notice of and to
vote at the Special Meeting. At such date there
were outstanding [ ] shares of
Class A Common Stock, each of which will be
entitled to one vote at the Special Meeting, and
[ ] shares of Class B Common Stock, each of
which will be entitled to one vote at the
Special Meeting.
Purpose of the Special
Meeting ...................... The purpose of the Special Meeting is to
consider and vote upon the following matters:
(a) a proposal to approve the sale by
Holdings and Advertising of their assets
and businesses pursuant to (i) the
Acquisition Agreement, by and among
Omnicom, TBWA, Holdings and Advertising,
and (ii) the Advertising Stock Sale
Agreement between Holdings and Adelaide
Horton;
(b) a proposal to amend the Holdings
Certificate effective as of the Closing
under, and as defined in, the
Acquisition Agreement to change its
corporate name to CDH Corporation;
(c) the approval and adoption of the Plan of
Liquidation, including the dissolution
of Holdings, the creation of the
Liquidating Trust pursuant to the
Liquidating Trust Agreement and the
appointment of the Liquidating Trustees;
and
(d) such other proposals as may properly be
brought before the Special Meeting.
Votes Required ............. The approval of the various proposals by
Holdings Stockholders will require the
affirmative vote of the holders of a majority of
the voting power represented by the outstanding
shares of Class A Common Stock and of Class B
Common Stock, voting together as a single class.
Directors, officers and affiliates of Holdings
as a group owning as of [May 4, 1995]
approximately [75.82%] of the Holdings Common
Stock have expressed an intention to vote in
favor of the various proposals.
The Acquisition
The Acquisition .............. Pursuant to the Acquisition Agreement, TBWA will
acquire assets of Holdings and Advertising
relating to their advertising businesses (the
"Businesses") for consideration payable by the
issuance to Holdings and Advertising of shares
of Omnicom Common Stock for distribution to the
Holdings Stockholders and the Rightsholders, and
the assumption by TBWA of liabilities of
Holdings and Advertising relating to the
Businesses.
The shares of Omnicom Common Stock to be issued
to Holdings and Advertising shall be valued at
the "Market Value" (which shall be determined by
the average of the closing prices per share of
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Omnicom Common Stock reported on the New York
Stock Exchange for the 20 consecutive trading
days ending three business days immediately
prior to the Closing Date under, and as defined
in, the Acquisition Agreement). The number of
shares of Omnicom Common Stock to be issued
shall be calculated and applied as follows:
(a) TBWA will pay Holdings shares of Omnicom
Common Stock having an aggregate Market
Value of (x) if the Closing is held on
or prior to October 31, 1995, (i)
$11,180,563 PLUs (ii) an amount equal to
$2,418 multiplied by the number of days
in the period commencing on the Closing
Date and ending on October 31, 1995, or
(y) if the Closing is held after October
31, 1995 and on or prior to December 31,
1995, (iii) $11,930,880 PLUS (iv) an
amount equal to $2,418 multiplied by the
number of days in the period commencing
on the Closing Date and ending on
December 31, 1995. Of this Omnicom
Common Stock, shares having such Market
Value as may be necessary to insure the
satisfaction of obligations of Holdings
and Advertising to the Rightsholders,
will be contributed to Advertising (the
"Contributed Stock").
(b) TBWA will pay Advertising shares of
Omnicom Common Stock having an aggregate
Market Value of $14,000,000.
Notwithstanding the foregoing, the Acquisition
Agreement provides that prior to the Closing the
parties will negotiate in good faith an upwards
adjustment to the acquisition price if the
"Annualized Revenues" of Holdings and its
subsidiaries, being the commissions and fees
expected to be earned by Holdings and its
subsidiaries from clients who are such at the
time of the calculation for the fiscal year
ending October 31, 1995 (the "1995 Fiscal Year")
exceed $100,000,000 and the profits before taxes
(as adjusted to exclude net interest expense and
certain other items agreed between the parties)
("EBIT") of Holdings and its subsidiaries for
the 1995 Fiscal Year is reasonably expected to
exceed $17,200,000. If an upwards adjustment is
not agreed, Holdings has the right to either
terminate the Acquisition Agreement or proceed
with the Closing at the original price. Any
additional consideration payable will be made in
shares of Omnicom Common Stock valued at the
Market Value.
On the Distribution Date (as defined herein),
the shares of Omnicom Common Stock paid to
Holdings and to Advertising will be distributed
as follows:
(a) Ten percent of the Omnicom Common Stock
paid to Holdings (after deducting the
Contributed Stock) and to Advertising
(including ten percent of the
Contributed Stock) will be placed into
an escrow account (the "General Escrow
Fund") under the terms of an escrow
agreement (the "Escrow Agreement") among
TBWA, Holdings, Advertising and The
Chase Manhattan Bank, N.A., as escrow
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agent (the "Escrow Agent"), to provide
for payment of indemnification
obligations to Omnicom and TBWA arising
out of the Acquisition Agreement.
(b) Shares of Omnicom Common Stock having a
Market Value of $1,700,000, contributed
by Holdings and Advertising on a pro
rata basis, will be placed into an
additional escrow account (the "Special
Escrow Fund") under the Escrow Agreement
to provide for the payment of
indemnification obligations to Omnicom
and TBWA relating to an asset whose
collectibility could not reasonably be
assured at the signing of the
Acquisition Agreement (the "Indemnified
Receivable").
(c) Five percent of the Omnicom Common Stock
paid to Holdings (after deducting the
Contributed Stock) will be delivered to
the Liquidating Trust to fund the
payment and satisfaction of obligations
and liabilities of Holdings and
Advertising as shall not have been
assumed by TBWA under the Acquisition
Agreement; and five percent of the
Omnicom Common Stock paid to Advertising
(including five percent of the
Contributed Stock) will be delivered to
a separate escrow fund (the "Liquidating
Trust Escrow Fund") to fund (together on
a pro rata basis with the Holdings
Stockholders) the payment and
satisfaction of Liabilities of Holdings
and Advertising as shall not have been
assumed by TBWA under the Acquisition
Agreement.
(d) The remainder of the Omnicom Common
Stock held by Holdings will be delivered
to the holders of the Holdings Common
Stock pro rata in accordance with their
respective shareholdings; and the
remainder of the Omnicom Common Stock
held by Advertising will be delivered to
the Rightsholders pro rata in accordance
with their respective interests.
(e) After the distribution by Advertising to
the Rightsholders, Holdings shall
consummate the sale of the capital stock
of Advertising pursuant to the
Advertising Stock Sale Agreement.
See "The Acquisition Agreement--The
Acquisition-- Determination of Acquisition
Price", "--Renegotiation of Acquisition Price",
"--Payment of Obligations to Rightsholders" and
"--The Escrow Agreement" and "The Advertising
Stock Sale Agreement".
Distribution Date ............ The distributions of the shares of Omnicom
Common Stock by Holdings and Advertising will
not occur until the "Distribution Date". The
Distribution Date will be the date of
publication by Omnicom of financial results
covering at least 30 days of combined operations
for Omnicom and the Businesses after the Closing
Date, provided that if the Closing occurs on or
prior to August 31, 1995, the Distribution Date
will be the earlier of the date of such
publication and October 30, 1995 (whether or not
such financial results are published). Assuming
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the Closing occurs on or before August 31, 1995,
the earliest that such financial results would
be published is October 26, 1995. During the
period from the Closing Date through the
Distribution Date, Holdings Stockholders and
Rightsholders will bear the risk of fluctuations
in the market price of the Omnicom Common Stock.
Payment of Obligations
to Rightsholders ............. In 1993 and 1988, Holdings adopted the EAR Plan
and EPU Plan, respectively, and has issued
awards under such Plans. If the employment of a
participant is terminated for any reason, then
under the terms of the EAR Plan, such
participant shall have the right, but not the
obligation, to cause Holdings or Advertising to,
and under the EPU Plan Holdings or Advertising
shall, redeem vested units for cash in each case
at their book value as at the end of the most
recent fiscal quarter. At March 31, 1995, such
book value was less than zero. However, in the
event of a liquidation, with respect to their
priority, each EAR and EPU shall be deemed
equivalent in value to one share of Holdings
Common Stock and shall be treated in the same
manner as Holdings Common Stock.
Therefore, Rightsholders will receive shares of
Omnicom Common Stock as payment under such
Plans, subject to the same terms and conditions
as if they were Holdings Stockholders, including
without limitation the escrow and
indemnification provisions more fully described
herein.
Per Share and Per Right
Consideration ................ The total value of Omnicom Common Stock to be
paid by TBWA to Holdings and Advertising
pursuant to the Acquisition Agreement will be
dependent on when the Closing Date occurs (as
described above and as more fully described
under "The Acquisition Agreement--The
Acquisition--Determination of Acquisition
Price"). In order to make certain estimates
relating to the consideration to be paid to the
Holdings Stockholders and the Rightsholders
which are included in this
Prospectus/Information Statement, it has been
assumed that the Closing Date will occur on
August 15, 1995 and the Market Value of the
Omnicom Common Stock will be $563/8. Based on an
estimated total acquisition price of
$25,366,749, after deposits are made on behalf
of the Holdings Stockholders and Rightsholders
into the General Escrow Fund, the Special Escrow
Fund, the Liquidating Trust and the Liquidating
Trust Escrow Fund (as applicable), each holder
of Class A Common Stock, Class B Common Stock,
EPUs and EARs will be entitled to receive in a
liquidating distribution, per share of Holdings
Common Stock or per EPU or EAR, shares of
Omnicom Common Stock with a value (determined in
accordance with the terms of the Acquisition
Agreement) equal to $________. If none of such
Omnicom Common Stock were used to fund such
escrows and such trust, the value of the per
share or per unit distribution would be
$________.
Since the amounts held in such escrows and such
trust are subject to claims in respect of
contingent liabilities, there can be no
assurances that amounts held therein will in
fact be distributed to Holdings Stockholders and
Rightholders.
See "The Plan of Liquidation--Liquidating
Distribution to Holdings Stockholders" and
"--Liquidating Distribution to Rightsholders".
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Escrow Agreement and
Indemnification Obligations .. The obligation of Holdings to indemnify Omnicom
and TBWA against losses and damages may arise in
one of two ways: pursuant to the general
indemnification obligations under the
Acquisition Agreement, or as a result of
inaccurate or misleading information supplied by
Holdings for use in this Prospectus/Information
Statement.
The indemnification obligations of Holdings
under the Acquisition Agreement will be limited
to and satisfied solely from, the General Escrow
Fund and the Special Escrow Fund (individually
sometimes referred to as an "Escrow Fund" and
collectively as the "Escrow Funds") under the
Escrow Agreement (such that neither Omnicom nor
TBWA nor any of their affiliates will have any
recourse for the payment of any losses or other
damages of any kind against Holdings or
Advertising or their respective affiliates or
past, present or future directors, officers or
employees or the Holdings Stockholders or
Rightsholders, nor shall any of such persons be
personally liable for any such losses or
damages). The General Escrow Fund will be
separated into two sub-accounts: the
"Stockholders General Escrow Fund" and the
"Rightsholders General Escrow Fund".
Indemnification obligations to be satisfied out
of the General Escrow Fund will terminate on the
earlier of the first independent audit report,
if any, of TBWA and the Businesses following the
Closing Date or one year from the Closing Date
(except that claims asserted in writing on or
prior to such date will survive until they are
decided and are final and binding on the
parties). The Special Escrow Fund will also be
separated into two sub-accounts: the
"Stockholders Special Escrow Fund" and the
"Rightsholders Special Escrow Fund".
Indemnification obligations to be satisfied out
of the Special Escrow Fund will terminate no
later than the second anniversary of the Closing
under the Acquisition Agreement (except that
claims asserted in writing on or prior to such
date will survive until they are decided and are
final and binding on the parties). Following the
termination of the Escrow Agreement, shares then
remaining on deposit in the Stockholders General
and Special Escrow Funds and the Rightsholders
General and Special Escrow Funds, respectively,
will be distributed to the Liquidating Trust and
the Liquidating Trust Escrow Fund in each case
to satisfy contingent liabilities of Holdings in
accordance with the Liquidating Trust Agreement
and the Liquidating Trust Escrow Agreement,
respectively. Each sub-account of an Escrow Fund
will satisfy its pro rata share of the
applicable category of losses based on the
number of shares of Omnicom Common Stock then on
deposit in such account. For purposes of
satisfying any claims, each share of Omnicom
Common Stock deposited in any Escrow Fund will
be valued at the Market Value, regardless of
actual fluctuations in the market value of the
Omnicom Common Stock after the Closing Date.
The indemnification obligations of Holdings
which may arise to the extent it furnishes
inaccurate or incomplete information for
inclusion in the Prospectus/Information
Statement are not limited to amounts on deposit
in the Escrow Funds nor to the limited periods
of survival.
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Deposit and Pledge
Agreement .................... The applicable shares of Omnicom Common Stock
will be deposited into the Escrow Funds on the
Distribution Date. Prior to such time, the
applicable shares of Omnicom Common Stock will
be delivered by Holdings and Advertising to The
Chase Manhattan Bank, N.A., as deposit agent
(the "Deposit Agent"), pursuant to the terms of
a deposit and pledge agreement among Omnicom,
TBWA, Holdings, Advertising and the Deposit
Agent (the "Deposit and Pledge Agreement"), to
be held as security for the fulfillment of the
obligation of Holdings and Advertising to
deliver the said shares into such Escrow Funds.
Arrangement with Respect to
Holdings Preferred Stock ..... On or about July 1, 1995, but no later than July
10, 1995, the Trustee of the Chiat/Day Profit
Sharing and 401(k) Plan (the "Profit Sharing
Plan"), the sole record owner of the preferred
stock, cumulative, $.01 par value per share, of
Holdings (the "Holdings Preferred Stock"),
pursuant to an Agreement dated as of May 9, 1995
between Holdings and the Trustee of the Profit
Sharing Plan (the "Profit Sharing Plan Purchase
Agreement"), will sell to Holdings for a cash
payment of $14,081,773.93 all the shares of
Holdings Preferred Stock it owns, which shares
shall then be retired by Holdings. Holdings
shall pay for such shares by obtaining a loan
which will be guaranteed by Omnicom or one of
its affiliates.
Other Terms and Conditions of the Acquisition Agreement
Financial Actions ............ Between the date of the Acquisition Agreement
and the Closing Date, certain financial
arrangements are required to occur: (i) TBWA
shall lend Holdings $55,000,000 and lend
Advertising $1,000,000 on reasonable commercial
terms and pursuant to financing documents
reasonably acceptable to the parties thereto and
in substantially the form of the Amended and
Restated Credit Agreement between Holdings and
Omnicom, among others, more fully described
below, and the documents ancillary thereto; (ii)
Holdings shall make a capital contribution of
not less than $55,000,000 to Advertising; and
(iii) Advertising shall repay in full all
outstanding principal, together with accrued
interest, of its 8.17% Junior Subordinated
Installment Notes, its 13.25% Junior
Subordinated Notes, its 13.25% Senior
Subordinated Notes, and the notes issued under
the Amended and Restated Credit Agreement (as
defined below).
Conditions to the
Acquisition .................. The obligations of Omnicom, TBWA, Holdings
and Advertising to consummate the Acquisition
are subject to the satisfaction of certain
mutual conditions, including, without
limitation: obtaining the requisite approval of
the Holdings Stockholders; the absence of any
pending litigation, proceeding, investigation or
claim by governmental authorities seeking to
restrain or invalidate the consummation of the
Acquisition; the Registration Statement having
been declared effective by the SEC and not
subject to a stop order or threatened stop order
and the Omnicom Common Stock being registered
thereunder having been approved for listing on
the New York Stock Exchange.
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The obligations of Omnicom and TBWA to
consummate the Acquisition are also subject to
the satisfaction of certain additional
conditions including, without limitation: the
SEC not having objected to Omnicom's treatment
of the acquisition of the Businesses as a
pooling-of-interests for accounting purposes;
Advertising continuing to be the advertising
agency of record for certain key clients, or,
with respect to some of these clients,
Advertising having replaced a loss of any such
client with an account of similar size (measured
by revenues); the receipt by Holdings of letters
from Rightsholders who own in the aggregate at
least 83% of the outstanding EARs and EPUs on
the Closing Date, which group must include all
Rightsholders who are also Holdings
Stockholders, to the effect that they will not
raise any objection to the payment of their
outstanding awards being made in shares of
Omnicom Stock and their corresponding
participation in the indemnification obligations
of Holdings (each, a "Consent Letter"); the
execution of employment agreements with TBWA or
one of its affiliates by each of Robert
Kuperman, Thomas Patty, Adelaide Horton, Ira
Matathia, Steven Hancock and Robert Wolf, and
the execution of non-competition agreements by
each of such individuals; there not having been
a material and adverse change in the Businesses
(which shall include TBWA not having received
reasonable assurances and financial data that
(a) if the Closing is on or prior to August 31,
1995, EBIT for the nine months ended July 31,
1995 is at least $7,500,000 and EBIT for the
1995 Fiscal Year is reasonably expected to
exceed $13,500,000; and (b) if the Closing is on
or after November 1, 1995, EBIT for the 1995
Fiscal Year is at least $13,500,000).
The obligations of Holdings and Advertising to
effect the Acquisition are also subject to the
satisfaction of certain additional conditions
including, without limitation: that the
Annualized Revenues of Holdings and its
subsidiaries for the 1995 Fiscal Year, shall not
be greater than $100,000,000 and EBIT of
Holdings and its subsidiaries for the 1995
Fiscal Year is not reasonably expected to exceed
$17,200,000; TBWA or one of its affiliates
having entered into each of the employment
agreements described above; and TBWA having
assumed the employment agreement between
Holdings and Leland Clow and the employment and
consulting agreement between Holdings and Jay
Chiat (and TBWA having validly assigned Mr.
Chiat's contract to Omnicom).
See "The Acquisition Agreement--Other Terms
and Conditions of the Acquisition Agreement",
"The Acquisition Agreement--The Acquisition
--Renegotiation of Acquisition Price" and "The
Transactions--Interests of Certain Persons in
the Transactions-Employment and Consulting
Agreements; Non-Competition Agreements".
Termination of the
Acquisition Agreement ........ The Acquisition Agreement may be terminated
under certain circumstances, notwithstanding
approval of the Acquisition by the Holdings
Stockholders, (i) by mutual consent of the
Boards of Directors of Omnicom, TBWA, Holdings
and Advertising or (ii) by either Omnicom and
TBWA or by Holdings and Advertising (a) if there
has been a breach of any representation,
warranty or covenant by the other party and such
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breach is not cured within 30 days after notice
of such breach, unless such breach does not
materially adversely affect the business or
assets of the breaching party or the ability of
any or all parties, to consummate the
transactions contemplated by the Acquisition
Agreement, (b) if a final, nonappealable order
or judgment is issued enjoining the transactions
contemplated by the Acquisition Agreement, or
(c) if the Acquisition is not consummated by
December 31, 1995 or at any time after October
31, 1995 if the conditions to such parties'
obligation to close shall have become incapable
of being satisfied by December 31, 1995. See
"The Acquisition Agreement--Other Terms and
Conditions of the Acquisition Agreement".
Operation of the
Businesses ................... After the Closing under the Acquisition
Agreement After the Closing under the
Acquisition Agreement, the Businesses will be
combined with the TBWA International network of
companies to form a combined full service
operating network operating as one integrated
unit. The integrated unit will operate under the
name "TBWA Chiat/Day" in North America. See "The
Transactions--Interests of Certain Persons in
the Transactions."
The Amendment
Change of Holdings'
Corporate Name ............... The Holdings Certificate sets forth Holdings'
corporate name as "Chiat/Day Holdings Inc."
Following the Closing under the Acquisition
Agreement, TBWA will own all rights of Holdings
in and to the "Chiat/Day" name, and Holdings has
agreed that immediately following the Closing
thereunder it would change its corporate name to
a name not including the "Chiat/Day" designation
or any variation thereof. Under the proposed
amendment, Holdings name will be changed to "CDH
Corporation". See "Proposed Amendment of the
Holdings Certificate."
The Liquidation
Dissolution .................. Following the Closing under the Acquisition
Agreement, Holdings will be dissolved in
accordance with the procedures prescribed under
the Delaware General Corporation Law (the
"DGCL"). Upon dissolution, Holdings will
establish the Liquidating Trust, the trustees of
which will have the authority to wind up
Holdings' affairs.
Establishment and Operation
of Liquidating Trust ........ The Liquidating Trust will hold all of the
assets of Holdings remaining after the initial
distributions of Omnicom Common Stock described
above under "--The Acquisition". Pursuant to the
terms of the Liquidating Trust Agreement
governing the operation of the Liquidating
Trust, each share of Holdings Common Stock,
regardless of class, shall have an equal
interest in the Liquidating Trust.
The Liquidating Trust will be funded, on behalf
of the Holdings Stockholders, with five percent
of the Omnicom Common Stock paid by TBWA to
Holdings as part of the acquisition price under
the Acquisition Agreement (after deducting the
Contributed Stock). The Liquidating Trust may
also receive from time to time, on behalf of the
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Holdings Stockholders, distributions of Omnicom
Common Stock pursuant to the terms of the Escrow
Agreement.
The Liquidating Trustees will distribute the
assets in the Liquidating Trust to the Holdings
Stockholders, pro rata in accordance with their
interests, as expeditiously as possible,
provided that adequate reserves shall be taken
for Trust Liabilities (as defined below),
expenses of the Liquidating Trustees (which
shall include ordinary and customary expenses)
and to make distributions to any missing
beneficiaries. Payments made from the
Liquidating Trust to satisfy such liabilities
will be reimbursed in part from the Liquidating
Trust Escrow Fund.
See "The Plan of Liquidation--General" and
"--Operation of the Liquidating Trust".
The Liquidating
Trust Escrow Fund ............ The Liquidating Trust Escrow Fund will be
funded, on behalf of the Rightsholders, with
five percent of the Omnicom Common Stock paid by
TBWA to Advertising as part of the acquisition
price under the Acquisition Agreement (including
five percent of the Contributed Stock). The
Liquidating Trust Escrow Fund may also receive
from time to time, on behalf of the
Rightsholders, distributions of Omnicom Common
Stock pursuant to the terms of the Escrow
Agreement.
The Liquidating Trust Escrow Fund will be used
to satisfy the Rightsholders' share of Trust
Liabilities.
Whenever the Liquidating Trustee makes a
distribution of trust property to the Holdings
Stockholders, a proportionate amount of the
Liquidating Trust Escrow Fund will be
distributed to the Rightsholders, pro rata in
accordance with their interests.
See "The Plan of Liquidation--The Liquidating
Trust Escrow".
Other Considerations
Recommendation of the Board
of Directors of Holdings .... The Board of Directors of Holdings, by unanimous
vote, approved each of the matters constituting
part of the Transactions, and recommends the
approval of each of such matters by the Holdings
Stockholders.
Interests of Certain Persons
in the Transactions ......... As of [May 4, 1995,] directors and executive
officers of Holdings, and their affiliates,
owned of record an aggregate of [75.82%] of the
outstanding shares of Holdings Common Stock.
Accordingly, the Transactions can be approved
without the affirmative vote of any other
Holdings Stockholders. Each of such directors
and executive officers has expressed an
intention to vote the shares of Holdings Common
Stock owned by him or her in favor of the
Transactions.
As of [May 4, 1995,] directors and executive
officers of Holdings, and their affiliates,
owned of record an aggregate of [97.3%] of the
outstanding awards under the EAR and EPU Plans.
Each of such directors and executive officers
have executed and delivered to Holdings his or
her Consent Letter as described above.
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For a description of certain interests of
certain directors and executive officers of
Holdings in the Transactions that are in
addition to the interests of Holdings
Stockholders generally, see "The
Transactions--Interests of Certain Persons in
the Transactions".
Accounting Treatment ........ The Acquisition will be accounted for by Omnicom
as a pooling-of-interests. See "The
Transactions--Accounting Treatment".
Certain Federal Income
Tax Consequences ............ The Acquisition will be a taxable transaction to
Holdings and Advertising; and the distributions
pursuant to the Plan of Liquidation will be a
taxable transaction to Holdings Stockholders and
Rightsholders. Holders of Class A Common Stock
and of Class B Common Stock issued in July, 1989
pursuant to a certain stock purchase agreement
between Holdings and certain management and
other investors ("Mojo B Common Stock") will
recognize gain or loss as a result of the
Transactions equal to the difference between the
sum of (i) the fair market value of all Omnicom
Common Stock received (whether distributed or
placed in the Liquidating Trust or the
Stockholders General or Special Escrow Funds)
plus (ii) the cash received in respect of any
fractional shares, and their adjusted basis in
the Class A Common Stock or Mojo B Common Stock.
Holders of Class B Common Stock other than the
Mojo B Common Stock will recognize compensation
income equal to the excess of the sum of (a) the
fair market value of the Omnicom Common Stock
received (whether distributed or placed in the
Liquidating Trust or the Stockholders General or
Special Escrow Funds) plus (b) the cash received
in respect of any fractional shares, over the
sum of (x) the amount paid for their Class B
Common Stock, and (y) the amount, if any, of
ordinary income which they have previously
recognized in respect of their Class B Common
Stock.
Each Holdings Stockholder's share of the income
(including dividends on the Omnicom Common
Stock), gain or loss realized by the Liquidating
Trust or the Stockholders General or Special
Escrow Funds will be recognized by such Holdings
Stockholder (whether or not distributed) in
computing his or her federal income tax.
Rightsholders will recognize compensation income
equal to the fair market value of the Omnicom
Common Stock received (whether distributed or
placed in the Liquidating Trust Escrow Fund or
the Rightsholders General or Special Escrow
Funds) plus the cash received in respect of any
fractional shares. Each Rightsholder's share of
the income (including dividends on the Omnicom
Common Stock), gain or loss realized by the
Liquidating Trust Escrow Fund or the
Rightsholders General or Special Escrow Funds
will be recognized by such Rightsholder (whether
or not distributed) in computing his or her
federal income tax.
EACH HOLDINGS STOCKHOLDER AND RIGHTSHOLDER
SHOULD CAREFULLY REVIEW THE MATTERS DISCUSSED
UNDER THE CAPTION "FEDERAL INCOME TAX
CONSEQUENCES OF THE SALES OF ASSETS AND
DISSOLUTION AND LIQUIDATION" AND SHOULD CONSULT
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HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE TRANSACTIONS TO
HIM OR HER.
Regulatory Approvals ......... Omnicom and Holdings each filed notification and
report forms under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended
(the "Hart-Scott-Rodino Act") with the Federal
Trade Commission (the "FTC") and the Antitrust
Division of the Justice Department (the
"Antitrust Division") on _________, 1995, and
each was advised that there was early
termination of the applicable waiting period on
_____________, 1995. See "The
Transactions--Regulatory Approvals".
Resales of Omnicom Common
Stock; Resale Restrictions ... This Prospectus also covers resales of Omnicom
Common Stock by the Liquidating Trustees and the
Liquidating Trust Escrow Agent upon deposit of
Omnicom Common Stock into the Liquidating Trust
and Liquidating Trust Escrow Fund, respectively.
All such resales shall be made on the New York
Stock Exchange at then-prevailing market prices
or in negotiated transactions. Such resales are
expected to be completed within 60 days after
the Distribution Date. See "The
Transactions--Resales of Omnicom Common Stock".
Resales of Omnicom Common Stock by Holdings
Stockholders or Rightsholders who are deemed to
be "affiliates" (as such term is understood
under the Securities Act) of Holdings prior to
the Acquisition may be subject to certain
restrictions. See "The Transactions-- Resale
Restrictions".
No Dissenters' Rights ....... Holders of Holdings Common Stock are not
entitled to dissenters' rights under the DGCL in
connection with the Transactions. See "The
Transactions--No Dissenters' Rights".
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COMPARATIVE PER SHARE DATA
Set forth below are unaudited income from continuing operations, cash
dividends declared and book value per common share data of Omnicom and Holdings
on both historical and pro forma combined bases. Pro forma combined income from
continuing operations per share is calculated under the pooling-of-interests
accounting method and assumes that the Acquisition had occurred immediately
prior to the period being reported upon. Since Omnicom is on a calendar year for
financial reporting purposes, while Holdings' fiscal year ends on October 31,
the combined results for the three months ended March 31, 1995 and for each year
in the three years ended December 31, 1994, respectively, reflect Omnicom's
results for those periods and Holdings' results for the three months ended
January 31, 1995, and for each year in the three years ended October 31, 1994.
Pro forma combined cash dividends declared per share reflects Omnicom cash
dividends declared in the periods indicated. The per share equivalent pro forma
combined data has been calculated based upon the material assumptions that the
aggregate acquisition price will be $25,366,749, and the Market Value of the
Omnicom Common Stock will be $563/8. The information set forth below should be
read in conjunction with the respective audited and unaudited financial
statements of Omnicom incorporated by reference in this Prospectus/Information
Statement and of Holdings included in this Prospectus/Information Statement.
<TABLE>
<CAPTION>
As of March 31 , 1995 As of December 31, 1994
---------------------- -----------------------
<S> <C> <C>
Book Value per Share:
Omnicom ......................... $15.86 $14.96
Holdings ........................ $(1.62) $(1.60)
Pro forma ....................... $13.29 $12.45
Three Months ended Year Ended December 31,
March 31, 1995 ----------------------------------
------------------- 1992 1993 1994
----- ----- -----
Cash Dividends Declared
per Share:
Omnicom ......................... $ 0.31 $1.21 $1.24 $1.24
Holdings ........................ -- -- -- --
Pro forma ....................... $ 0.31 $1.21 $1.24 $1.24
Net Income per Share:
Omnicom:
Primary ....................... $ 0.68 $2.31 $2.79 $3.15
Fully Diluted ................. $ 0.68 $2.20 $2.62 $3.07
Holdings:
Primary ....................... $(0.03) $0.03 $(0.39) $0.11
Primary (including
EPUs and EARs) .............. $(0.03) $0.02 $(0.39) $0.05
Pro forma:
Primary ........................ $ 0.65 $2.35 $2.14 $3.23
Fully Diluted .................. $ 0.65 $2.24 $2.09 $3.14
</TABLE>
18
<PAGE>
MARKET PRICE DATA
There is no public market for Holdings Common Stock. Holdings has not
declared or paid any cash dividends on any shares of Holdings Common Stock in
the current fiscal year, or in any of the periods presented in "Selected
Financial Data of Holdings". In the event that the Acquisition is not
consummated, it is not expected that any cash dividends would be paid on any
shares of Holdings Common Stock in the foreseeable future.
Omnicom Common Stock is listed on the NYSE. The table below sets forth, for
the calendar quarters indicated, the reported high and low sale prices of
Omnicom Common Stock as reported on the NYSE Composite Tape, in each case based
on published financial sources, and the dividends paid per share on the Omnicom
Common Stock for such periods.
Omnicom Common Stock
-------------------------------------
High Low Dividends
------ ------ ---------
1993
First Quarter ...................... 47 1/2 38 3/8 .310
Second Quarter ..................... 47 1/4 38 1/4 .310
Third Quarter ...................... 46 1/4 37 .310
Fourth Quarter ..................... 46 1/2 41 1/2 .310
1994
First Quarter ...................... 49 7/8 43 3/4 .310
Second Quarter ..................... 49 1/2 44 7/8 .310
Third Quarter ...................... 51 1/2 48 .310
Fourth Quarter ..................... 53 3/4 49 .310
1995
First Quarter ...................... 56 7/8 50 .310
Second Quarter (through _____, 1995)
On May 10, 1995, the last full trading day prior to the execution and
delivery of the Acquisition Agreement, the closing price of Omnicom Common Stock
on the NYSE Composite Tape was $56 3/8 per share.
On [ ], 1995, the most recent practicable date prior to the
printing of this Prospectus/Information Statement, the closing price of Omnicom
Common Stock on the NYSE Composite Tape was $[ ] per share.
19
<PAGE>
THE SPECIAL MEETING
Date, Time and Place of Special Meeting
This Prospectus/Information Statement is being furnished to the holders of
Class A Common Stock and the holders of Class B Common Stock in connection with
the Special Meeting of Holdings Stockholders to be held on , 1995, at the
offices of Holdings, 180 Maiden Lane, New York, New York 10038, at ____ A.M.,
local time, and at any adjournment or postponement thereof.
This Prospectus/Information Statement is first being mailed to the Holdings
Stockholders on or about , 1995.
Business to Be Transacted at the Special Meeting
At the Special Meeting, Holdings Stockholders will consider and vote upon
the following matters (collectively, the "Holdings Vote Matters"):
(i) a proposal to approve the sale by Holdings and Advertising of
their assets and businesses pursuant to (i) the Acquisition
Agreement and (ii) the Advertising Stock Sale Agreement;
(ii) a proposal to amend the Holdings Certificate effective as of the
Closing under the Acquisition Agreement to change its corporate
name to CDH Corporation;
(iii) the approval and adoption of the Plan of Liquidation, including
the dissolution of Holdings, the creation of the Liquidating
Trust pursuant to the Liquidating Trust Agreement and the
appointment of the Liquidating Trustees; and
(iv) such other proposals as may properly be brought before this
meeting or any adjournment thereof.
None of the Holdings Vote Matters shall become effective unless all of the
proposals are adopted by the requisite vote of the Holdings Stockholders.
Each of the directors and executive officers of Holdings has expressed an
intention to vote in favor of the Transactions.
Record Date, Voting Rights
Only stockholders of record of Class A Common Stock and Class B Common
Stock at the close of business on _________, 1995 will be entitled to vote at
the Special Meeting. On that date, there were issued and outstanding ________
shares of Class A Common Stock and ______ shares of Class B Common Stock. Each
share of each class of Holdings Common Stock is entitled to one vote per share
on the Holdings Vote Matters at the Special Meeting or any adjournment or
postponement thereof.
Voting Requirements
The presence of the holders of a majority of the voting power of all shares
of Class A Common Stock and Class B Common Stock entitled to vote outstanding on
the record date is necessary to constitute a quorum for the transaction of
business at the Special Meeting.
Under the DGCL and the Holdings Certificate, the affirmative vote of the
holders of the majority of the outstanding shares of Class A Common Stock and
Class B Common Stock voting together as a class, will be required to approve the
Holdings Vote Matters. Abstentions have the effect of negative votes.
Approval Under Holdings Certificate
Under the Holdings Certificate, the approval of a majority of the holders
of Class A Common Stock, excluding certain shares that were originally issued to
Morgan Capital Corporation, is required for the sale of the assets pursuant to
the Acquisition Agreement as well as certain transactions provided for herein
with affiliated parties. See "The Transactions--Interests of Certain Persons in
the Transaction". The holders of a majority of such Class A Common Stock have
consented to such matters as provided in the Holdings Certificate and in the
manner provided for in Holdings' by-laws and Section 228 of the DGCL.
20
<PAGE>
Affiliate Ownership
As of the Record Date, directors, officers and affiliates of Holdings as a
group owned approximately __________ shares of Class A Common Stock and
_________ shares of Class B Common Stock, representing approximately _____% of
the aggregate outstanding shares of Holdings Common Stock. Accordingly the
Transactions can be approved by the affirmative vote of such persons even if all
other Holdings Stockholders vote against the proposals. These persons have
expressed an intention to vote in favor of the Transactions.
THE TRANSACTIONS
(The information contained in this Registration Statement of which this
Prospectus/Information Statement forms a part is qualified in its entirety by
reference to the complete texts of the Acquisition Agreement, the Advertising
Stock Sale Agreement, the Escrow Agreement, the Plan of Liquidation, the
Liquidating Trust Agreement and the Liquidating Trust Escrow Agreement, which
are filed as Exhibits thereto and are incorporated herein by reference.)
Background of and Holdings' Reasons for the Transactions;
Recommendation of the Holdings Board of Directors
Overview
After the Closing, the Businesses will be combined with the TBWA
International network of companies to form a combined advertising network
operating as one integrated unit. In furtherance of this, the members of the
TBWA International group operating under the TBWA name in North America will
change their corporate names to include the designation "TBWA Chiat/Day". See
"Interests of Certain Persons in the Transactions" for a description of the
positions within this integrated network that will be held by certain executive
officers of Holdings and its subsidiaries.
The terms of the Acquisition, including the terms of the Escrow Agreement,
are the result of arm's-length negotiation between representatives of Omnicom
and TBWA and representatives of Holdings and Advertising.
Background of the Transactions
In early 1993, Holdings commenced exploring strategic alternatives in order
to expand internationally and reduce the debt on its balance sheet. These
alternatives included possible strategic combinations with other advertising
agencies and groups, including Omnicom. Preliminary discussions were held with
parties other than Omnicom but such discussions did not lead to serious
negotiations. Holdings and Omnicom began informally discussing possible
combinations in 1993 shortly after Omnicom acquired TBWA, but at such time these
discussions did not advance to substantive negotiations and ceased. Since 1993,
however, TBWA and Holdings frequently consulted with respect to their joint
representation of Nissan.
In late 1994 and January 1995, Holdings was engaged in discussions with
potential lenders regarding the refinancing of its bank credit facility (the
"Bank Credit Agreement") which was to mature in May 1995 and $11 million of
Holding's 13.25% Senior Subordinated Notes which mature[d and were paid in full]
on August 1, 1995. The terms proposed by prospective institutional lenders
included substantial penalties for early repayment and the equivalent of an
equity participation in Holdings in the event that it were sold while such
financing was outstanding. During the period Holdings was considering whether to
accept such terms of refinancing, discussions with Omnicom were renewed and
began to assume the characteristics of negotiations in January of 1995. Holdings
realized that to proceed with the proposed refinancing would create significant
obstacles to consummating any acquisition transaction. Instead, Omnicom agreed
to assume the liabilities of the banks under the Bank Credit Agreement and
extended the maturity until December 10, 1995 (as assumed and amended, the
"Amended and Restated Credit Agreement").
The negotiations with Omnicom concerning a possible combination with TBWA
and Holdings continued through January and on February 1, the parties reached
preliminary agreement in principle and a public announcement was made. The
negotiations continued through March and April 1995 and culminated on May 11,
1995 in the execution of the definitive Acquisition Agreement and related
documents following approval by the Board of Directors of each company.
21
<PAGE>
Holding's Reasons for the Transactions
The decision of the Board of Directors of Holdings to enter into the
Acquisition was largely influenced by the Board's assessment of the perceived
benefits of a strategic combination with TBWA in the United States and Europe as
well as the limited growth opportunities of an independent Holdings in light of
its highly leveraged balance sheet. The Board also took into consideration that
the shareholders of Holdings, including the Profit Sharing Plan, had been
holding for a significant period of time an illiquid investment in Holdings. The
Board of Directors believes that the Acquisition offers a fair price for the
assets of Holdings and Advertising, provides the Holdings Stockholders a liquid
investment and that the combination with TBWA contemplated by the Acquisition
provides an excellent strategic fit and the increased liquidity needed to
capitalize on growth opportunities for the combined organization.
The Holdings Board of Directors made its determination without the
assistance of a financial advisor and without a "fairness opinion". Instead, the
Holdings Board of Directors has relied upon its own experience and the knowledge
of its management in assessing the advantages and disadvantages of the
Transactions.
Recommendation of the Holdings Board of Directors
For the reasons set forth above, the Holdings Board of Directors believes
that the Transactions are fair to, and in the best interests of, Holdings and
the Holdings Stockholders and recommends that the Holdings Stockholders vote FOR
the approval of the sale of the assets and businesses of Holdings and
Advertising pursuant to the Acquisition Agreement and the Advertising Stock Sale
Agreement, FOR the approval of the amendment of the Holdings Certificate, and
FOR the approval of the Plan of Liquidation.
Omnicom's Reasons for the Acquisition
Omnicom's and TBWA's respective Board of Directors each believes that the
Acquisition represents an opportunity for TBWA to strengthen its position as a
major global advertising agency network without diminishing its overall
financial strength. TBWA's international strength is concentrated outside of the
United States, while Holdings and Advertising have a strong North American
presence; the Acquisition is therefore a natural geographic fit which will
expand TBWA's worldwide capabilities.
The fit is also strategic from a client servicing perspective. Advertising
is the advertising agency of record in the United States and Canada for the
Nissan and Infiniti divisions of the Nissan Motor Corp.; while TBWA handles the
Nissan business on a Pan European basis as well as the local business in 9
European countries. The Acquisition represents an opportunity to strengthen the
Nissan relationship by being in a position to service this client throughout the
world.
The Boards of Directors of Omnicom and TBWA believe that the corporate
cultures of the two networks will combine well, as both networks have
historically placed their major emphasis on creative output. The Boards of
Directors of TBWA and Omnicom also considered the potential synergies which
would result in lower costs as a result of the combining of the operations.
Omnicom has not retained an outside party to evaluate the proposed
Acquisition but has instead relied upon the knowledge of its management in
considering the financial aspects of the Acquisition.
In reaching its conclusion, the Board of Directors of Omnicom and TBWA
considered, among other things: (i) information concerning the financial
performance, condition, business operations and prospects of each of Holdings
and Advertising; and (ii) the proposed terms and structure of the Acquisition.
It is anticipated that the Acquisition will be non-dilutive to Omnicom's results
of operations. Accordingly, the Board of Directors of Omnicom has unanimously
approved the Acquisition Agreement and the transactions contemplated thereby.
22
<PAGE>
Interests of Certain Persons in the Transaction
(The following describes certain interests of the directors and executive
officers of holdings in the transactions that are in addition to the interests
of Holdings Stockholders generally.)
Employment and Consulting Agreements; Non-Competition Agreements
Pursuant to the Acquisition Agreement, the employment and consulting
agreement dated May ___, 1995 between Jay Chiat and Holdings will be assumed by
TBWA and then assigned to Omnicom. Upon the completion of the Acquisition, Mr.
Chiat will serve as a consultant under the employment and consulting agreement
and will serve as such until May __, 2002, and the agreement automatically
extends until the earlier of May __, 2005 or such earlier date on which Holdings
no longer maintains certain key client relationships. Mr. Chiat's compensation
in Omnicom's opinion is reasonable for the services he is to render and in any
event is significantly less than he was earning immediately prior to the
Acquisition. Mr. Chiat will not be provided with any employee benefits. In
addition, pursuant to the terms of the Acquisition Agreement, Mr. Chiat will
enter into a non-competition agreement with Omnicom which will have a term of 10
years commencing on the Closing Date of the Acquisition. No additional
consideration is being paid with respect to such non-competition agreement.
Pursuant to the Acquisition Agreement, the employment agreement dated May
__, 1995 between Leland Clow and Holdings will be assumed by TBWA. Such
employment agreement extends to December 31, 1998 and provides for annual salary
compensation at the same levels as the predecessor employment agreement.
Following the consummation of the Acquisition, Mr. Clow's salary level will be
subject to increases in connection with the salary review procedures of TBWA and
Mr. Clow will participate in TBWA bonus plans. Benefits substantially equivalent
to those Mr. Clow was receiving under his predecessor employment agreement will
also be provided. In addition, pursuant to the terms of the Acquisition
Agreement, Mr. Clow will enter into a non-competition agreement with Omnicom
which will have a term commencing on the Closing Date of the Acquisition and
ending on the later of December 31, 1998 or two years after the termination of
Mr. Clow's employment. No additional consideration is being paid with respect to
such non-competition agreement.
Pursuant to the Acquisition Agreement, TBWA or one of its affiliates will
enter into employment agreements with Steve Hancock, the President/CEO of the
Toronto office of Advertising, and each of the following key executive officers
who are also directors of Holdings: Adelaide Horton; Robert Kuperman; Ira
Matathia; and Tom Patty. It is anticipated that the employment agreements will
have a term commencing on the Closing Date of the Acquisition and ending on
December 31, 1998 and provide for annual salary compensation and fringe benefits
substantially equivalent to those such persons were receiving immediately prior
to the Acquisition. Such persons will also be eligible to participate in TBWA
bonus plans. In addition, the Acquisition Agreement provides that Robert Wolf,
also a director of Holdings, will enter into an employment agreement with
Omnicom with a term ending on December 31, 1996. Mr. Wolf's employment agreement
provides for the same annual salary he was receiving immediately prior to the
Acquisition and benefits customarily provided by Omnicom to its employees.
Pursuant to the terms of the Acquisition Agreement, the executives and
directors listed in the first sentence of the immediately preceding paragraph
and Mr. Wolf will enter into non-competition agreements with Omnicom which will
have a term commencing on the closing date of the Acquisition and ending on the
later of December 31, 1998 or two years after termination of the applicable
party's employment. There is no additional consideration being paid in
connection with these non-competition agreements.
In connection with the Transactions, a 1987 deferred compensation
arrangement between Advertising and Robert Kuperman will be canceled by the
payment of the present value of the vested benefits thereunder. The liability
for such vested benefits has already been recorded on the books of Advertising.
The terms of the Acquisition Agreement permit Holdings and Advertising to
pay to their directors and employees bonuses accrued for fiscal year 1994, and
permit Advertising to accrue for bonuses for the 1995 Fiscal Year an amount up
to 10% of profit from normal advertising operations before all federal, state,
local and foreign income taxes and adjusted to exclude interest income and
interest expense, with such accrual to be reviewed and adjusted upward or
downward after completion of the 1995 Fiscal Year consistent with past practice
(provided that for the period from the Closing Date through October 31, 1995,
the accrual shall be based on the financial results of the Businesses as
conducted by TBWA). Holdings has established a bonus pool of approximately
23
<PAGE>
$2,500,000 with respect to fiscal year 1994, 40% of which will be allocated to
its senior officers, all of whom are directors. Bonuses with respect to Fiscal
Year 1995 have not yet been determined, but it is expected that all or a
substantial portion of such bonuses will be paid to the same individuals. In
addition, if such profits exceed budgeted amounts for the 1995 Fiscal Year,
additional bonus payments will be made.
Pursuant to the Acquisition Agreement, all other employees of Holdings or
Advertising (many of whom are stockholders of Holdings) will be offered
employment by TBWA or its affiliates on substantially equivalent terms as their
employment prior to the Acquisition.
Other Agreements
Prior to the Closing Date, Holdings will redeem its 8.17% Junior
Subordinated Installment Notes due 2005 and its 13.25% Junior Subordinated Notes
due 2005 (collectively, the "Junior Notes") at their face value plus accrued
interest to the date of redemption. Jay Chiat, a director of Holdings,
beneficially owns $[3,000,000] in principal amount of the Junior Notes and will
receive $________ as a result of this redemption.
Pursuant to the Acquisition Agreement, certain works of art owned by Mr.
Chiat will be leased to TBWA on the same basis as the art is currently leased
for a nominal sum commencing on the consummation of the Acquisition. In
connection with such lease, TBWA will pay for the costs of insuring such works
of art against theft, loss and damage. The lease will be terminable upon one
month's notice by either party thereto.
Following the Distribution Date, Ms. Horton [ADD ASSIGNEES, IF ANY] will
purchase from Holdings for $250,000 in cash, all of the issued and outstanding
common stock of Advertising pursuant to the Advertising Stock Sale Agreement. At
the time of such purchase, the only asset which Advertising will own will be its
rights, through its ownership of all of the capital stock of Chiat/Day Direct
Marketing, Inc., under the litigation entitled Chiat/Day Direct Marketing, Inc.
f/k/a/ Perkins/Butler Direct Marketing Inc. v. National Car Rental Systems,
Inc., No. 93 civ. 2717 (S.D.N.Y.)(the "National Car Suit"). Pursuant to the
Advertising Stock Sale Agreement, Holdings has agreed to indemnify Ms. Horton
and Advertising for any losses incurred in respect of liabilities of Advertising
not assumed by TBWA under the Acquisition Agreement. To the extent that Holdings
were unable to fully indemnify Ms. Horton and Advertising, any recovery from the
National Car Suit received by Advertising would be at risk. The Board of
Directors of Holdings believes that the sale of Advertising to Ms. Horton is on
terms no less favorable to Holdings than would result from an arms-length
negotiation conducted with unrelated parties. See "The Advertising Stock Sale
Agreement".
David C. Wiener and Company, P.C., of which David C. Wiener is a principal,
will receive fees for services rendered to Holdings and Advertising in
connection with the Acquisition in an aggregate amount estimated to be
approximately $350,000. Mr. Wiener is a member of the Board of Directors of
Holdings.
Prior to the consummation of the Acquisition, pursuant to the Profit
Sharing Plan Purchase Agreement the shares of Preferred Stock held in the Profit
Sharing Plan are being acquired by Holdings for $14,081,773.93 in cash. All of
the directors and senior executive officers of Holdings (together with
approximately 600 other employees), other than Mr. Wiener, are participants in
such plan.
See also "Description of Holdings Capital Stock" for a description of the
security ownership of management of Holdings.
Accounting Treatment
The Acquisition will be accounted for by Omnicom as a pooling-of-interests
for financial reporting purposes in accordance with generally accepted
accounting principles. Accordingly, upon consummation of the Acquisition, the
assets and liabilities of Holdings and Advertising will be included in the
consolidated balance sheet of Omnicom and its subsidiaries in the amounts which
were included in the books of Holdings immediately before the Acquisition,
subject to adjustments required to conform the accounting policies of Holdings
to those utilized by Omnicom, and such other adjustments as may be necessary to
comply with pooling-of-interests accounting rules and regulations.
Regulatory Approvals
Under the Hart-Scott-Rodino Act and the rules promulgated therewith by the
FTC, the Acquisition may not be consummated until notifications have been given
and certain information has been furnished to the FTC and the Antitrust Division
and specified waiting period requirements have been satisfied. Omnicom and
Holdings each filed notification and report forms under the Hart-Scott-Rodino
Act with the FTC and the Antitrust Division on ____________, 1995. The required
24
<PAGE>
waiting period under the Hart-Scott-Rodino Act was terminated early on
_______________, 1995.
At any time before or after consummation of the Acquisition, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
consummation of the Acquisition or seeking divestiture of assets of Omnicom. At
any time before or after the Closing Date, and notwithstanding that the
Hart-Scott-Rodino Act waiting period has expired, any state could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest. Such action could include seeking to enjoin the consummation of the
Acquisition or seeking divestiture of assets of Omnicom. Private parties may
also seek to take legal action under the antitrust laws under certain
circumstances.
Based on information available to them, Omnicom and Holdings believe that
the Acquisition can be effected in compliance with Federal and state antitrust
laws. However, there can be no assurance that a challenge to the consummation of
the Acquisition on antitrust grounds will not be made or that, if such a
challenge were made, Omnicom and Holdings would prevail or would not be required
to accept certain conditions, possibly including certain divestitures of assets
of Omnicom, in order to consummate the Acquisition.
Resales of Omnicom Common Stock
This Prospectus also covers resales of Omnicom Common Stock by the
Liquidating Trustees and the Liquidating Trust Escrow Agent upon deposit of
Omnicom Common Stock into the Liquidating Trust and the Liquidating Trust Escrow
Fund, respectively. All such resales shall be made on the New York Stock
Exchange at then-prevailing market prices or in negotiated transactions. Such
resales are expected to be completed within 60 days after the Distribution Date.
See "The Plan of Liquidation".
Resale Restrictions
All shares of Omnicom Common Stock received by Holdings Stockholders and
Rightsholders as a result of the Acquisition will be freely transferable, except
that shares of Omnicom Common Stock received by persons who are deemed to be
"affiliates" (as such term is understood under the Securities Act) of Holdings
prior to the Acquisition ("Holdings Affiliates") shall be subject to certain
restrictions, as more fully described below. Persons who may be deemed to be
affiliates of Holdings or Omnicom generally include individuals or entities that
control, are controlled by, or are under common control with, such party and may
include certain officers and directors of such party as well as principal
stockholders of such party. The Acquisition Agreement provides that Holdings
will furnish Omnicom with a list identifying all persons who may be considered
to be Holdings Affiliates, and gives Omnicom the right to review such list and
require changes. Holdings is required to use its best efforts to cause each of
the Holdings Affiliates to execute a written agreement to comply fully with the
restrictions described below.
Federal Securities Laws. Shares of Omnicom Common Stock received by
Holdings Affiliates may be resold by such Holdings Affiliates only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act or as otherwise permitted under the Securities Act.
Pooling-of-Interests Rules. In order to satisfy a condition of the
pooling-of-interests rules as the accounting treatment to be accorded the
Acquisition, Holdings Affiliates may not sell, assign, transfer, convey,
encumber or dispose of, directly or indirectly, or otherwise reduce their risk
relative to, any shares of Omnicom Common Stock until the publication by Omnicom
of its financial results covering a period of at least thirty days of combined
operations of Omnicom and the Businesses after the Closing Date (except that
this restriction will lapse no later than October 30, 1995 as long as the
Closing of the Acquisition has occurred on or prior to August 31, 1995). This
prohibition precludes the use of "hedging" techniques during this period.
Stock Exchange Listing
It is a condition to the Acquisition that the shares of Omnicom Common
Stock required to be issued in connection with the Acquisition be authorized for
listing on the NYSE, subject to official notice of issuance. An application has
been filed for listing such Omnicom Common Stock on the NYSE.
No Dissenters' Rights
Holders of Holdings Common Stock are not entitled to any rights of
dissenting shareholders under Delaware law in connection with the Transactions.
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<PAGE>
THE ACQUISITION AGREEMENT
(The following is a brief summary of the Acquisition Agreement and the
related Escrow Agreement. Copies of the Acquisition Agreement and the Escrow
Agreement are filed as Exhibits to the Registration Statement of which this
Prospectus/Information Statement forms a part and are incorporated herein by
reference. This summary is qualified in its entirety by reference to the
Acquisition Agreement and the Escrow Agreement.)
The Acquisition
General
Omnicom, TBWA, Holdings and Advertising entered into the Acquisition
Agreement on May 11, 1995. It provides for TBWA to acquire the assets of
Holdings and Advertising other than (a) their respective corporate seals and
minute books, (b) the issued and outstanding capital stock of Advertising and
Chiat/Day Direct Marketing, Inc. and any other subsidiary which is inactive, has
no assets or is in the process of liquidation, (c) the rights of Holdings
arising under the Advertising Stock Sale Agreement, other than the right to the
cash acquisition price thereunder to the extent reflected in the books and
records of Holdings, and (d) the rights of Advertising in and to the National
Car Suit (the value of which will be obtained by TBWA through the right to
receive the cash acquisition price receivable under the Advertising Stock Sale
Agreement), in exchange for the payment of the acquisition price as more fully
described below and the assumption by TBWA of liabilities of Holdings and
Advertising relating to the Businesses (certain non-operating liabilities of
Holdings and Advertising are not to be assumed by TBWA pursuant to the terms of
the Acquisition Agreement).
Determination of Acquisition Price
Subject to the potential adjustment described below in "The Acquisition
Agreement--The Acquisition--Renegotiation of Acquisition Price", the
consideration payable by TBWA for the Businesses will be determined as follows:
(a) TBWA will pay Holdings shares of Omnicom Common Stock having an
aggregate Market Value of (x) if the Closing is held on or prior to October
31, 1995, (i) $11,180,563 plus (ii) an amount equal to $2,418 multiplied by
the number of days in the period commencing on the Closing Date and ending
on October 31, 1995, or (y) if the Closing Date is held after October 31,
1995 and on or prior to December 31, 1995, (iii) $11,930,880 plus (iv) an
amount equal to $2,418 multiplied by the number of days in the period
commencing on the Closing Date and ending on December 31, 1995. Of this
Omnicom Common Stock, the Contributed Stock (being shares having such
Market Value as may be necessary to insure the satisfaction of obligations
of Holdings and Advertising to the Rightsholders) will be contributed to
Advertising for the benefit of the Rightsholders.
(b) TBWA will pay Advertising shares of Omnicom Common Stock having an
aggregate Market Value of $14,000,000.
The "Market Value" of the shares of Omnicom Common Stock will be determined
by the average of the closing prices per share of Omnicom Common Stock reported
on the New York Stock Exchange for the 20 consecutive trading days ending three
business days immediately prior to the Closing Date. Omnicom has agreed that it
will not, and will not permit TBWA or any of its other subsidiaries to, purchase
any Omnicom Common Stock (whether pursuant to open-market purchases or
otherwise) during the period during which the Market Value is calculated.
The shares of Omnicom Common Stock received as acquisition price will be
allocated on a pro rata basis to the Holdings Stockholders after allocating
sufficient shares to satisfy Holdings' and Advertising's obligations under the
EPU and EAR Plans. Accordingly, such shares of Omnicom Common Stock will be
distributed to the Holdings Stockholders and the Rightsholders as described in
"The Acquisition Agreement--The Acquisition --Payment of Obligations to
Rightsholders" and "The Plan of Liquidation--Liquidating Distributions to
Holdings Stockholders" and "--Liquidating Distributions to Rightsholders".
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<PAGE>
Renegotiation of Acquisition Price
In the event that on the scheduled Closing Date the "Annualized Revenues"
of Holdings and its subsidiaries exceeds $100,000,000, and the EBIT of Holdings
for its 1995 Fiscal Year exceeds or is reasonably expected to exceed
$17,200,000, then Omnicom, TBWA, Holdings and Advertising have agreed that each
would negotiate in good faith whether or not there should be an upwards
adjustment to the acquisition price. If agreement is reached to so increase the
acquisition price, the Acquisition Agreement and related documents would be
amended to the extent necessary to reflect this adjustment. If the parties do
not agree on such an increase, Holdings would have the option to either
terminate the Acquisition Agreement or proceed with the Closing at the original
acquisition price.
"Annualized Revenues" has been defined in the Acquisition Agreement to mean
the commissions and fees of Holdings and its subsidiaries for the fiscal year
commencing November 1, 1994 and ending October 31, 1995 (forecasted, to the
extent necessary) from those clients that were such on October 31, 1994 and from
new clients won since November 1, 1994, annualized as if those clients had been
clients during the entire year. The calculation excludes commissions and fees
earned from clients lost since November 1, 1994 or expected to be lost in the
near future.
Holdings does not currently anticipate, based on its existing clients and
their specified budgets, that Annualized Revenues or EBIT will exceed the
renegotiation thresholds.
Closing Date
The Acquisition Agreement provides that the Closing Date shall be
determined by Omnicom by notice given to Holdings within five days after the
date of the Special Meeting. The Closing Date chosen by Omnicom must not be
later than thirty days after its giving of the notice; and each party is
required to use its best efforts to close on or prior to August 31, 1995, except
that if the Closing has not occurred by August 31, 1995, then each party is
required to use its best efforts to close as soon as is practicable after
October 31, 1995. Notwithstanding these requirements, the Closing Date will be
delayed in the event of a dispute as to whether Annualized Revenues exceed
$100,000,000 and/or EBIT exceeds $17,200,000, or during the pendency of any
renegotiation of the acquisition price, pending final determination of such
matters.
Arrangements With Respect to Holdings Preferred Stock
On or about July 1, 1995 but no later than July 10, 1995 (the "Preferred
Stock Purchase Date"), the Trustee of the Profit Sharing Plan, the sole record
owner of the Holdings Preferred Stock, will sell to Holdings for a cash payment
of $14,081,773.93 (representing the aggregate liquidation preference of such
Holdings Preferred Stock) all the shares of Holdings Preferred Stock it owns,
pursuant to the terms of the Profit Sharing Plan Purchase Agreement, which
shares will then be retired by Holdings.
Certain financial arrangements have been made in order to finance this
purchase of Holdings Preferred Stock. On the Preferred Stock Purchase Date,
Omnicom shall guarantee or cause one of its affiliates to guarantee a loan to
Holdings in the principal amount of $14,081,773.93 from a bank acceptable to
Omnicom and on terms acceptable to Omnicom (the "Preferred Stock Purchase
Loan"), the proceeds of which will be applied by Holdings to purchase the
Holdings Preferred Stock pursuant to the Profit Sharing Plan Purchase Agreement.
On the day prior to the Closing Date, TBWA shall lend Holdings an amount equal
to the outstanding balance of the Preferred Stock Purchase Loan (the "TBWA
Loan"), the proceeds of which will be applied by Holdings to repay the Preferred
Stock Purchase Loan.
Holdings is in the process of obtaining all governmental approvals
(including approval by the Internal Revenue Service) and of taking all other
action necessary to terminate the Profit Sharing Plan effective on or about the
Closing Date under the Acquisition Agreement, even though such approvals may be
obtained and such action taken on or after the Closing Date. Amounts on deposit
in the Profit Sharing Plan will then be distributed to participants in
accordance with their respective interests in the Profit Sharing Plan.
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Payment of Obligations to Rightsholders
In 1993 and 1988, Holdings adopted the EAR Plan and EPU Plan, respectively,
and has issued awards under such Plans; recipients of such awards are sometimes
referred to herein as "Rightsholders". If the employment of a participant is
terminated for any reason, then under the terms of the EAR Plan such participant
shall have the right, but not the obligation within ninety days of such
termination to cause Holdings or Advertising to, and under the EPU Plan Holdings
or Advertising shall, redeem vested units for cash in each case at the net book
value of the phantom shares which are the subject of the awards as at the end of
the most recent fiscal quarter. However, in the event of a liquidation, with
respect to their priority, each EAR and EPU shall be deemed equivalent in value
to one share of Holdings Common Stock and shall be treated in the same manner as
Holdings Common Stock.
Therefore, as is the case with Holdings Stockholders, obligations of
Holdings and Advertising to the Rightsholders will be settled by the
distribution to the Rightsholders of shares of Omnicom Common Stock. To ensure
that Advertising will be able to satisfy such obligations, Holdings shall
contribute to Advertising the Contributed Stock, which is expected to have an
aggregate Market Value of approximately $_____________.
This Prospectus/Information Statement is being furnished to Rightsholders
because the Rightsholders will receive shares of Omnicom Common Stock as payment
under such Plans, subject to the same terms and conditions as if they were
Holdings Stockholders. Accordingly, on the Distribution Date (a) shares of
Omnicom Common Stock paid to Advertising under the Acquisition Agreement
(including the Contributed Stock) will be subject to the indemnification
obligations of Holdings, such that (i) ten percent of such shares will be placed
in the General Escrow Fund under the Escrow Agreement and (ii) shares of Omnicom
Common Stock having an aggregate Market Value equal to the Rightsholders' pro
rata share of $1,700,000 will be placed in the Special Escrow Fund under the
Escrow Agreement, and (b) five percent of the shares of Omnicom Common Stock
paid to Advertising under the Acquisition Agreement (including the Contributed
Stock) will be transferred to the Liquidating Trust Escrow Fund to fund
(together on a pro rata basis with the Holdings Stockholders) the payment and
satisfaction of any obligations and liabilities of Holdings and Advertising as
shall not have been assumed by TBWA under the Acquisition Agreement. The
remainder of the shares of Omnicom Common Stock paid to Advertising under the
Acquisition Agreement (including the Contributed Stock) will be distributed to
the Rightsholders. See "The Plan of Liquidation--The Liquidating Trust Escrow".
It is a condition of Closing of the Acquisition Agreement that
Rightsholders that hold in the aggregate at least 83% of the outstanding EARs
and EPUs on the Closing Date, which group must include all Rightsholders that
are also Holdings Stockholders, shall have delivered to Holdings their written
Consent Letters to the effect that they will not raise any objection to this
treatment and consenting to the appointment of Holdings as their collective
agent in connection with the administration of the Escrow Agreement.
As of [May 4, 1995,] directors and executive officers of Holdings, and
their affiliates, held an aggregate of [97.3%] of the outstanding awards under
the EAR and EPU Plans as of such date. Each of such directors, executive
officers and affiliates have executed and delivered to Holdings his or her
Consent Letter in respect of such awards. Accordingly, the above described
condition of Closing has been satisfied.
The Escrow Agreement
Holdings on behalf of itself and the Holdings Stockholders, and
Advertising, on behalf of itself and the Rightsholders shall establish, pursuant
to the Escrow Agreement, the General Escrow Fund by the deposit with the Escrow
Agent of certificates in negotiable form duly endorsed in blank representing
shares of Omnicom Common Stock equal to ten percent of the shares of Omnicom
Common Stock issued and delivered as part of the acquisition price. The General
Escrow Fund will be segregated into two funds: the Stockholders General Escrow
Fund and the Rightsholders General Escrow Fund, based on the respective number
of shares of Omnicom Common Stock contributed by Holdings and Advertising, and
each Fund will satisfy its pro rata share of any indemnification payment based
on the number of shares of Omnicom Common Stock then on deposit in such Fund.
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Holdings and Advertising will also establish, pursuant to the Escrow
Agreement, the Special Escrow Fund, by the deposit with the Escrow Agent of
shares of Omnicom Common Stock having an aggregate Market Value of $1,700,000,
of which approximately $________ will be contributed by Holdings, on behalf of
the Holdings Stockholders, and approximately $______ will be contributed by
Advertising, on behalf of the Rightsholders. The Special Escrow Fund will also
be segregated into two funds: the Stockholders Special Escrow Fund and the
Rightsholders Special Escrow Fund, each of which will satisfy its pro rata share
of any indemnification payment based on the number of shares of Omnicom Common
Stock on deposit in such Fund. (For a description of the indemnification
obligations of Holdings and the Holdings Stockholders and the Rightsholders to
Omnicom, see "The Acquisition Agreement--Other Terms and Conditions of the
Acquisition Agreement--Indemnification".)
Pursuant to the Escrow Agreement, Holdings, on behalf of itself and the
Holdings Stockholders, and Advertising, on behalf of itself and the
Rightsholders, shall grant to Omnicom a security interest in the Escrow Funds to
secure the performance of the indemnification obligations of Holdings under the
Acquisition Agreement and the performance of its obligations to Omnicom under
the Escrow Agreement.
Pursuant to the Escrow Agreement, Omnicom and Holdings have agreed to
indemnify and hold the Escrow Agent and its directors, officers and employees
harmless from and against any and all costs, charges, damages and attorney's
fees which the Escrow Agent in good faith may incur or suffer in connection with
or arising out of the Escrow Agreement. The fees and charges of the Escrow Agent
with respect to the Escrow Agreement shall be shared between Omnicom and
Holdings in accordance with the Escrow Agent's customary fees as charged from
time to time. The Escrow Agent may deduct any unpaid fees from the Escrow Funds
prior to the Escrow Agent's distributing any assets in connection with the
termination of the Escrow Funds.
The Liquidating Trustees shall replace Holdings as a party to the Escrow
Agreement following the creation and funding of the Liquidating Trust.
The Escrow Agreement shall automatically terminate if and when all the
shares of Omnicom Common Stock held in any Escrow Fund shall have been
distributed by the Escrow Agent in accordance with the terms of the Escrow
Agreement.
General Escrow Fund. The Escrow Agreement provides that wherever there
shall be delivered to the Escrow Agent either (i) a certificate signed by
Omnicom and Holdings, or (ii) a certified copy of an arbitration award rendered
pursuant to the arbitration proceedings specified in the Escrow Agreement
determining, that an indemnification payment is due from the General Escrow
Funds to Omnicom, the Escrow Agent shall, to the extent that the shares of
Omnicom Common Stock then on deposit in the General Escrow Fund shall be
sufficient for the purpose, deliver to Omnicom the number of shares of Omnicom
Common Stock, valued at the original Market Value, equal to the indemnification
payment.
On the next business day following the earlier of (x) the first independent
audit report, if any, of TBWA and the Businesses following the Closing Date, or
(y) one year from the Closing Date, the Escrow Agent shall deliver to the
Liquidating Trust (on behalf of the Holdings Stockholders) the remaining shares
of Omnicom Common Stock then on deposit in the Stockholders General Escrow Fund,
and to the Liquidating Trust Escrow Fund (on behalf of the Rightsholders) the
remaining shares of Omnicom Common Stock then on deposit in the Rightsholders
General Escrow Fund; as reduced in each case by any amounts necessary to cover
outstanding claims for indemnification.
All dividends, interest and other amounts received with respect to shares
of Omnicom Common Stock held in the General Escrow Fund shall be income for tax
purposes to Holdings (or the Holdings Stockholders following the dissolution of
Holdings) and the Rightsholders, shall be paid directly to the Liquidating
Trustees (on behalf of the Holdings Stockholders) or the Liquidating Trust
Escrow Agent (on behalf of the Rightsholders), as the case may be, and shall not
constitute part of the General Escrow Fund.
Special Escrow Fund. The Escrow Agreement provides that whenever there
shall be delivered to the Escrow Agent either (i) a certificate signed by
Omnicom and Holdings, or (ii) a certified copy of a final nonappealable judgment
of an arbitration award rendered pursuant to the arbitration proceedings
specified in the Escrow Agreement determining, that a payment is due from the
Special Escrow Fund to Holdings or Omnicom, the Escrow Agent shall, to the
extent that the shares of Omnicom Common Stock then on deposit in the Special
Escrow Fund shall be sufficient for the purpose, deliver to such party the
number of shares of Omnicom Common Stock, valued at the original Market Value,
equal to the payment.
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Amounts will be due from the Special Escrow Fund when the collectibility of
the Indemnified Receivable becomes determined or, if earlier, on the second
anniversary of the Closing Date under the Acquisition Agreement. Therefore, at
such time, if any, as TBWA recovers the payments in respect of said asset
("Asset Proceeds"), it shall give notice to such effect to Holdings and to the
Escrow Agent, together with an accounting of the costs and expenses incurred in
connection with recovering any such payments at any time after the Execution
Date of the Acquisition Agreement ("Asset Costs"). TBWA shall be entitled to
receive payment from the Stockholders Special Escrow Fund and the Rightsholders
Special Escrow Fund, pro rata in accordance with the number of shares of Omnicom
Common Stock then on deposit in each such Fund, in the amount of the Asset
Costs; the Liquidating Trustees (on behalf of the Holdings Stockholders) and the
Liquidating Trust Escrow Agent (on behalf of the Rightsholders) shall be
entitled to receive payment from the Stockholders Special Escrow Fund and the
Rightsholders Special Escrow Fund, pro rata in accordance with the number of
shares of Omnicom Common Stock then on deposit in each such Fund, in an
aggregate amount equal to (i) the amount of the Asset Proceeds, less (ii) the
Asset Costs, less (iii) $250,000 if the final determination of the matter occurs
within one year from the Closing Date, or $300,000 if the matter is determined
thereafter; TBWA shall then be entitled to receive the balance, if any,
remaining in the Special Escrow Fund.
All dividends, interest and other amounts received with respect to shares
of Omnicom Common Stock held in the Special Escrow Fund shall be income for tax
purposes to Holdings (or the Holdings Stockholders following the dissolution of
Holdings) and the Rightsholders, shall be paid directly to the Liquidating
Trustees (on behalf of the Holdings Stockholders) or the Liquidating Trust
Escrow Agent (on behalf of the Rightsholders), as the case may be, and shall not
constitute part of the Special Escrow Fund.
The Deposit and Pledge Agreement
Pursuant to the Deposit and Pledge Agreement, Holdings and Advertising will
deliver to the Deposit Agent all the shares of Omnicom Common Stock received by
them on the Closing Date.
On the Distribution Date, the Deposit Agent will make the distributions of
such shares of Omnicom Common Stock described under "Summary--The
Acquisition--The Acquisition" to the Liquidating Trust, the Liquidating Trust
Escrow Fund, the Holdings Stockholders and the Rightsholders.
On the Distribution Date, the Deposit Agent will also deposit the
applicable shares of Omnicom Common Stock into the Escrow Funds. Prior to such
time, the applicable shares of Omnicom Common Stock will be held by the Escrow
Agent as security for the fulfillment of the obligation of Holdings and
Advertising to deliver such shares into the Escrow Funds.
Employment Arrangements
The Acquisition Agreement provides that TBWA or one of the other companies
operating within the TBWA International network will offer employment to
substantially all employees of Holdings and its subsidiaries following the
Closing of the Acquisition; and that such personnel who accept such employment
will be employed on substantially equivalent terms and conditions as such
personnel were employed by Holdings or a subsidiary immediately prior to the
Closing Date. The Acquisition Agreement also provides for specific employment
arrangements with certain key executives; see "The Transactions--Interests of
Certain Persons in the Transactions".
Other Terms and Conditions of the Acquisition Agreement
Representations and Warranties
The Acquisition Agreement contains various customary representations and
warranties of Holdings and Advertising relating to, among other things: (a) the
organization and similar corporate matters of Holdings and each of the
subsidiaries; (b) the capital structure of Holdings and each of its
subsidiaries; (c) authorization, execution, delivery, performance and
enforceability of the Acquisition Agreement and related matters; (d) absence of
conflicts under charters or by-laws, required consents or approvals and
violations of any instruments or laws; (e) financial statements provided to
Omnicom by Holdings; (f) absence of certain material adverse events, changes or
effects; (f) certain accounting matters; (g) certain contracts, including, but
not limited to, certain employment, consulting and benefit matters; (h)
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litigation; (i) certain tax matters; (j) undisclosed liabilities; (k) insurance;
(l) compliance with law and licenses, authorizations and permits held by
Holdings necessary to conduct its business; (m) client relations; (n) employment
relations; (o) retirement and other employee plans and matters relating to the
Employee Retirement Income Security Act of 1974, as amended; (p) the shareholder
votes required; (q) change in capital structure; and (r) trademarks, trade
names, assumed or fictitious names, copyrights, logos, service marks and
slogans.
The Acquisition Agreement also contains various customary representations
and warranties of Omnicom and TBWA relating to, among other things; (a)
organization and similar corporate matters of Omnicom and TBWA; (b)
authorization, execution and delivery of the Acquisition Agreement and related
matters; (c) absence of any conflicts under charters or by-laws, required
consents or approvals and no violations of any instruments or laws; (d) the
shares of Omnicom Common Stock to be issued in the transaction; (e) financial
statements provided to Holdings by Omnicom; (f) absence of certain adverse
events, changes or effects; and (g) litigation.
Certain Covenants
Pursuant to the Acquisition Agreement, Holdings has agreed that, during the
period from the date of the Acquisition Agreement until the Closing Date,
Holdings and each of its subsidiaries will, among other things: (a) obtain all
government approvals and other action necessary to terminate the Profit Sharing
Plan of Holdings; (b) not solicit, initiate or encourage any other offer or
inquiry concerning the acquisition of the Businesses; (c) give timely notice of
a meeting to its shareholders to approve the Acquisition, the amendment of the
Holdings Certificate and the Plan of Liquidation and recommend approval of the
transactions contemplated by the Acquisition Agreement; (d) inform Omnicom's
management as to the operation, management and business of the Businesses to be
acquired; (e) permit Omnicom and TBWA to make such reasonable investigation of
the assets, properties and businesses of Holdings and Advertising as they deem
necessary or advisable; and (f) except (i) as permitted by the Acquisition
Agreement and (ii) as otherwise consented to in writing by Omnicom (on behalf of
itself and TBWA), operate its businesses in the ordinary course and, to the
extent consistent with past practice, and use reasonable commercial efforts to
preserve existing business organization, existing business relationships, and
goodwill intact.
Pursuant to the Acquisition Agreement, Holdings and Advertising and Omnicom
and TBWA have covenanted with one another to take certain additional actions,
including without limitation; (a) Holdings and Omnicom each shall take all
corporate and other action, make all filings with courts or governmental
authorities and use its reasonable efforts to obtain in writing all approvals
and consents required to be taken, made or obtained by it in order to effectuate
the Acquisition; (b) to prepare this Prospectus/Information Statement and the
Registration Statement of which it is a part, with each party representing and
warranting to the other as to the accuracy of the information supplied by it for
inclusion herein; (c) to each use its reasonable efforts to consummate the
Acquisition and the other transactions contemplated by the Acquisition
Agreement; (d) to obtain all necessary sales tax exemptions and take all such
other action as may be necessary or advisable to cause the transfer of the
Assets to TBWA pursuant to the Acquisition not to be subject to sales tax; and
(e) to take the actions more fully described in "Financial Actions" below.
Financial Actions
Between the date of the Acquisition Agreement and the Closing Date, certain
financial arrangements are required to occur: (i) TBWA shall lend Holdings
$55,000,000 and lend Advertising $1,000,000 on reasonable commercial terms and
pursuant to financing documents reasonably acceptable to the parties thereto and
in substantially the form of the Amended and Restated Credit Agreement and the
documents ancillary thereto; (ii) Holdings shall make a capital contribution of
not less than $55,000,000 to Advertising; and (iii) Advertising shall repay in
full all outstanding principal, together with accrued interest, of the 8.17%
Junior Subordinated Installment Notes, the 13.25% Junior Subordinated Notes, the
13.25% Senior Subordinated Notes, and the notes issued under the Amended and
Restated Credit Agreement. Upon the payment in full of amounts outstanding under
the Amended and Restated Credit Agreement in accordance with clause (iii) and
prior to the Closing, Omnicom agrees to release or cause to be released (by,
among other things, filing UCC termination statements in all appropriate
jurisdictions) all liens and other security interests granted to secure the
obligations of Holdings and Advertising thereunder.
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Indemnification
The Acquisition Agreement provides that Holdings shall indemnify and hold
harmless, and shall reimburse TBWA and its affiliates, directors, officers, and
employees for all losses, claims, damages and liabilities (to the extent not
covered by insurance), and all fees, costs and expenses (including reasonable
attorneys' fees) related thereto (together referred to herein as "Loss" or
"Losses"), arising out of, based upon, or resulting from (i) the inaccuracy or
breach of any representation or warranty (other than that referred to in clause
(iv) below) of Holdings or Advertising or any covenant of Holdings or
Advertising contained in or made pursuant to the Acquisition Agreement, (ii) the
breach of or failure by Holdings or Advertising to perform or discharge its
obligations under the Acquisition Agreement or under the transactions
contemplated thereby, (iii) a claim or cause of action by a third party relating
to any liability of Holdings or Advertising not assumed by TBWA, or (iv) any
inaccuracy in or breach of a specified representation and warranty relating to
the Indemnified Receivable. Pursuant to the Acquisition Agreement, no Losses
arising out of a matter referred to in (i), (ii) or (iii) above shall be
reimbursed to TBWA until such time as all Losses arising out of a matter
referred to in (i) through (iii) above shall exceed $300,000, in which case
Holdings shall be liable for all Losses in excess of $300,000 (Losses arising
out of the matter referred to in clause (iv) above shall be reimbursable without
regard to the $300,000 "cushion"). Losses arising out of matters referred to in
clauses (i) through (iii) above shall be satisfied only out of the General
Escrow Fund and Losses arising out of the matter referred to in clause (iv)
above shall be satisfied only out of the Special Escrow Fund. The aggregate
indemnity obligation of Holdings as so determined shall be satisfied from the
Escrow Funds as provided in the Escrow Agreement, and neither Omnicom nor TBWA
nor any of their affiliates will have any recourse for the payment of any such
indemnity obligations against Holdings or Advertising (or the Holdings
Stockholders or Rightsholders), nor will any of such persons be personally
liable for any such indemnity obligations. See "The Acquisition Agreement--The
Acquisition--Escrows". Indemnity obligations shall be paid by returning to
Omnicom out of the relevant Escrow Fund the number of whole shares of Omnicom
Common Stock, valued at the original Market Value, equal to the Losses (subject
to the $300,000 "cushion," where applicable).
The obligation of Holdings to indemnify shall terminate and be of no
further force and effect on the earlier to occur of (x) the date of first
independent audit report, if any, of the consolidated financial results of TBWA
and the Businesses following the Closing Date, and (y) one year from the Closing
Date (the "Indemnity Period"). Upon the expiration of the Indemnity Period, all
such representations, warranties, covenants and agreements shall expire,
terminate, and be of no further force or effect, except that claims asserted in
writing against Holdings on or prior to such expiration shall survive until they
are decided and are final and binding upon TBWA and Holdings. However, in that
the collectibility of the Indemnified Receivable cannot reasonably be assured at
the present time, these limitations will not apply to the matter as to which
TBWA is entitled to be indemnified under that clause. Instead, this
indemnification obligation will terminate on the earlier of (i) the second
anniversary of the Closing Date, the date by which the parties expect such
collectibility to have been finally determined and (ii) the date on which such
collectibility shall in fact have been finally determined, provided that claims
asserted in writing prior to such expiration shall survive until they are final
and binding.
See "The Acquisition Agreement--The Acquisition--The Escrow
Agreement--General Escrow Fund" and "--Special Escrow Fund."
Pursuant to the Acquisition Agreement, Omnicom and Holdings have also
agreed to indemnify the other, including its directors, officers, agents,
"controlling persons" as defined by the Securities Act, and attorneys (and, with
respect to Holdings, the Holdings Stockholders and Rightsholders) against any
liability, damage, cost, loss, or expense arising out of any untrue statement of
a material fact furnished by it for inclusion in the Registration Statement, or
caused by any omission to furnish a material fact concerning it that is required
to be stated therein or that is necessary to make the statements furnished by it
not misleading. This indemnification obligation is separate from the
indemnification obligation of Holdings to TBWA discussed above, and is not
limited to amounts on deposit in the Escrow Funds under the Escrow Agreement,
nor to the limited periods of survival.
Conditions
In addition to approval of the Acquisition Agreement, the Advertising Stock
Sale Agreement, the amendment of the Holdings Certificate and the Plan of
Liquidation by Holdings Stockholders at the Special Meeting, and to the required
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regulatory approvals, the respective obligations of Omnicom, TBWA, Holdings and
Advertising to consummate the Acquisition are subject to the satisfaction of
certain conditions, including without limitation: (i) the accuracy in all
material respects of the representations and warranties made by the parties in
the Acquisition Agreement; (ii) the performance by the parties of their
respective obligations under the Acquisition Agreement prior to the Closing
Date; (iii) the absence of any material adverse changes in the condition of the
businesses of Holdings or Advertising on the one hand or Omnicom, on the other
hand; (iv) the effectiveness of the Registration Statement under the Securities
Act with respect to the shares of Omnicom Common Stock to be issued pursuant to
the Acquisition Agreement and the approval of the listing of such Omnicom Common
Stock on the New York Stock Exchange; (v) the execution and delivery of the
Escrow Agreement; (vi) the absence of any action or proceeding enjoining the
transactions contemplated by the Acquisition Agreement; (vii) the absence of any
action or proceeding by any governmental agency that might result in enjoining
the consummation of said transactions; and (viii) the consummation of the
transactions contemplated by the Profit Sharing Plan Purchase Agreement.
The obligations of Omnicom to effect the Acquisition are subject to
satisfaction of certain additional conditions including, without limitation: (i)
the SEC not having objected to Omnicom's treatment of the Acquisition as a
pooling-of-interests for accounting purposes; (ii) Advertising continuing to be
the advertising agency of record for certain key clients or, with respect to
some of these clients, Advertising's having replaced a loss of any such client
with an account of similar size (measured by revenues); (iii) the receipt by
Holdings of Consent Letters from Rightsholders holding in the aggregate at least
83% of the outstanding EARs and EPUs on the Closing Date, including all
Rightsholders who are also Holdings Stockholders; (iv) the execution of
employment agreements with TBWA or one of its affiliates by each of Robert
Kuperman, Thomas Patty, Adelaide Horton, Ira Matathia, Steven Hancock and Robert
Wolf and the execution and delivery of non-competition agreements by each of
such individuals; and (v) there not having been a material and adverse change in
the Businesses (which shall include TBWA not having received reasonable
assurances and financial data that (a) if the Closing is on or prior to August
31, 1995, EBIT for the nine months ended July 31, 1995 is at least $7,500,000
and EBIT for the 1995 Fiscal Year is reasonably expected to exceed $13,500,000;
and (b) if the Closing is on or after November 1, 1995, EBIT for the 1995 Fiscal
Year is at least $13,500,000).
The obligations of Holdings and Advertising to effect the Acquisition are
subject to the satisfaction of certain additional conditions including, without
limitation: (i) that Annualized Revenues of Holdings and its subsidiaries during
the 1995 Fiscal Year shall not be in excess of $100,000,000 and EBIT for the
1995 Fiscal Year shall not exceed (or shall not reasonably be expected to
exceed) $17,200,000; (ii) TBWA or one of its affiliates having entered into the
employment agreements described above; and (iii) TBWA having assumed the
existing employment agreement between Holdings and Leland Clow and the existing
employment and consulting agreement between Holdings and Jay Chiat (and TBWA
having validly assigned such contract to Omnicom). SEE "The Acquisition
Agreement--The Acquisition--Renegotiation of Acquisition Price" and "The
Transactions--Interests of Certain Persons in the Transactions".
Pursuant to the terms of the Acquisition Agreement, each of Omnicom and
Holdings is entitled to waive any of its conditions to consummation of the
Acquisition to the extent that any such condition is not satisfied in full by
the other party, other than conditions relating to the absence of any objection
by the SEC to Omnicom's treatment of the Acquisition as a pooling-of-interests
for accounting purposes and the approval of the Transactions by the Holdings
Stockholders.
Additional Agreements
Pursuant to the Acquisition Agreement, Omnicom, TBWA, Holdings and
Advertising have made certain additional agreements with respect to periods
following the Closing Date, including without limitation the following: (a) each
of Holdings and Advertising shall change its corporate name to a name not
including the "Chiat/Day" designation or any variation thereof and will cause
each inactive subsidiary which is not being acquired by TBWA under the
Acquisition Agreement to similarly change its corporate name; (b) TBWA shall
change its corporate name, and shall cause those members of the TBWA
international group operating under the TBWA name in North America to change
their corporate names, in each case to include the designation "TBWA Chiat/Day";
(c) Holdings shall provide Omnicom with copies of all appropriate tax returns
and certificates, all of which shall be made consistent with the allocation of
acquisition price agreed to between the parties; and (d) Holdings and
Advertising will, if requested by Omnicom, make certain tax elections under U.S.
and Canadian laws.
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Termination
The Acquisition Agreement may be terminated and the contemplated
Acquisition may be abandoned at any time prior to the Closing, whether before or
after approval by the Holdings Stockholders, (a) by mutual consent of the Boards
of Directors of Omnicom, TBWA, Holdings and Advertising; (b) by either Omnicom
and TBWA, on the one hand, or Holdings and Advertising, on the other hand, if
there has been a breach of any representation, warranty or covenant on the part
of the other party set forth in the Acquisition Agreement which breach has not
been cured within 30 days following receipt by the breaching party of notice of
such breach, unless the breach of any such representation, warranty, or covenant
does not materially adversely affect the business or assets of the breaching
party or the ability of either party or parties to consummate the Acquisition;
(c) by the Board of Directors of Omnicom, TBWA, Holdings or Advertising if a
final and nonappealable order, decree or judgment of any court or other
governmental authority is issued which would enjoin the Acquisition; or (d) by
either Omnicom and TBWA or Holdings and Advertising if the Closing Date shall
not have occurred prior to the close of business on December 31, 1995 or at any
time after October 31, 1995 if the conditions to such parties' obligation to
close shall have become incapable of being satisfied by December 31, 1995.
In the event of any termination of the Acquisition Agreement by either
Omnicom and TBWA or by Holdings and Advertising as provided above, the
Acquisition Agreement shall become void and there will be no liability or
obligation on the part of any party or its respective officers or directors
except that such termination does not preclude any action or claim for damages
to which any party is otherwise entitled as a result of a breach by the other
party.
Amendment
The Acquisition Agreement and the exhibits and schedules thereto may be
amended, supplemented or qualified by the parties only by an agreement in
writing signed by all parties with due authorization.
THE ADVERTISING STOCK SALE AGREEMENT
(A copy of the Advertising Stock Sale Agreement is filed as an Exhibit to
the Registration Statement of which this Prospectus/Information Statement forms
a part and is incorporated herein by reference. This summary of the Advertising
Stock Sale Agreement is qualified in its entirety by reference to such
agreement.)
Pursuant to the Advertising Stock Sale Agreement, as soon as practicable
after the Distribution Date, Adelaide Horton [ADD ASSIGNEES, IF ANY] will
purchase from Holdings all of the issued and outstanding common stock of
Advertising. At such time, the only asset which Advertising will own will be its
rights, through its ownership of all of the capital stock of Chiat/Day Direct
Marketing, Inc., under the National Car Suit. Pursuant to the Advertising Stock
Sale Agreement, Holdings has agreed to indemnify Ms. Horton and Advertising for
any losses incurred in respect of liabilities of Advertising not assumed by TBWA
under the Acquisition Agreement. To the extent that Holdings were unable to
fully indemnify Ms. Horton and Advertising, any recovery from the National Car
Suit received by Advertising would be at risk.
PROPOSED AMENDMENT OF THE HOLDINGS CERTIFICATE
The Holdings Certificate sets forth the corporate name of Holdings as
"Chiat/Day Holdings, Inc." Following the Closing under the Acquisition
Agreement, TBWA will own all rights in and to the "Chiat/Day" name, and Holdings
has agreed that immediately following the Closing thereunder it would change its
corporate name to a name not including the "Chiat/Day" designation or any
variation thereof. Under the proposed amendment Holdings' name will be changed
to "CDH Corporation". Pursuant to the Acquisition Agreement, Advertising will
also change its corporate name to a name not including the "Chiat/Day"
designation or any variation thereof, and each of Holdings and Advertising will
cause its inactive subsidiaries which are not being acquired by TBWA under the
Acquisition Agreement, to effect a similar change to its corporate name.
Advertising intends to change its name to "CDAD Corporation" . Approval by the
Holdings Stockholders of this amendment to the Holdings Certificate is a
condition of Omnicom's and TBWA's obligation to consummate the Acquisition under
the Acquisition Agreement.
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THE PLAN OF LIQUIDATION
(Copies of the Plan of Liquidation, the Liquidating Trust Agreement and the
Liquidating Trust Escrow Agreement are filed as Exhibits to the Registration
Statement of which this Prospectus/Information Statement forms a part and are
incorporated herein by reference. This summary of the Plan of Liquidation, the
Liquidating Trust Agreement and the Liquidating Trust Escrow Agreement is
qualified in its entirety by reference to such agreements.)
General
The Plan of Liquidation provides that, upon consummation of the Closing
under the Acquisition Agreement, Holdings will be dissolved pursuant to the
provisions of the DGCL. Following the procedures prescribed in the DGCL, the
Board of Directors of Holdings will file with the Secretary of State of the
State of Delaware a Certificate of Dissolution, thereby terminating the
corporate existence of Holdings. Thomas Patty and David Wiener, the Liquidating
Trustees of the Liquidating Trust established pursuant to the Liquidating Trust
Agreement will, however, function with authority to wind up Holdings' affairs,
pay, satisfy and discharge certain liabilities and obligations not assumed by
TBWA under the Acquisition Agreement, and distribute to the Holdings
Stockholders all of the remaining assets of Holdings.
The distribution of the shares of Omnicom Common Stock will not occur until
the Distribution Date. Assuming the Closing occurs on August 31, 1995, the
earliest that the Distribution Date would occur is October 26, 1995. During the
period from the Closing Date until the Distribution Date, Holdings Stockholders
and Rightsholders will bear the risk of fluctuations in the market price of the
Omnicom Common Stock.
The Liquidating Trust, after the Acquisition and the distributions to occur
on the Distribution Date, shall hold all the remaining assets of Holdings
(except to the extent Holdings distributes any such assets directly to Holdings
Stockholders), including the right to receive any assets remaining after the
termination of the Escrow Agreement. If any assets remain in the Liquidating
Trust after all claims, charges, liabilities and obligations of the Liquidating
Trust have been paid or discharged, the Liquidating Trustees will, as
expeditiously as is practicable, distribute such assets to the former holders of
Holdings Common Stock on a pro rata basis according to their interests.
All of the directors and officers of Holdings who are also Holdings
Stockholders have indicated that they intend to vote for the Plan of Liquidation
in their capacity as Holdings Stockholders. In order to effectuate the Plan of
Liquidation, Holdings will give notice to all known creditors, if any, after
giving effect to the assumption of liabilities by TBWA pursuant to the
Acquisition Agreement, and will pay or make adequate provision for any Trust
Liabilities. It is intended that the consummation of the transactions
contemplated by the Acquisition Agreement, followed by the distribution to the
Holdings Stockholders in complete liquidation of Holdings, will not give rise to
dissenter's rights in favor of Holdings Stockholders under Delaware law.
Liquidating Distribution to Holdings Stockholders
Pursuant to the Plan of Liquidation, on the Distribution Date, Holdings
Stockholders will receive a distribution of the shares of Omnicom Common Stock
paid by TBWA to Holdings as acquisition price under the Acquisition Agreement
(exclusive of the Contributed Stock), as reduced by (i) the five percent of such
shares which will be deposited by Holdings on the Distribution Date into the
Liquidating Trust on behalf of the Holdings Stockholders and (ii) the shares of
Omnicom Common Stock used to fund on the Distribution Date the Stockholders
General Escrow Fund and the Stockholders Special Escrow Fund under the Escrow
Agreement.
Based on an estimated total acquisition price of $25,366,749 (see "The
Acquisition Agreement--The Acquisition--Determination of Acquisition Price"),
each holder of Holdings Common Stock will be entitled to receive in such
distribution, per share of Holdings Common Stock, shares of Omnicom Common Stock
with a value (determined in accordance with the terms of the Acquisition
Agreement) equal to $_____. If none of the Omnicom Common Stock received by
Holdings were used to fund the Stockholders General Escrow Fund, the
Stockholders Special Escrow Fund and the Liquidating Trust on behalf of the
Stockholders, the value of the per share distribution for shares of Holdings
Common Stock would be $_____. Since the amounts held in such escrows and such
trust are subject to claims in respect of contingent liabilities, there can be
no assurances that amounts held therein will in fact be distributed to the
Holdings Stockholders.
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Liquidating Distribution to Rightsholders
On the Distribution Date, the Rightsholders will also receive a
distribution of Omnicom Common Stock from Advertising. See "The Acquisition
Agreement--The Acquisition--Payment of Obligations to Rightsholders". The shares
of Omnicom Common Stock available for such distribution will be the shares of
Omnicom Common Stock paid by TBWA to Advertising as acquisition price under the
Acquisition Agreement (inclusive of the Contributed Stock), as reduced by (i)
the five percent of such shares which will be deposited by Advertising on the
Distribution Date into the Liquidating Trust Escrow Fund on behalf of the
Rightsholders and (ii) the shares of Omnicom Common Stock used to fund on the
Distribution Date the Rightsholders General Escrow Fund and the Rightsholders
Special Escrow Fund under the Escrow Agreement.
Based on an estimated total acquisition price of $25,366,749 (see "The
Acquisition Agreement--The Acquisition--Determination of Acquisition Price"),
each Rightsholder (whether an EPU holder or an EAR holder) will be entitled to
receive in such distribution, per EPU or EAR, shares of Omnicom Common Stock
with a value (determined in accordance with the terms of the Acquisition
Agreement) equal to $_____. If none of the Omnicom Common Stock received by
Advertising were used to fund the Rightsholders General Escrow Fund, the
Rightsholders Special Escrow Fund and the Liquidating Trust Escrow Fund on
behalf of the Rightsholders, the value of the per unit distribution for each EPU
or EAR would be $_____. Since the amounts held in such escrows are subject to
claims in respect of contingent liabilities, there can be no assurances that
amounts held therein will in fact be distributed to the Rightsholders.
Fractional Shares
If any of the foregoing distributions does not result in a Holdings
Stockholder or Rightsholder being entitled to a whole number of shares of
Omnicom Common Stock, the Holdings Stockholder or Rightsholder will receive a
cash payment in lieu of any entitlement to a fractional share of Omnicom Common
Stock from the proceeds of a sale on the NYSE by Holdings or Advertising (as the
case may be) of a sufficient number of shares of Omnicom Common Stock to settle
the aggregate amount of fractional share distribution entitlements of all
similarly situated Holdings Stockholders and Rightsholders. As a result, no
fractional shares of Omnicom Common Stock will be distributed under the Plan of
Liquidation.
Operation of the Liquidating Trust
Following the dissolution of Holdings and the completion of the liquidating
distributions described above, each share of Holdings Common Stock, regardless
of class, shall have an equal interest in the Liquidating Trust. After such
time, the Liquidating Trustees will, on behalf of the Holdings Stockholders, (i)
receive any additional liquidating distributions from Holdings, (ii) act as the
agent of the Holdings Stockholders in connection with the administration of the
Escrow Agreement and the Liquidating Trust Escrow Agreement, (iii) respond to
the assertion of any and all claims of indemnification by TBWA pursuant to the
terms of the Acquisition Agreement and the Escrow Agreement, (iv) pursue any
claims which Holdings may have against the Special Escrow Fund and (v) complete
the winding up of the affairs of Holdings and the payment of certain liabilities
not assumed by TBWA under the Acquisition Agreement out of the assets of the
Liquidating Trust.
As described above under "--Liquidating Distribution to Holdings
Stockholders", five percent of the shares of Omnicom Common Stock received by
Holdings as part of the acquisition price under the Acquisition Agreement
(exclusive of the Contributed Stock) will be deposited in the Liquidating Trust,
on behalf of the Holdings Stockholders, for the satisfaction of the following
liabilities (collectively, "Trust Liabilities") of Holdings (in each case other
than the liabilities assumed by TBWA pursuant to the Acquisition Agreement): (i)
all claims and obligations, including all contingent, conditional or unmatured
contractual claims, known to Holdings or the Liquidating Trustees, (ii) any
claim which is the subject of a pending action, suit or proceeding against
Holdings and (iii) claims which, based on facts known to Holdings or the
Liquidating Trustees, are likely to arise or become known to Holdings or the
Liquidating Trustees within ten years. The obligation of Holdings to indemnify
TBWA and Advertising for losses arising out of retained liabilities will
constitute a Trust Liability. See "The Advertising Stock Sale Agreement". In
addition, Trust Liabilities will include the costs and expenses payable by
Holdings in respect of (i) the Escrow Agent's fees under the Escrow Agreement,
(ii) maintaining insurance to cover indemnification obligations of Holdings
under the Holdings Certificate and the Liquidating Trust Agreement to its
directors, officers and agents (including the Liquidating Trustees) and (iii)
certain legal and other professional fees in connection with the liquidation,
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the establishment of the trust, final tax returns and other post-Closing
transactions and matters. As described more fully below under "--The Liquidating
Trust Escrow", the Liquidating Trustees shall be reimbursed from the Liquidating
Trust Escrow Fund for the Rightsholders' share of any such Trust Liabilities.
The Liquidating Trust will also receive from time to time, on behalf of the
Holdings Stockholders, distributions of Omnicom Common Stock from the
Stockholders General Escrow Fund and the Stockholders Special Escrow Fund
maintained pursuant to the Escrow Agreement. See "The Acquisition Agreement--The
Acquisition--The Escrow Agreement". Pursuant to the Liquidating Trust Agreement,
the Liquidating Trustees will promptly sell any shares of Omnicom Common Stock
received by them and retain the net cash proceeds as the property (the "Trust
Property") of the Liquidating Trust.
Pursuant to the Liquidating Trust Agreement, the Liquidating Trustees shall
invest and reinvest the Trust Property and shall maintain any income earned on
such Trust Property ("Trust Income") separately from the Trust Property. The
Trust Income will include any cash and other taxable dividends paid to the
Liquidating Trustees, on behalf of the Holdings Stockholders, in respect of
Omnicom Common Stock on deposit in the Stockholders General Escrow Fund and the
Stockholders Special Escrow Fund. See "The Acquisition Agreement--The
Acquisition--The Escrow Agreement". All Trust Income will be distributed by the
Liquidating Trustees at the end of each fiscal quarter to the former Holdings
Stockholders, pro rata in accordance with their interests.
The Liquidating Trustees shall distribute Trust Property at least once
annually to the former Holdings Stockholders, pro rata in accordance with their
interests, provided that no distribution shall be made without satisfying or
adequately providing for (i) a reserve for all remaining Trust Liabilities, (ii)
a reserve for Trustee expenses and (iii) a reserve for payments owing to missing
beneficiaries.
The termination of the Liquidating Trust will occur on the later of (i)
three years and six months from the date the Liquidating Trust is established or
upon payment to the former Holdings Stockholders of all of the Trust Property
and Trust Income, whichever is earlier, and (ii) the date of termination of the
Escrow Agreement, provided that the Liquidating Trust shall continue for a
reasonable period for the limited purpose of discharging any remaining Trust
Liabilities.
The Liquidating Trust Escrow
As described above under "The Acquisition Agreement--The
Acquisition--Payment of Obligations to Rightsholders" five percent of the shares
of Omnicom Common Stock received by Advertising as part of the acquisition price
under the Acquisition Agreement (including five percent of the Contributed
Stock) will be deposited in the separate Liquidating Trust Escrow Fund created
by the escrow agreement (the "Liquidating Trust Escrow Agreement") among
Holdings (or, after the creation and funding of the Liquidating Trust, the
Liquidating Trust), Advertising and ___________________, as escrow agent (the
"Liquidating Trust Escrow Agent"), on behalf of the Rightsholders, for the
satisfaction of the Rightsholders' share of Trust Liabilities. The Liquidating
Trust Escrow Agent may also receive from time to time, on behalf of the
Rightsholders, distributions of Omnicom Common Stock from the Rightsholders
General Escrow Fund and the Rightsholders Special Escrow Fund maintained
pursuant to the Escrow Agreement. See "The Acquisition Agreement--The
Acquisition--The Escrow Agreement". Pursuant to the Liquidating Trust Escrow
Agreement, the Liquidating Trust Escrow Agent will promptly sell any shares of
Omnicom Common Stock received by it and retain the net cash proceeds in the
Liquidating Trust Escrow Fund.
Pursuant to the Liquidating Trust Escrow Agreement, the Liquidating Trust
Escrow Agent shall invest and reinvest the funds on deposit in the Liquidating
Trust Escrow Fund (any income earned in respect of such funds, the "Liquidating
Trust Escrow Income"). The Liquidating Trust Escrow Income will include any cash
and other taxable dividends paid to the Liquidating Trust Escrow Agent, on
behalf of the Rightsholders, in respect of Omnicom Common Stock on deposit in
the Rightsholders General Escrow Fund and the Rightsholders Special Escrow Fund.
All Liquidating Trust Escrow Income will be distributed by the Liquidating Trust
Escrow Agent at the end of each fiscal quarter to the former Rightsholders, pro
rata in accordance with their interests.
The Liquidating Trust Escrow Agent will reimburse the Liquidating Trust
from the Liquidating Trust Escrow Fund, upon proper request made by the
Liquidating Trustees, for the Rightsholders' proportionate share of payments
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made by the Liquidating Trust in respect of Trust Liabilities. Such
proportionate share shall be equal to (x) the total amount of the payment made
by the Liquidating Trustee multiplied by (y) a fraction, the numerator of which
equals the total amount of funds then on deposit in the Liquidating Trust Escrow
Fund and the denominator of which equals (1) the numerator plus (2) the amount
of Trust Property then on deposit in the Liquidating Trust.
Upon each distribution by the Liquidating Trustee of Trust Property to the
Stockholders pursuant to the Liquidating Trust Agreement, the Liquidating Trust
Escrow Agent shall distribute to the Rightsholders, pro rata in accordance with
their interests, the same percentage of the Liquidating Trust Escrow Fund as is
being distributed to the Holdings Stockholders from the Liquidating Trust.
The Liquidating Trust Escrow Agent will act as the agent of the
Rightsholders for purposes of the administration of the Liquidating Trust Escrow
Agreement. The Liquidating Trust Escrow Agent will also serve as a trustee of
the Liquidating Trust.
FEDERAL INCOME TAX CONSEQUENCES
OF THE SALES OF ASSETS
AND DISSOLUTION AND LIQUIDATION
The following discussion summarizes certain federal income tax
consequences associated with the transactions under the Internal Revenue Code of
1986, as amended (the "code"). Because the following discussion does not
describe all potentially relevant tax considerations, each Holdings Stockholder
and Rightsholder (each, a "Holder") should consult his or her own tax advisor
regarding the tax consequences of the transactions in light of his or her own
tax situation. In particular, the following discussion may not be complete or
applicable in its entirety with respect to Holders who are not individuals, who
are dealers in securities, or who acquired their Holdings Common Stock througH
employee stock option programs.
Corporate Tax
Holdings believes that although the asset sales by it and Advertising and
the Advertising Stock Sale are taxable transactions, they will not result in
significant federal income tax liability being incurred by Holdings. This
conclusion is based on a number of positions taken or to be taken by Holdings
which might be subject to IRS challenge. To the extent that the IRS were to
successfully challenge any of Holdings' positions, amounts held in the
Liquidating Trust and the Liquidating Trust Escrow Fund would be used to pay the
ensuing tax liability. Accordingly, no assurance can be given that any of the
portions held in the Liquidating Trust will be ultimately distributed to the
Holdings Stockholders or that funds held in the Liquidating Trust Escrow Fund
will be ultimately distributed to the Rightsholders. To the extent that funds
available from these sources were inadequate to satisfy amounts due to the IRS,
the IRS could seek payment from Holdings Stockholders to the extent of such
unsatisfied liability up to the amounts distributed to such Holdings
Stockholders.
Holder Tax
The following summary applies only to Holders who are United States
persons for federal income tax purposes and except as specifically described
below, does not apply to Holders who are not U.S. persons.
Holders of Class A Common Stock and Mojo B Common Stock
For federal income tax purposes, holders of Class A Common Stock ("Class A
Stockholders") and Mojo B Common Stock ("Mojo B Stockholders") will recognize
gain or loss as a result of the Transactions equal to the difference between the
sum of (i) the fair market value of all of the Omnicom shares received (whether
distributed or placed in the Liquidating Trust or the Stockholders General or
Special Escrow Funds) plus (ii) the cash received in respect of any fractional
shares, and their adjusted basis in the Class A Common Stock or Mojo B Common
Stock. Class A Stockholders and Mojo B Stockholders who have held their shares
for over one year at the time of the transaction will be subject to tax at rates
up to the 28% maximum rate currently applicable to long-term capital gain. The
basis in the shares of Omnicom Common Stock received will be equal to their fair
market value on the Distribution Date and the holding period for the shares of
Omnicom Common Stock will commence on the date of the distribution. Provided
that the Liquidating Trust is classified as a trust for federal income tax
purposes (see discussion below), if amounts in the Liquidating Trust are
subsequently used to pay creditors (or payments are made to Omnicom out of the
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Stockholders General or Special Escrow Funds), Class A Stockholders and Mojo B
Stockholders should be entitled to a capital loss in the year such payments are
made. If the amount of payments made to creditors that are allocable to a Class
A Stockholder or Mojo B Stockholder are in excess of $3,000 and the other
requirements of section 1341 of the Code are met, such shareholder should be
able to compute his or her federal income tax liability for the year such
payments are made under the provisions of section 1341 of the Code. Under
section 1341 of the Code, a shareholder's federal income tax liability would be
the lesser of the tax liabilities as computed under two alternative computation
methods. Under the first method, the shareholder would compute his or her tax
liability by taking a regular capital loss in the year that payments are made.
Under the second method, the shareholder would decrease his or her tax liability
in the year of payment by the amount of tax liability that was generated by the
prior inclusion. The tax return for the year of inclusion would not be reopened
under either computation method. No additional federal income tax consequences
will occur when amounts are distributed from the Liquidating Trust to a Class A
Stockholder or a Mojo B Stockholder.
With respect to a Class A Stockholder's or Mojo B Stockholder's shares of
Omnicom Common Stock that are placed in the Liquidating Trust or the
Stockholders General or Special Escrow Funds, in the event the shares are
disposed of by the Liquidating Trust or the Stockholders General or Special
Escrow Funds, any difference in the value of the shares of Omnicom Common Stock
between the date of distribution and the date disposed of by Liquidating Trust
or such Escrow Funds will be treated as long-term or short-term capital gain or
loss by such Holder, depending on the holding period. Such Holder's share of any
other income (including dividends paid on the Omnicom Common Stock), gain or
loss realized by the Liquidating Trust or the Stockholders General or Special
Escrow Funds will be recognized by such Holder (whether or not distributed) in
computing his or her federal income tax.
Holders of Class B Common Stock
Holders of Class B Common Stock (other than holders of Mojo B Common Stock)
("Class B Stockholders") will recognize compensation income on the date of
distribution of shares of Omnicom Common Stock pursuant to the Plan of
Liquidation, equal to the excess of the sum of (i) the then fair market value of
the shares of Omnicom Common Stock (including the value of any amount to be held
in the Liquidating Trust or the Stockholders General or Special Escrow Funds)
plus (ii) the cash received in respect of any fractional shares, over the sum of
(a) the amount they paid for their Class B Common Stock, and (b) the amount, if
any, of ordinary income which they have previously recognized in respect of
their Class B Common Stock. The Holder's holding period for his or her shares of
Omnicom Common Stock will commence on the date of distribution and the basis of
the shares of Omnicom Common Stock will be the fair market value on the date of
such distribution.
With respect to a Class B Stockholder's shares of Omnicom Common Stock that
are placed in the Liquidating Trust or the Stockholders General or Special
Escrow Funds, in the event the shares are disposed of by the Liquidating Trust
or such Escrow Funds, any difference in the value of the shares of Omnicom
Common Stock between the date of distribution and the date disposed of by the
Liquidating Trust or such Escrow Funds will be treated as long-term or
short-term capital gain or loss by such Holder, depending on the holding period.
Such Holder's share of any other income (including dividends paid on the Omnicom
Common Stock), gains or losses realized by the Liquidating Trust or such Escrow
Funds will be recognized by such Holder in computing his or her federal income
taxes.
In addition, to the extent that any amount placed in the Liquidating Trust
or the Stockholders General or Special Escrow Funds is subsequently utilized to
discharge an obligation of Holdings, the affected Class B Stockholder should be
entitled to a federal income tax deduction, in the year of such expenditure,
equal to the amount of such expenditure previously included in the Class B
Stockholder's income. If the amount of the deduction exceeds $3,000, such
deduction may qualify for treatment under the provisions of Code section 1341,
previously described above. No additional federal income tax consequences will
occur when amounts are distributed from the Liquidating Trust to the Class B
Stockholder.
Tax on Holders of EPUs and EARs
Rightsholders will recognize compensation income equal to the sum of (i)
the fair market value of the shares of Omnicom Common Stock which they are
entitled to receive in the liquidation of Holdings, on the date such Omnicom
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Common Stock is either distributed or made available to them, plus (ii) the cash
received in respect of any fractional shares. For this purpose, any Omnicom
Common Stock placed in the Liquidating Trust Escrow Fund or the Rightsholders
General or Special Escrow Funds on their behalf is treated as having been
distributed to them.
With respect to a Rightsholder's shares of Omnicom Common Stock that are
placed in the Liquidating Trust Escrow Fund or the Rightsholders General or
Special Escrow Funds, in the event the shares are disposed of while in the
Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow
Funds, any difference in the value of the Omnicom Common Stock between the date
of distribution and the date disposed of will be treated as long-term or
short-term capital gain or loss by the Rightsholder, depending on the holding
period. The Rightsholder's share of any other income (including dividends paid
on the Omnicom Common Stock), gains or losses realized by the Liquidating Trust
Escrow Fund or the Rightsholders General or Special Escrow Funds will be
recognized by the Rightsholder in computing his or her federal income tax.
In addition, to the extent that any amount placed in the Liquidating Trust
Escrow Fund or the Rightsholders General or Special Escrow Funds is subsequently
utilized to discharge an obligation of Holdings, the affected Rightsholder
should be entitled to a federal income tax deduction, in the year of such
expenditure, equal to the amount of such expenditure previously included in the
Rightsholder's income. If the amount of the deduction exceeds $3,000, such
deduction may qualify for treatment under the provisions of Code section 1341
previously discussed above. No additional federal income tax consequences will
occur when amounts are distributed from the Liquidating Trust Escrow Fund or the
Rightsholders General or Special Escrow Funds to the Rightsholder.
Certain Consequences to Non-U.S. Holders
A Holder who is not a U.S. person (a "Non-U.S. Holder") will generally not
be subject to United States federal income tax with respect to gain or ordinary
income recognized as a result of the transaction unless (i) the gain is
effectively connected with a trade or business of the Non-U.S Holder in the
United States (or, in the case of ordinary income, is from United States
sources; i.e., is payable as the result of services performed in the United
States) or (ii) in the case of a Non-U.S. Holder who is an individual and holds
Class A common stock or Mojo B Common Stock as a capital asset, such Holder is
present in the United States for 183 days or more in the taxable year of the
sale and certain other conditions are met. Assuming the Liquidating Trust and
Liquidating Trust Escrow Fund are each classified as a trust for federal income
tax purposes (see discussion below) dividends paid on the shares of Omnicom
Stock held in the Liquidating Trust and Liquidating Trust Escrow Fund and
dividends paid on Omnicom Common Stock held in the Rightsholders or Stockholders
General or Special Escrow Funds will be subject to withholding of United States
federal income tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are effectively connected
with the conduct of a trade or business of the Non-U.S. Holder in the United
States. Under the current United States- Australia income tax treaty, for
example, dividends are subject to withholding at a 15% rate. A Non-U.S. Holder
who wishes to claim the benefit of an applicable treaty rate may be required to
satisfy applicable certification and other requirements. Dividends that are
effectively connected with a trade or business in the United States are subject
to United States federal income tax on a net basis.
Liquidating Trust and Liquidating Trust Escrow Fund
Holdings believes that the Liquidating Trust and the Liquidating Trust
Escrow Fund will each be treated as a grantor trust for federal income tax
purposes and not as an association taxable as a corporation. As such, items of
taxable income, deduction, gain and loss (including gain or loss on the sale of
shares of Omnicom Common Stock) would be passed through to the Holders and
reported by them on their tax return (whether or not distributed). However,
since the Liquidating Trust and the Liquidating Trust Escrow Fund will not meet
all of the IRS requirements to obtain a ruling as to grantor trust status, there
is a risk that the IRS could successfully assert that the Liquidating Trust or
the Liquidating Trust Escrow Fund should be taxed as a corporation. In that
event, the Liquidating Trust or the Liquidating Trust Escrow Fund would pay tax
on its income at the regular corporate rates of up to 35% and any distributions
to Holders would be taxed as dividends at ordinary income tax rates to the
extent of the earnings and profits of the Liquidating Trust or the Liquidating
Trust Escrow Fund.
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Withholding Taxes
That portion of the Omnicom Common Stock (and any cash received in respect
of fractional shares) which is taxable to Holders as ordinary or compensation
income is subject to federal income tax withholding at the prescribed rate of
28%, as well as FICA and other applicable federal, state and local withholding.
Holdings expects that Holders will make arrangements with Holdings to satisfy
their tax obligations. A Holder who fails to satisfy this withholding
requirement could be subject to potential additional estimated tax payment
liability and to penalties if such liability is not satisfied. If any person
receiving shares of Omnicom Common Stock in respect of his employment with
Holdings does not pay the relevant taxes, the Liquidating Trust and the related
Liquidating Trust Escrow Fund would have liability for the amount of such tax.
THE TAX CONSEQUENCES OF THE SALES OF ASSETS, THE LIQUIDATION OF HOLDINGS
AND THE INCOME WITH RESPECT TO THE LIQUIDATING TRUST, LIQUIDATING TRUST ESCROW
FUND, AND ESCROW FUNDS MAY BE INFLUENCED BY THE IRS'S VIEWS OF FACTUAL
CIRCUMSTANCES SURROUNDING THE TRANSACTIONS PROVIDED FOR HEREIN. NO RULINGS OR
OPINIONS OF COUNSEL HAVE BEEN OBTAINED WITH RESPECT TO THESE MATTERS.
EACH HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE
APPLICABILITY AND EXTENT OF ANY RELEVANT STATE, LOCAL OR FOREIGN TAX LAWS.
41
<PAGE>
BUSINESS INFORMATION CONCERNING OMNICOM
(The information contained in this section is qualified in its entirety by
reference to documents incorporated by reference.)
Omnicom, through its wholly and partially owned companies, operates
advertising agencies which plan, create, produce and place advertising in
various media such as television, radio, newspaper and magazines; and offers
clients such additional services as marketing consultation, consumer market
research, design and production of merchandising and sales promotion programs
and materials, direct mail advertising, corporate identification, and public
relations. Omnicom offers these services to clients worldwide on a local,
national, pan-regional or global basis. Operations cover the major regions of
North America, the United Kingdom, Continental Europe, the Middle East, Latin
America, the Far East and Australia. In 1994 and 1993, 54% and 52%,
respectively, of Omnicom's billings came from its non-U.S. operations.
According to the unaudited industry-wide figures published in the trade
journal, ADVERTISING AGE, in 1994 Omnicom was ranked as the third largest
advertising agency group worldwide.
Omnicom operates three separate, independent agency networks: the BBDO
Worldwide Network, the DDB Needham Worldwide Network and the TBWA International
Network. Omnicom also operates independent agencies, Altschiller & Company and
Goodby, Silverstein & Partners, and certain marketing service and specialty
advertising companies through Diversified Agency Services.
BBDO Worldwide, DDB Needham Worldwide and TBWA International, by themselves
and through their respective subsidiaries and affiliates, independently operate
advertising agency networks worldwide. Their primary business is to create
marketing communications for their clients' goods and services across the total
spectrum of advertising and promotion media. Each of the agency networks has its
own clients and competes with each other in the same markets.
The BBDO Worldwide, DDB Needham Worldwide and TBWA International agencies
typically assign to each client a group of advertising specialists which may
include account managers, copywriters, art directors and research, media and
production personnel. The account manager works with the client to establish an
overall advertising strategy for the client based on an analysis of the client's
products or services and its market. The group then creates and arranges for the
production of the advertising and/or promotion and purchases time, space or
access in the relevant media in accordance with the client's budget.
42
<PAGE>
SELECTED FINANCIAL DATA OF OMNICOM
The following table summarizes certain selected consolidated financial data
of Omnicom and its subsidiaries and is qualified in its entirety by the more
detailed financial information and notes thereto incorporated by reference into
this Prospectus/Information Statement.
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share Amounts)
--------------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year:
Commissions and fees ................ $1,756,205 $1,516,475 $1,385,161 $1,236,158 $1,178,233
Income before change
in accounting principles .......... 108,134 85,345 65,498 57,052 52,009
Net income .......................... 80,125 85,345 69,298 57,052 52,009
Earnings per common
share before change in
accounting principles:
Primary ......................... 3.15 2.79 2.31 2.08 2.01
Fully diluted ................... 3.07 2.62 2.20 2.01 1.94
Cumulative effect of
change in accounting
principles:
Primary ........................... (0.81) -- 0.14 -- --
Fully diluted ..................... (0.81) -- 0.11 -- --
Earnings per common share after
change in accounting principles:
Primary ........................... 2.34 2.79 2.45 2.08 2.01
Fully diluted ..................... 2.34 2.62 2.31 2.01 1.94
Dividends declared per common
share ............................. 1.24 1.24 1.21 1.10 1.07
At year end:
Total assets ........................ 2,852,204 2,289,863 1,951,950 1,885,894 1,748,529
Long-term obligations:
Long-term debt ...................... 187,338 278,312 235,129 245,189 278,960
Deferred compensation and other
liabilities ....................... 95,973 56,933 51,919 31,355 25,365
</TABLE>
43
<PAGE>
BUSINESS INFORMATION CONCERNING HOLDINGS
General
The principal line of business of Holdings and its subsidiaries includes
planning and creating advertising campaigns for clients, purchasing various
media spots (television, radio, newspapers and magazines), and providing
marketing consultation, market research and production services. In 1994,
Holdings was the 16th largest advertising agency in the U.S. and 27th largest in
the world according to statistics published in Advertising Age, a trade
publication. Holdings operates major offices in Venice, California, London, New
York and Toronto, and a regional network of offices in, Atlanta, Calgary,
Chicago, Dallas, San Francisco, Washington, D.C. and Jacksonville. The principal
office of Chiat/Day is located at 180 Maiden Lane, New York, New York 10038.
Sales and Marketing
Holdings believes that it has a reputation as an industry leader in terms
of the creativity and effectiveness of its campaigns. Holdings believes that its
reputation and the "Chiat/ Day" name are important generators of business.
Holdings has organized management teams to explore and pursue clients in
the major industry groups that it does not currently service. Holdings maintains
constant contact with industry sources for new business leads and presents five
to eight extensive business pitches per office per year.
Customers
Holdings serves a diversified and well-known client base in many
industries, including airlines, automobile, banking, cellular communications,
consumer electronics, entertainment, financial services, food products,
insurance, footwear, personal computers and soft drinks. Eight of Holdings' ten
largest clients representing 57% of 1994 gross income have been with Holdings
for more than five years.
Since 1988, Nissan Motor Company has been Holdings' largest client. In
1992, Nissan awarded its Infiniti account to Holdings without requiring
competitive bids. Nissan and Infiniti accounted for 49% of Holdings' gross
income in 1993 and 55% of Holdings' gross income in 1994. Holdings has no other
client which accounts for 10% or more of its gross income.
Like most advertising agencies, Holdings experiences a certain amount of
client turnover. Agreements between Holdings and its clients are generally
terminable by either Holdings or the client on 90 days notice. Turnover is
primarily generated by a change in the management of the client, an effort by
Holdings to pursue a client in the same category as an existing client, a client
merger or a change in the client's financial or strategic direction.
Competition
Agencies typically pitch new clients by presenting an ad campaign in
competition against other firms. The basis for the selection includes: relevance
of the campaign to the product strategy, creativity, market insights, the
agency's ability to provide the appropriate media exposure, past success and
personal chemistry. Holdings believes that agencies are rarely selected on the
basis of price. Typically, agencies are precluded from representing more than
one client in an industry for reasons of potential conflicts.
Services
Holdings' principal line of business includes planning and creating
advertising campaigns for clients; purchasing various media placements in local
television, network, cable, radio, newspapers, magazines and outdoor; and
providing marketing, market research and production services.
Holdings' four major offices (New York, Venice, Toronto and London) are
full service operations with a total workforce of approximately 600, committed
to Account Management, Account Planning, Creative, Media Planning and Buying,
and Production. The offices that form the regional network with a total
workforce of approximately 150 support the localized needs of Holdings' national
clients.
44
<PAGE>
Pricing and Billing
Holdings generates most of its revenue from fees and commissions for
production and placement in various media of agency generated advertising
campaigns. Most of Holdings' revenue is based on a combination of commissions
and fees with seven of the ten largest accounts on this system. This pricing
method provides a fixed minimum fee augmented by commissions based on the
client's media billings. This pricing method protects the agency from large
variations in its clients' media budgets.
Some clients are billed on a "cost plus mark-up" fee structure. Cost plus
mark-up billing entails billing the client a fixed monthly fee for the staffing
dedicated to the account plus an amount to cover overhead.
In addition, Holdings is sometimes paid a bonus by clients based on
predetermined performance criteria.
Billing and Accounting Practices
Revenue is recognized in the month in which the advertisement is run.
"Advance billings" in the current liability section of the balance sheet
represents costs and commissions which have been approved by and billed to
clients but for which related vendor invoices have not been received and income
has not been earned. "Expenditures billable to clients" in the current asset
portion of the balance sheet represents unbilled receivables. Both "Advance
billings" and "Expenditures billable to clients" are primarily the result of
timing differences between the receipt of invoices (media and production) and
the client billing cycle.
For media placement, Holdings obtains written approval of an estimate (the
"Estimate") from its clients before commitments are made to media vendors.
Clients are billed based on the approved Estimate.
Production of advertising spots follows a similar pattern, except that in
this case Holdings bills the client as costs are incurred. On average,
production costs charged to clients account for about 10% of all billing
activity. Spot (local television), newspaper, magazine and radio advertising
account for about 65% of billings. Network advertising represents the remaining
25% of billings.
Seasonality
Historically, Holdings' business has been seasonal, with increased billings
generated in the third and fourth quarters of each fiscal year. The seasonality
generally reflects the media placement patterns of Holdings' clients and is
similar to that experienced by other firms in the industry.
Personnel
On March 31, 1995, Holdings employed approximately 750 persons. In
addition, turnover at the senior management level has been very low. All of the
eight senior executives of Holdings have been with Holdings for at least eight
years, with an average tenure of over 13 years.
Since most employees are assigned to one specific account, Holdings can
respond quickly to account losses or acquisitions by hiring or reducing staff
accordingly.
None of Holdings' employees are represented by unions.
Legal Proceedings
Holdings is not involved in any material pending legal proceedings not
covered by insurance or by adequate indemnification, which, if decided adversely
to Holdings' interest, would have a material adverse effect on the financial
position of Holdings.
Properties
All of Holdings' offices are located in leased premises. Holding's
principal offices are in New York City and Venice. Holdings also leases offices
in Calgary, Chicago, Dallas, London, Toronto, San Francisco, Washington, D.C.
and Jacksonville.
45
<PAGE>
SELECTED FINANCIAL DATA OF HOLDINGS
The following table summarizes certain selected consolidated financial data
of Holdings and is qualified in its entirety by the more detailed financial
information and notes thereto appearing elsewhere in this Prospectus/Information
Statement. The financial data as of and for each of the five years ended October
31, 1994 is derived from the financial statements audited by Coopers & Lybrand
LLP, independent public accountants. The financial data for the three-month
periods ended January 31, 1994 and 1995, are derived from unaudited financial
statements and, in the opinion of Holdings, reflect all adjustments, consisting
only of normal non-recurring adjustments, necessary for a fair statement of
results of operations for such periods. Operating results for the three months
ended January 31, 1995, are not necessarily indicative of the results that may
be achieved for the entire year ending October 31, 1995. See "Financial
Statements", the related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations of Holdings".
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share Amounts)
---------------------------------------------------------------
1994 1993 1992 1991 1990
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
For the years ended October 31,
Fee and commission
income $89,277 $97,198 $106,013 $115,470 $131,457
Operating expenses 78,117 88,224 95,421 120,369 147,375
Restructuring expenses -- 25,848 -- -- --
Income (loss) before income tax provision 7,573 (20,690) 4,162 (5,656) (16,642)
Net income (loss) 5,971 (21,545) 3,407 (6,089) (17,389)
Earnings per share:
Net income (loss):
Primary 0.11 (0.39) 0.06 (0.10) (0.25)
Primary (including EPUs and EARs) 0.05 (0.39) 0.04 (0.10) (0.25)
Total assets 96,077 74,871 99,843 150,701 165,771
Long-term obligations:
Long-term debt 10,448 20,697 43,657 70,398 92,598
Other liabilities 12,800 15,433 4,103 25,995 7,019
</TABLE>
46
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF HOLDINGS
Results of Operations
Fiscal year 1993 compared to fiscal year 1992 and fiscal year 1994 compared to
fiscal year 1993.
Fee and commission income decreased in fiscal years ended October 31, 1993
and 1994 by 9% and 8%, respectively, compared to the prior fiscal years. The
decrease in fiscal year 1993 was mainly attributable to the loss of the American
Express and Nutrasweet accounts and the fiscal year 1994 decrease was mainly
attributable to loss of the Reebok account.
Salaries and employee benefit expenses were reduced by 6% in fiscal year
1993 and 3% in fiscal year 1994, respectively, as compared to the prior fiscal
years. Due to the reduction in fee and commission income in fiscal years 1993
and 1994, staff reductions were made to reduce costs. Selling, general and
administrative expenses were slightly higher in fiscal year 1993 from fiscal
year 1992. In fiscal year 1994, Holdings established a "virtual office" in its
New York and Venice offices by eliminating fixed office locations for personnel.
Holdings and Advertising employees carry portable phones and computers and are
encouraged to work where they feel most productive. Based on the implementation
of the virtual office, selling, general and administrative expenses were reduced
in fiscal year 1994 by 26% compared to fiscal year 1993.
A one-time restructuring charge was taken in fiscal year 1993 of
$25,848,000. This restructuring charge represented the estimated loss on
subletting the premises at 79 Fifth Avenue in New York through its December 31,
1997 term, the write-down of leaseholds at 79 Fifth Avenue in New York and at
340 Main Street and 320 Hampton Avenue in Venice, California.
The $637,000 and $12,000 losses from operations of a foreign subsidiary in
fiscal years 1993 and 1992 reflect the operating results of Holdings' Australian
subsidiary, the stock of which was transferred effective January 1, 1993 to an
unrelated third party. As a result of such transfer, Holdings recorded a
$3,504,000 gain on disposal of foreign subsidiary in fiscal year 1993.
The 42% decrease in other operating expenses in fiscal year 1993 compared
to fiscal year 1992 was due largely to the impact of a $3,200,000 charge in
fiscal year 1992 to reflect the settlement of certain litigation. An additional
92% reduction in other operating expenses was realized in fiscal year 1994
compared to fiscal year 1993 primarily due to income received in connection with
the sale of Holdings' Australian subsidiary and due to increased deferred
compensation expenses in fiscal year 1993 of approximately $1,000,000.
Interest expense was reduced by 39% in fiscal year 1993 versus fiscal year
1992 due to reduced levels of debt. A 2% increase in interest expense in fiscal
1994 versus fiscal 1993 was due to an increase in dividends issued to the profit
sharing plan in 1994.
The income tax provision for fiscal year 1993 decreased 63% compared to
fiscal year 1992 due largely to the use in fiscal year 1993 of net operating
loss carryforwards previously generated. While the income tax provision
increased 87% in fiscal year 1994 compared to fiscal year 1993, the income tax
provision was less than what would have been provided under the statutory rate
due to the use of net operating loss carryforwards and a foreign tax credit
generated in fiscal year 1994. FASB 109 was adopted effective October 1, 1993
creating a deferred tax asset of $18,717,000. No benefit was recorded on the
financial statements, but the effect is described in the footnotes.
First quarter 1995 compared to first quarter 1994.
In the first quarter 1995, fee and commission income were down by 9% as
compared to the same period of the previous year due to a change in spending
patterns of clients. In first quarter 1995, salaries and employee benefits
increased by 12% as compared to first quarter 1994 due to increased staffing in
the creative and account services area. At the same time, reductions of 9% were
made in the first quarter 1995 in administrative salaries as compared to the
first quarter of the previous year. A reduction in selling, general and
administrative expenses of 8% in first quarter 1995 versus first quarter 1994
was attributable to the implementation of the virtual office.
47
<PAGE>
Liquidity and Capital Resources
Holdings' principal source of operating capital has been from operations,
Senior Debt of $20,000,000 under the Amended and Restated Credit Agreement and
Senior Subordinated Debt of $11,000,000 under the 13.25% Senior Subordinated
Notes. The Senior Debt is due and payable on December 10, 1995 and the Senior
Subordinated Debt is payable on August 1, 1995. In the event the Transactions
are not consummated, Holdings would be required to refinance its entire debt
structure by December 10, 1995. Although Holdings received proposals regarding
refinancing the Senior Subordinated Debt and Holdings bank debt, such proposals
were not pursued.
Working capital increased in fiscal year 1993 by 2.6% versus fiscal year
1992 and decreased in fiscal year 1994 by 15.7% versus fiscal year 1993. There
was a slight decrease in working capital from fiscal year 1994 to the quarter
ended January 31, 1995.
Capital expenditures, net of retirements of $900,000, were made in fiscal
year 1993 and $5,600,000 in fiscal year 1994. These expenditures included, among
other things, leasehold improvements and upgraded telephone and computer
systems.
Holdings believes that its cash flows and funds available under existing
debt facilities will be adequate to meet its cash requirements through the
contemplated Closing Date of the Acquisition, but it is possible that additional
borrowings from Omnicom may be required.
DESCRIPTION OF OMNICOM CAPITAL STOCK
Each share of Omnicom Common Stock entitles the holder thereof to one vote
on all matters submitted to a vote of shareholders. All shares of Omnicom Common
Stock have equal rights and are entitled to such dividends as may be declared by
the Board of Directors out of funds legally available therefor and to share
ratably upon liquidation in the assets available for distribution to
stockholders. Omnicom is not aware of any restrictions on its present or future
ability to pay dividends. However, in connection with certain borrowing
facilities entered into by Omnicom and its subsidiaries, Omnicom is subject to
certain restrictions on current ratio, ratio of total consolidated indebtedness
to total consolidated capitalization, ratio of net cash flow to consolidated
indebtedness, and limitation on investments in and loans to affiliates and
unconsolidated subsidiaries. The Omnicom Common Stock is not subject to call or
assessment, has no preemptive conversion or cumulative voting rights and is not
subject to redemption. Omnicom's shareholders elect a classified board of
directors, and may not remove a director except by an affirmative two-thirds
vote of all outstanding shares. A two-thirds vote is also required for Omnicom's
shareholders to amend Omnicom's by-laws or certain provisions of its charter
documents, and to change the number of directors comprising the full board.
Omnicom may issue Omnicom Preferred Stock in series having whatever rights
and preferences the Board of Directors may determine. One or more series of
Omnicom Preferred Stock may be made convertible into Omnicom Common Stock at
rates determined by the Board of Directors, and Omnicom Preferred Stock may be
given priority over the Omnicom Common Stock in payment of dividends, rights on
liquidation, voting and other rights. Omnicom has no current plans to issue any
Omnicom Preferred Stock. Omnicom Preferred Stock may be issued from time to time
upon authorization of the Omnicom Board of Directors without action of the
shareholders.
Omnicom currently has outstanding $143,750,000 of 4.5%/6.25% Step-Up
Convertible Subordinated Debentures with a scheduled maturity in 2000, which are
convertible into Omnicom Common Stock at a conversion price of $54.88, subject
to adjustment in certain events.
Chemical Bank, 450 West 33rd Street, New York, New York 10001 is the
transfer agent and the registrar of the Omnicom Common Stock.
48
<PAGE>
DESCRIPTION OF HOLDINGS CAPITAL STOCK
Holdings is a Delaware corporation incorporated on May 2, 1988. Holdings is
the sole stockholder of Advertising, a Delaware corporation incorporated on
March 15, 1985.
Holdings Common Stock
Holdings has two classes of Common Stock: Class A Common Stock, par value
$0.01 per share and Class B Common Stock, par value $0.01 per share.
Class A Common Stock: There are 75,000,000 shares of Class A Common Stock
authorized and there were [13,527,269] shares outstanding at March 31, 1995. The
holders of Class A Common Stock are entitled to receive dividends when and as
declared by the Holdings Board of Directors, but only after full cumulative
dividends on the Holdings Preferred Stock have been paid or declared in full and
sums set aside for the payment thereof. Class A Common Stock and Class B Common
Stock rank equal with respect to the payment of dividends. Pursuant to the
Holdings Certificate, holders of Class A Common Stock, excluding certain shares
originally issued to Morgan Capital Corporation, have additional voting rights
with respect to (i) certain transactions with affiliates, (ii) the creation of
certain employee benefit plans, (iii) changes to the Holdings Certificate or
By-laws which adversely affect the Class A Common Stock, (iv) certain sales or
issuances of stock, and (v) certain business combinations. In the event of
certain dilutive transactions other than in connection with a merger,
consolidation, reorganization, or any public offering of stock of Holdings or in
consideration of the acquisition of stock or assets of another entity, holders
of Class A Common Stock are entitled to receive additional shares to prevent
dilution. At March 31, 1995, there were [19] record holders of Class A Common
Stock. See "Plan of Liquidation" herein for a description of the rights of
holders of Class A Common Stock in the event of a liquidation.
Class B Common Stock: There are 200,000,000 shares of Class B Common Stock
authorized and there were [39,993,465] shares outstanding at March 31, 1995. The
holders of Class B Common Stock are entitled to receive dividends when and as
declared by the Board of Directors, but only after full cumulative dividends on
the Holdings Preferred Stock have been paid or declared in full and sums set
aside for the payment thereof. Class A Common Stock and Class B Common Stock
rank equal with respect to the payment of dividends. Class B Common Stock has
the same voting rights as Class A Common Stock, except that certain shares of
Class A Common Stock have additional voting rights in some situations as
discussed above. At March 31, 1995, there were approximately 28 record holders
of Class B Common Stock. See "Liquidation" herein for a description of the
rights of holders of Class B Common Stock in the event of a liquidation.
Shares of Class B Common Stock which have been issued pursuant to the 1988
Chiat/Day Holdings, Inc. Restricted Stock Purchase Plan (the "Holdings Stock
Purchase Plan") are subject to the restrictions contained therein. Any sale,
transfer or disposition of the shares must comply with the provisions of the
Holdings Stock Purchase Plan and of the related Stockholders' Agreements.
49
<PAGE>
The following table reflects the beneficial ownership of directors,
executive officers and owners of more than 5% of the outstanding shares of each
of the Class A Common Stock, the Class B Common Stock (without taking into
account the outstanding EARs and EPUs), and all Holdings Common Stock, in each
case on a fully diluted basis at the close of business on March 31, 1995:
<TABLE>
<CAPTION>
Shares of Percent
Shares of Class A Shares of Class Holdings of Holdings
Name and Address Common Stock Percent of B Common Percent Common Common
of Beneficial Owner Owned Class Stock Owned(1) of Class Stock Stock
- ------------------- ------------- -------- ------------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jay Chiat ...................... 6,794,533 50% 18,547,970 46% 25,342,503 47%
c/o Chiat/Day inc. Advertising
180 Maiden Lane
New York, NY 10038
Leland Clow .................... 0 * 3,641,020 9% 3,641,020 7%
c/o Chiat/Day inc. Advertising
340 Main Street
Venice, CA 90291
Adelaide Horton ................ 100,000 * 0 * 100,000 *
c/o Chiat/Day inc. Advertising
180 Maiden Lane
New York, NY 10038
Robert Kuperman ................ 50,000 * 969,015 2% 1,019,015 2%
c/o Chiat/Day inc. Advertising
340 Main Street
Venice, CA 90291
Ira Matathia ................... 0 * 375,000 * 375,000 *
c/o Chiat/Day inc. Advertising
180 Maiden Lane
New York, NY 10038
Tom Patty ...................... 100,000 * 1,282,045 3% 1,382,045 3%
c/o Chiat/Day inc. Advertising
340 Main Street
Venice, CA 90291
David C. Wiener ................ 125,000 * 2,876,060 7% 3,001,060 6%
440 Sylvan Avenue
Englewood Cliffs
New Jersey, 07632
Robert Wolf .................... 200,000 1% 3,376,060 8% 3,576,060 7%
c/o Chiat/Day inc. Advertising
340 Main Street
Venice, CA 90291
Mac & Co (2) ................... 5,142,846 38% 0 * 5,142,846 10%
c/o Harvey Rabinowitz
Mellon Securities Trust Co.
120 Broadway,
New York, NY 10271
Directors and Officers as a Group 7,419,533 55% 33,159,475 83% 40,579,008 76%
</TABLE>
- ----------------
* represents holdings of less than 1%
(1) Jay Chiat also holds 5,396,715 EPUs and 26,945,903 EARs; Leland Clow also
holds 566,360 EPUs and 3,280,420 EARs; Adelaide Horton also holds 700,000
EPUs and 196,825 EARs; Robert Kuperman also holds 1,169,240 EPUs and
656,084 EARs; Ira Matathia also holds 1,125,000 EPUs and 131,217 EARs; Tom
Patty also holds 1,132,725 EPUs and 984,126 EARs; David C. Wiener also
holds 176,970 EPUs and 1,312,168 EARs; Robert Wolf also holds 1,176,970
EPUs and 1,968,252 EARs.
(2) Chesterfield Investments is the beneficial owner.
Following the Acquisition and the dissolution and liquidation of Holdings
described herein there will be no Class A Common Stock or Class B Common Stock
outstanding and none of the current directors and officers of Holdings will own
in excess of % of Omnicom Common Stock.
50
<PAGE>
No dividends have been declared or paid on the Holdings Class A Common
Stock or Class B Common Stock in the current fiscal year, or in any of the
periods presented in "Selected Financial Data of Holdings". Pursuant to the
Amended and Restated Credit Agreement, Advertising is prohibited from paying
dividends other than dividends paid in shares.
There is no established trading market for Holdings Class A Common Stock or
Class B Common Stock.
Holdings Preferred Stock
There are 200,000 shares of Holdings Preferred Stock authorized and there
were 140,817.7393 shares outstanding at March 31, 1995. All of the outstanding
shares of Holdings Preferred Stock are owned by the Profit Sharing Plan.
The holders of Holdings Preferred Stock are entitled to receive cumulative
dividends payable in cash, or at Holdings' option, in shares of Holdings
Preferred Stock (valued at $100 per share) or a combination of cash and shares
of Holdings Preferred Stock at a rate equal to 9% per annum of the liquidation
preference of all shares of Holdings Preferred Stock outstanding, if such amount
is paid entirely in cash, or at a rate of 10% per annum of the liquidation
preference if such amount is paid entirely in additional shares of Holdings
Preferred Stock, or at a blended rate based upon the weighted average of (i) the
number of shares of Holdings Preferred Stock in respect of which dividends are
paid in cash multiplied by 9%, and (ii) the number of shares in respect of which
dividends are paid in additional shares of Holdings Preferred Stock multiplied
by 10%. All dividends on shares of Holdings Preferred Stock are payable, if,
when and as declared by the Board of Directors, annually in arrears on August 1,
of each year. Any dividends in arrears on the Holdings Preferred Stock accrue
dividends at the rate of 9% per annum. The holders of Holdings Preferred Stock
are not entitled to vote on any corporate matters, except as required by law. In
the event of liquidation, the holders of Holdings Preferred Stock are entitled
to receive the amount of $100 in cash for each outstanding share of Holdings
Preferred Stock plus all declared and unpaid dividends before any distribution
to the holders of Class A Common Stock or Class B Common Stock. If the assets
available are insufficient for such a payment, the holders of Holdings Preferred
Stock shall share ratably in any distribution. Subject to the prior payment of
certain senior indebtedness of Advertising, the Holdings Preferred Stock may be
redeemed at Holdings' option on and after July 31, 1996 at a price of $100 per
share plus accrued but unpaid dividends subject to certain restrictions provided
in the Holdings Certificate. Subject to the prior payment of certain senior
indebtedness of Advertising, the Holdings Preferred Stock may be redeemed at the
holder's option on and after July 31, 1996 at a price of $100 per share plus
accrued but unpaid dividends subject to certain restrictions provided in the
Holdings Certificate.
Dividends in respect of shares of Holdings Preferred Stock have been
declared annually since issuance in July of each year and have been paid by the
issuance of additional shares of Holdings Preferred Stock.
There is no trading market for the Holdings Preferred Stock.
Pursuant to the terms of the Profit Sharing Plan Purchase Agreement, the
Profit Sharing Plan has agreed with Holdings to sell all of the outstanding
shares of Holdings Preferred Stock to Holdings on or about July 1, 1995, but no
later than July 10, 1995, for an amount payable in cash of $14,081,773.93
consisting of $100 per share.
Vote Required
The presence of the holders of a majority of the voting power of all
shares of Class A Common Stock and Class B Common Stock entitled to vote
outstanding on the record date is necessary to constitute a quorum at the
Special Meeting. Under the DGCL and the Holdings Certificate the affirmative
vote of the holders of the majority of the outstanding shares of Class A Common
Stock and Class B Common Stock voting together as a class, are required to
approve each of the sales pursuant to the Acquisition Agreement and Advertising
Stock Sale Agreement, the Plan of Liquidation and the Amendment to the Holdings
Certificate. Abstentions will have the effect of negative votes. Directors,
officers and affiliates of Holdings who hold in the aggregate more than a
majority of the outstanding Class A Common Stock and Class B Common Stock in the
aggregate have indicated their intention to vote in favor of each of the
Holdings Vote Matters. See "The Transactions--Interests of Certain Persons in
the Transactions." Accordingly, if such persons vote in favor of these the
Transactions, they may be approved even if all of the other Holdings
Stockholders vote against these proposals.
51
<PAGE>
None of the Holdings Vote Matters shall become effective unless all of the
proposals are adopted by the requisite vote of the Holdings Stockholders.
Rights of Dissenting Holdings Stockholders
It is intended that the transactions described herein, including the sale
of the assets and the distribution to the Holdings Stockholders in liquidation
of Holdings, will not give rise to dissenters' rights in favor of Holdings
Stockholders under Delaware law.
Equity Appreciation Rights
Pursuant to the EAR Plan, Holdings has authorized [54,084,848] EARs each of
which is equivalent to one share of Class B Common Stock and has the same
priority as Class B Common Stock in the event of a liquidation. In the absence
of liquidation, the EARs are valued at their net book value, which was $0 at
March 31, 1995. At the close of business on March 31, 1995, there were
[36,939,112] EARs outstanding. At the Closing Date, all of the outstanding EARs
will be vested.
Equity Participation Units
Pursuant to the EPU Plan, Holdings has authorized 50,000,000 EPUs, each of
which is equivalent to one share of Class B Common Stock and has the same
priority as Class B Common Stock in the event of a liquidation. In the absence
of liquidation, the EPUs are valued at their net book value, which was $0 at
March 31, 1995. At March 31, 1995 there were [22,498,890] EPUs outstanding. At
the Closing Date all of the EPUs will be vested.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Acquisition and the subsequent dissolution of
Holdings and distribution of shares of Omnicom Common Stock to Holdings
Stockholders and Rightsholders, the shareholders of Holdings, a Delaware
corporation, will become shareholders of Omnicom, a New York corporation, and
their rights as such will be governed by New York law, as well as the Omnicom
Certificate of Incorporation (the "Omnicom Certificate") and By-laws (the
"Omnicom By-laws") as amended from time to time in accordance with New York law.
While it is not practical to describe all changes in the rights of Holdings
shareholders that will result from the application of New York law in lieu of
Delaware law and the differences between the Omnicom Certificate and the Omnicom
By-laws and the Holdings Certificate and the Holdings By-laws (the "Holdings
By-laws"), the following is a summary of material differences.
References to the "NYBCL" are to the New York Business Corporation Law,
while references to the "DGCL" are to the Delaware General Corporation Law.
Special Meetings of Stockholders
Under Delaware law, a special meeting of stockholders may be called only by
the board of directors or by such person as may be authorized by the certificate
of incorporation or by-laws. The Holdings By-laws provide that a special meeting
of stockholders may be called by the Board of Directors, the Chairman of the
Board or the President and shall be called by the Board upon the written request
of the holders of record of a majority of the outstanding shares entitled to
vote at the meeting requested to be called.
Under New York law, a special meeting of shareholders may be called by the
board of directors and by such person or persons as may be authorized to do so
in the certificate of incorporation or by-laws. In addition, if an annual
shareholder meeting has not been held for a certain period of time and a
sufficient number of directors were not elected to conduct the business of the
corporation, the board shall call a special meeting for the election of
directors. If the board fails to do so, or sufficient directors are not elected
within a certain period, holders of 10% of the shares entitled to vote in an
election of directors may call a special meeting for such an election. The
Omnicom By-laws provide that a special meeting of shareholders may be called,
for any purpose or purposes, by the Board of Directors or by the President, or
by the Secretary upon the request of a majority of the Board of Directors.
52
<PAGE>
Removal of Directors
Under Delaware law, unless otherwise provided in the certificate of
incorporation or the by-laws, shareholders may remove any director, with or
without cause, by the affirmative vote of the holders of a majority of the
shares then entitled to vote at an election of directors. The Holdings By-laws
provide that directors may be removed with or without cause by vote of the
stockholders.
Under New York law, (i) shareholders may remove any director for cause, and
the certificate or provision of a by-law adopted by the shareholders may give
the board such right; (ii) if the certificate or the by-laws so provide,
shareholders may remove directors without cause; and (iii) an action to remove a
director for cause may be brought by the attorney-general or by the holders of
ten percent of the outstanding shares, whether or not entitled to vote. Neither
the Omnicom Certificate nor the Omnicom By-Laws permit the removal of directors
other than for cause.
Vacancies On The Board
Under Delaware law, unless otherwise provided in the certificate of
incorporation or the by-laws, the board of directors may fill any vacancy on the
board including vacancies resulting from an increase in the number of directors.
Under the Holdings By-laws, vacancies on the Board for any reason (including
vacancies resulting from an increase in the number of directors) except the
removal of directors by stockholders (which may only be filled by vote of the
stockholders) may be filled by vote of a majority of the directors then in
office. A director elected to fill a vacancy shall be elected to hold office for
the unexpired term of his predecessor.
Under New York law, newly created directorships resulting from an increase
in the number of directors and vacancies occurring in the board for any reason
except the removal of directors without cause may be filled by vote of the
board. However, the certificate of incorporation or by-laws may provide that
such newly created directorships or vacancies are to be filled by vote of the
shareholders. Unless the certificate of incorporation or the specific provision
of a by-law adopted by the shareholders provide that the board may fill
vacancies occurring in the board by reason of the removal of directors without
cause, such vacancies may be filled only by vote of the shareholders. A director
elected to fill a vacancy, unless elected by the shareholders, will hold office
until the next meeting of shareholders at which the election of directors is in
the regular order of business and until his or her successor has been elected
and qualified. The Omnicom By-laws provide that any vacancy in the Omnicom Board
may be filled by a majority vote of the remaining directors or by the
shareholders.
Classification of the Board of Directors
Holdings' Board of Directors is not classified into classes.
Omnicom's Certificate of Incorporation provides that directors are to be
classified into three classes, which are to hold office in staggered three-year
terms.
Books and Records; Inspection
Under Delaware law, any person who is a shareholder of record has the right
to examine, for any purpose reasonably relating to his or her interest as a
shareholder, the minutes of a corporation and the right to receive upon request
certain financial statements of the corporation.
Under New York law, only shareholders of record for at least six months and
any person or the authorized agent of any person or persons holding at least
five percent of any class of the outstanding shares have the right to examine
the minutes of a corporation and the right to receive upon request certain
financial statements of the corporation. Under the federal securities laws,
shareholders of Omnicom receive financial information substantially more
extensive than that required under New York law.
Amendments of the Certificate of Incorporation
Under Delaware law, an amendment to the certificate of incorporation
proposed by the board of directors requires an affirmative vote of a majority of
the outstanding stock entitled to vote thereon, and a majority of the
outstanding stock of each class entitled to vote as a class thereon. Whether or
not entitled by the charter, the holders of the outstanding shares of a class
53
<PAGE>
are entitled to vote as a class on a charter amendment if the amendment would
increase or decrease the aggregate number of authorized shares of such class or
adversely affect the powers, preferences or special rights of such class. In
addition, the Holdings Certificate specifically requires the approval of the
holders of a majority of the shares of Class A Common Stock (excluding those
shares originally issued to Morgan Capital Corporation) voting separately for
any amendment to the Holdings Certificate which adversely affects their rights.
Under New York law, an amendment or change of the certificate of
incorporation may be authorized by vote of the Board, followed by vote of the
holders of a majority of all outstanding shares entitled to vote thereon.
Certain categories of amendments which adversely affect the rights of any
holders of shares of a class or series of stock require the affirmative vote of
the holders of a majority of all outstanding shares of such class or series,
voting separately. The Omnicom Certificate requires the affirmative vote of 66
2/3% of the voting power of all outstanding shares of voting stock of Omnicom in
order to amend or repeal the provisions of the Omnicom Certificate setting the
number of directors constituting the entire Board of Directors and dividing the
directors into classes, and absolving directors from personal liability pursuant
to Section 719 of the NYBCL.
Amendments to By-Laws
Under Delaware law, the by-laws of a corporation generally may be amended
or repealed by the affirmative vote of the holders of a majority of the shares
entitled to vote thereon. As permitted by the DGCL, the Holdings By-laws provide
that the Holdings By-laws may be made, altered or repealed by the Holdings
Board. Any By-law adopted by the Holdings Board may be amended or repealed by
the stockholders entitled to vote thereon. In addition, the Holdings Certificate
specifically requires the approval of the holders of a majority of the shares of
Class A Common Stock (excluding those shares originally issued to Morgan Capital
Corporation) voting separately for any amendment to the Holdings By-laws which
adversely affects their rights.
Under New York law, except as otherwise provided in the certificate of
incorporation, by-laws may be amended, repealed or adopted by the holders of
shares entitled to vote in the election of any director. When so provided in the
certificate of incorporation or a by-law adopted by the shareholders, by-laws
may also be amended, repealed or adopted by the board by such vote as may be
therein specified, which may be greater than the vote otherwise prescribed by
law, but any by-law adopted by the board may be amended or repealed by the
shareholders entitled to vote thereon. Under the terms of the Omnicom
Certificate and Omnicom By-laws, Omnicom By-laws may be amended, repealed or
adopted only by the affirmative vote of at least 66 2/3% of the total voting
power of all outstanding shares of voting stock of Omnicom.
Dividends and Distributions
Delaware law permits the payment of dividends on capital stock, subject to
any restrictions contained in the certificate of incorporation, out of a
corporation's surplus (the excess of net assets over capital) or, in case there
is no surplus, out of net profits for the current and/or preceding fiscal year.
If the capital of the corporation is diminished to an amount less than the
aggregate amount of capital represented by the outstanding stock having a
preference on the distribution of assets, then dividends may not be declared and
paid out of such net profits until the deficiency in the amount of capital
represented by the shares having a preference on the distribution of assets
shall have been repaired. The Holdings Certificate provides that unless full
cumulative dividends on the Holdings Preferred Stock have been paid or declared
in full and sums set aside for their payment, no dividends may be paid or
declared on the Class A Common Stock or Class B Common Stock. The Amended and
Restated Credit Agreement prohibits the payment of dividends other than
dividends paid in shares.
Under New York law, dividends may be declared or paid and other
distributions may be made out of surplus only, so that the net assets of the
corporation remaining after such declaration, payment or distribution must at
least equal the amount of its stated capital. When any dividend is paid or any
other distribution is made from sources other than earned surplus, a written
notice must accompany such payment or distribution as provided by the NYBCL. A
corporation may declare and pay dividends or make other distributions except
when currently the corporation is insolvent or would thereby be made insolvent,
or when the declaration, payment or distribution would be contrary to any
restrictions contained in the corporation's certificate of incorporation.
54
<PAGE>
State Takeover Legislation
Section 203 of the DGCL prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date such person became an interested
stockholder, unless (i) prior to such date, the business combination or the
transaction which resulted in the stockholder becoming an interested stockholder
is approved by the board of directors of the corporation, (ii) upon consummation
of the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the outstanding
voting stock of the corporation outstanding at the time the transaction
commenced, or (iii) on or after such date the business combination is approved
by the board of directors of the corporation and by the affirmative vote, not by
written consent, of at least 66 2/3% of the voting stock which is not owned by
the interested stockholder. A "business combination" includes mergers,
consolidations, asset transfers (including any sale, lease, exchange, mortgage,
pledge or other disposition of assets) and other transactions resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
a person who (i) owns 15% or more of the outstanding voting stock of the
corporation or (ii) is an affiliate or associate of a corporation and was the
owner of 15% or more of the outstanding voting stock at any time within the past
three years.
The NYBCL prohibits any business combination (defined to include a variety
of transactions, including mergers, consolidations, sales or dispositions of
assets, issuances of stock, liquidations, reclassifications and the receipt of
certain benefits from the corporation, including loans or guarantees) with,
involving or proposed by any interested shareholder (defined generally as any
person who, (i) directly or indirectly, beneficially owns 20% or more of the
outstanding voting stock of a resident domestic New York corporation or (ii) is
an affiliate or associate of such resident domestic corporation and at any time
within the past five years was a beneficial owner of 20% or more of such stock)
for a period of five years after the date on which the interested shareholder
became such. After such five-year period a business combination between a
resident domestic New York corporation and such interested shareholder is
prohibited unless either certain "fair price" provisions are complied with or
the business combination is approved by a majority of the outstanding voting
stock not beneficially owned by such interested shareholder or its affiliates or
associates. The NYBCL exempts from its prohibitions any business combination
with an interested shareholder if such business combination, or the purchase of
stock by the interested shareholder that caused such shareholder to become such,
is approved by the board of directors of the resident domestic New York
corporation prior to the date on which the interested shareholder becomes such.
Section 203 of the DGCL does not apply to Holdings, as Holdings is not a
publicly held corporation as defined by the DGCL. Under the NYBCL, corporations
may opt to not be governed by the statute; Omnicom has not so elected.
Business Combinations
Generally, under the DGCL, the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote on the matter is required to
approve mergers, consolidations, and any sales, leases or exchanges of all or
substantially all of the assets of a corporation. The Holdings Certificate
requires in addition the approval of the holders of a majority of the shares of
Class A Common Stock (excluding the shares originally issued to Morgan Capital
Corporation) voting separately as a class for any such transactions. The
Holdings Certificate further provides that this requirement shall not prevent a
merger, consolidation or asset sale if the consideration received by Holdings,
its subsidiaries and holders of shares of Class A Common Stock consists solely
of cash or freely tradeable registered securities or a combination thereof.
Under the NYBCL, the affirmative vote of the holders of two-thirds of all
outstanding shares of stock of a New York corporation entitled to vote thereon
is required to approve mergers and consolidations, and for sales, leases,
exchanges or other dispositions of all or substantially all the assets of a
corporation, if not made in the usual or regular course of the business actually
conducted by such corporation.
Rights of Dissenting Shareholders
Delaware law grants appraisal rights to any stockholder opposing a merger
or consolidation (except that it restricts the appraisal rights of shareholders
of the merging domestic corporation which is to be the surviving corporation by
eliminating appraisal rights for such shareholders if the merger did not require
for its approval the vote of the holders of the surviving corporation).
55
<PAGE>
Accordingly, a dissenting shareholder is entitled to receive in cash the fair
value of his shares as determined by the Delaware Court of Chancery in the event
the merger or consolidation is consummated.
Shareholders of a New York corporation have the right to dissent not only
in the context of a merger or consolidation, but also in the event of certain
amendments or changes to the certificate of incorporation adversely affecting
their shares, certain sales, exchanges or other dispositions of all or
substantially all of the corporation's assets and certain share exchanges.
Indemnification of Directors, Officers and Employees
Section 145 of the DGCL generally provides that a corporation may, and in
certain circumstances, must, indemnify any person who is or was threatened with
any action, suit or proceeding by reason of the fact that he or she is or was a
director, officer, employee or agent of such corporation for expenses, judgments
or settlements actually and reasonably incurred by such person in connection
with suits and other legal action or proceedings if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful.
The determination of whether a director, officer, employee or agent has met the
applicable standard of conduct is made (i) by a majority vote of a quorum of
directors not party to the action, suit or proceeding, or (ii) by an independent
legal counsel in a written opinion if a quorum of disinterested directors is
unobtainable or if the disinterested directors so direct or (iii) by the
shareholders. In the case of shareholder derivative suits, the corporation may
indemnify any person who is or was threatened with any action, suit or
proceeding by reason of the fact that he or she is or was a director, officer,
employee or agent if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which the action was brought determined upon application that, in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper. The DGCL also
permits a corporation to adopt procedures for advancing expenses to directors,
officers and others without the need for a case-by-case determination of
eligibility, so long as in the case of officers and directors they undertake to
repay the amounts advanced if it is ultimately determined that the officer or
director was not entitled to be indemnified. The aforementioned provisions
relating to indemnification and advancement of expenses are not exclusive and a
corporation may provide additional rights to those seeking indemnification or
advancement of expenses. The Holdings Certificate provides for indemnification
of directors, officers, employees and agents to the fullest extent authorized
under the DGCL. The Holdings Certificate also authorizes the advancement of
expenses relating to actions for which such persons may be indemnified.
Under Section 722 of the NYBCL, a corporation may indemnify any person
made, or threatened to be made, a party to any action or proceeding, except for
shareholder derivative suits, by reason of the fact that he or she was a
director or officer of the corporation, provided such director or officer acted
in good faith for a purpose which he or she reasonably believed to be in the
best interests of the corporation and, in criminal proceedings, in addition, had
no reasonable cause to believe his or her conduct was unlawful. In the case of
shareholder derivative suits, the corporation may indemnify any person by reason
of the fact that he or she was a director or officer of the corporation if he or
she acted in good faith for a purpose which he or she reasonably believed to be
in the best interests of the corporation, except that no indemnification may be
made in respect of (i) a threatened action, or a pending action which is settled
or otherwise disposed of, or (ii) any claim, issue or matter as to which such
person has been adjudged to be liable to the corporation, unless and only to the
extent that the court in which the action was brought, or, if no action was
brought, any court of competent jurisdiction, determines upon application that,
in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such portion of the settlement amount and
expenses as the court deems proper.
The indemnification described above under the NYBCL is not exclusive of
other indemnification rights to which a director or officer may be entitled,
whether contained in the certificate of incorporation or by-laws, or, when
authorized by (i) such certificate of incorporation or by-laws, (ii) a
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resolution of shareholders, (iii) a resolution of directors, or (iv) an
agreement providing for such indemnification, provided that no indemnification
may be made to or on behalf of any director or officer if a judgment or other
final adjudication adverse to the director or officer establishes that his or
her acts were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or that he
or she personally gained in fact a financial profit or other advantage to which
he or she was not legally entitled.
Any person who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered by
a court pursuant to the NYBCL, any indemnification under the NYBCL pursuant to
the above paragraphs may be made only if authorized in the specific case and
after a finding that the director or officer met the requisite standard of
conduct (i) by the disinterested directors if a quorum is available, or (ii) in
the event a quorum of disinterested directors is not available or so directs by
either (A) the board upon the written opinion of independent legal counsel, or
(B) by the shareholders.
The Omnicom By-laws provide that Omnicom shall provide indemnification to
its directors and officers in respect of claims, actions, suits or proceedings
based upon, arising from, relating to or by reason of the fact that any such
director or officer serves or served in such capacity with Omnicom or at the
request of Omnicom in any capacity with any other enterprise, and permits
Omnicom to indemnify others and to advance expenses to the fullest extent
permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Omnicom or
Holdings pursuant to the foregoing provisions, Omnicom and Holdings have been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Limitation of Personal Liability of Directors
Section 102 (b) (7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision that would eliminate a director's
monetary liability for breaches of his fiduciary duty in a lawsuit by or on
behalf of the corporation or in an action by stockholders of the corporation,
provided that such provision may not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The Holdings Certificate contains such a provision
providing for the limitation of liability of directors for monetary damages for
breach of fiduciary duty as a director to the fullest extent permitted by the
DGCL.
Section 402(b) of the NYBCL provides that a corporation's certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of directors to the corporation or its shareholders for damages for
any breach of duty in such capacity. However, no such provision can eliminate or
limit (i) the liability of any director if a judgment or other final
adjudication adverse to such director establishes that such director's acts or
omissions were in bad faith, or involved intentional misconduct or a knowing
violation of law, or that the director personally gained in fact a financial
profit or other advantage to which such director was not legally entitled or
that the director's acts violated certain provisions of the NYBCL or (ii) the
liability of any director for any act or omission prior to the adoption of such
a provision in the certificate of incorporation.
The Omnicom Certificate provides that no director shall be personally
liable to Omnicom or any of its shareholders for damages for any breach of duty
as a director, except for liability resulting from a judgment or other final
adjudication adverse to the director (i) for acts or omissions in bad faith or
which involve intentional misconduct or a knowing violation of the law, (ii) for
any transaction from which the director derived a financial profit or other
advantage to which the director was not legally entitled, or (iii) under Section
719 of the NYBCL.
LEGAL MATTERS
The validity of the shares of Omnicom Common Stock to be issued in
connection with the Acquisition will be passed on by Davis & Gilbert, 1740
Broadway, New York, New York 10019, counsel to Omnicom.
57
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EXPERTS
The consolidated financial statements and schedules of Omnicom and its
subsidiaries incorporated by reference in this Prospectus/Information Statement
and the Registration Statement of which this Prospectus/Information Statement is
a part, have been audited by Arthur Andersen, LLP independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The consolidated balance sheets as of October 31, 1994 and 1993, and the
consolidated statements of operations, stockholders deficit, and cash flows for
each of the three years in the period ended October 31, 1994 of Holdings
contained in this Prospectus/Information Statement and the Registration
Statement of which this Prospectus/Information Statement is a part have been
audited by Coopers & Lybrand LLP, independent certified public accountants as
indicated in their report, which includes an explanatory paragraph concerning
Holding's ability to continue as a going concern, and are included herein in
reliance upon the authority of that firm as experts in accounting and auditing.
58
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INDEX TO HOLDINGS FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants .................................... F-1
Consolidated Balance Sheets as of October 31, 1994 and 1993 (audited) F-2
Consolidated Statements of Operations for the years ended
October 31, 1994, 1993 and 1992 (audited) ......................... F-3
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended October 31, 1994, 1993 and 1992 (audited) ..... F-4
Consolidated Statements of Cash Flows for the years ended
October 31, 1994, 1993 and 1992 (audited) ......................... F-5
Notes to Consolidated Financial Statements (audited) ................. F-6
Consolidated Condensed Balance Sheets as of January 31, 1995
and 1994 (unaudited) ............................................... F-15
Consolidated Condensed Statements of Operations for the three
months ended January 31, 1995 and 1994 (unaudited) ................. F-17
Consolidated Condensed Statements of Cash Flows for the three months
ended January 31, 1995 and 1994 (unaudited) ........................ F-18
Notes to Consolidated Condensed Financial Statements (unaudited) ..... F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Chiat/Day Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Chiat/Day
Holdings, Inc. and Subsidiaries as of October 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the three years in the period ended October 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Chiat/Day
Holdings, Inc. and Subsidiaries as of October 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1994 in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1,
the Company's debt under its Senior Note and Senior Subordinated Note totaling
$18,750,000 is due in 1995, which combined with its working capital and
stockholders' deficits at October 31, 1994, raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to this
matter are discussed in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Coopers & Lybrand LLP
Sherman Oaks, California
April 7, 1995, except for Note 10
as to which the date is
June 7, 1995
F-1
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31, 1994 and 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................................................. $ 5,831,000 $ 3,393,000
Receivables:
Client accounts receivable ........................................................... 57,468,000 46,324,000
Expenditures billable to clients ..................................................... 16,746,000 10,704,000
Notes and other receivables .......................................................... 375,000 861,000
Income taxes receivable .............................................................. 894,000 774,000
Notes receivable from employees ...................................................... 1,158,000 852,000
Less--allowance for doubtful accounts ................................................ (4,007,000) (2,218,000)
------------ ------------
72,634,000 57,297,000
Prepaid expenses and other ............................................................. 736,000 1,292,000
------------ ------------
Total current assets ........................................................... 79,201,000 61,982,000
------------ ------------
Fixed assets, at cost:
Furniture and fixtures ................................................................. 3,211,000 1,134,000
Office equipment ....................................................................... 4,760,000 4,913,000
Leasehold improvements ................................................................. 9,227,000 6,578,000
Construction in progress ............................................................... -- 250,000
------------ ------------
17,198,000 12,875,000
Less--accumulated depreciation and amortization ........................................ (5,999,000) (5,375,000)
------------ ------------
11,199,000 7,500,000
------------ ------------
Other assets:
Notes receivable ....................................................................... 3,201,000 281,000
Other .................................................................................. 2,476,000 5,108,000
------------ ------------
5,677,000 5,389,000
------------ ------------
$ 96,077,000 $ 74,871,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt ...................................................... $ 18,750,000 $ 64,000
Accounts payable and advanced billings ................................................. 112,094,000 96,018,000
Other accrued liabilities .............................................................. 12,139,000 13,397,000
Bank overdraft ......................................................................... -- 8,625,000
Income tax payable ..................................................................... 1,180,000 15,000
------------ ------------
Total current liabilities ...................................................... 144,163,000 118,119,000
------------ ------------
Long-term debt, net of current portion .................................................... 10,448,000 20,697,000
Other non-current liabilities ............................................................. 12,800,000 15,433,000
Redeemable preferred stock, cumulative, $.01 par value; 200,000 shares
authorized; issued--140,718 in 1994 and 121,218 in 1993;
liquidation value of $14,072,000 at October 31, 1994 ................................... 14,072,000 12,122,000
Stockholders' equity (deficit):
Class A common stock, $.01 par value; 75,000,000 shares authorized;
issued--16,749,344 in 1994 and 1993 .................................................. 167,000 167,000
Class B common stock, $.01 par value; 200,000,000 shares authorized; issued
--40,190,305 in 1994 and 41,015,305 in 1993 .......................................... 402,000 410,000
Additional paid-in capital ............................................................. 26,288,000 26,280,000
Foreign currency translation adjustment ................................................ (373,000) (496,000)
Accumulated deficit .................................................................... (107,616,000) (113,587,000)
------------ ------------
(81,132,000) (87,226,000)
Less--treasury stock at cost; 3,222,075 Class A common shares and 196,840
Class B common shares in 1994 and 1993 ................................................. (4,274,000) (4,274,000)
------------ ------------
Total stockholders' equity (deficit) ........................................... (85,406,000) (91,500,000)
------------ ------------
$ 96,077,000 $ 74,871,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Fee and commission income ................... $ 89,277,000 $ 97,198,000 $ 106,013,000
Costs and expenses:
Salaries and employee benefits ........... 50,976,000 52,817,000 56,013,000
Selling, general and administrative ...... 27,000,000 36,408,000 36,160,000
Restructuring costs ...................... -- 25,848,000 --
Loss from operations of foreign subsidiary -- 637,000 12,000
Gain on sale of foreign subsidiary ....... -- (3,504,000) --
Other, net ............................... 141,000 1,866,000 3,236,000
------------- ------------- -------------
78,117,000 114,072,000 95,421,000
Operating profit (loss) .......... 11,160,000 (16,874,000) 10,592,000
Interest income (expense):
Interest expense ......................... (4,678,000) (4,585,000) (7,517,000)
Interest income .......................... 1,091,000 769,000 1,087,000
------------- ------------- -------------
(3,587,000) (3,816,000) (6,430,000)
Income (loss) before income tax provision and
extraordinary item ....................... 7,573,000 (20,690,000) 4,162,000
Income tax provision ........................ 1,602,000 855,000 2,337,000
------------- ------------- -------------
Income (loss) before extraordinary item .. 5,971,000 (21,545,000) 1,825,000
Extraordinary item:
Utilization of loss carryforwards ........ -- -- 1,582,000
------------- ------------- -------------
Net income (loss) ........................ $ 5,971,000 ($ 21,545,000) $ 3,407,000
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Number
Of Shares Common Common Additional
Common Stock Stock Paid-In Treasury
Stock Class A Class B Capital Stock
---------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1991 ................... 58,984,566 $168,000 $456,000 $6,156,000 ($4,274,000)
Relinquishment and retirement of
Common Stock - Class B ................... (1,800,000) (18,000) 18,000
Adjustment for foreign subsidiary
held for disposition ......................
Foreign currency translation adjustment .....
Net income for the year ended
October 31, 1992 ..........................
---------- -------- -------- ----------- ----------
Balance, October 31, 1992 ................... 57,184,566 168,000 438,000 6,174,000 (4,274,000)
Repurchase of Common Stock - Class A ........ (73,832)
Retirement of Common Stock - Class A ........ (1,000) 1,000
Repurchase of Common Stock - Class B ........ (765,000) (8,000) (340,000)
Relinquishment and retirement of
Common Stock - Class B .................... (2,000,000) (20,000) 20,000
Conversion of Junior Subordinated Notes ..... 20,425,000
Foreign currency translation adjustment .....
Net (loss) for the year
ended October 31, 1993 ....................
---------- -------- -------- ----------- ----------
Balance, October 31, 1993 ................... 54,345,734 167,000 410,000 26,280,000 (4,274,000)
Relinquishment and retirement of
Common Stock - Class B .................... (825,000) (8,000) 8,000
Foreign currency translation adjustment .....
Net income for the year
ended October 31, 1994 ....................
---------- -------- -------- ----------- ----------
Balance, October 31, 1994 ................... 53,520,734 $167,000 $402,000 $26,288,000 ($4,274,000)
========== ======== ======== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Foreign
Currency
Translation Accumulated
Adjustment Deficit Total
-------- ------------ -----------
<S> <C> <C> <C>
Balance, October 31, 1991 ................... ($482,000) ($95,449,000) ($93,425,000)
Relinquishment and retirement of
Common Stock - Class B ...................
Adjustment for foreign subsidiary
held for disposition ...................... 237,000 237,000
Foreign currency translation adjustment ..... 103,000 103,000
Net income for the year ended
October 31, 1992 .......................... 3,407,000 3,407,000
-------- ------------ -----------
Balance, October 31, 1992 .................. (142,000) (92,042,000) (89,678,000)
Repurchase of Common Stock - Class A ........
Retirement of Common Stock - Class A ........
Repurchase of Common Stock - Class B ........ (348,000)
Relinquishment and retirement of
Common Stock - Class B ....................
Conversion of Junior Subordinated Notes ..... 20,425,000
Foreign currency translation adjustment ..... (354,000) (354,000)
Net (loss) for the year
ended October 31, 1993 .................... (21,545,000) (21,545,000)
-------- ------------ -----------
Balance, October 31, 1993 ................... (496,000) (113,587,000) (91,500,000)
Relinquishment and retirement of
Common Stock - Class B ....................
Foreign currency translation adjustment ..... 123,000 123,000
Net income for the year
ended October 31, 1994 .................... 5,971,000 5,971,000
-------- ------------ -----------
Balance, October 31, 1994 ................... ($373,000) ($107,616,000) ($85,406,000)
======== ============ ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ....................................... $ 5,971,000 ($ 21,545,000) $ 3,407,000
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization ......................... 2,831,000 4,773,000 5,049,000
Gain on disposition of foreign subsidiary and
sale of certain assets ............................. -- (3,504,000) (743,000)
Provision for losses on receivables ................... 1,789,000 2,057,000 219,000
Amortization of discount on long-term debt ............ 10,000 593,000 800,000
Increase in interest payable .......................... 891,000 418,000 2,531,000
Contribution of preferred stock to profit sharing plan 575,000 450,000 900,000
Preferred stock dividends issued to profit sharing plan 1,375,000 1,127,000 929,000
Restructuring provision ............................... -- 24,582,000 --
Change in assets and liabilities:
(Increase) decrease in receivables .................. (17,126,000) 11,135,000 (34,425,000)
Decrease (increase) in prepaid expenses and other ... 556,000 (176,000) 41,000
Increase (decrease) in accounts payable and
advanced billings ................................ 16,076,000 (8,459,000) 25,634,000
(Decrease) increase in other accrued liabilities .... (1,408,000) (3,568,000) 2,012,000
Cash provided (used) by foreign subsidiary held
for disposition .................................. -- 1,723,000 (2,127,000)
Increase (decrease) in income taxes payable ......... 1,165,000 (545,000) (200,000)
(Decrease) increase in deferred income taxes ........ -- (25,000) 25,000
(Decrease) increase in other noncurrent liabilities . (2,633,000) (683,000) 948,000
------------- ------------- -------------
Total adjustments ............................... 4,101,000 29,898,000 1,593,000
------------- ------------- -------------
Net cash provided by operating activities ....... 10,072,000 8,353,000 5,000,000
------------- ------------- -------------
Cash flows from investing activities:
Purchases of fixed assets, net of retirements ........... (5,615,000) (882,000) (374,000)
(Increase) decrease in other assets ..................... (1,202,000) 1,523,000 125,000
Cash used by foreign subsidiary held for diposition,
including $9,850,000 of cash included in net
liabilities of foreign subsidiary held for disposition -- -- (10,446,000)
------------- ------------- -------------
Net cash (used) provided by investing activities (6,817,000) 641,000 (10,695,000)
------------- ------------- -------------
Cash flows from financing activities:
(Decrease) increase in bank overdraft ................... (8,625,000) 8,625,000 --
Debt borrowings (repayments) ............................ 7,685,000 (16,057,000) (6,052,000)
Repurchase of Chiat/Day Holdings, Inc. stock ............ -- (348,000) --
Cash used by foreign subsidiary held for disposition .... -- -- (923,000)
------------- ------------- -------------
Net cash (used) in financing activities .......... (940,000) (7,780,000) (6,975,000)
------------- ------------- -------------
Effect of exchange rate changes on cash .................... 123,000 354,000 (535,000)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents ....... 2,438,000 1,568,000 (13,205,000)
Cash and cash equivalents, beginning of year ............... 3,393,000 1,825,000 15,030,000
------------- ------------- -------------
Cash and cash equivalents, end of year ..................... $ 5,831,000 $ 3,393,000 $ 1,825,000
============= ============= =============
Supplemental disclosure of cash flow information:
(excluding foreign subsidiary amounts):
Cash paid during the year for:
Interest .............................................. $ 2,475,000 $ 2,507,000 $ 3,155,000
============= ============= =============
Income taxes .......................................... $ 279,000 $ 1,820,000 $ 1,365,000
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary Of Significant Accounting Policies:
Line Of Business:
Chiat/Day Holdings, Inc. (the "Company") is a holding company that directly
or indirectly owns 100% of the common stock of companies (including Chiat/Day
inc. Advertising ["Advertising"] and Venice Holdings Pty. Limited ["Mojo"]) that
collectively are known as "Chiat/Day" (see Notes 2 and 8). The Company's
principal line of business includes planning and creating advertising campaigns
for clients, placing ads with various media (including television, radio,
newspaper and magazines), and providing marketing consultation, market research
and production services. Chiat/Day also provides public relations and direct
marketing services. The Company's clients operate in a broad range of product
industries throughout the world. Credit is extended to clients based on an
evaluation of each client's financial condition, and generally collateral is not
required. Credit losses, if any, have been generally provided for in the
financial statements and have been consistently within management's
expectations.
Basis Of Presentation:
The Company's consolidated financial statements have been presented on the
basis that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. As discussed in Note 5, the Company's Senior Note and Senior
Subordinated Notes are due in 1995.
In February 1995 the Company reached an agreement in principal to sell the
assets and assign the liabilities of its businesses (see Note 10). If the sale
does not occur, the Company will have to pursue alternative financing
arrangements to meet its current debt obligations.
Principles Of Consolidation:
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Fees, Commissions and Costs:
The principal sources of advertising revenues are commissions and fees for
the production and placement of advertisements in television, radio and print
media. Revenue earned from television and radio media is recognized on the date
of broadcast. Revenue earned from advertising production is recognized as costs
are incurred. Generally, commission revenue earned from print media is
recognized on the space closing date (the date upon which the advertiser has
made a binding commitment to the publication to run an advertisement) of the
related publications.
Generally, revenue is billed and earned in accordance with contractual
provisions. For the Company's most significant contract, commissions are
billable on a sliding scale subject to a maximum annual amount for 1994 and 1993
only. As of October 31, 1994 and 1993 under this contract, the Company has
recognized commissions earned of 78% and 78% for the contract period April 1,
1994 through March 31, 1995 and April 1, 1993 through March 31, 1994,
respectively.
Revenues from other sources, including public relations and direct
marketing, are primarily derived from fees for services rendered. Fee revenue
earned from these sources is recognized as services are rendered. Salaries and
other agency costs are generally expensed as incurred.
The Company's major client, Nissan Motor Corporation, accounted for 41%,
39% and 38% of total revenues in 1994, 1993 and 1992, respectively, and
Infiniti, its division, accounted for 14% and 10% of total revenues in 1994 and
1993, respectively.
F-6
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary Of Significant Accounting Policies, Continued:
Fixed Assets:
Depreciation and amortization are provided over the estimated useful lives
of the assets using primarily the straight-line method for financial reporting
purposes and accelerated depreciation methods for tax reporting purposes.
Estimated useful lives of these assets are as follows:
Furniture and fixtures ................................. 5-10 years
Office equipment ....................................... 5-10 years
Leasehold improvements ................................. Lease term
Gains and losses on sales and retirements are reflected in Other income
(expense). Improvements which increase the useful lives of fixed assets are
capitalized. Maintenance, repairs and minor replacements are expensed as
incurred.
Foreign Currency Translation:
The Company translates the financial statements of its foreign subsidiaries
in accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 52. Assets and liabilities reported in the consolidated balance
sheet have been translated at the current rates of exchange as of October 31,
1994 and 1993. Revenues and expenses reported in the consolidated statements of
operations have been translated using the average exchange rates during 1994,
1993 and 1992. Resulting translation adjustments have been excluded from the
consolidated statements of operations and are reported in a separate component
of stockholders' equity (deficit).
Gains and losses resulting from foreign currency transactions are charged
to other income (expense) as incurred and were not material in 1994, 1993 or
1992.
Income Taxes:
Effective November 1, 1993, the Company adopted the provisions of SFAS No.
109 which requires recognition of deferred tax assets and liabilities for
temporary differences and net operating loss (NOL) and tax credit carryforwards.
Under SFAS No. 109, deferred income taxes are established based on enacted tax
rates expected to be in effect when temporary differences are scheduled to
reverse and NOL and tax credit carryforwards are expected to be utilized. The
principle temporary differences relate to restructuring costs and employee
bonuses. Adoption of SFAS No. 109 did not have a material impact on the
Company's financial position or results of operations.
For years ended 1993 and 1992 the Company accounted for income taxes under
the requirements of APB Opinion No. 11.
Cash Flows:
The Company places its temporary cash investments in short-term financial
instruments and money market funds, which generally mature within 90 days. The
Company limits the amount of credit exposure to any one issuer.
For purposes of reporting cash flows, the Company considers amounts due
from banks (including certificates of deposit and repurchase agreements) and
commercial paper with maturities at date of purchase of three months or less to
be cash equivalents.
Reclassifications
Certain reclassifications have been made to the 1993 and 1992 reported
amounts to conform them to the current presentation.
F-7
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Foreign Operations:
The Company's foreign divisions and subsidiaries are primarily engaged in
providing advertising and related services. On February 16, 1993 (effective
January 1, 1993), the Company completed the transfer of the stock of its foreign
subsidiary to FCB International, Inc. ("FCB") (see Note 8). The financial
results for 1993 and 1992 of this subsidiary are summarized in Note 8.
Combined condensed financial information for foreign divisions and
subsidiaries (excluding the financial results of the subsidiary transferred to
FCB) is as follows:
1994 1993 1992
----------- ----------- -----------
Total assets ................... $16,589,000 $12,926,000 $11,973,000
Total liabilities .............. 12,959,000 11,378,000 14,502,000
Fee and commission income ...... 13,674,000 10,574,000 12,905,000
3. Income Taxes:
Income (loss) before income tax provision (benefit) and provision (benefit)
for taxes for the years ended October 31, 1994, 1993 and 1992 consisted of the
following:
1994 1993 1992
------------ ------------ ------------
Income (loss) before income
tax provision:
Domestic ............. $ 4,460,000 ($ 23,576,000) $ 3,518,000
International ........ 3,113,000 2,886,000 644,000
------------- ------------- -------------
Totals ........... $ 7,573,000 ($ 20,690,000) $ 4,162,000
============= ============= =============
Current Deferred Total
------------ ------------ ------------
Provision for taxes:
October 31, 1994:
Federal ............... $ 35,000 -- $ 35,000
State and local ....... 152,000 -- 152,000
Foreign ............... 1,415,000 -- 1,415,000
------------ ------------ ------------
$ 1,602,000 -- $ 1,602,000
============ ============ ============
October 31, 1993:
Federal ............... $ 542,000 -- $ 542,000
State and local ....... 277,000 -- 277,000
Foreign ............... 36,000 -- 36,000
------------ ------------ ------------
$ 855,000 -- $ 855,000
============ ============ ============
October 31, 1992:
Federal ............... $ 1,698,000 $ 25,000 $ 1,723,000
State and local ....... 927,000 (333,000) 594,000
Foreign ............... 20,000 -- 20,000
------------ ------------ ------------
$ 2,645,000 ($ 308,000) $ 2,337,000
============ ============ ============
F-8
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Income Taxes, Continued:
The Company's effective income tax rate varied from the statutory federal
income tax rate as a result of the following factors:
1994 1993 1992
---- ---- ----
Statutory federal income tax rate ........ 35.0% (34.0)% 34.0%
State and local taxes, net of
federal benefit ....................... 1.3 0.9 9.4
Foreign taxes ............................ 18.7 0.2 0.5
Net operating loss ....................... (4.8) -- --
Tax credits .............................. (11.0) -- --
Realization of valuation allowance ....... (26.3) -- --
Preferred stock dividends ................ 6.4 1.9 7.6
Alternative minimum tax .................. 0.4 2.6 3.4
Unrealized benefit of net operating
loss .................................. -- 32.0 --
Extraordinary credit ..................... -- -- (38.0)
Other .................................... 1.4 0.5 1.2
----- ---- ----
Effective rate ........................... 21.1% 4.1% 18.1%
===== ==== ====
The major components of the net deferred tax asset as of October 31, 1994
are as follows:
Deferred tax assets:
Accrued reserves ........................................ $ 8,743,000
Deferred compensation ................................... 5,835,000
Tax loss/tax credit carryforwards ....................... 1,219,000
Fixed assets and depreciation ........................... 441,000
Rent .................................................... 329,000
Other ................................................... 2,150,000
------------
Total deferred tax assets ........................... 18,717,000
Valuation allowance ..................................... (18,717,000)
------------
Net deferred tax asset .............................. $ --
============
A full valuation allowance has been established as the potential deferred
tax asset above may not be realized.
As of October 31, 1994, for income tax purposes, the Company had state and
foreign net operating loss carryforwards of approximately $3.1 million and $2.1
million, respectively, which will expire during the years 1995-2000. Also, the
Company had $344,000 of AMT credits which can be carried forward indefinitely.
U.S. tax rules impose limitations on the use of net operating losses and tax
credits following certain changes in ownership (See Note 10).
4. Related-Party Transactions:
In October 1991, the Company moved into new office facilities in Venice,
California which it leases from Venice Operating Corporation ("VOC"), a company
owned by the majority stockholder and certain members of the Board of Directors
of the Company. In October 1994, VOC sold its office facilities to an unrelated
third party. Effective October 17, 1994 the lease with VOC was terminated and
the Company entered into a new twenty year lease with six consecutive five-year
renewal options. The Company was assigned a $3,000,000 promissory note by VOC in
satisfaction of the return of the Company's security deposit and accrued
interest thereon due from VOC. The note bears interest at 10% per annum and will
be paid to the Company when it achieves certain financial targets or the
F-9
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Related-Party Transactions, Continued:
property is sold, but no later than October 17, 2014. In 1994, 1993 and 1992 the
Company paid $2,474,000, $2,056,000 and $2,018,000, respectively, in rent to
VOC. At October 31, 1993, the Company had $1,998,000 and $552,000 of security
deposit and accrued interest thereon, respectively, outstanding.
The Company also has consulting, employment, non-compete and loan
agreements with certain members of the Board of Directors and officers.
5. Long-Term Debt and Redeemable Preferred Stock:
Long-term debt as of October 31, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Senior Note payable to banks.
Interest rates averaged 8.1% in 1994 and 7.5% in 1993 .................... $ 7,750,000 --
Senior Subordinated Notes due in 1995; various rates;
interest payable semiannually in arrears ................................. 11,000,000 11,000,000
8.17% Junior Subordinated Installment Note (less unamortized discount of
$304,000 and $305,000 at October 31, 1994 and 1993, respectively); due
July 31, 2005; interest compounded semiannually at an effective interest
rate of 8.65%; payment of interest and principal subject to certain
restrictions contained in the Senior Bank
Note and Senior Subordinated Notes ....................................... 5,249,000 5,247,000
13.25% Junior Subordinated Note; maturing July 31, 2005
(less unamortized discount of $90,000 and $98,000 at October 31, 1994 and
1993, respectively); interest compounded annually at an effective interest
rate of 8.45%; payment of interest and principal subject to certain
restrictions contained in the Senior Bank Note
and Senior Subordinated Notes ............................................ 1,400,000 1,391,000
Other notes payable, payments due in 1994; interest at 11.25% ............... -- 64,000
Accrued interest on Junior and Senior Subordinated Notes .................... 3,799,000 3,059,000
------------ ------------
29,198,000 20,761,000
Less--current portion ....................................................... (18,750,000) (64,000)
------------ ------------
$ 10,448,000 $ 20,697,000
============ ============
</TABLE>
Aggregate annual maturities of long-term obligations including accrued
interest on Junior and Senior Subordinated Notes are as follows:
Year Ending
October 31,
-----------
1995 ....................................... $18,750,000
1996 ....................................... --
1997 ....................................... --
1998 ....................................... --
1999 ....................................... --
Thereafter ................................. 10,448,000
-----------
$29,198,000
===========
F-10
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Long-Term Debt and Redeemable Preferred Stock, Continued:
On September 17, 1992 and June 30, 1993, Advertising amended and restated
its Credit Agreement for the Senior Bank Note wherein the banks originally
agreed to make loans up to an aggregate principal amount of $42,000,000, of
which $20,000,000 in aggregate principal was available and outstanding on
September 17, 1992. In addition to amending certain terms of the Senior Bank
Note, the banks provided an additional $6,000,000 revolving credit facility. The
1993 amendment further modified the Credit Agreement to extend the commitment
reduction dates and change the financial covenants. $4,200,000 of the revolving
credit facility expired on October 31, 1993. At October 31, 1994 and 1993,
$7,750,000 and $16,000,000, respectively, of the Senior Bank Note was available;
$7,750,000 was outstanding at October 31, 1994 and no borrowings were
outstanding at October 31, 1993. The revolving credit facility was guaranteed by
certain key executives and stockholders of the Company.
In January 1995, the Senior Bank Note was assigned to Omnicom (see Note
10). As a result of this assignment, the available commitment was increased to
$20,000,000, the revolving credit facility was terminated and the term was
extended to December 10, 1995. Interest is payable at prime plus 2%.
In 1992, certain terms of the Senior Subordinated Notes due in 1995
("Senior Notes") were amended. For $5 million of such Notes, the cash interest
rate was capped at 14.25% effective August 1, 1991. Interest that increases by
one quarter percent every six months from August 1, 1991 until the Senior Notes
have been registered under the Securities Act of 1993 will be capitalized and
paid on redemption, but no later than August 1995. The interest rate on $6
million of the Senior Notes has been fixed at 13.25% effective August 1, 1991.
In October 1993, the maturity dates of the Junior Subordinated Notes
("Junior Notes") were extended from July 31, 1995 to July 31, 2005 and
participants in the Junior Notes were offered the ability to exchange their
participation in the Junior Notes for participation in a new Equity Appreciation
Rights Plan (see Note 6). As a result of acceptances of this proposal, the
outstanding principal and accrued interest in the Junior Notes was reduced by
$20,425,000 at October 31, 1993 and charged to paid-in capital.
Borrowing arrangements contain restrictive covenants which require, among
other things, the maintenance of minimum cash flow and working capital
requirements, and certain limitations on capital expenditures and the payment of
dividends.
Redeemable Preferred Stock:
The Preferred Stock has no voting rights and does not participate in Common
Stock dividends. The Preferred Stock is entitled to cumulative dividends equal
to 9% of the liquidation preference of shares held by the Plan if such amount is
paid in cash, or 10% of the liquidation preference if such amount is paid in
shares of Preferred Stock, or any combination thereof. In addition, the trustees
of the Plan have the right to compel the redemption of Preferred Stock held by
the Plan in an aggregate amount not to exceed $500,000 per year. In the event
the Preferred Stock is not redeemed within 180 days from the date surrendered,
then such surrendered shares shall be entitled to dividends at the rate of 14%
per annum. In 1994, 1993 and 1992, stock dividends equal to 13,750, 11,272 and
9,290 shares of Preferred Stock, respectively, were issued to the Plan.
In the event of liquidation or sale of substantially all of the assets of
the Company, holders of the Preferred Stock will be entitled to receive, before
any distribution to holders of Common Stock, $100 per share plus any accrued but
unpaid dividends. The Preferred Stock may be redeemed, subject to applicable
law, at the end of eight years at the option of the Company or the holders of
such Preferred Stock, provided that the Senior Bank Note and Senior Subordinated
Notes have been paid in full, and, at any time at the option of the holder, to
the extent the shares sought to be redeemed are allocated for the benefit of a
Plan participant who is entitled to a distribution of his account balance in
such Plan. The purchase price for redemption would be equal to the liquidation
preference plus any unpaid dividends. The sale of such Preferred Stock to third
parties will be subject to the right of first refusal by the Company.
F-11
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Stockholders' Equity:
Common Stock:
The Class A and Class B Common Stock are alike in all respects except that
the Class A Common Stock has certain registration and preferential rights,
including the right to receive additional shares, and the holders of Class A
Common Stock have the right to approve certain transactions. Holders of Class A
Common Stock also are entitled to receive, in consideration for and upon payment
of an amount equal to the par value thereof, additional shares of Class A Common
Stock in the event that additional shares of Class B Common Stock or equity
participation units are issued or granted in connection with dilutive
transactions as defined in the Company's restated certificate of incorporation.
In addition, the Chiat/Day Profit Sharing and 401(k) Plan (the "Plan") (see Note
7) is entitled to receive, for no consideration, additional Class B Common Stock
in the event of certain issuances of Common Stock to the majority stockholder.
At October 31, 1994, 13,434 additional shares of Class A Common Stock are
entitled to be received by current Class A stockholders due to anti-dilution
provisions. In conjunction with the transaction discussed in Note 8, 765,000
shares of Class B Common Stock were repurchased by the Company for approximately
$348,000.
Restricted Stock Plan:
In August 1988, the Board of Directors of the Company approved a restricted
stock purchase plan for which 100,000,000 shares of Class B Common Stock were
reserved. These shares are offered for sale to certain key employees and others
selected by the Board of Directors at a purchase price to be determined from
time to time by the Company. The shares of stock purchased under the plan vest
over a five-year period of employment beginning from the date of purchase. The
plan provides that upon termination of employment, vested shares may be sold
back to or purchased by the Company at book value at date of sale. Non-vested
shares may be sold back to or purchased by the Company at the lower of the
original purchase price or book value at date of sale. At October 31, 1994,
59,809,695 shares remain unissued.
Equity Participation Plan:
Under an equity participation plan approved by the Board of Directors of
the Company in August 1988, the Company may grant up to 50,000,000 equity
participation units to eligible participants. All full-time employees of the
Company are eligible to be selected as participants in the equity participation
plan. Each equity participation unit is equivalent in value to one share of
Class B Common Stock and is treated in the same manner as Class B Common Stock
with respect to its priority in the event of a liquidation.
Equity participation units awarded under the plan vest over a five-year
period of employment beginning from the date of award. Participants are
entitled, upon the redemption of equity participation units, to receive payment
in cash determined by multiplying the number of vested equity participation
units by the increase between the book value per unit (as defined in the plan)
as of the date of grant (which is determined to be zero when the book value is
negative) and the book value per unit as of the valuation date immediately
preceding the date of redemption. As of October 31, 1994, there were 26,591,110
equity participation units available for award. In conjunction with the
transaction described in Note 8, 2,970,000 equity participation units were
relinquished to the Company.
Equity Appreciation Rights Plan:
Under an Equity Appreciation Rights Plan approved by the Board of Directors
of the Company in October 1993, the Company may grant up to 54,084,848 equity
appreciation rights to eligible participants. Only Junior Note participants (as
defined in the plan) are eligible to be awarded equity appreciation rights under
the plan. Each equity appreciation right is equivalent in value to one share of
Class B Common Stock and is treated in the same manner as Class B Common Stock
with respect to its priority in the event of a liquidation.
F-12
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Stockholders' Equity, Continued:
Equity appreciation rights awarded under the plan are 41.27% vested in each
participant on the date of award except for certain participants that are 100%
vested on the date of award. Participants not 100% vested at the date of award
become fully vested 21 months from October 31, 1993 based upon conditions stated
in the plan. Upon redemption of the equity appreciation rights, participants are
entitled to receive payment in cash determined by multiplying the number of
equity appreciation rights by the increase, if any, between the book value per
unit (as defined in the plan and determined to be zero when the book value is
negative) as of October 31, 1993 and the book value per unit as of the valuation
date immediately preceding the date of redemption. As of October 31, 1994, there
were 36,939,112 equity appreciation rights outstanding.
7. Employee Benefit Plans:
Effective November 1, 1990, the Chiat/Day inc. Advertising Employees'
Profit Sharing and Pre-Tax Savings Investment Plan (the "401(k) Plan") was
merged into the Chiat/Day Holdings, Inc. Employee Profit Sharing Plan (the
"Profit Sharing Plan"), formerly known as the Chiat/Day inc. Advertising
Employee Stock Ownership Plan ("ESOP"), to form the Chiat/Day Profit Sharing and
401(k) Plan (the "Plan"), a defined contribution plan.
The Company contributed cash of $250,000 in 1994 and preferred stock with a
liquidation value of $275,000 for the fiscal year ended October 31, 1994. In
February 1994 and 1993 the Company made stock contributions of $781,000 related
to its 1993 obligation. The Company contributed cash of $315,000 and preferred
stock with a liquidation value of $450,000 for the obligation related to the
fiscal year ended October 31, 1992. The Company has certain future fixed minimum
contributions of $525,000, in stock and cash, to the Plan for fiscal years
ending October 31, 1995 to October 31, 2000.
8. Disposition Of Foreign Subsidiary:
On February 16, 1993 (effective January 1, 1993), the Company completed the
transfer of the stock of its foreign subsidiary to FCB for no consideration.
Concurrent with the transfer of shares to FCB, the Company exercised its option
to acquire $10,350,000 of debt owed to the bank by the foreign subsidiary for
$700 and agreed to accept from FCB, in full satisfaction of such debt,
$1,380,000 plus future contingent payments up to a maximum of $3,450,000. In
1994, the Company received $653,000 from FCB in contingent payments.
Future payments are contingent upon certain future conditions being
satisfied as specified in the debt restructuring deed between the Company and
FCB. Any future payments will be recognized as income when received.
The net loss from operations for the two months ended December 31, 1992 and
the year ended October 31, 1992 is reflected as loss from operations of foreign
subsidiary in the consolidated statements of operations. The Company recognized
a gain on the disposal of such subsidiary in 1993.
The financial results as of and for the two months ended December 31, 1992
and the year ended October 31, 1992 are summarized as follows:
1993 1992
------------ ------------
Fee and commission income .................. $ 3,069,000 $ 22,708,000
Operating (loss) profit .................... (933,000) 1,983,000
Other nonoperating income (expense) ........ 296,000 (1,971,000)
Net loss ................................... (637,000) (12,000)
Current assets ............................. 17,951,000 22,211,000
Total assets ............................... 53,341,000 58,418,000
Current liabilities ........................ 19,268,000 23,880,000
Long-term debt ............................. 31,656,000 32,578,000
Total liabilities .......................... 51,585,000 57,198,000
Total stockholders' equity ................. 1,756,000 1,220,000
F-13
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Commitments And Contingencies:
Litigation:
The Company is involved in legal actions arising in the normal course of
business. After taking into consideration legal counsel's evaluation of such
actions, management is of the opinion that their outcome will not have a
material effect on the Company's consolidated financial position or results of
operations.
On October 26, 1992 and November 20, 1992, the Company settled two lawsuits
which were filed in 1990 related to real estate matters. The aggregate cost of
such settlements was $6,246,000. In 1992, the Company recognized an incremental
charge of $3,200,000 related to these lawsuits. Adequate provision for the
balance of the settlements was made in prior years.
Leases:
The Company recorded a $25,848,000 charge in 1993 related to costs
associated with certain real estate operating leases. Effective November 1,
1993, Advertising entered into a new real estate operating lease in New York
that will enable the Company to significantly reduce future rental expense
through a reduction in the total amount of space leased. Occupancy of the new
space occurred in 1994 and the net future rental obligations and related costs
for the write-off of fixed assets abandoned of $18,054,000 associated with the
old lease have been accrued in 1993. $11,776,000 of net future rental
obligations remain at October 31, 1994. $6,062,000 of the charge related to the
early termination of a lease and other costs incurred in conjunction with the
consolidation of operations into one location at the Company's headquarters in
California and the write-off of fixed assets abandoned in conjunction with such
lease termination. The remaining balance of $1,732,000 represents a reserve for
costs in excess of anticipated sublease income for other property leased in
California.
The Company leases facilities and equipment under various operating lease
agreements expiring at various dates through the year 2015. The aggregate
minimum future commitments under such leases (excluding the old New York lease)
are as follows:
Years Ending
October 31,
-----------
1995 ....................................... $ 4,395,000
1996 ....................................... 3,716,000
1997 ....................................... 4,150,000
1998 ....................................... 3,892,000
1999 and thereafter ........................ 47,998,000
-----------
$64,151,000
===========
Rental expense for leases was $5,580,000, $9,422,000 and $9,140,000
(excluding rental expense related to the Company's foreign subsidiary disposed
of in 1993) for the years ended October 31, 1994, 1993 and 1992, respectively.
10. Subsequent Event:
On May 11, 1995, the Company signed an agreement whereby TBWA International
Inc., a wholly-owned subsidiary of Omnicom Group Inc. ("Omnicom"), will acquire
the assets of the Company's businesses and assume substantially all of its
liabilities in exchange for Omnicom common stock. The sale is conditional on the
registration of the Omnicom common stock on Form S-4, clearance by the
appropriate governmental agencies, approval by a majority of the Company's
stockholders and certain other conditions. The sale is anticipated to close by
August 1995.
F-14
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
January 31, January 31,
1995 1994
------------ -------------
Current assets:
Cash and cash equivalents ................. $ 19,054,000 $ 11,786,000
Receivables:
Client accounts receivable ................ 25,243,000 26,425,000
Expenditures billable to clients .......... 16,722,000 6,222,000
Income tax receivable ..................... 681,000 665,000
Notes and other receivables ............... 871,000 913,000
Notes receivable from employees ........... 1,390,000 1,084,000
Less: allowance for doubtful accounts ..... (3,971,000) (2,656,000)
------------ ------------
40,936,000 32,653,000
Prepaid expenses and other ................... 1,087,000 1,250,000
------------ ------------
Total current assets ................ 61,077,000 45,689,000
------------ ------------
Fixed assets, at cost:
Furniture and fixtures .................... 3,205,000 1,162,000
Office equipment .......................... 4,966,000 3,764,000
Leasehold improvements .................... 9,174,000 6,582,000
Construction in progress .................. -- 1,839,000
------------ ------------
17,345,000 13,347,000
Less: accumulated depreciation
and amortization ....................... (6,429,000) (4,666,000)
------------ ------------
10,916,000 8,681,000
------------ ------------
Other assets:
Notes receivable ........................... 3,166,000 166,000
Other ...................................... 2,904,000 5,085,000
------------ ------------
6,070,000 5,251,000
------------ ------------
$ 78,063,000 $ 59,621,000
============ ============
The accompanying notes to consolidated condensed financial statements are an
integral part of these balance sheets.
F-15
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
January 31, January 31,
1995 1994
----------- -----------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt ........................... $28,746,000 $7,312,000
Accounts payable and advanced billings ...................... 84,672,000 73,441,000
Other accrued liabilities ................................... 14,743,000 13,600,000
----------- -----------
Total current liabilities ............................. 128,161,000 94,353,000
----------- -----------
Long-term debt, net of current portion ......................... 10,661,000 28,665,000
Other non-current liabilities .................................. 12,043,000 14,745,000
Redeemable preferred stock, cumulative, $.01 par value;
200,000 shares authorized;
issued and outstanding - 140,818 in 1995;
121,218 in 1994; liquidation value of
$14,082,000 in 1995 ......................................... 14,082,000 12,122,000
Stockholders' equity (deficit):
Class A common stock, $.01 par value;
75,000,000 shares authorized;
issued and outstanding - 16,749,344 in 1995
and 1994 ................................................. 167,000 167,000
Class B common stock, $.01 par value; 200,000,000
shares authorized; issued and outstanding -
40,190,305 in 1995 and 41,015,305 in 1994 ................ 402,000 410,000
Additional paid-in capital .................................. 26,288,000 26,280,000
Foreign currency translation adjustment ..................... (347,000) (519,000)
Accumulated deficit ......................................... (109,120,000) (112,328,000)
----------- -----------
(82,610,000) (85,990,000)
Less: treasury stock at cost; 3,222,075 Class A Common
shares and 196,840 shares Class B Common shares in
1995 and 1994 ............................................ (4,274,000) (4,274,000)
----------- -----------
Total stockholders' equity (deficit) .................. (86,884,000) (90,264,000)
----------- -----------
$78,063,000 $59,621,000
=========== ===========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these balance sheets.
F-16
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three months ended January 31,
------------------------------
1995 1994
------------ ------------
Fee and commission income .................... $ 17,798,000 $ 19,591,000
Costs and expenses:
Salaries and employee benefits ............ 12,801,000 11,431,000
Selling, general and administrative ....... 5,685,000 6,211,000
------------ ------------
18,486,000 17,642,000
Operating (loss) profit ................... (688,000) 1,949,000
Interest income (expense):
Interest expense .......................... (697,000) (735,000)
Interest income ........................... 240,000 126,000
------------ ------------
(457,000) (609,000)
------------ ------------
(Loss) income before income
tax provision ........................ (1,145,000) 1,340,000
Income tax provision ......................... (359,000) (81,000)
------------ ------------
Net (loss) income ...................... ($ 1,504,000) $ 1,259,000
============ ============
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
F-17
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended January 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Net (loss) income ..................................... ($ 1,504,000) $ 1,259,000
----------- ------------
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization ......................... 750,000 567,000
Provision for losses on receivables ................... (36,000) 438,000
Amortization of discount on long-term debt ............ 2,000 4,000
(Decrease) in interest payable ........................ (144,000) (161,000)
Decrease in income tax receivable ..................... 213,000 --
Preferred stock dividends issued to profit sharing plan 10,000 --
Change in assets and liabilities
Decrease in receivables ............................. 31,522,000 24,204,000
(Increase) decrease in prepaid expenses and other ... (351,000) 42,000
(Decrease) in accounts payable and advanced billings (27,423,000) (31,513,000)
(Decrease) in income tax payable .................... (1,132,000) --
Increase in other accrued liabilities ............... 2,910,000 876,000
(Decrease) in other noncurrent liabilities .......... (757,000) (688,000)
------------ ------------
Total adjustments ................................... 5,564,000 (6,231,000)
------------ ------------
Net cash provided (used) by operating activities .... 4,060,000 (4,972,000)
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets, net of retirements ....... (202,000) (1,526,000)
(Increase) in other assets .......................... (658,000) (84,000)
------------ ------------
Net cash used in investing activities ............. (860,000) (1,610,000)
------------ ------------
Cash flows from financing activities:
Debt borrowings ..................................... 9,997,000 14,998,000
------------ ------------
Net cash provided by financing activities ......... 9,997,000 14,998,000
Effect of exchange rate changes on cash ............... 26,000 (23,000)
------------ ------------
Net increase in cash and cash equivalents ............. 13,223,000 8,393,000
Cash and cash equivalents at beginning of period ...... 5,831,000 3,393,000
------------ ------------
Cash and cash equivalents at end of period ............ $ 19,054,000 $ 11,786,000
============ ============
Supplemental disclosures:
Interest ............................................ $ 829,000 $ 877,000
============ ============
Income taxes ........................................ $ 1,279,000 $ 68,000
============ ============
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
F-18
<PAGE>
CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) The consolidated condensed interim financial statements included herein
have been prepared by Holdings, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although Holdings believes that
the disclosures are adequate to make the information presented not misleading.
2) These statements reflect all adjustments consisting of normal recurring
accruals which, in the opinion of management, are necessary for a fair
presentation of the information contained therein. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in Holdings' latest
fiscal report.
3) Results of operations for the interim periods are not necessarily
indicative of annual results.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Registrant's Certificate of Incorporation contains a provision limiting
the liability of directors (except for approving statutorily prohibited
dividends, share repurchases or redemptions, distributions of assets on
dissolution or loans to directors) to acts or omissions in bad faith, involving
intentional misconduct or a knowing violation of the law, or resulting in
personal gain to which the director was not legally entitled. The Registrant's
By-Laws provide that an officer or director will be indemnified against any
costs or liabilities, including attorneys fees and amounts paid in settlement
with the consent of the registrant in connection with any claim, action or
proceeding to the fullest extent permitted by the New York Business Corporation
Law.
Section 722(a) of the New York Business Corporation Law provides that a
corporation may indemnify any officer or director, made or threatened to be
made, a party to an action other than one by or in the right of the corporation,
including an action by or in the right of any other corporation or other
enterprise, which any director or officer of the corporation served in any
capacity at the request of the corporation, because he was a director or officer
of the corporation, or served such other corporation or other enterprise in any
capacity, against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees actually and necessarily incurred as a
result of such action, or any appeal therein, if such director or officer acted,
in good faith, for a purpose which he reasonably believed to be in, or in the
case of service for any other corporation or other enterprise, not opposed to,
the best interests of the corporation and, in criminal actions, in addition, had
no reasonable cause to believe that his conduct was unlawful.
Section 722(c) of the New York Business Corporation Law provides that a
corporation may indemnify any officer or director made, or threatened to be
made, a party to an action by or in the right of the corporation by reason of
the fact that he is or was a director of the corporation, or is or was serving
at the request of the corporation as a director of officer of any other
corporation of any type or kind, or other enterprise, against amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred by him in connection with the defense or settlement of such
action, or in connection with an appeal therein, if such director or officer
acted, in good faith, for a purpose which he reasonably believed to be in, or,
in the case of service for another corporation or other enterprise, not opposed
to, the best interests of the corporation. The corporation may not, however,
indemnify any officer or director pursuant to Section 722(c) in respect of (1) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (2) any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that the
court in which the action was brought or, if no action was brought, any court of
competent jurisdiction, determines in its discretion, that the person is fairly
and reasonably entitled to indemnity for such portion of the settlement and
expenses as the court deems proper.
Section 723 of the New York Business Corporation Law provides that an
officer or director who has been successful on the merits or otherwise in the
defense of a civil or criminal action of the character set forth in Section 722
is entitled to indemnification as permitted in such section. Section 724 of the
New York Business Corporation Law permits a court to award the indemnification
required by Section 722.
The Registrant has entered into agreements with its directors to indemnify
them for liabilities or costs arising out of any alleged or actual breach of
duty, neglect, errors or omissions while serving as a director. The Registrant
also maintains and pays premiums for directors' and officers' liability
insurance policies.
Item 21. Exhibits and Financial Statement Schedules.
(a) See Exhibit Index
(b) See the financial statement schedules included in Omnicom's Annual
Report on Form 10-K incorporated in this Prospectus/Information Statement
included in this Registration Statement.
II-1
<PAGE>
Item 22. 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 of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; 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 such information in this
Registration Statement.
Provided however, that paragraphs (1)(i) and (1)(ii) shall not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
to this Registration Statement any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant further undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c) under
the Securities Act, the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415 under the
Securities Act, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
II-2
<PAGE>
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such requests, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of the responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 7, 1995.
OMNICOM GROUP INC.
Registrant
By: /s/ BRUCE CRAWFORD
--------------------------
Bruce Crawford
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer or director of Omnicom
Group Inc. whose signature appears below constitutes and appoints Bruce Crawford
and Barry J. Wagner, and each of them, his true and lawful attorney-in-fact and
agent, with full and several power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
---------- ----- ----
<S> <C> <C>
/S/ BRUCE CRAWFORD
-------------------------------------- President and Chief June 7, 1995
(Bruce Crawford) Executive Officer and Director
/S/ FRED J. MEYER
-------------------------------------- Chief Financial Officer June 7, 1995
(Fred J. Meyer) and Director
/S/ DALE A. ADAMS
-------------------------------------- Controller (Principal June 7, 1995
(Dale A. Adams) Accounting Officer)
--------------------------------------
(Bernard Brochand) Director
/S/ LEONARD S. COLEMAN, JR.
--------------------------------------
(Leonard S. Coleman, Jr.) Director June 7, 1995
/S/ ROBERT J. CALLANDER
--------------------------------------
(Robert J. Callander) Director June 7, 1995
/S/ JAMES A. CANNON
--------------------------------------
(James A. Cannon) Director June 7, 1995
/S/ PETER I. JONES
--------------------------------------
(Peter I. Jones) Director June 7, 1995
/S/ JOHN R. PURCELL
-------------------------------------- Director June 7, 1995
(John R. Purcell)
/S/ KEITH L. REINHARD
-------------------------------------- Director June 7, 1995
(Keith L. Reinhard)
/S/ ALLEN ROSENSHINE Director June 7, 1995
--------------------------------------
(Allen Rosenshine)
/S/ GARY L. ROUBOS Director June 7, 1995
--------------------------------------
(Gary L. Roubos)
-------------------------------------- Director
(Quentin I. Smith, Jr.)
/S/ ROBIN B. SMITH
-------------------------------------- Director June 7, 1995
(Robin B. Smith)
/S/ JOHN D. WREN
-------------------------------------- Director June 7, 1995
(John D. Wren)
/S/ WILLIAM G. TRAGOS
-------------------------------------- Director June 7, 1995
(William G. Tragos)
/S/ EGON P.S. ZEHNDER
-------------------------------------- Director June 7, 1995
(Egon P.S. Zehnder)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit Page
- -------- ---------------------- ----
<S> <C> <C>
2.1 Asset Purchase Agreement dated May 11, 1995, among Chiat/Day Holdings, Inc.,
Chiat/Day inc. Advertising, Omnicom Group Inc. and TBWA International Inc. ..............
2.2 Plan of Liquidation of Chiat/Day Holdings, Inc. .........................................
2.3 Form of Escrow Agreement by and between Chiat/Day inc. Advertising, Chiat/Day
Holdings, Inc., TBWA International and The Chase Manhattan Bank, N.A.,
as Escrow Agent .........................................................................
2.4 Form of Liquidating Trust Agreement by and between Chiat/Day Holdings, Inc., on
behalf of its stockholders, and Thomas Patty and David C. Wiener, as Trustees ...........
2.5 Form of Deposit and Pledge Agreement among Chiat/Day inc. Advertising Chiat/Day
Holdings, Inc., Omnicom Group Inc., TBWA International and The Chase Manhattan
Bank, as Deposit Agent ..................................................................
2.6 Stock Purchase Agreement dated May 11, 1995 between Chiat/Day Holdings, Inc.
and Adelaide Horton (a/k/a the Advertising Stock Sale Agreement) ........................
2.7 Profit Sharing Plan Purchase Agreement dated as of May 9, 1995 between Chiat/Day
Holdings, Inc. and Michael Kooper, as Trustee ...........................................
2.8* Form of Liquidating Trust Escrow Agreement among Holdings, Advertising and
, as Escrow Agent ..........................................................
5* Opinion of Davis & Gilbert as to the legality of the Omnicom Common Stock
registered hereunder ....................................................................
23.1 Consent of Arthur Andersen LLP as to financial statements of Omnicom
Group Inc. ..............................................................................
23.2 Consent of Coopers & Lybrand LLP as to financial statements of
Chiat/Day Holdings, Inc. ................................................................
23.3 Consent of Davis & Gilbert (included in Exhibit 5) ......................................
24 Powers of Attorney (included on signature page) .........................................
- -------------------
* To be filed by amendment
</TABLE>
ASSET PURCHASE AGREEMENT
by and among
OMNICOM GROUP INC.,
TBWA INTERNATIONAL INC.,
CHIAT/DAY HOLDINGS, INC.
and
CHIAT/DAY INC. ADVERTISING
Dated May 11, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
SALES OF ASSETS
Section 1.1 Company Assets and Liabilities............................ 2
1.1.1 Company Assets Transferred................................ 2
1.1.2 Excluded Company Assets................................... 2
1.1.3 Assumed Company Liabilities............................... 3
1.1.4 Retained Company Liabilities.............................. 4
Section 1.2 Advertising Assets and Liabilities........................ 5
1.2.1 Advertising Assets Transferred............................ 5
1.2.2 Excluded Advertising Assets............................... 5
1.2.3 Assumed Advertising Liabilities........................... 6
1.2.4 Retained Advertising Liabilities.......................... 7
ARTICLE II
PURCHASE PRICE AND CLOSING
Section 2.1 Purchase Price............................................ 8
2.1.1 Basic Payments............................................ 8
2.1.2 Preferred Stock Loan...................................... 9
Section 2.2 Closing................................................... 9
Section 2.3 Purchase of Preferred Stock............................... 11
Section 2.4 Payment of Liabilities and Establishment of
Liquidating Trust...................................... 11
Section 2.5 Escrow Agreement.......................................... 12
Section 2.6 Dissolution; Distribution of the Company's Properties..... 13
Section 2.7 Payment of Obligations to Rights Holders by Advertising... 13
RTICLE III
REPRESENTATIONS OF THE SELLERS
Section 3.1 Execution and Validity of Agreement and
Related Documents...................................... 14
3.1.1 Execution and Validity of Agreement by the Company........ 14
3.1.2 Execution and Validity of Agreement by Advertising........ 14
3.1.3 Execution and Validity of Related Agreements.............. 14
Section 3.2 Capitalization, Existence and Good Standing of
the Company........................................... 15
Section 3.2.1 Capitalization............................................ 15
3.2.2 Existence and Good Standing............................... 15
Section 3.3 Subsidiaries and Investments.............................. 15
Section 3.4 Financial Statements and No Material Changes.............. 16
Section 3.5 Books and Records......................................... 17
Section 3.6 Title to Properties; Encumbrances......................... 17
i
<PAGE>
Section 3.7 Leases.................................................... 18
Section 3.8 Contracts................................................. 18
Section 3.9 Restrictive Documents..................................... 19
Section 3.10 Litigation................................................ 20
Section 3.11 Taxes..................................................... 20
3.11.1 Taxes..................................................... 20
3.11.2 VAT Legislation........................................... 21
3.11.3 Additional Representations................................ 22
Section 3.12 Liabilities............................................... 22
Section 3.13 Insurance................................................. 22
Section 3.14 Intellectual Properties................................... 22
Section 3.15 Compliance with Laws; Licenses and Permits................ 23
3.15.1 Compliance................................................ 23
3.15.2 Licenses.................................................. 23
Section 3.16 Client Relations.......................................... 24
Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable.... 24
Section 3.18 Employment Relations...................................... 24
Section 3.19 Employee Benefit Matters.................................. 25
3.19.1 List of Plans............................................. 25
3.19.2 Severance................................................. 25
3.19.3 No Retiree Benefits....................................... 26
3.19.4 Plan Compliance........................................... 26
3.19.5 Additional Representations................................ 26
Section 3.20 Interests in Customers, Suppliers, Etc.................... 26
Section 3.21 Bank Accounts and Powers of Attorney...................... 27
Section 3.22 Compensation of Employees................................. 27
Section 3.23 No Changes Since the Balance Sheet Date................... 27
Section 3.24 Required Approvals, Notices and Consents.................. 28
Section 3.25 Corporate Controls........................................ 29
Section 3.26 Information Supplied...................................... 29
Section 3.27 Brokers................................................... 29
Section 3.28 Other Disclosures......................................... 30
Section 3.29 Copies of Documents; Schedules............................ 30
ARTICLE IV
REPRESENTATIONS OF OMNICOM AND THE PURCHASER
Section 4.1 Existence and Good Standing............................... 31
Section 4.2 Execution and Validity of Agreements and
Related Documents...................................... 31
Section 4.3 Restrictive Documents..................................... 31
Section 4.4 Omnicom Stock............................................. 32
Section 4.5 Financial Statements and No Material Changes.............. 32
Section 4.6 Litigation................................................ 32
ii
<PAGE>
Section 4.7 Consents and Approvals of Governmental Authorities........ 33
Section 4.8 Brokers................................................... 33
Section 4.9 Information Supplied...................................... 33
Section 4.10 Copies of Documents; Schedules............................ 33
ARTICLE V
COVENANTS OF THE SELLERS
Section 5.1 Regulatory and Other Approvals............................ 33
Section 5.2 HSR Filings............................................... 34
Section 5.3 Investigation by Omnicom and the Purchaser................ 34
Section 5.4 No Solicitations.......................................... 35
Section 5.5 Conduct of Business....................................... 35
Section 5.6 Financial Information..................................... 38
Section 5.7 Notice and Cure........................................... 38
Section 5.8 Termination of Profit Sharing Plan........................ 39
Section 5.9 Consultation.............................................. 39
Section 5.10 Company Stockholder Approval.............................. 39
Section 5.11 Fulfillment of Conditions................................. 40
ARTICLE VI
COVENANTS OF OMNICOM AND THE PURCHASER
Section 6.1 Regulatory and Other Approvals............................ 40
Section 6.2 HSR Filings............................................... 40
Section 6.3 Financial Information and Reports......................... 41
Section 6.4 Agreements Regarding Employees............................ 41
Section 6.5 Notice and Cure........................................... 42
Section 6.6 Fulfillment of Conditions................................. 42
Section 6.7 Blue Sky; New York Stock Exchange Listing................. 43
Section 6.8 Access to Books and Records............................... 43
Section 6.9 Purchases of Omnicom Stock................................ 43
Section 6.10 Financial Results of Combined Businesses.................. 43
Section 6.11 Chiat Art Lease; Insurance................................ 43
Section 6.12 Exchange Act Filings...................................... 44
Section 6.13 Mojo Receivable........................................... 44
ARTICLE VII
MUTUAL COVENANTS
Section 7.1 Preparation of Registration Statement..................... 44
Section 7.2 Affiliates' Letters....................................... 45
Section 7.3 Reasonable Efforts to Consummate Transaction.............. 46
iii
<PAGE>
Section 7.4 Sales Tax Liability....................................... 46
Section 7.5 Financial Transactions.................................... 46
Section 7.6. Calculation of Revenues................................... 46
7.6.1 Delivery of Revenues Statement............................ 46
7.6.2 Definition of Annualized Revenues......................... 47
Section 7.7 Public Announcements...................................... 48
Section 7.8 Renegotiation of Purchase Price........................... 48
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF OMNICOM AND THE PURCHASER
Section 8.1 Representations and Warranties............................ 48
Section 8.2 Good Standing Certificates................................ 49
Section 8.3 Performance............................................... 49
Section 8.4 Certified Resolutions..................................... 49
Section 8.5 No Litigation............................................. 49
Section 8.6 Regulatory Consents and Approvals......................... 49
Section 8.7 Registration Statement; New York Stock Exchange Listing... 50
Section 8.8 Company Stockholder Approval.............................. 50
Section 8.9 Required Approvals, Notices and Consents.................. 50
Section 8.10 Pooling of Interests Accounting........................... 50
Section 8.11 Opinion of Counsel........................................ 50
Section 8.12 Escrow Agreements......................................... 50
Section 8.13 Employment Agreements..................................... 50
Section 8.14 Non-Competition Agreements................................ 51
Section 8.15 Employment/Consulting Agreements.......................... 51
Section 8.16 Loss of Client Account.................................... 51
Section 8.17 Affiliates Representation Letters......................... 51
Section 8.18 EAR and EPU Holders....................................... 51
Section 8.19 Closing of Profit Sharing Plan Purchase Agreement......... 51
Section 8.20 Repayment of Indebtedness................................. 52
Section 8.21 Material Adverse Effect................................... 52
Section 8.22 Proceedings............................................... 52
Section 8.23 Financial Transactions.................................... 52
Section 8.24 Deposit and Pledge Agreement.............................. 52
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE SELLERS
Section 9.1 Representations and Warranties............................ 53
Section 9.2 Good Standing Certificates................................ 53
Section 9.3 Performance............................................... 53
Section 9.4 Certified Resolutions..................................... 53
iv
<PAGE>
Section 9.5 No Litigation............................................. 53
Section 9.6 Regulatory Consents and Approvals......................... 53
Section 9.7 Registration Statement, New York Stock Exchange Listing... 54
Section 9.8 Company Stockholder Approval.............................. 54
Section 9.9 Opinion of Counsel........................................ 54
Section 9.10 Employment Agreements..................................... 54
Section 9.11 Employment/Consulting Agreements.......................... 54
Section 9.12 Increased Revenues of the Sellers......................... 54
Section 9.13 Proceedings............................................... 55
Section 9.14 Financial Transactions.................................... 55
Section 9.15 Incentive Agreement....................................... 55
Section 9.16 Escrow Agreements......................................... 55
Section 9.17 Closing of Profit Sharing Plan Purchase Agreement......... 55
Section 9.18 Material Adverse Effect................................... 55
ARTICLE X
ADDITIONAL AGREEMENTS
Section 10.1 Change of Name of Sellers................................. 55
Section 10.2 Change of Name of TBWA Advertising Inc.................... 56
Section 10.3 Allocation of Purchase Price.............................. 56
Section 10.4 Future Tax Returns........................................ 56
Section 10.5 Tax Elections............................................. 57
Section 10.6 Canadian Elections........................................ 57
Section 10.7 Dispute Resolution........................................ 57
Section 10.8 Termination............................................... 58
Section 10.9 Effect of Termination..................................... 58
Section 10.10 Bulk Transfer Laws........................................ 58
Section 10.11 No Merger................................................. 59
Section 10.12 Transfer Tax Compliance................................... 59
Section 10.13 Indebtedness to the Purchaser............................. 59
ARTICLE XI
SURVIVAL; INDEMNIFICATION
Section 11.1 Survival.................................................. 59
Section 11.2 Obligation of the Company to Indemnify.................... 60
Section 11.3 Indemnification Procedures................................ 60
11.3.1 Notice of Asserted Liability.............................. 60
11.3.2 Defense of Asserted Liability............................. 60
11.3.3 Cooperation............................................... 60
11.3.4 Settlements............................................... 61
Section 11.4 Limitations on Indemnification............................ 61
v
<PAGE>
11.4.1 Indemnity Cushion......................................... 61
11.4.2 Termination of Indemnification Obligations and
Other Limitations...................................... 61
11.4.3 Treatment................................................. 62
11.4.4 Tax Effects............................................... 62
ARTICLE XII
MISCELLANEOUS
Section 12.1 Expenses.................................................. 63
Section 12.2 Governing Law............................................. 63
Section 12.3 Jurisdiction.............................................. 63
Section 12.4 Person Defined............................................ 63
Section 12.5 Knowledge Defined......................................... 64
Section 12.6 Affiliate Defined......................................... 64
Section 12.7 Captions.................................................. 64
Section 12.8 Confidentiality........................................... 64
Section 12.9 Notices................................................... 64
Section 12.10 Parties in Interest....................................... 65
Section 12.11 Severability.............................................. 66
Section 12.12 Counterparts.............................................. 66
Section 12.13 Entire Agreement.......................................... 66
Section 12.14 Amendment................................................. 66
Section 12.15 Third Party Beneficiaries................................. 66
Section 12.16 Extension; Waiver......................................... 66
Section 12.17 Exchange Rate............................................. 66
vi
<PAGE>
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Affiliates Representation Letter
Exhibit C Opinion of Simpson Thacher & Bartlett
Exhibit D Letter from Coopers & Lybrand LLP
Exhibit E Letter from Arthur Andersen LLP
Exhibit F Form Non-Competition Agreement
Exhibit G Form Jay Chiat Non-Competition Agreement
Exhibit H Consent Letter
Exhibit I Opinion of Davis & Gilbert
ANNEXES
Annex I Additional Tax Representations
Annex II Additional Employee Benefit Plan Representations
SCHEDULES
Schedule 1.1.4(ix) Company Guarantees
Schedule 3.2 Foreign Qualifications
Schedule 3.3 Subsidiaries
Schedule 3.4A Financial Statements
Schedule 3.4B GAAP Exceptions
Schedule 3.5 Books and Records
Schedule 3.6 Title to Properties; Encumbrances
Schedule 3.7 Leases
Schedule 3.8 Contracts
Schedule 3.9 Restrictive Documents
Schedule 3.10 Litigation
Schedule 3.11 Taxes
Schedule 3.13 Insurance
Schedule 3.14 Intellectual Properties
Schedule 3.16 Client Relations
Schedule 3.19 Employee Benefit Matters
Schedule 3.20 Interests in Customers; Suppliers
Schedule 3.21 Bank Accounts and Powers of Attorney
Schedule 3.22 Compensation of Employees
Schedule 3.23 Changes Since the Balance Sheet Date
Schedule 3.24 Approvals, Notices and Consents of Sellers
Schedule 4.3 Restrictive Documents
Schedule 4.7 Approvals, Notices and Consents of Purchaser
Schedule 5.5 Conduct of Business
vii
<PAGE>
Schedule 6.4 Benefits Offered to Affected Employees
Schedule 7.8 Calculation of EBIT
viii
<PAGE>
Index of Defined Terms
Term Page
- ---- ----
Advertising...................................................................1
Advertising Assets............................................................5
Advertising Balance Sheet....................................................16
Advertising Contracts.........................................................6
Advertising Stock Sale Agreement..............................................2
Affected Employees...........................................................41
Affiliate....................................................................64
Agreement.................................................................... 1
Amended and Restated Credit Agreement........................................18
Annualized Revenues..........................................................47
Arbitrator...................................................................57
Asserted Liability...........................................................60
Assets........................................................................5
Assumed Advertising Liabilities...............................................7
Assumed Company Liabilities...................................................3
Assumed Liabilities...........................................................7
Balance Sheet................................................................17
Balance Sheet Date...........................................................17
Businesses....................................................................1
Chiat Consulting Agreement...................................................36
Claims Notice................................................................60
Closing......................................................................10
Closing Date.................................................................10
Clow Employment Agreement....................................................36
Code.........................................................................26
Common Stock.................................................................12
Company.......................................................................1
Company Affiliates...........................................................45
Company Assets................................................................2
Company Balance Sheet........................................................16
Company Contracts.............................................................3
Contributed Stock.............................................................9
Deposit and Pledge Agreement.................................................52
Distribution Date............................................................12
EARs.........................................................................13
EAR Plan.....................................................................13
ix
<PAGE>
Term Page
- ---- ----
EBIT.........................................................................48
EPUs.........................................................................13
EPU Plan.....................................................................13
ERISA........................................................................25
Escrow Agent.................................................................12
Escrow Agreement.............................................................12
Escrow Funds.................................................................12
Excluded Advertising Assets.................................................. 5
Excluded Assets...............................................................6
Excluded Company Assets.......................................................2
Execution Date................................................................1
GAAP.........................................................................17
Gains Tax....................................................................59
General Escrow Fund..........................................................12
Group........................................................................50
HSR Act......................................................................34
Inactive Subsidiary..........................................................16
Indemnified Parties..........................................................60
Information Statement........................................................29
Intellectual Property........................................................23
International................................................................16
Knowledge....................................................................64
Liabilities..................................................................22
Licenses.....................................................................23
Liens.........................................................................2
Liquidating Trust............................................................11
Liquidating Trust Escrow Fund................................................13
Losses.......................................................................60
Lost Clients.................................................................47
Market Value..................................................................9
Material Adverse Effect......................................................20
Measuring Month..............................................................47
Measuring Period.............................................................47
Mojo Receivable..............................................................30
New Clients..................................................................47
Omnicom.......................................................................1
Omnicom Group................................................................41
Omnicom Stock.................................................................8
Original Clients.............................................................47
x
<PAGE>
Term Page
- ---- ----
Person.......................................................................63
Plan.........................................................................25
Post Execution Date Event....................................................39
Preferred Stock..............................................................11
Preferred Stock Purchase Date................................................11
Profit Sharing Plan..........................................................11
Profit Sharing Plan Purchase Agreement.......................................11
Prospectus Materials.........................................................44
Publication Date.............................................................12
Purchase Price................................................................8
Purchase Price Allocation....................................................56
Purchaser.....................................................................1
Registration Statement.......................................................29
Related Group................................................................26
Representatives..............................................................34
Requirements of Law..........................................................23
Retained Advertising Liabilities..............................................7
Retained Company Liabilities..................................................4
Retained Liabilities..........................................................7
Revenues Statement...........................................................47
Sales Taxes..................................................................46
SEC..........................................................................29
Securities Act...............................................................29
Sellers.......................................................................1
Special Escrow Fund..........................................................12
Stockholders.................................................................11
Subsidiary...................................................................16
Taxes........................................................................20
Termination Date.............................................................61
Third Party Claim............................................................60
Transaction Costs............................................................30
Transfer Taxes...............................................................59
VAT..........................................................................20
xi
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated May 11, 1995 (the
"Execution Date") by and among OMNICOM GROUP INC., a New York corporation
("Omnicom"); TBWA INTERNATIONAL INC., a Delaware corporation and wholly-owned
subsidiary of Omnicom (the "Purchaser"); CHIAT/DAY HOLDINGS, INC., a Delaware
corporation (the "Company"); and CHIAT/DAY INC. ADVERTISING, a Delaware
corporation, and wholly-owned subsidiary of the Company ("Advertising"; together
with the Company, sometimes collectively referred to herein as the "Sellers").
W I T N E S S E T H :
WHEREAS, the Sellers are engaged in the advertising business (the
"Businesses");
WHEREAS, the Sellers wish to sell, and the Purchaser wishes to purchase,
the assets of the Sellers relating to the Businesses, and in connection
therewith, the Purchaser has agreed to assume the liabilities of the Sellers
relating to the Businesses, all upon the terms and subject to the conditions of
this Agreement; and
WHEREAS, the respective Boards of Directors of the Company, Advertising,
Omnicom and the Purchaser have approved this Agreement and the transactions
contemplated hereby;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1
<PAGE>
ARTICLE I
SALES OF ASSETS
Section 1.1 Company Assets and Liabilities.
1.1.1 Company Assets Transferred. On the terms and subject to the
conditions set forth in this Agreement, the Company will sell, transfer, convey,
assign and deliver to the Purchaser, and the Purchaser will purchase, at the
Closing (as defined in Section 2.2), free and clear of all mortgages, liens,
security interests, encumbrances, claims, charges, hypothecates and restrictions
of any kind or character (collectively, "Liens"), except as set forth in Section
3.6, all of the Company's right, title and interest in, to and under all of the
Company's assets, properties and business, of every kind and description and
wherever located, including without limitation, (i) all of the issued and
outstanding shares of capital stock owned directly by the Company in any other
corporations (except for any shares of capital stock owned in Advertising and
any other subsidiaries of the Company which are designated on Schedule 3.3 as an
Inactive Subsidiary (as defined in Section 3.3)); (ii) all of the assets,
properties and rights of the Company on the Company Balance Sheet (referred to
in Section 3.4) as modified or changed between the Balance Sheet Date (as
defined in Section 3.4) and the Closing Date (as defined in Section 2.2) without
violation of the provisions of Section 3.23 or Section 5.5; (iii) the Chiat
Consulting Agreement and the Clow Employment Agreement (each as defined in
Section 5.5(xi) below); and (iv) all other property, tangible and intangible,
real, personal or mixed, cash, securities, bank accounts, accounts receivable,
goodwill, the trade name "Chiat/Day", the Company's and Advertising's corporate
name, advances, deposits, prepayments, inventories, work-in-process,
expenditures billable to clients, supplies, leaseholds, leasehold improvements,
fixtures, machinery, equipment, vehicles, office furnishings and fixtures,
claims of all kinds, rights under contracts, client lists, open media
commitments and purchase orders, licenses, insurance policies, trade names of
the Company and each of its subsidiaries, trademarks, trademark registrations
and applications, copyrights, copyright registrations and applications,
publication rights, trade secrets, all other intellectual property, and all
books and records of the Company (collectively, the "Company Assets").
1.1.2 Excluded Company Assets. Anything in Section 1.1.1 to the contrary
notwithstanding, there shall be excluded from the assets, properties, rights and
business to be transferred to the Purchaser hereunder the following
(collectively, the "Excluded Company Assets"): (i) the corporate seal, minute
book, charter documents and stock records of the Company, (ii) the issued and
outstanding capital stock of Advertising and any Inactive Subsidiary (including
without limitation, Chiat/Day Direct Marketing, Inc.), (iii) rights arising
under the stock purchase agreement of even date herewith between the Company and
Adelaide Horton relating to the sale of the capital stock of Advertising (the
"Advertising Stock Sale Agreement"), other than the right to receive the cash
purchase price receivable thereunder to the extent reflected in the books and
2
<PAGE>
records of the Company, (iv) any rights of the Company or any subsidiary of the
Company in and to the assets described in Sections 1.2.2(iii) and (iv) below.
1.1.3 Assumed Company Liabilities. In connection with the sale, transfer,
conveyance, assignment and delivery of the Company Assets pursuant to this
Agreement, on the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Purchaser agrees to:
(i) assume, pay and discharge in due course all debts and liabilities
of the Company existing on the Closing Date to the extent duly reflected in
the books and records of the Company, including without limitation, (x) any
indebtedness owing by the Company to Omnicom or any of its affiliates (as
defined in Section 12.6) (whether pursuant to Sections 2.1.2, 2.3 or 7.5
hereof or otherwise), and (y) all debts and liabilities to the extent
reflected on the Company Balance Sheet, as modified or changed between the
Balance Sheet Date and the Closing Date in the ordinary course of business,
and provided that the Purchaser will not assume or discharge debts or
liabilities, if any, incurred by the Company as a result of transactions
that the Company may enter in violation of this Agreement and which are not
recorded on the books and records of the Company, or liabilities not
related to the operating Businesses to the extent provided in Section
l.l.4;
(ii) assume, observe, perform and fulfill all terms and conditions of
all executory contracts, agreements, licenses, leases, commitments and
undertakings of the Company ("Company Contracts") including those incurred
by the Company subsequent to the Balance Sheet Date, provided that the
Purchaser will not assume or discharge any of the Company Contracts entered
into in violation of this Agreement or those contracts not related to the
operating Businesses to the extent provided in Section 1.1.4 (including
without limitation those contracts marked on any Schedule to this Agreement
as not being assigned to and assumed by the Purchaser);
(iii) assume, pay and discharge the liability for Sales Taxes arising
out of the transfer of the Company Assets to the Purchaser to the extent
provided in Section 7.4;
(iv) assume, pay and discharge the liability for all Transaction Costs
(as defined in Section 3.28); and
(v) assume, pay and discharge the liability for any severance benefits
payable by the Company as a result of the termination of any employee prior
to the Closing at the written request of Omnicom or the Purchaser.
The items referred to in this Section 1.1.3 are collectively referred to as
the "Assumed Company Liabilities".
3
<PAGE>
1.1.4 Retained Company Liabilities. The Purchaser shall not assume by
virtue of this Agreement or the transactions contemplated hereby, and shall have
no liability for, the following non-operating liabilities of the Company (the
"Retained Company Liabilities"):
(i) except as otherwise provided in Section 1.1.3(iii), any tax
liability arising out of or in connection with or resulting from the
transactions contemplated by this Agreement;
(ii) any obligation of the Company to distribute to its stockholders
or the Liquidating Trust (as defined in Section 2.4) or the Escrow Funds
(as defined in Section 2.5) or otherwise apply the Purchase Price (as
defined in Section 2.1) paid to it pursuant to this Agreement;
(iii) any liability or obligation under the Profit Sharing Plan
Purchase Agreement (as defined in Section 2.3);
(iv) any liability or obligation of the Company for taxes imposed on
or measured by the income or capital of the Company, sales, payroll, or
other Taxes (as defined in Section 3.11), or any interest or penalties
thereon, applicable to or arising from any period, except with respect to
periods ending on or prior to October 31, 1994 to the extent provided for
on the Company Balance Sheet;
(v) any liability or obligation of the Company which was required to
be disclosed to the Purchaser pursuant to this Agreement and which was not
so disclosed, provided that any liability or obligation reflected on the
Company Balance Sheet shall be deemed to have been disclosed to the
Purchaser to the extent reserved for thereon;
(vi) any liability or obligation of the Company arising from the
failure of the Company to perform or discharge any of its agreements
contained herein;
(vii) any claim, cause of action, proceeding or other litigation
pending or threatened on the Closing Date or which is initiated at any time
thereafter, against the Company and which is based on acts, facts,
circumstances, events or conditions occurring or existing prior to the
Closing except to the extent reserved against on the Company Balance Sheet
or to the extent disclosed to the Purchaser on Schedule 3.10;
(viii) any liability or obligation under the Advertising Stock Sale
Agreement;
(ix) any liability or obligation of the Company under any guarantee
issued by the Company, except for those guarantees set forth on Schedule
1.1.4(ix);
(x) except as otherwise provided in Section 1.1.3, any liability or
obligation of the Company with respect to any plan, policy, arrangement or
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agreement providing employment benefits or compensation to employees or
severance payments (if any) arising solely by reason of the consummation of
this Agreement, including any Plan referred to in Section 3.19, other than
(x) employment, consulting or severance agreements and Plans specifically
assumed by the Purchaser, (y) any liability reserved for on the Company
Balance Sheet to the extent reserved for thereon, or (z) any liability
incurred between the Balance Sheet Date and the Closing Date and which
relates to the ordinary and normal course of business;
(xi) any liability or obligation of the Company arising under the Deed
of Transfer and Acceptance of Shares agreement, dated February 16, 1993
between the Company and FCB International, Inc.; and
(xii) any liability or obligation of the Company incurred by or
accruing to the Company after the Closing Date unless specifically assumed
by the Purchaser under this Agreement.
Section 1.2 Advertising Assets and Liabilities.
1.2.1 Advertising Assets Transferred. On the terms and subject to the
conditions set forth in this Agreement, Advertising will sell, transfer, convey,
assign and deliver to the Purchaser, and the Purchaser will purchase, at the
Closing, free and clear of all Liens, except as set forth in Section 3.6, all of
Advertising's right, title and interest in, to and under all of Advertising's
assets, properties and business, of every kind and description and wherever
located, including without limitation, (i) all of the issued and outstanding
shares of capital stock directly owned by Advertising (except for any shares of
capital stock owned in any subsidiaries which are designated on Schedule 3.3 as
an Inactive Subsidiary), (ii) all of the assets, properties and rights of
Advertising on the Advertising Balance Sheet (referred to in Section 3.4) as
modified or changed between the Balance Sheet Date and the Closing Date without
violation of the provisions of Section 3.23 or Section 5.5 and (iii) all other
property, tangible and intangible, real, personal or mixed, cash, securities,
bank accounts, accounts receivable, goodwill, advances, deposits, prepayments,
inventories, work-in-process, expenditures billable to clients, supplies,
leaseholds, leasehold improvements, fixtures, machinery, equipment, vehicles,
office furnishings and fixtures, claims of all kinds, rights under contracts,
client lists, open media commitments and purchase orders, licenses, insurance
policies, trademarks, trademark registrations and applications, copyrights,
copyright registrations and applications, publication rights, trade secrets, all
other intellectual property, and all books and records of Advertising
(collectively, the "Advertising Assets"; and together with the Company Assets
but excluding the Excluded Assets (as defined in Section 1.2.2 below), sometimes
collectively referred to herein as the "Assets").
1.2.2 Excluded Advertising Assets. Anything in Section 1.2.1 to the
contrary notwithstanding, there shall be excluded from the assets, properties,
rights and business to be transferred to the Purchaser hereunder the following
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(collectively, the "Excluded Advertising Assets"; and together with the Excluded
Company Assets, sometimes collectively referred to herein as the "Excluded
Assets"): (i) the corporate seal, minute book, charter documents and stock
records of Advertising, (ii) the issued and outstanding capital stock of the
Company and any Inactive Subsidiary (including without limitation Chiat/Day
Direct Marketing, Inc.), (iii) any and all rights of Advertising in, to and
under the lease relating to, all tenant improvements made to and all furniture
and other appurtenances from time to time on the premises of, the residential
townhouse at 149 East 38th Street, New York, New York and (iv) any and all
rights of Advertising in or to the legal action entitled Chiat/Day Direct
Marketing, Inc. f/k/a Perkins/Butler Direct Marketing, Inc. v. National Car
Rental Systems, Inc., No. 93 Civ. 2717 (S.D.N.Y.), including without limitation,
the sole and exclusive right to prosecute such legal action and to any proceeds
resulting therefrom received after Closing, whether by way of judgment,
settlement or otherwise (the value of such asset having been obtained by the
Purchaser through the right to receive the cash purchase price receivable under
the Advertising Stock Sale Agreement to the extent reflected in the books and
records of the Company); provided, however, if prior to the Closing such action
is fully resolved, whether by judgment, settlement or otherwise, and the
proceeds thereof are received by Advertising, such asset shall not be an
Excluded Asset.
1.2.3 Assumed Advertising Liabilities. In connection with the sale,
transfer, conveyance, assignment and delivery of the Advertising Assets pursuant
to this Agreement, on the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Purchaser agrees to:
(i) assume, pay and discharge in due course all debts and liabilities
of Advertising existing on the Closing Date to the extent duly reflected in
the books and records of Advertising, including without limitation, (x) any
indebtedness owing by Advertising to Omnicom or any of its affiliates
(whether pursuant to Sections 2.1.2, 2.3 or 7.5 hereof or otherwise), and
(y) all debts and liabilities to the extent reflected on the Advertising
Balance Sheet, as modified or changed between the Balance Sheet Date and
the Closing Date in the ordinary course of business, provided that the
Purchaser will not assume or discharge debts or liabilities, if any,
incurred by Advertising as a result of transactions that Advertising may
enter in violation of this Agreement and which are not recorded on the
books and records of Advertising or liabilities not related to the
operating Businesses to the extent provided in Section l.2.4 (including
without limitation those contracts marked on any Schedule to this Agreement
as not being assigned to and assumed by the Purchaser);
(ii) assume, observe, perform and fulfill all terms and conditions of
all executory contracts, agreements, licenses, leases, commitments and
undertakings of Advertising ("Advertising Contracts"), including those
incurred by Advertising subsequent to the Balance Sheet Date, provided that
the Purchaser will not assume or discharge any of the Advertising Contracts
entered into in violation of this Agreement or those contracts not related
to the operating Businesses to the extent provided in Section 1.2.4
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(including without limitation those contracts marked on any Schedule to
this Agreement as not being assigned to and assumed by the Purchaser);
(iii) assume, pay and discharge the liability for Sales Taxes arising
out of the transfer of the Advertising Assets to the Purchaser to the
extent as provided in Section 7.4; and
(iv) assume, pay and discharge the liability for any severance
benefits payable by Advertising as a result of the termination of any
employee prior to the Closing at the written request of Omnicom or the
Purchaser.
The items referred to in this Section 1.2.3 are collectively referred to as
the "Assumed Advertising Liabilities"; and together with the Assumed Company
Liabilities, collectively, the "Assumed Liabilities."
1.2.4 Retained Advertising Liabilities. The Purchaser shall not assume by
virtue of this Agreement or the transactions contemplated hereby, and shall have
no liability for, the following non-operating liabilities of Advertising (the
"Retained Advertising Liabilities"; and together with the Retained Company
Liabilities, sometimes collectively referred to herein as the "Retained
Liabilities"):
(i) except as otherwise provided in Section 1.2.3(iii), any tax
liability arising out of or in connection with or resulting from the
transactions contemplated by this Agreement;
(ii) any obligation of Advertising to distribute to its stockholder or
the participants in the EAR Plan and EPU Plan (as defined in Section 2.7
below) or the Liquidating Trust Escrow Fund (as defined in Section 2.7) or
the Escrow Funds or otherwise apply the Purchase Price paid to it pursuant
to this Agreement;
(iii) any liability or obligation under the lease agreement dated June
1, 1987, as amended, relating to the residential townhouse at 149 East 38th
Street, New York, New York;
(iv) any liability or obligation of Advertising under the EAR Plan and
the EPU Plan;
(v) any liability or obligation of Advertising for taxes imposed on or
measured by the income or capital of Advertising, sales, payroll, or other
Taxes or any interest or penalties thereon, applicable to or arising from
any period, except with respect to periods ending on or prior to October
31, 1994 to the extent provided for on the Advertising Balance Sheet;
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(vi) any liability or obligation of Advertising which was required to
be disclosed to the Purchaser pursuant to this Agreement and which was not
so disclosed, provided that any liability or obligation reflected on the
Advertising Balance Sheet shall be deemed to have been disclosed to the
Purchaser to the extent reserved for thereon;
(vii) any liability or obligation of Advertising arising out of the
failure of Advertising to perform or discharge any of its agreements
contained herein;
(viii) except as otherwise provided in Section 1.2.3, any liability or
obligation of Advertising with respect to any plan, policy, arrangement or
agreement providing employment benefits or compensation to employees or
severance benefits (if any) arising solely by reason of the consummation of
this Agreement, including any Plan referred to in Section 3.19, other than
(x) employment, consulting or severance agreements and Plans specifically
assumed by the Purchaser, (y) any liability reserved for on the Advertising
Balance Sheet to the extent provided for thereon, or (z) any liability
incurred between the Balance Sheet Date and the Closing Date and which
relates to the ordinary and normal course of business;
(ix) any claim, cause of action, proceeding or other litigation
pending or threatened on the Closing Date or which is initiated at any time
thereafter against Advertising and which is based on acts, facts,
circumstances, events or conditions occurring or existing prior to the
Closing except to the extent provided for on the Advertising Balance Sheet
or to the extent disclosed to the Purchaser on Schedule 3.10; and
(x) any liability or obligation of Advertising incurred by or accruing
to Advertising after the Closing Date unless specifically assumed by the
Purchaser under this Agreement.
ARTICLE II
PURCHASE PRICE AND CLOSING
Section 2.1 Purchase Price. In full consideration for the purchase by the
Purchaser of the Assets, the purchase price (the "Purchase Price") shall be
calculated and paid by the Purchaser as follows:
2.1.1 Basic Payments. (a) At the Closing, the Purchaser will pay the
Company shares of Omnicom Group Inc. common stock, par value $.50 per share
("Omnicom Stock"), having an aggregate Market Value (as defined below) of (i) if
the Closing Date is on or prior to October 31, 1995, (x) $11,180,563 plus (y) an
amount equal to $2,418 multiplied by the number of days in the period commencing
on the Closing Date and ending on October 31, 1995 or (ii) if the Closing Date
is after October 31, 1995 and on or prior to December 31, 1995, (1) $11,930,880
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plus (2) an amount equal to $2,418 multiplied by the number of days in the
period commencing on the Closing Date and ending on December 31, 1995, in each
case rounded to the nearest full share. As used in this Agreement the term,
"Market Value" shall mean the average of the closing prices per share of Omnicom
Stock reported on the New York Stock Exchange for the 20 consecutive trading
days ending three business days immediately prior to the Closing Date. The
closing price for each day shall be the closing price on the New York Stock
Exchange Consolidated Tape (or any successor composite tape reporting
transactions on the New York Stock Exchange) or, if such a composite tape shall
not be in use or shall not report transactions in the Omnicom Stock, or if the
Omnicom Stock shall be listed on a stock exchange other than the New York Stock
Exchange, the last reported sales price regular way on the principal national
securities exchange on which the Omnicom Stock shall be listed or admitted to
trading (which shall be the national securities exchange on which the greatest
number of shares of the Omnicom Stock has been traded during such twenty
consecutive business days), or, in either case, if there is no transaction on
any such day, the average of the bid and asked prices regular way on such day.
(b) At the Closing, the Purchaser will pay Advertising shares of Omnicom
Stock having an aggregate Market Value of $14,000,000, rounded to the nearest
full share.
(c) All certificates representing Omnicom Stock to be paid by the Purchaser
to the Company or Advertising at the Closing shall be registered in such names
and represent such number of shares as the Company and Advertising may request.
(d) On the Closing Date, the Company shall contribute to Advertising such
number of shares of Omnicom Stock (valued at the Market Value) as may be
necessary to insure that, after giving effect to the distributions described in
Section 2.7 hereof, the obligations of the Company and Advertising to holders of
EPUs and EARs (each as defined in Section 2.7 below) will be satisfied (such
contributed shares, the "Contributed Stock").
2.1.2 Preferred Stock Loan. On the day prior to the Closing Date the
Purchaser shall lend the Company an amount equal to the outstanding balance of
the loan (including accrued and unpaid interest) described in Section 2.3(b) and
the Company shall use the proceeds of such loan from the Purchaser to repay the
loan (including accrued and unpaid interest) described in Section 2.3(b). At the
Closing, the Purchaser shall cancel its loan to the Company described in the
preceding sentence.
Section 2.2 Closing. (a) Not more than five days from the occurrence of the
special meeting of stockholders of the Company contemplated by Section 5.10,
Omnicom shall notify the other parties to this Agreement of its desire to close,
specifying a closing date not more than thirty days following the date of
mailing of such notice of its intention to close, provided that the parties
hereto shall use their best efforts to close on or prior to August 31, 1995, and
provided further that if the Closing does not occur on or prior to August 31,
1995, the parties agree to use their best efforts to close as soon as is
practicable after October 31, 1995. The transfer of the Assets and Assumed
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Liabilities to the Purchaser and delivery of the Purchase Price in exchange
therefor (the "Closing") shall take place at 10:00 a.m. at the offices of Davis
& Gilbert, 1740 Broadway, New York, New York on the date so determined (the
"Closing Date"). In the event a proceeding shall have been instituted attacking
the legality of this Agreement or seeking to enjoin its consummation, or there
is a pending dispute being resolved under Section 10.7 to determine whether the
condition of Closing set forth in the last sentence of Section 8.21 has been
satisfied, then the Closing Date shall be suspended pending a final
determination of any such proceeding or dispute, unless any party to this
Agreement avails itself of the right to terminate this Agreement as permitted by
Section 10.8.
(b) At the Closing, each of the Sellers shall, by delivery of appropriate
deeds, assignments, bills of sale or other documents of transfer and any
necessary consents, transfer to the Purchaser title as required by this
Agreement to all of the Assets. Notwithstanding anything to the contrary
contained in this Agreement, each of the Sellers may retain its respective
stockholder and minute books, stock record books and such of its other corporate
and accounting records as it may be required to keep in order to conclude its
affairs, liquidate and dissolve, in the case of the Company, or to continue its
existence, in the case of Advertising, but the Sellers shall afford Omnicom and
the Purchaser such reasonable access to such records as Omnicom and the
Purchaser may require.
(c) At the Closing, the Purchaser shall deliver to the Sellers one or more
written instruments of assumption in such form as the Sellers or their counsel
shall reasonably request to effect the assumption by the Purchaser as required
by this Agreement of all of the Assumed Liabilities.
(d) Each of the Sellers will, from time to time, at the request of the
Purchaser, whether at or after the Closing Date, execute and deliver such other
and further instruments of conveyance, assignments, transfer and consent as the
Purchaser or its counsel may reasonably require for the most effectual
conveyance and transfer of the Assets to the Purchaser, and the Sellers will
assist the Purchaser in the collections and reduction to possession of the
Assets and the Businesses.
(e) Anything in this Agreement to the contrary notwithstanding, in the
event an assignment or purported assignment of any of the Company Contracts or
Advertising Contracts, or any claim, right or benefit arising thereunder or
resulting therefrom, without the consent of other parties thereto, would
constitute a breach thereof or would not result in the Purchaser receiving all
of the rights of the Company or Advertising thereunder, such contract shall be
deemed not to have been assigned by the Sellers to the Purchaser. In those
circumstances, if requested by the Purchaser, the Sellers will use their best
efforts to obtain any such consent. If such consent is not obtained and is
required to effectively assign the Company Contract or Advertising Contract to
the Purchaser, the Sellers will cooperate with the Purchaser in any reasonable
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arrangement to provide the Purchaser with the full claims, rights and benefits
under any such Company Contracts or Advertising Contracts, including enforcement
at the cost and for the benefit of the Purchaser of any and all rights of the
Company or Advertising, as the case may be, against a third party thereto
arising out of the breach or cancellation by such third party or otherwise, and
any amount received by the Company or Advertising in respect thereof shall be
held for and paid over to the Purchaser.
Section 2.3 Purchase of Preferred Stock. (a) On or about July 1, 1995 (the
"Preferred Stock Purchase Date"), the Trustee of the Chiat/Day Profit Sharing
Plan and 401(k) Plan (the "Profit Sharing Plan"), the sole record owner of the
Preferred Stock, cumulative, $.01 par value per share, of the Company (the
"Preferred Stock"), will sell for a cash payment of $14,081,773.93 all the
shares of Preferred Stock it owns to the Company pursuant to the terms of that
certain agreement of even date herewith (the "Profit Sharing Plan Purchase
Agreement") between Michael Kooper, a Trustee of the Profit Sharing Plan and the
Company.
(b) On the Preferred Stock Purchase Date, Omnicom shall guarantee or cause
one of its affiliates to guarantee a loan to the Company in the principal amount
of $14,081,773.93 from a bank acceptable to Omnicom and on terms acceptable to
Omnicom, and the Company shall apply the proceeds of such loan to purchase the
Preferred Stock pursuant to the Profit Sharing Plan Purchase Agreement.
Section 2.4 Payment of Liabilities and Establishment of Liquidating Trust.
Immediately upon Closing, the Company shall make provision for the payment and
satisfaction of all obligations and liabilities of the Company and Advertising
not constituting Assumed Liabilities. In the course of its orderly winding-up
process, the Company shall cause to be created a liquidating trust (the
"Liquidating Trust") for and on behalf of the Company's Class A and Class B
stockholders (collectively, the "Stockholders"). Approval of the creation and
operation of the Liquidating Trust, as well as the identity of (or means of
selecting) the trustee or trustees thereof, shall be included in the resolution
to be acted upon by the Company's stockholders entitled to vote upon and adopt
the plan of voluntary dissolution. Such resolution shall provide for (x) the
Company's Stockholders' acceptance of such trustee or trustees as their
collective agent under the terms of the Liquidating Trust; and (y) such trustee
or trustees (i) to receive on their behalf liquidating distributions from the
Company; (ii) to act as the agent of the Company's Stockholders in connection
with the administration of the Escrow Agreement, from and after the transfer by
the Company to the Liquidating Trust of the Company's right and interests
therein; (iii) to respond to the assertion of any and all claims for
indemnification by the Purchaser, and to assert claims, pursuant to the terms of
the Escrow Agreement, and the provisions of this Agreement pertaining thereto;
and (iv) to complete the winding up of the Company's affairs and payment of its
liabilities not assumed by the Purchaser pursuant to this Agreement from the
assets of the Liquidating Trust. The terms of the Liquidating Trust shall
include provisions, among others, which:
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(a) provide for receipt from the Company of all of the liquidating
distributions (other than the initial distribution described in Section 2.6
hereof) from the Company for and on behalf of the Company's Stockholders, which
receipt shall include the Company's interests and right to receive any
distributions from the General Escrow Fund and the Special Escrow Fund (as such
terms are defined below in Section 2.5), and the Omnicom Stock;
(b) provide for the trustee or trustees (and their successor trustees, if
any) to serve as the party designated to act for the Company and for and on
behalf of the Stockholders, under the Escrow Agreement; and
(c) provide that the duration of the Liquidating Trust will extend at least
to the termination of the Escrow Agreement.
Section 2.5 Escrow Agreement. Solely to fund (together on a pro-rata basis
with the holders of EARs and EPUs) and secure the indemnification obligations of
the Company described in Section 11.2, on the Distribution Date the Company for
and on behalf of itself and the Stockholders (i) shall transfer to The Chase
Manhattan Bank, N.A., as escrow agent (the "Escrow Agent"), 10% of the Omnicom
Stock received by the Company under Section 2.1.1(a) (after deducting the
Contributed Stock) to be held in the separate general escrow account (the
"General Escrow Fund") created pursuant to the terms of that certain Escrow
Agreement (the "Escrow Agreement") in the form attached hereto as Exhibit A
among the Company, Advertising, the Purchaser and the Escrow Agent, and (ii)
shall transfer to the Escrow Agent whole shares of Omnicom Stock having an
aggregate Market Value of $1,700,000 multiplied by a fraction, the numerator of
which is the number of shares of Class A common stock of the Company and Class B
common stock of the Company (collectively, "Common Stock") outstanding on the
Closing Date and the denominator of which is the sum of the number of shares of
Common Stock and the number of EARs and EPUs outstanding on the Closing Date to
be held in the separate special escrow account (the "Special Escrow Fund"; and
together with the General Escrow Fund, sometimes collectively referred to herein
as the "Escrow Funds") created pursuant to the terms of Escrow Agreement. To the
extent that the Company transfers shares of Omnicom Stock received pursuant to
Section 2.1.1(a) into the Escrow Funds, such shares shall be valued at Market
Value. The Escrow Funds shall also contain shares of Omnicom Stock deposited by
Advertising pursuant to Section 2.7 below. The term "Distribution Date" as used
in this Agreement shall mean one of the following dates: (a) if the Closing Date
occurs on or before October 31, 1995, the date shall be the earlier of (x) the
date on which Omnicom makes publicly available interim financial results
satisfying all applicable FASB pooling-of-interests requirements covering at
least thirty days of post-Closing combined operations of Omnicom and the
Businesses of the Company and Advertising acquired hereunder (the "Publication
Date") and (y) October 30, 1995; and (b) if the Closing Date occurs after
October 31, 1995, the date shall be the Publication Date.
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Section 2.6 Dissolution; Distribution of the Company's Properties. As soon
as practicable after the Closing, the Company shall file a Certificate of
Dissolution with the Secretary of State of the State of Delaware and dissolve.
As soon as practicable on or after the Distribution Date and after the
establishment of the Liquidating Trust, the Company shall distribute to its
Stockholders such number of shares of Omnicom Stock delivered at the Closing
pursuant to Section 2.1.1(a), less (x) any shares of Omnicom Stock used to fund
the Escrow Funds, on behalf of the Stockholders, and (y) 5% of the shares of
Omnicom Stock received by the Company under Section 2.1.1(a) after deducting the
Contributed Stock which shall be delivered to the Liquidating Trust, on behalf
of the Stockholders, to fund (together on a pro-rata basis with the holders of
EARs and EPUs) the payment and satisfaction of any obligations and liabilities
of the Company and Advertising not constituting Assumed Liabilities and (z) the
Contributed Stock. It is intended that the sale of the Assets, the purchase of
the Preferred Stock and Class B common stock pursuant to the Profit Sharing Plan
Purchase Agreement, and the distribution to the Stockholders in complete
liquidation of the Company, shall not give rise to dissenters' rights in favor
of the Company's Stockholders under Delaware law.
Section 2.7 Payment of Obligations to Rights Holders by Advertising. On the
Distribution Date, Advertising (for and on behalf of itself and each of the
holders of Equity Appreciation Rights ("EARs") issued under the 1993 Equity
Appreciation Rights Plan of the Company (the "EAR Plan"), and each of the
holders of Equity Participation Awards ("EPUs") issued under the 1988 Amended
and Restated Equity Participation Plan of the Company (the "EPU Plan")), (i)
shall transfer to the Escrow Agent 10% of the Omnicom Stock delivered at the
Closing pursuant to Section 2.1.1(b) or as Contributed Stock to be held in the
General Escrow Fund created pursuant to the Escrow Agreement and (ii) shall
transfer to the Escrow Agent whole shares of Omnicom Stock having an aggregate
Market Value of $1,700,000 multiplied by a fraction, the numerator of which is
the number of EARs and EPUs outstanding on the Closing Date and the denominator
of which is the sum of the number of shares of Common Stock and the number of
EARs and EPUs outstanding on the Closing Date to be held in the Special Escrow
Fund created pursuant to the Escrow Agreement, in order in each case to fund
(together on a pro-rata basis with the Stockholders) and secure the
indemnification obligations of the Company described in Section 11.2 below, and
(iii) shall transfer to a separate escrow fund (the "Liquidating Trust Escrow
Fund") 5% of the shares of Omnicom Stock received by Advertising under Section
2.1.1(b) or as Contributed Stock to fund (together on a pro rata basis with the
Stockholders) the payment and satisfaction of any obligations and liabilities of
the Company and Advertising not constituting Assumed Liabilities. As soon as
practicable on or after the Distribution Date and prior to the closing of the
Advertising Stock Sale Agreement, Advertising shall distribute to the holders of
EARs and EPUs such number of shares of Omnicom Stock delivered at the Closing
pursuant to Section 2.1.1(b) and shares of Omnicom Stock received from the
Company as the Contributed Stock pro rata in accordance with their interests,
less any shares of Omnicom Stock used to fund the Escrow Funds and the
Liquidating Trust Escrow Fund as aforesaid. To the extent that Advertising
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transfers shares of Omnicom Stock received pursuant to Section 2.1.1(b) or as
Contributed Stock into the Escrow Funds, such shares shall be valued at Market
Value.
ARTICLE III
REPRESENTATIONS OF THE SELLERS
The Sellers, jointly and severally, represent, warrant and agree to and
with Omnicom and the Purchaser as follows:
Section 3.1 Execution and Validity of Agreement and Related Documents.
3.1.1 Execution and Validity of Agreement by the Company. The Company has
the full corporate power and authority to enter into this Agreement and to
perform its obligations hereunder, provided that certain matters require
Stockholder approval as provided in Section 5.10. The execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby have been authorized by the Board of Directors of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and, assuming due authorization, execution and delivery by Omnicom and
the Purchaser, constitutes the legal, valid and binding obligation of the
Company enforceable against it in accordance with its terms, provided that
certain matters require Stockholder approval as provided in Section 5.10.
3.1.2 Execution and Validity of Agreement by Advertising. Advertising has
the full corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Advertising and the consummation of the transactions contemplated hereby have
been authorized by the Board of Directors of Advertising, and the Company, as
its sole stockholder. This Agreement has been duly and validly executed and
delivered by Advertising and, assuming due authorization, execution and delivery
by Omnicom and the Purchaser, constitutes the legal, valid and binding
obligation of Advertising enforceable against it in accordance with its terms.
3.1.3 Execution and Validity of Related Agreements. Each of the Sellers has
the full corporate power and authority to enter into the Escrow Agreement and
the Deposit and Pledge Agreement referred to in Section 8.24 and to perform its
obligations under each such agreement; and the execution and delivery of each of
such agreements and the consummation of the transactions contemplated thereby
have been duly authorized by the Boards of Directors of the Sellers. Each of the
Escrow Agreement and the Deposit and Pledge Agreement has been duly and validly
executed and delivered by each Seller and, assuming due authorization, execution
and delivery by the other parties thereto, constitutes the legal, valid and
binding obligation of each Seller enforceable against each Seller in accordance
with its terms, provided that certain matters require Stockholder approval as
provided in Section 5.10. The Company has the full corporate power and authority
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to enter into the Advertising Stock Sale Agreement and the Profit Sharing Plan
Purchase Agreement and to perform its obligations under each such agreement,
provided that certain matters require Stockholder approval as provided in
Section 5.10; and the execution and delivery of each of such agreements and the
consummation of the transactions contemplated thereby have been duly authorized
by the Board of Directors of the Company. Each of the Advertising Stock Sale
Agreement and the Profit Sharing Plan Purchase Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by the other parties thereto, constitutes the legal,
valid and binding obligation of the Company enforceable against it in accordance
with its terms, provided that certain matters require Stockholder approval as
provided in Section 5.10.
Section 3.2 Capitalization, Existence and Good Standing of the Company.
3.2.1 Capitalization. The Company has an authorized capitalization
consisting of 75,000,000 shares of Class A common stock, $.01 par value per
share, of which 13,527,269 shares are issued and outstanding and no shares are
held in Treasury; 200,000,000 shares of Class B common stock, $.01 par value per
share, of which 39,993,465 shares are issued and outstanding and no shares are
held in Treasury; and 200,000 shares of Preferred Stock, cumulative, $.01 par
value per share, of which 140,817.7393 shares are issued and outstanding. All
such outstanding shares have been duly authorized and validly issued and are
fully paid and non-assessable and have not been issued in violation of any
preemptive rights of stockholders. No other class of capital stock of the
Company is authorized or outstanding. Except as contemplated under the Profit
Sharing Plan Purchase Agreement and except for the repurchase agreements set
forth on Schedule 3.8, there are no outstanding options, warrants, rights,
calls, commitments, conversion rights, rights of exchange, plans or other
agreements of any character providing for the purchase, issuance or sale of any
shares of the capital stock of the Company, or providing for the payment of any
additional monies in respect of the Company's previous repurchase of any shares
of its capital stock.
3.2.2 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with the full corporate power and authority to own its property and to
carry on its business all as and in the places where such properties are now
owned or operated or such business is now being conducted. Except as set forth
on Schedule 3.2, the Company has not qualified to do business as a foreign
corporation in any jurisdiction, and neither the character nor location of the
properties owned or leased by the Company, nor the nature of the business
conducted by the Company, requires such qualification in any jurisdiction. The
Company is in good standing in each state or other jurisdiction in which it is
qualified to do business as a foreign corporation or foreign branch as set forth
on Schedule 3.2.
Section 3.3 Subsidiaries and Investments. Schedule 3.3 contains a true and
complete list of all of the Company's directly and indirectly owned subsidiaries
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(individually a "Subsidiary" and collectively the "Subsidiaries"). Schedule 3.3
indicates those Subsidiaries which are inactive, those which own no assets, and
those which are in the process of liquidation (each, an "Inactive Subsidiary"),
which list of Inactive Subsidiaries shall be updated through the Closing to
include any other Subsidiaries falling within such defined term. Except as set
forth in Schedule 3.3, neither the Company nor any Subsidiary owns any capital
stock or other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity. Schedule 3.3
also sets forth the name, jurisdiction of organization and capitalization of
each of the Subsidiaries, and a list of all of the stockholders of each
Subsidiary (indicating the number of shares owned by each such stockholder).
Except for shares held by a nominee of the Company or another Subsidiary to
satisfy local law requirements, the Company or another Subsidiary owns of record
and beneficially and has valid title to that percentage of the issued and
outstanding shares of capital stock of each Subsidiary as set forth on Schedule
3.3, free and clear of all Liens. Each Subsidiary is a corporation duly
incorporated and organized, validly existing and in good standing under the laws
of its jurisdiction of organization, with the full corporate power and authority
to own its property and to carry on its business all as and in the places where
such properties are now owned or operated or such business is now being
conducted. The Canadian branch of Advertising is duly qualified to do business
in Ontario as an Extra-Provincial corporation. Except as set forth on Schedule
3.3, no Subsidiary has qualified to do business as a foreign corporation in any
jurisdiction, and neither the character nor the location of the properties owned
or leased by the Subsidiary, nor the nature of the business conducted by such
Subsidiary, requires such qualification in any jurisdiction. Each Subsidiary is
in good standing in each state or other jurisdiction in which it is qualified to
do business as a foreign corporation or foreign branch as set forth on Schedule
3.3. Except for the Canadian branch of Advertising and the U.K. branch of
Chiat/Day inc. Advertising International ("International") and as otherwise set
forth on Schedule 3.3, no Subsidiary has a branch, agency, place of business or
permanent establishment outside of the United States. All of the outstanding
shares of capital stock of each Subsidiary have been duly authorized and validly
issued and are duly paid and non-assessable, and have not been issued in
violation of any preemptive rights of Stockholders. Except as contemplated under
the Advertising Stock Sale Agreement, there are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character, providing for the purchase, issuance
or sale of any shares of the capital stock of any Subsidiary.
Section 3.4 Financial Statements and No Material Changes. Schedule 3.4A
sets forth the following: (a) an audited consolidated balance sheet of the
Company and its subsidiaries as at October 31, 1992, 1993 and 1994, and the
related statements of operations, stockholders' equity (deficit) and cash flow
for the years then ended, reported on by Coopers & Lybrand, independent
certified public accountants, (b) consolidating balance sheets of the Company
and Advertising as at October 31, 1994 (such consolidating balance sheets of the
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Company and Advertising are referred to herein as the "Company Balance Sheet"
and the "Advertising Balance Sheet," respectively), (c) consolidating balance
sheets as at October 31, 1994 of the U.S. offices of Advertising, the Toronto
office of Advertising and the London office of International. The consolidated
balance sheet of the Company and its subsidiaries as at October 31, 1994 is
referred to in this Agreement as the "Balance Sheet". Such financial statements,
including the footnotes thereto, are true and correct in all material respects
and have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP") consistently applied throughout the periods indicated except
as set forth on Schedule 3.4B. Each of the consolidated balance sheets of the
Company and its subsidiaries fairly presents the consolidated financial position
of the Company and its subsidiaries at the respective date thereof and reflects
all claims against and all debts and liabilities of the Company and its
subsidiaries, fixed or contingent, as at the date thereof, required to be shown
thereon under GAAP, and the related statements of operations, stockholders'
equity (deficit) and cash flow fairly present the consolidated results of
operations of the Company and its subsidiaries, retained earnings and the cash
flow for the respective periods indicated. Each of the consolidating balance
sheets as at October 31, 1994 fairly presents the financial condition of the
applicable operating unit at the Balance Sheet Date and reflects all claims
against and all debts and liabilities of such operating unit, fixed and
contingent, as at such date, required to be shown thereon under GAAP. Since
October 31, 1994 (the "Balance Sheet Date"), except for the execution and
delivery of this Agreement and the transactions required or permitted to take
place pursuant hereto on or prior to the Closing Date, there has been no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, in the results of operations of the Company
and its Subsidiaries.
Section 3.5 Books and Records. All accounts, books, ledgers and official
and other records material to the business of the Company and its Subsidiaries
of whatsoever kind have been properly and accurately kept and completed in all
material respects, and there are no material inaccuracies or discrepancies of
any kind contained or reflected therein. Except as set forth on Schedule 3.5,
neither the Company nor any of its Subsidiaries have any of its records,
systems, controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent on or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company or such Subsidiary. The
Company has delivered to the Purchaser complete and correct copies of the
Certificate of Incorporation and By-laws (or equivalent charter documents) of
the Company and of each Subsidiary which is not an Inactive Subsidiary; and
prior to the Closing will deliver any approved amendments, changes or
restatements of such instruments.
Section 3.6 Title to Properties; Encumbrances. The Company and its
Subsidiaries have good and valid title to (a) all their properties and assets
owned by them (real and personal, tangible and intangible), including, without
limitation, all the properties and assets reflected in the Balance Sheet, and
(b) all the properties and assets purchased by the Company and its Subsidiaries
since the Balance Sheet Date except for properties and assets reflected in the
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Balance Sheet or acquired since the Balance Sheet Date that have been sold or
otherwise disposed of in the ordinary course of business, free and clear of all
Liens except as reflected on Schedule 3.6 and except for Liens granted to secure
the obligations of the Company and Advertising under the Amended and Restated
Credit Agreement dated as of February 1, 1995 among the Company, Advertising,
Omnicom and Cargill, Wilson & Acree, as agent (as such agreement may be amended
from time to time, the "Amended and Restated Credit Agreement"). The property,
plant and equipment owned by the Company and the Subsidiaries taken as a whole
are in a state of good maintenance and repair and are adequate and suitable for
the purposes for which they are presently being used.
Section 3.7 Leases. Neither the Company nor any Subsidiary owns a freehold
interest in any real property. Schedule 3.7 contains an accurate and complete
list of all personal property leases with a fixed annual rental in excess of
$50,000 and all real property leases to which the Company or a Subsidiary is a
party (as lessee, lessor, sublessee or sublessor), including without limitation,
leases which the Company or a Subsidiary has subleased or assigned to a third
party and as to which the Company or a Subsidiary remains liable. Each lease set
forth on Schedule 3.7 (or required to be set forth on Schedule 3.7) is in full
force and effect; all rents and additional rents due to date on each such lease
have been paid; in each case, the lessee has been in peaceable possession since
the commencement of the original term of such lease and no waiver, indulgence or
postponement of the lessee's obligations thereunder has been granted by the
lessor; and, except as set forth in Schedule 3.7, there exists no default or
event of default by the Company or any Subsidiary or to the best knowledge,
information and belief of the Sellers, by any other party, or occurrence,
condition or act (including the purchase of the Assets hereunder) which, with
the giving of notice, the lapse of time or the happening of any further event or
condition, would become a default or event of default under such lease, and
there are no outstanding claims of breach or indemnification or notice of
default or termination of any such lease. Except as set forth on Schedule 3.7,
there are no rent reviews under any lease held by the Company or a Subsidiary
currently in progress or to commence within the next 60 day period. The real
property and personal property leased by the Company and its Subsidiaries taken
as a whole is in a state of good maintenance and repair and is adequate and
suitable for the purposes for which it is presently being used, and the Sellers
are not aware of any material repair or restoration works likely to be required
in connection with any of their leased properties. Except as set forth on
Schedule 3.7, the Company or a Subsidiary is in physical possession and actual
and exclusive occupation of the whole of each of their leased properties.
Section 3.8 Contracts. Schedule 3.8 hereto contains an accurate and
complete list of the following agreements to which the Company or any Subsidiary
is a party: (a) all Plans (as defined in Section 3.19) and Disclosed Schemes (as
defined in Section 1.1 of Annex II hereto), (b) any agreement, contract or
commitment relating to capital expenditures which involve payments of $250,000
or more in any single or related transaction, (c) any agreement, contract or
commitment relating to the making of any loan, advance or investment to or in
any Person (as defined in Section 12.4), which in any case involves more than
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$50,000, (d) any instrument or arrangement evidencing or related in any way to
indebtedness (excluding intercompany indebtedness) for money borrowed or to be
borrowed, whether directly or indirectly, by way of loan, purchase money
obligation, guaranty (other than the endorsement of negotiable instruments for
collection in the ordinary course of business), conditional sale, purchase or
otherwise, which in any case involves $50,000 or more, (e) any management
service, employment, consulting or any other similar type of contract which is
not cancelable without penalty or other financial obligation within 30 days, (f)
any agreement, contract or commitment limiting its freedom to engage in any line
of business or to compete with any other Person, including agreements limiting
its ability to take on competitive accounts after the termination thereof or
limiting the ability of its affiliates to take on competitive accounts during
the term thereof, but excluding standard exclusivity requirements in
agency-client agreements entered into in the ordinary course of business, (g)
any agreement, contract or commitment not covered by another clause of this
Section 3.8 which is material to the businesses of the Company and its
Subsidiaries taken as a whole, (h) any collective bargaining or union agreement,
(i) any agreement with any of its officers or directors or stockholders
(including stockholder agreements or indemnification agreements), (j) any
secrecy or confidentiality agreement (other than standard confidentiality
agreements in computer software license agreements or agency-client agreements
entered into in the ordinary course of business), (k) any licensing or franchise
agreement (other than computer software license agreements and other than those
entered into in its capacity as agent), (l) any agency/client agreement which
generated commissions and fees during 1994, or is expected to generate
commission and fees during 1995, of at least $100,000, (m) any agreements with
media buying services; provided, however, commitments to purchase media in the
ordinary course of business do not have to be set forth on Schedule 3.8, and (n)
any joint venture or partnership agreement involving a sharing of profits not
covered by (a) through (m) above; provided, however, that (x) commitments to
media and production expenses which are fully reimbursable from clients, and (y)
estimates or purchase orders given in the ordinary course of business relating
to the execution of projects, do not have to be set forth on Schedule 3.8. Each
contract, agreement or commitment set forth on Schedule 3.8 (or required to be
set forth on Schedule 3.8) is in full force and effect, and there exists no
default or event of default by the Company or any Subsidiary or to the best
knowledge, information and belief of the Sellers, by any other party, or
occurrence, condition, or act (including the purchase of the Assets hereunder)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default or event of default thereunder,
and there are no outstanding claims of breach or indemnification or notice of
default or termination of any such agreements, contracts or commitments.
Schedule 3.8 also indicates which of the agreements set forth thereon are not
being assigned to, or assumed by, the Purchaser.
Section 3.9 Restrictive Documents. Except for approvals required under the
HSR Act (as defined in Section 5.2 below) and except as set forth on Schedule
3.9, neither the Company nor any of its Subsidiaries is subject to, or a party
to, any charter, by-law, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
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decree, or any other restriction of any kind or character, which would prevent
consummation of the transactions contemplated by this Agreement or any other
agreement entered into by any of them in connection with the transactions
contemplated hereby. Except as set forth on Schedule 3.9, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (i) violate, conflict with or result
in the breach of any provision of the charter documents or by-laws of the
Company or any Subsidiaries; (ii) violate, conflict with or result in the breach
or modification of any of the terms of, or constitute (or with notice or lapse
of time or both constitute) a default under, or otherwise give any other
contracting party the right to accelerate or terminate, any obligation,
contract, agreement, lien, judgment, decree or other instrument to which the
Company or any Subsidiary is a party or by or to which the Company or any
Subsidiary or any of their assets or properties may be bound or subject; (iii)
violate any order, writ, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, the
Company or any Subsidiary or any of their assets or properties; or (iv) result
in a violation by the Company or any Subsidiary of any statute, law or
regulation of any jurisdiction which is applicable to the business or operations
of the Company or such Subsidiary except as could not reasonably be expected to
have a Material Adverse Effect. For purposes of this Agreement, the term
"Material Adverse Effect" shall mean any material and adverse effect on the
financial condition, results of operations, assets, properties or businesses of
the Company and the Subsidiaries taken as a whole.
Section 3.10 Litigation. Except as set forth on Schedule 3.10, there is no
action, suit, proceeding at law or in equity by any Person, or any arbitration
or any administrative or other proceeding by or before (or to the best
knowledge, information and belief of the Sellers, any investigation by) any
governmental or other instrumentality or agency, pending or, to the best
knowledge, information and belief of the Sellers, threatened against either of
the Sellers with respect to this Agreement or the transactions contemplated
hereby, or against or affecting the Company or any of its Subsidiaries or any of
their properties or rights. Except as set forth on Schedule 3.10, neither the
Company nor any Subsidiary is subject to any judgment, order or decree entered
in any lawsuit or proceeding.
Section 3.11 Taxes. Except as set forth on Schedule 3.11;
3.11.1 Taxes. The Company and its Subsidiaries have timely filed or caused
to be filed, taking into account any valid extensions of due dates, completely
and accurately, (x) all Federal and foreign, tax or information returns and (y)
all material state and local tax or information returns (including estimated tax
returns), in each case, required under the statutes, rules or regulations of
such jurisdictions to be filed by the Company and its Subsidiaries. The term
"Taxes" means taxes, duties, charges or levies of any nature imposed by any
taxing or other governmental authority, including without limitation income,
gains, capital gains, surtax, capital, franchise, capital stock, value-added
taxes ("VAT"), taxes required to be deducted from payments made by the payor and
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accounted for to any tax authority, employees' income withholding, back-up
withholding, withholding on payments to foreign persons, social security,
national insurance, unemployment, worker's compensation, payroll, disability,
real property, personal property, sales, use, goods and services or other
commodity taxes, business, occupancy, excise, customs and import duties,
transfer, stamp and other taxes (including interest, penalties or additions to
tax in respect of the foregoing), and includes all taxes payable by the Company
or any Subsidiary pursuant to Treasury Regulations ss.1.1502-6 or any similar
provision of state, local or foreign law, and, (i) for the purposes of United
Kingdom taxation "Taxes" shall also include corporation tax, advance corporation
tax, inheritance tax, national insurance contributions, stamp duty, stamp duty
reserve tax, and general business rates income tax, in each case whether
disputed or not, and (ii) for the purposes of Canadian taxation the term "Taxes"
shall also include employer health taxes and Canada or Quebec Pension Plan
contributions. All Taxes shown on said returns to be due have been paid and all
additional assessments received prior to the date hereof have been paid or are
being contested in good faith, in which case such contested assessments are
disclosed on Schedule 3.11. The amount set up as an accrual for Taxes on the
Balance Sheet is sufficient for the payment of all unpaid Taxes of the Company
and its Subsidiaries, whether or not disputed, for all periods ended on and
prior to the date thereof. Since the Balance Sheet Date, neither the Company nor
any Subsidiary has incurred any liabilities for Taxes other than in the ordinary
course of business. The Company and its Subsidiaries have withheld all amounts
required to be withheld on account of Taxes from amounts paid to employees,
former employees, directors, officers and residents and non-residents and
remitted the same to the appropriate taxing authority within the prescribed time
periods. The Company and its Subsidiaries have collected all sales, use, goods
and services or other commodity Taxes required to be collected and remitted the
same to the appropriate taxing authority within the prescribed time periods. The
Company and its Subsidiaries have delivered to the Purchaser correct and
complete copies of all federal, state and foreign income tax returns filed with
respect to the Companies for all taxable periods beginning on or after November
1, 1991. The Federal income tax returns of the Company or its Subsidiaries have
been audited by the Internal Revenue Service for all periods through October 31,
1989. The Company has delivered to the Purchaser true and complete copies of all
notices of deficiencies or proposed deficiencies and of all audit reports issued
to the Company by any taxing authority for periods beginning on or after
November 1, 1988. No examination by any taxing authority of any return of the
Company or any Subsidiary is currently in progress, and neither the Company nor
any Subsidiary has received written notice of any proposed audit or examination.
No deficiency in the payment of Taxes by the Company or any Subsidiary for any
period has been asserted in writing by any taxing authority and remains
unsettled at the date of this Agreement. Neither the Company nor any Subsidiary
has made any agreement, waiver or other arrangement providing for an extension
of time with respect to the assessment or collection of any Tax against it.
3.11.2 VAT Legislation. Each Subsidiary, branch or division of the Company
or any Subsidiary which is incorporated or doing business in a Member State of
the European Economic Community is registered for the purposes of the VAT
legislation in such Member State and in each Member State where it carries on
business. Neither the Company nor any Subsidiary has agreed to become an agent,
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manager or factor of or fiscal representative of or for any Person other than
the Company or another Subsidiary not resident in its jurisdiction for the
purposes of the relevant VAT legislation.
3.11.3 Additional Representations. The Sellers hereby further make the
representations and warranties set forth on Annex I hereto, which is
incorporated herein and made a part hereof as if set forth herein in its
entirety.
Section 3.12 Liabilities. Except as set forth on the Balance Sheet or
referred to in the footnotes thereto, and except for liabilities under the
Profit Sharing Plan Purchase Agreement, the Advertising Stock Sale Agreement,
liabilities under loans required to be taken pursuant to the terms of this
Agreement, and liabilities permitted under Section 5.5 of this Agreement,
neither the Company nor any Subsidiary has any outstanding claims, liabilities
or indebtedness of any nature whatsoever (collectively in this Section 3.12,
"liabilities"), whether accrued, absolute or contingent, determined or
undetermined, asserted or unasserted, and whether due or to become due, other
than (i) liabilities disclosed in any Schedule hereto; (ii) liabilities under
contracts, agreements, licenses, leases, commitments and undertakings of the
type required to be disclosed on any Schedule but because of the dollar amount
or other qualifications are not required to be listed on such Schedule; (iii)
liabilities incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date not involving borrowings by the Company
and its Subsidiaries; and (iv) liabilities which are fully covered by insurance
maintained by the Company or any of its Subsidiaries on or prior to the Closing
Date and which will inure to the Purchaser's benefit after the Closing Date.
Section 3.13 Insurance. Schedule 3.13 is a schedule of all insurance
policies (including life insurance) or binders maintained by the Company and its
Subsidiaries. All such policies are valid, outstanding and enforceable policies
and all premiums that have become due have been currently paid. None of such
policies shall lapse or terminate by reason of the transactions contemplated
hereby. Neither the Company nor any Subsidiary has received any notice of
cancellation or non-renewal of any such policy or binder. Neither the Company
nor any Subsidiary has received notice from any of its insurance carriers that
any premiums will be materially increased in the future or that any insurance
coverage listed on Schedule 3.13 will not be available in the future on
substantially the same terms now in effect; provided, that the Sellers make no
representation as to any cancellation, non-renewal, premium increase or change
in terms which may occur after the Execution Date with respect to any earthquake
or flood insurance (provided, that the Sellers have no current knowledge
regarding the likely occurrence of the foregoing). Except as set forth on
Schedule 3.13, within the last two years neither the Company nor any Subsidiary
has filed for any claim exceeding $100,000 against any of its insurance
policies, exclusive of automobile policies.
Section 3.14 Intellectual Properties. Schedule 3.14 hereto contains an
accurate and complete list of all patents, patent applications, trade name,
trademark, copyright and service mark registrations and applications (now
pending) owned by the Company and its Subsidiaries (collectively, the
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"Intellectual Property") and all agreements under which any Person has granted a
license under any Intellectual Property to the Company or any Subsidiary (other
than "off-the-shelf" computer software licenses). The term "Intellectual
Property" as used in this Section shall not include any of the foregoing listed
items which are owned or licensed by a client of the Company or any of its
Subsidiaries and which are used by the Company or one of its Subsidiaries in the
rendering of services to such client, provided that in all cases the Company and
its Subsidiaries have the requisite permission and authority to use such items
as currently used or anticipated to be used. No claim of infringement or
misappropriation of Intellectual Property is or has been pending or, to the best
knowledge, information and belief of the Sellers, threatened against the Company
or any of its Subsidiaries and, to the best knowledge, information and belief of
the Sellers, neither the Company nor any of its Subsidiaries is infringing or
misappropriating any intellectual property of others and none of the trademarks
or trade names set forth in Schedule 3.14 have been abandoned. Except as set
forth on Schedule 3.14, neither the Company nor any of its Subsidiaries has
expressly granted any license, franchise or permit in effect on the date hereof
to any person or entity to use any of the trade names or any of the trademarks
owned by it.
Section 3.15 Compliance with Laws; Licenses and Permits.
3.15.1 Compliance. The Company and its Subsidiaries are, and their business
have been conducted, in compliance with all applicable laws, regulations,
orders, judgments, decrees, codes, and ordinances ("Requirements of Law"),
except in each case where the failure to so comply would not have a Material
Adverse Effect, including without limitation, (i) all Requirements of Law
promulgated by the Federal Trade Commission or any other Federal, state,
provincial, municipal or local governmental regulatory agency or enforcement
authority; (ii) all environmental Requirements of Law, whether regarding
emissions, hazardous materials, hazardous wastes, toxic chemicals or otherwise;
and (iii) all Requirements of Law relating to labor, civil rights, and
occupational safety and health laws, worker's compensation, employment or pay
equity. Neither the Company nor any Subsidiary has been charged with, or, to the
best information, knowledge and belief of the Sellers threatened with, or under
any investigation with respect to, any charge concerning any violation of any
Requirements of Law.
3.15.2 Licenses. The Company and its Subsidiaries have all licenses,
permits and other governmental certificates, authorizations and approvals
(collectively "Licenses") required by any governmental or regulatory body for
the operation of their businesses and the use of their properties as presently
operated or used, except where the failure to have such Licenses would not have
a Material Adverse Effect. All of the Licenses are in full force and effect and
no action or claim is pending, nor to the best knowledge, information and belief
of the Sellers is threatened, to revoke or terminate any of the Licenses or
declare any License invalid in any material respect.
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Section 3.16 Client Relations. Except as set forth on Schedule 3.16, there
has not been, and the Sellers have no reasonable basis to believe that there
will be any adverse change in relations with clients as a result of the purchase
and sale of the Assets contemplated by this Agreement. Schedule 3.16 sets forth
for the Company and the Subsidiaries taken as a whole, the twenty largest
clients (measured by revenues) as at the date hereof, the revenues from each
such client and from all clients (in the aggregate) for the fiscal year ended
October 31, 1994, and the projected revenues of such twenty largest clients and
all clients (in the aggregate) for the fiscal year ending October 31, 1995. The
Sellers do not warrant that the estimated projected revenues set forth on
Schedule 3.16 will prove to be accurate; provided, however, the Sellers do
represent that they were made in good faith and upon a reasonable basis. Except
as set forth on Schedule 3.16, no current client of the Company or any
Subsidiary has advised the Company or any Subsidiary in writing that it is
terminating or considering terminating the handling of its business by the
Company or any Subsidiary, as a whole or in respect of any particular product,
project or service, or is planning to reduce its future spending with the
Company or any Subsidiary in any material manner, and to the best knowledge,
information and belief of the Sellers, no client has orally advised the Company
or any Subsidiary of any of the foregoing events.
Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable. Except
for the Mojo Receivable (as defined in Section 3.28), the amount of all
work-in-process, accounts receivable, expenditures billable to clients and other
debts due or recorded in the records and books of account of the Company and the
Subsidiaries as being due to the Company or any Subsidiary will be good and
collectible in full (less the amount of any provision, reserve or similar
adjustment therefor made in such records and books of account) in the ordinary
course of business, but in no event later than one year from the Closing Date,
and none of such accounts receivable or other debts (or accounts receivable
arising from such work-in-process) is or will be subject to any counterclaim or
set-off except to the extent of any such provision, reserve or adjustment. There
has been no material adverse change since the Balance Sheet Date in the amount
or aging of the work-in-process, accounts receivable, expenditures billable to
clients or other debts due to the Company or any Subsidiary or the reserves with
respect thereto, or accounts payable of the Company or any Subsidiary, in each
case other than in the ordinary course of business.
Section 3.18 Employment Relations. (a) The Company and the Subsidiaries are
in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages, hours and vacation, and is not engaged in any unfair labor practice; (b)
no unfair labor practice complaint against the Company or any Subsidiary is
pending before any applicable government entity and without limiting the
generality of the foregoing, no complaint has been filed by any Person alleging
a violation by the Company or any Subsidiary of the Employment Standards Act
(Ontario), Human Rights Act (Ontario) or any similar legislation; (c) there is
no organized labor strike, dispute, slowdown or stoppage actually pending or to
the best knowledge, information and belief of the Sellers threatened against or
involving the Company or any Subsidiary; (d) there are no labor unions
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representing or, to the best knowledge, information and belief of the Sellers,
attempting to represent the employees of the Company or any Subsidiary; (e) no
claim or grievance nor any arbitration proceeding arising out of or under any
collective bargaining agreement is pending and to the best knowledge,
information and belief of the Sellers, no claim or grievance therefor has been
threatened; (f) no collective bargaining agreement is currently being negotiated
by the Company or any of its Subsidiaries; (g) neither the Company nor any
Subsidiary has experienced any work stoppage or similar organized labor dispute
during the last three years; and (h) all filings and payments under the Worker's
Compensation Act (Ontario) have been filed or are made and up to date and there
are no claims made under this or similar legislation which, if adversely
determined, would have a Material Adverse Effect. There is no legal action,
suit, proceeding or claim pending or, to the best knowledge, information and
belief of the Sellers, threatened between the Company or any Subsidiary and any
of their employees, former employees, agents, former agents, job applicants or
any association or group of any of their employees, except as set forth on
Schedule 3.10.
Section 3.19 Employee Benefit Matters.
3.19.1 List of Plans. Schedule 3.8 to this Agreement lists all written
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, stock appreciation rights, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all termination,
severance or other contracts or agreements (other than employment agreements),
whether formal or informal, whether covering one person or more than one person,
and whether or not subject to any of the provisions of ERISA, which are
maintained, contributed to or sponsored by the Company and its Subsidiaries for
the benefit of any employee (each item listed on Schedule 3.8 being referred to
herein individually, as a "Plan" and collectively, as the "Plans"). The Company
has delivered to the Purchaser a complete and accurate copy of (i) each welfare
benefit plan (as defined in Section 3(1) of ERISA (a "Welfare Plan") (including
all amendments thereto whether or not such amendments are currently effective),
(ii) each trust agreement or other funding arrangement with respect to each
Welfare Plan, including insurance contracts, (iii) each summary plan description
and summary of material modifications relating to a Plan, and (iv) the three
most recently filed IRS Form 5500 relating to each Welfare Plan. The information
reported on each such Form 5500 is accurate and true. Except as set forth on
Schedule 3.19 or as contemplated by Section 6.4, neither the Company nor any
Subsidiary has any commitment (i) to create or cause to exist any other employee
benefit plan, program or arrangement or (ii) to modify, change or terminate any
Plan.
3.19.2 Severance. Except as set forth on Schedule 3.19, none of the Plans,
any employment agreement or other arrangement to which the Company or any
Subsidiary is a party, provides for the payment of separation, severance,
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termination or similar-type benefits to any person or obligates the Company or
any Subsidiary to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement or
as a result of a "change in control," within the meaning of such term under
section 280G of the Internal Revenue Code of 1986, as amended (the "Code").
3.19.3 No Retiree Benefits. No Welfare Plan provides or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Subsidiary.
3.19.4 Plan Compliance. Each Plan has been operated materially in
accordance with the requirements of all applicable law, including, without
limitation, to the extent applicable, ERISA and the Code and the regulations and
authorities published thereunder. The Company and the Subsidiaries have
performed all material obligations required to be performed by it under, is not
in any respect in default under or in violation of, and the Sellers have no
knowledge of any default or violation by any party to, any Plan. No legal
action, suit, audit, investigation or claim is pending or to the best knowledge,
information and belief of the Sellers threatened with respect to any Plan (other
than claims for benefits in the ordinary course) and, no fact, event or
condition exists that could give rise to any such action, suit, audit,
investigation or claim. All reports, disclosures, notices and filings with
respect to such Plans required to be made to employees, participants,
beneficiaries, alternate payees and government agencies have been timely made or
an extension has been timely obtained. There has been no prohibited transaction
(within the meaning of Section 406 of ERISA or section 4975 of the Code) with
respect to any Plan subject to ERISA. Neither the Company nor any Subsidiary has
incurred any liability for any excise tax arising under Sections 4975 or 4980B
of the Code or any civil penalty arising under Sections 502(i) or 502(l) of
ERISA, and, to the best knowledge, information and belief of the Sellers no
fact, event or condition exists which could give rise to any such liability. All
contributions, premiums or payments required to be made, paid or accrued with
respect to any Plan have been made, paid or accrued on or before their due
dates, including extensions thereof. All such contributions have been fully
deducted for income tax purposes and no such deduction has been challenged or
disallowed by any government entity and no fact or event exists which could give
rise to any such challenge or disallowance.
3.19.5 Additional Representations. The Sellers hereby further make the
representations and warranties set forth on Annex II hereto, which is
incorporated by reference herein and made a part hereof as if set forth herein
in its entirety.
Section 3.20 Interests in Customers, Suppliers, Etc. Except as set forth on
Schedule 3.20, to the best knowledge, information and belief of the Sellers, no
officer, director, or employee of the Company or any Subsidiary, any parent,
brother, sister, child or spouse of any such officer, director or employee
(collectively, the "Related Group"), or any entity controlled by anyone in the
Related Group:
(i) owns, directly or indirectly, any interest in (excepting less than
1/4 of 1% stock holdings for investment purposes in securities of publicly
held and traded companies), or has any right to receive payments from, or
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is an officer, director, employee or consultant of, any Person which is, or
is engaged in business as, a competitor, lessor, lessee, supplier,
distributor, sales agent, customer or client of the Company or any
Subsidiary;
(ii) owns, directly or indirectly (other than through the ownership of
stock or other securities of the Company or any Subsidiary), in whole or in
part, any tangible or intangible property that the Company or any
Subsidiary uses in the conduct of business; or
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, the Company or any Subsidiary, except for claims in the
ordinary course of business such as for accrued vacation pay, accrued
benefits under employee benefit plans, employment agreements, loans to any
employee, in each case consistent with past practice and individually not
in excess of $5,000, and except as set forth on Schedule 3.8(c) and similar
matters and agreements existing on the date hereof.
Section 3.21 Bank Accounts and Powers of Attorney. Set forth in Schedule
3.21 is an accurate and complete list showing (a) the name of each bank in which
the Company and its Subsidiaries have an account, credit line or safe deposit
box and the names of all persons authorized to draw thereon or to have access
thereto, and (b) the names of all persons, if any, holding powers of attorney
from the Company and its Subsidiaries and a summary statement of the terms
thereof.
Section 3.22 Compensation of Employees. Schedule 3.22 is an accurate and
complete list showing (a) the names and positions of all employees and
consultants who are currently being compensated in the aggregate from the
Company or any Subsidiary at an annualized rate of $150,000 or more, together
with a statement of the current annual salary, and material fringe benefits of
such employees and consultants not generally available to all employees of the
Company and its Subsidiaries, (b) all bonus compensation paid or payable in the
aggregate (whether by agreement, custom or understanding) to any employee of the
Company and its Subsidiaries for services rendered during the fiscal year ended
October 31, 1994 and October 31, 1995, and (c) the names of all retired
employees, if any, of the Company or its Subsidiaries who are receiving or
entitled to receive any healthcare or life insurance benefits or any payments
from the Company and its Subsidiaries not covered by any pension plan to which
the Company or its Subsidiaries are a party, their ages and current unfunded
pension rate, if any. The present severance and vacation policy of the Company
and each of its Subsidiaries is set forth on Schedule 3.22.
Section 3.23 No Changes Since the Balance Sheet Date. Since the Balance
Sheet Date except as specifically stated on Schedule 3.23 or as contemplated or
otherwise permitted under the terms of this Agreement, neither the Company nor
any Subsidiary has (a) incurred any liability or obligation of any nature
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(whether accrued, absolute, contingent or otherwise), except in the ordinary
course of business, (b) permitted any of its assets to be subjected to any Lien
(other than Liens in favor of Omnicom or any of its subsidiaries), (c) sold,
transferred or otherwise disposed of any assets or properties except in the
ordinary course of business, (d) made any capital expenditure or commitment
therefor which individually or in the aggregate exceeded $100,000, (e) declared
or paid or set aside for payment any dividends or made any distribution on any
shares of its capital stock, or redeemed, purchased or otherwise acquired any
shares of its capital stock or any option, warrant or other right to purchase or
acquire any such shares, (f) paid any bonuses to employees in excess of "spot"
bonuses which individually do not exceed $5,000 and in the aggregate do not
exceed $50,000, (g) increased or prepaid its indebtedness for borrowed money,
except current borrowings under credit lines listed on the Balance Sheet in the
ordinary course of business or borrowings made from Omnicom or its affiliates,
or made any loan to any employee, including for normal travel and expense
advances or relocation allowances, except in each case consistent with past
practice and individually not in excess of $5,000, or made any loan to any other
Person, (h) written down the value of any work-in-process, or written off as
uncollectible any notes or accounts receivable, except write-downs and writeoffs
in the ordinary course of business, none of which individually or in the
aggregate, is material to the Company and its Subsidiaries (i) granted any
increase in the rate of wages, salaries, bonuses or other remuneration of any
employee who, whether as a result of such increase or prior thereto, receives
aggregate compensation from the Company or any Subsidiary at an annual rate of
$150,000 or more, or except in the ordinary course of business to any other
employees, (j) canceled or waived any claims or rights of substantial value, (k)
made any change in any method of accounting, (l) otherwise conducted its
business or entered into any transaction, except in the usual and ordinary
manner and in the ordinary course of its business, (m) amended or terminated any
agreement (other than agreements with Omnicom or any of its affiliates) which is
material to its businesses, (n) renewed, extended or modified any lease of real
property or except in the ordinary course of business any lease of personal
property, (o) adopted, amended or terminated any Plan or (p) agreed, whether or
not in writing, to do any of the foregoing.
Section 3.24 Required Approvals, Notices and Consents. Except as set forth
on Schedule 3.24 and except for third party consents, the obtaining of which
have been waived by Purchaser under this Section 3.24, and except for approvals
required under the HSR Act, no consent, approval or authorization of, or
declaration or registration with, or action by, or notice to, any governmental
or regulatory authority, domestic or foreign, or any third party, is required in
connection with the execution and delivery by the Sellers of this Agreement and
the consummation of the transactions contemplated hereby. Notwithstanding
anything to the contrary contained in this Agreement, (x) to the extent that the
assignment to the Purchaser of any agency-client contract of the Company or any
Subsidiary requires the consent of any other party thereto, except for any
agency/client contract with Nissan Motor Corp., Omnicom and the Purchaser waive
the obligation to obtain such consent, and (y) to the extent that the assignment
to the Purchaser of any agreement, contract or commitment listed on Schedule
3.7, Schedule 3.8 and/or Schedule 3.13 hereof requires the consent of any other
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party thereto, except for those agreements, contracts or commitments which have
been marked with an asterisk on Schedule 3.7, Schedule 3.8 or Schedule 3.13,
Omnicom and the Purchaser waive the obligation to obtain such consent; and in
each case under (x) and (y), for the purposes of the representations,
warranties, agreements and covenants made by the Sellers in this Agreement,
consents in respect of such non-asterisked contracts shall be deemed to have
been received.
Section 3.25 Corporate Controls. To the best knowledge, information and
belief of the Sellers, neither the Company, its Subsidiaries nor any director,
officer, agent, employee or other Person associated with or while acting on
behalf of the Company and its Subsidiaries, has, directly or indirectly: used
any corporate fund for unlawful contributions, gifts, or other unlawful expenses
relating to political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any false or
fictitious entry on its books or records; made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment, or other payment of a
similar or comparable nature, to any person or entity, private or public,
regardless of form, whether in money, property, or services, to obtain favorable
treatment in securing business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained, and neither the Company nor any Subsidiary has participated in any
boycott or other similar practices affecting any of its actual or potential
customers.
Section 3.26 Information Supplied. None of the information supplied or to
be supplied by the Sellers for inclusion in either (i) the registration
statement on Form S-4 to be filed with the Securities and Exchange Commission
("SEC") by Omnicom in connection with the issuance of Omnicom Stock (the
"Registration Statement") under this Agreement or (ii) the information statement
relating to the meeting of the Company's stockholders to be held in connection
with this Agreement and the transactions contemplated hereby (the "Information
Statement"), contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or will, at the time the Registration Statement becomes
effective under the Securities Act of 1933, as amended (the "Securities Act"),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
Section 3.27 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of the Sellers in connection with this Agreement or the
transactions contemplated hereby, and no brokerage commissions, finder's fees or
similar fees or commissions are payable by the Company or any Subsidiary in
connection therewith based on any agreement, arrangement or understanding with
any of them.
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Section 3.28 Other Disclosures. The legal, accounting, other professional
fees and other expenses of the Sellers and the Subsidiaries, expended or accrued
by the Sellers or the Subsidiaries in connection with the financing arrangements
with Purchaser and its affiliates and in connection with this Agreement,
including without limitation the preparation of the Prospectus Materials as
provided in Section 7.1 and the transactions contemplated thereby (the
"Transaction Costs"), will not be more than $1,000,000. Within 30 days after the
Distribution Date, the Purchaser, as assignee, will collect from the Company the
purchase price due under paragraph 1(b) of the Advertising Stock Sale Agreement.
After the Execution Date and within two years from the Closing Date, the Company
or the Purchaser, as assignee of the Company, shall recover payments due under
the Chiat/Day Debt Restructuring Deed dated February 16, 1993 between the
Company, FCB International Inc., and Foote, Cone & Belding Communications, Inc.
and Venice Holdings Pty Limited (the "Mojo Receivable") of not less than
$1,700,000 after deducting (i) the costs and expenses (including attorneys fees
and disbursements) incurred from and after the Execution Date in connection with
recovering any such payments and (ii) $250,000 if the Mojo Determination Date
(as such term is defined in the Escrow Agreement) is within one year of the
Closing Date or $300,000 if the Mojo Determination Date is later than one year
from the Closing Date.
Section 3.29 Copies of Documents; Schedules. The Company has caused to be
made available for inspection and copying by Omnicom and the Purchaser and their
advisers, true, complete and correct copies of all documents referred to in this
Article III or in any Annex or Schedule. Summaries of all material oral
contracts contained in Schedule 3.8 are complete and accurate in all respects.
The Schedules referred to in this Article III have been previously delivered to
Omnicom and the Purchaser by the Sellers.
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ARTICLE IV
REPRESENTATIONS OF OMNICOM AND THE PURCHASER
Omnicom and the Purchaser, jointly and severally, represent, warrant and
agree to and with the Sellers as follows:
Section 4.1 Existence and Good Standing. Omnicom is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Omnicom and the
Purchaser is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character or location of the
properties owned or leased by it, or the nature of the business conducted by it,
requires such qualification. Each of Omnicom and the Purchaser has all requisite
corporate power and authority to own its assets and to carry on its business as
presently conducted.
Section 4.2 Execution and Validity of Agreement and Related Documents. Each
of Omnicom and the Purchaser has the full corporate power and authority to enter
into this Agreement, the Escrow Agreement and the Deposit and Pledge Agreement
and to perform its respective obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Escrow Agreement and the Deposit
and Pledge Agreement by Omnicom and the Purchaser and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
required corporate action on behalf of Omnicom and the Purchaser. Each of this
Agreement, the Escrow Agreement and the Deposit and Pledge Agreement has been
duly and validly executed and delivered by Omnicom and the Purchaser and,
assuming due authorization, execution and delivery by the other parties thereto,
constitutes the legal, valid and binding obligation of Omnicom and the
Purchaser, enforceable against each of them in accordance with its terms.
Section 4.3 Restrictive Documents. Except as set forth on Schedule 4.3, and
except for approvals required under the HSR Act, neither Omnicom nor the
Purchaser is subject to, or a party to, any charter, by-law, mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which would prevent consummation of the transactions contemplated by
this Agreement or any other agreement entered into by it in connection with the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
not (i) violate, conflict with or result in the breach of any provision of the
charter documents or by-laws of Omnicom or the Purchaser; (ii) except as set
forth on Schedule 4.3, violate, conflict with or result in the breach or
modification of any of the terms of, or constitute (or with notice or lapse of
time or both constitute) a default under, or otherwise give any other
contracting party the right to accelerate or terminate, any obligation,
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contract, agreement, lien, judgment, decree or other instrument to which Omnicom
or the Purchaser is a party or by or to which Omnicom or the Purchaser or their
respective assets or properties may be bound or subject; (iii) violate any
order, writ, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, Omnicom or the
Purchaser or their respective assets or properties; or (iv) result in a
violation by Omnicom or the Purchaser of any statute, law or regulation of any
jurisdiction which is applicable to the business or operations of Omnicom or the
Purchaser, except as could not reasonably be expected to have a material and
adverse effect on the financial condition, results of operations, assets,
properties or businesses of Omnicom and its subsidiaries taken as a whole.
Section 4.4 Omnicom Stock. The shares of Omnicom Stock to be delivered to
the Sellers pursuant to this Agreement, when delivered as provided herein, will
be validly issued and outstanding shares of voting common stock of Omnicom,
fully paid and non-assessable, and will not be subject to preemptive rights of
any Person. The Omnicom Stock to be so delivered will be registered under the
Registration Statement and duly listed for trading on the New York Stock
Exchange as of the Closing Date.
Section 4.5 Financial Statements and No Material Changes. Omnicom has
previously furnished to the Sellers true and complete copies of its Annual
Reports on Form 10-K for the three fiscal years ended December 31, 1992, 1993
and 1994, as amended by the Annual Reports on Form 10-K/A filed in respect of
the 1992 and 1993 Annual Reports. Since December 31, 1994, there has been no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or the results of consolidated operations of
Omnicom and its subsidiaries. As of their respective dates, such Form 10-Ks (in
the case of the 1992 and 1993 Annual Reports, as amended by the applicable Form
10-K/A) did not contain any untrue statement of a material fact, or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, or in
which they will be made, not misleading. The audited financial statements
included in such Reports have been prepared in accordance with GAAP applied on a
consistent basis (except as stated therein) and present fairly, in all material
respects, the consolidated financial position of Omnicom and its subsidiaries as
of the respective dates thereof, and the consolidated results of operations and
cash flows for each of the periods then ended.
Section 4.6 Litigation. There is no action, suit, proceeding at law or in
equity by any Person, or any arbitration or any administrative or other
proceeding by or before (or to the best knowledge, information and belief of
Omnicom and the Purchaser, any investigation by), any governmental or other
instrumentality or agency, pending or, to the best knowledge, information and
belief of Omnicom and the Purchaser, threatened against Omnicom or the Purchaser
(a) with respect to this Agreement or the transactions contemplated hereby, or
(b) against or affecting Omnicom or any of its subsidiaries or any of their
properties or rights which, if adversely determined, would be reasonably likely
to have a material and adverse effect on the financial condition, results of
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operations, assets, properties or businesses of Omnicom and its subsidiaries
taken as a whole.
Section 4.7 Consents and Approvals of Governmental Authorities. Except as
set forth on Schedule 4.7 and except for approvals required under the HSR Act,
no consent, approval or authorization of, or declaration or registration with,
or action by, or notice to, any governmental or regulatory authority, domestic
or foreign, or any third party, is required in connection with the execution and
delivery by Omnicom and the Purchaser of this Agreement and the consummation of
the transactions contemplated hereby.
Section 4.8 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of Omnicom or the Purchaser or their affiliates in connection
with this Agreement or the transactions contemplated hereby, and no brokerage
commissions, finders' fees or similar fees or commissions are payable by Omnicom
or the Purchaser in connection therewith based on any agreement, arrangement or
understanding with any of them.
Section 4.9 Information Supplied. None of the information supplied or to be
supplied by Omnicom for inclusion in either (a) the Registration Statement or
(b) the Information Statement contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, or will, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 4.10 Copies of Documents; Schedules. Omnicom and the Purchaser have
caused to be made available for inspection and copying by the Sellers and their
advisers, true, complete and correct copies of all documents referred to in this
Article IV or in any Schedule. The Schedules referred to in this Article IV have
been previously delivered to the Sellers by Omnicom or the Purchaser.
ARTICLE V
COVENANTS OF THE SELLERS
The Sellers covenant and agree with Omnicom and the Purchaser that, at all
times from and after the Execution Date until the Closing, the Sellers will
comply with all covenants and provisions of this Article V, except to the extent
Omnicom (on behalf of itself and the Purchaser) may otherwise consent in
writing.
Section 5.1 Regulatory and Other Approvals. The Sellers will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
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in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to governmental or regulatory authorities or any
other Person required of the Sellers to consummate the transactions contemplated
hereby including without limitation those described on Schedule 3.24 (except as
otherwise contemplated in Section 3.24), (b) provide such other information and
communications to such governmental or regulatory authorities or other Persons
as such governmental or regulatory authorities or other Persons may reasonably
request in connection therewith and (c) provide reasonable cooperation to
Omnicom and the Purchaser in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to governmental or regulatory
authorities or other Persons required of Omnicom or the Purchaser to consummate
the transactions contemplated hereby, including without limitation complying, if
necessary, with the Workers Adjustment and Retraining Notification Act (P.L.
100-379). The Sellers will provide prompt notification to Omnicom when any such
consent, approval, action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable, and will advise Omnicom of any
communications (and, unless precluded by law, provide copies of any such
communications that are in writing) with any governmental or regulatory
authority or other Person regarding any of the transactions contemplated by this
Agreement.
Section 5.2 HSR Filings. In addition to and not in limitation of the
Sellers' covenants contained in Section 5.1, the Sellers will (a) take promptly
all actions necessary to make the filings required of the Sellers under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) comply at the earliest practicable date with any request for
additional information received by the Sellers from the Federal Trade Commission
or the Antitrust Division of the Department of Justice pursuant to the HSR Act
and (c) cooperate with Omnicom in connection with Omnicom's filing under the HSR
Act and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement commenced by either
the Federal Trade Commission or the Antitrust Division of the Department of
Justice or state attorneys general.
Section 5.3 Investigation by Omnicom and the Purchaser. The Sellers will
(a) provide Omnicom and the Purchaser and their respective officers, employees,
counsel, accountants, financial advisors, consultants and other representatives
(collectively, "Representatives") with full access, upon reasonable prior notice
and during normal business hours, to the employees and such other officers and
agents of the Sellers who have any responsibility for the conduct of the
Businesses, to the Sellers' accountants and their work papers, and to the
Assets, but only to the extent that such access does not unreasonably interfere
with the Businesses and (b) furnish Omnicom, the Purchaser and the
Representatives with all such information and data concerning the Businesses,
the Assets and the Assumed Liabilities as Omnicom, the Purchaser or the
Representatives reasonably may request in connection with such investigation,
except to the extent that furnishing any such information or data would violate
any law, order, contract or License applicable to the Sellers or by which any of
their Assets are bound.
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Section 5.4 No Solicitations. Subject to the duties imposed by applicable
law, the Sellers will not take, nor will they permit any affiliate of the
Sellers (or authorize or permit any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
the Sellers or any such affiliate) to take, directly or indirectly, any action
to solicit, encourage, receive, negotiate, assist or otherwise facilitate
(including by furnishing confidential information with respect to the Businesses
or permitting access to the Assets of the Sellers) any offer or inquiry
concerning the acquisition of the Businesses from any Person other than Omnicom
or the Purchaser.
Section 5.5 Conduct of Business. From the Execution Date to the Closing
Date, except as contemplated or otherwise permitted under the terms of this
Agreement, the Sellers will operate the Businesses only in the ordinary course
consistent with past practice; provided, however, the Sellers shall diligently
proceed with the liquidation and dissolution of the Inactive Subsidiaries.
Without limiting the generality of the foregoing, except as contemplated by or
otherwise permitted by this Section 5.5, each Seller will refrain, and will
cause its subsidiaries to refrain, from taking any of the following actions
unless consented to in writing by Omnicom (on behalf of itself and the
Purchaser), which consent shall not be unreasonably withheld:
(i) other than pursuant to this Agreement or the Advertising Stock
Sale Agreement, selling, leasing or otherwise disposing of all or a
substantial part of its assets or Businesses;
(ii) amending its Certificate of Incorporation or by-laws (or
equivalent charter documents), other than pursuant to Section 10.1 or as
otherwise described on Schedule 5.5;
(iii) changing its equity capitalization;
(iv) engaging in any acquisition of the stock, assets or business of
another corporation or entity or making any equity investment of corporate
funds in another corporation or entity other than short-term investments in
cash equivalents;
(v) merging or consolidating with and into any corporation, limited
liability company or other entity, or merging or consolidating any
corporation, limited liability company or other entity with and into it;
(vi) except in respect of any Inactive Subsidiary or any other
Subsidiary indicated on Schedule 3.3 as being in the process of
liquidation, engaging in any liquidation or dissolution;
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(vii) engaging in any transaction involving an amount in excess of
$250,000, other than in the ordinary course of business to service its
clients;
(viii) other than pursuant to the Advertising Stock Sale Agreement,
engaging in the issuance or sale of stock or securities, or options,
warrants or obligations convertible into such stock or securities or,
issuing any phantom stock, equity participation units, stock appreciation
rights or similar rights;
(ix) entering into any line of business not related to advertising or
public relations;
(x) prepaying any indebtedness for borrowed money except for
obligations to Omnicom or one of its affiliates or payments of the 8.17%
Junior Subordinated Installment Notes, the 13.25% Junior Subordinated
Notes, the 13.25% Senior Subordinated Notes and the notes issued under the
Amended and Restated Credit Agreement; or creating or modifying any of the
terms of any of the following financial arrangements: any lien on any of
its assets or properties; any guarantee by it of the obligations of any
third party, whether a director, officer or employee of the Company or any
Subsidiary, or otherwise; and any indebtedness for borrowed money except in
the ordinary course of its business under credit lines set forth on
Schedule 3.8 or pursuant to a transaction with Omnicom or one of its
affiliates;
(xi) except as set forth on Schedule 5.5, entering into any
arrangement with any employee or consultant pursuant to which the
compensation or fee payable to such employee or consultant shall wholly or
partially be contingent upon (a) a percentage of its revenues or the
revenues generated by it relating to any of its clients or (b) its profits,
except for renewals in the ordinary course of business and consistent with
past practice of outstanding arrangements of such type which have been
disclosed on Schedule 3.8, and except for the consulting and/or employment
agreements to be entered into by each of Jay Chiat and Leland Clow with the
Company, in the forms previously approved in writing by Omnicom
(respectively, the "Chiat Consulting Agreement" and the "Clow Employment
Agreement");
(xii) making any loans to any employee, including normal travel and
expense advances or relocation allowances, except in each case consistent
with past practice and individually not in excess of $5,000, or to any
other Person;
(xiii) except as disclosed in Schedule 3.8 hereto, entering into any
lease or purchase of real property or commitment to construct real
property;
(xiv) granting any compensation increase to any employee whose total
annual compensation would after such increase exceed $150,000, or paying
bonuses to any employees, except (a) Advertising shall be permitted
consistent with past practices to accrue (but not pay) bonuses for
distribution to its senior executives and certain other key employees in
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respect of the period commencing November 1, 1994 and ending with the
Closing Date in an amount up to 10% of profit from normal advertising
operations before all federal, state, local and foreign income taxes and
adjusted to exclude interest income and income expense calculated in
accordance with GAAP, such accrual to be reviewed and adjusted upward or
downward after October 31, 1995 consistent with past practice (it being
understood that for the period commencing the day after the Closing Date
and ending October 31, 1995, the accrual shall be based on the financial
results of the Businesses as conducted by the Purchaser), (b) the Company
and its Subsidiaries shall be permitted to pay the bonuses accrued for on
the Balance Sheet, and (c) the Company and its Subsidiaries shall be
permitted to pay "spot" bonuses from time to time to employees in the
ordinary course of business and consistent with past practice not to exceed
$50,000 in the aggregate;
(xv) except for the Chiat Consulting Agreement and the Clow Employment
Agreement and the agreements referred to in Section 5.5(xix) below,
entering into any contract or agreement with any officer or director;
(xvi) except as set forth on Schedule 5.5, entering into any
affiliation arrangement with any advertising agency, other than the
Purchaser or another member of the TBWA International network;
(xvii) declaring or paying any dividends to its stockholders or making
other distributions in respect of its capital stock, splitting, combining
or reclassifying any of its capital stock, or issuing or authorizing or
proposing the issuance of any other securities in respect of, in lieu of,
or in substitution for, shares of its capital stock; provided that
Advertising may declare a dividend to its stockholder consisting solely of
shares of capital stock of the Company owned by Advertising; repurchasing
(other than pursuant to the Profit Sharing Plan Purchase Agreement and the
stock repurchase agreements existing as of the date hereof and described on
Schedule 3.8), redeeming or otherwise acquiring any of its shares of
capital stock;
(xviii) amending in any material respect any contract or agreement
material to the Businesses, including without limitation the Advertising
Stock Sale Agreement, the Profit Sharing Plan Purchase Agreement or any
agreement with Nissan Motor Corp.;
(xix) entering into any severance agreement involving a payment, or
obligation to pay, any amount in excess of the Company's normal severance
benefit as set forth on Schedule 3.22; provided, however, that Omnicom and
the Purchaser acknowledge that the Sellers collectively may also enter into
up to sixteen severance agreements (in a form previously approved by
Omnicom) each providing for not more than six months of severance pay;
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(xx) releasing, canceling or assigning any indebtedness for borrowed
money owed to it, or waiving any material right relating to its properties;
(xxi) accepting as a client any Person that the Chief Executive
Officer of Omnicom, in his reasonable discretion, determines to be
competitive with any significant client serviced by any member of the TBWA
International network, the DDB Needham Worldwide network or the BBDO
Worldwide network;
(xxii) accepting as a client any Person that the Chief Executive
Officer of Omnicom, in his reasonable discretion, determines to be contrary
to the best interests of Omnicom and its subsidiaries;
(xxiii) except as set forth on Schedule 5.5, creating or modifying any
Plan or entering (other than the Chiat Consulting Agreement and the Clow
Employment Agreement) into or modifying any employment agreement which is
not cancelable without penalty or other obligation on 30 days notice;
(xxiv) entering into any transaction or performing any act which would
be reasonably likely to result in any of the representations and warranties
of the Sellers contained in this Agreement not being true and correct; or
agreeing to take any of the actions that are prohibited herein or which
would constitute a violation of any of the covenants of the Sellers
contained herein; and
(xxv) delegating to directors the power to take any of the actions
prohibited by any of the foregoing clauses.
Notwithstanding anything in this Section 5.5 to the contrary, Advertising
shall be permitted to assign to Jay Chiat all of its rights and obligations in,
to and under the lease relating to the residential townhouse at 149 East 38th
Street, New York, New York.
Section 5.6 Financial Information. Within 20 days after the close of each
month between the Execution Date and the Closing Date, the Company shall furnish
to Omnicom the unaudited consolidated and consolidating balance sheets of the
Company and the Subsidiaries and the unaudited consolidating balance sheets of
the Company and each Subsidiary and operating unit, specified in clauses (b) and
(c) of Section 3.4, as at the close of such month, and the related consolidated
and consolidating statements of income and (with respect to quarterly
consolidated statements) cash flow for the period then ended and the fiscal
year-to-date. The unaudited financial statements referred to in this Section 5.6
shall be prepared in accordance with GAAP applied on a consistent basis with the
audited financial statements provided to Omnicom and the Purchaser pursuant to
Section 3.4 above.
Section 5.7 Notice and Cure. The Sellers will notify Omnicom in writing
(where appropriate and only with respect to matters occurring after the
Execution Date, through updates to the Schedules) of, and contemporaneously will
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provide Omnicom with true and complete copies of any and all information or
documents relating to, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction or circumstance, as soon as
practicable after it becomes known to the Sellers, occurring after the Execution
Date that causes or will cause any covenant or agreement of the Sellers under
this Agreement to be breached or that renders or will render untrue any
representation or warranty of the Sellers contained in this Agreement as if the
same were made on or as of the date of such event, transaction or circumstance
(each, a "Post Execution Date Event"). The Sellers also will notify Omnicom in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing, any other violation or breach, as soon as practicable after it becomes
known to the Sellers, of any representation, warranty, covenant or agreement
made by the Sellers in this Agreement. Except as herein provided, no notice
given pursuant to this Section shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein or shall in any way
limit the Purchaser's right to seek indemnity under Article XI; provided,
however, for purposes of determining Purchaser's right to seek indemnity under
Article XI, information contained on updates to the Schedules relating solely to
a Post Execution Date Event shall be deemed to be disclosed to Omnicom and the
Purchaser and such information shall be deemed to have been set forth in such
Schedule as of the Execution Date.
Section 5.8 Termination of Profit Sharing Plan. The Company shall obtain
all governmental approvals (including approval by the Internal Revenue Service)
and shall take all other action necessary to terminate the Profit Sharing Plan
effective on or about the Closing Date, even though such approvals may be
obtained and such action taken on or after the Closing Date.
Section 5.9 Consultation. Between the Execution Date and the Closing Date,
the Sellers will consult with Omnicom's management and the management of the
TBWA International network with a view to informing such management as to the
operation and management of the Businesses to be acquired by the Purchaser. The
Sellers will use commercially reasonable efforts to preserve the business
organization of the Businesses, to preserve for the Purchaser and the TBWA
International network the present business relationships of the Businesses, and
to preserve for the Purchaser and the TBWA International network all of the
confidential information and trade and business secrets relating to the
Businesses.
Section 5.10 Company Stockholder Approval. Within five days after the
Registration Statement becomes effective, the Company shall give notice of a
meeting of its stockholders to be held not more than 20 days from the date of
such notice for the purpose of voting on and approving, among other things, this
Agreement, a plan for the liquidation and dissolution of the Company and the
amendment to the Certificate of Incorporation of the Company contemplated by
Section 10.1 and the agreements and the transactions contemplated hereby and
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thereby. The Company shall use its best efforts to obtain such stockholder
approval. The Company will, through its Board of Directors, recommend to its
stockholders approval of the transactions contemplated by this Agreement.
Section 5.11 Fulfillment of Conditions. Each Seller will execute and
deliver at the Closing each agreement that such Seller is required hereby to
execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Omnicom and the Purchaser
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
ARTICLE VI
COVENANTS OF OMNICOM AND THE PURCHASER
Omnicom and the Purchaser covenant and agree with the Sellers that, at all
times from and after the Execution Date until the Closing, Omnicom and the
Purchaser will comply with all covenants and provisions of this Article VI,
except to the extent the Sellers may otherwise consent in writing.
Section 6.1 Regulatory and Other Approvals. Omnicom and the Purchaser will
(a) take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts, as
promptly as practicable to obtain all consents, approvals or actions of, to make
all filings with and to give all notices to governmental or regulatory
authorities or any other Person required of Omnicom or the Purchaser to
consummate the transactions contemplated hereby, including without limitation
those described on Schedule 4.7, (b) provide such other information and
communications to such governmental or regulatory authorities or other Persons
as such governmental or regulatory authorities or other Persons may reasonably
request in connection therewith and (c) provide reasonable cooperation to the
Sellers in obtaining all consents, approvals or actions of, making all filings
with and giving all notices to governmental or regulatory authorities or other
Persons required of the Sellers to consummate the transactions contemplated
hereby. Omnicom will provide prompt notification to the Sellers when any such
consent, approval, action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable, and will advise the Sellers of
any communications (and, unless precluded by law, provide copies of any such
communications that are in writing) with any governmental or regulatory
authority or other Person regarding any of the transactions contemplated by this
Agreement.
Section 6.2 HSR Filings. In addition to and without limiting the covenants
contained in Section 6.1, Omnicom will (a) take promptly all actions necessary
to make the filings required of Omnicom under the HSR Act, (b) comply at the
earliest practicable date with any request for additional information received
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by Omnicom from the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (c) cooperate with the Sellers
in connection with the Sellers' filing under the HSR Act and in connection with
resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal Trade Commission
or the Antitrust Division of the Department of Justice or state attorneys
general.
Section 6.3 Financial Information and Reports. As soon as reasonably
practicable after it becomes publicly available, Omnicom shall furnish to the
Company any Form 10-Q or other registration statement or report filed by Omnicom
with the SEC following the Execution Date and prior to the Closing Date.
Section 6.4 Agreements Regarding Employees. (a) The Purchaser shall cause
one or more companies operating within the TBWA International network to offer
employment to all employees of the Company and the Subsidiaries (including those
employees who are on vacation, temporary lay-off, leave of absence, sick-leave
or short- or long-term disability) (the "Affected Employees") following the
Closing Date (other than Jay Chiat, who shall become a consultant to Omnicom,
and Robert Wolf, who shall become an employee of Omnicom). Such personnel who
accept such employment will be employed on substantially the equivalent terms
and conditions (including titles, salary or wages) as such personnel were
employed by the Company or a Subsidiary immediately prior to the Closing Date
(other than as may be provided in the employment agreements referred to in
Sections 8.13 and 8.15), but nothing herein contained shall be deemed to create
an employment contract between the Purchaser and/or any of its affiliates and
any such personnel. In the event any employee of the Company or a Subsidiary
shall be deemed to have been terminated solely by reason of the consummation of
this Agreement, all liability for severance benefits and any other benefits not
recorded on the books and records of the Company as of the Closing Date, if any,
shall be borne by the Company. Except as provided below, employees of the
Company or a Subsidiary who become employees of a company operating within the
TBWA International network shall be subject to all rules, regulations,
requirements and policies applicable to all new hires of such company, and any
such employees who may be subsequently terminated will be entitled to severance
benefits in accordance with the policy of such company as then applicable,
except to the extent that written agreements with such employees that are
assumed by the Purchaser or subsequently entered into, provide otherwise.
Notwithstanding the foregoing, the Purchaser shall cause one or more companies
operating within the TBWA International network to offer Affected Employees the
benefits set forth on Schedule 6.4.
(b) With respect to any welfare benefit plans (within the meaning of
Section 3(1) of ERISA) maintained by Omnicom or a company operating within the
TBWA International network in which an Affected Employee will participate (the
"Omnicom Group") on or after the Closing Date, the Omnicom Group shall (i) cause
to be waived any pre-existing condition limitations, (ii) give effect, in
determining any deductible and maximum out-of-pocket limitations, to claims
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incurred and amounts paid by, and amounts reimbursed to, such employees with
respect to similar plans maintained by the Company and the Subsidiaries prior to
the Closing Date and (iii) permit those Affected Employees who are eligible as
of the Closing Date to participate in the Company and the Subsidiaries'
applicable welfare plan(s) to participate immediately in the applicable welfare
plan(s) of the Omnicom Group.
(c) The Omnicom Group shall recognize under its employee benefit plans,
programs, arrangements and policies in which an Affected Employee will
participate the service credited to the Affected Employees as of the Closing
Date to the extent recognized under the Company and the Subsidiaries' plans or
continuity of service rules (or, with respect to any benefit under the
applicable welfare plans of the Omnicom Group as to which there is no comparable
benefit under the applicable welfare plans of the Company and the Subsidiaries,
to the extent such service would have been recognized under the plans of the
Omnicom Group as if such service had been rendered to the Omnicom Group) for
purposes of any waiting period, eligibility conditions and benefits.
Notwithstanding the foregoing, no past service credit for service with the
Company and its Subsidiaries shall be given to any Affected Employee who may in
the future participate in Omnicom's Executive Salary Continuation Plan.
(d) The Omnicom Group shall observe the terms of the Company and the
Subsidiaries' vacation policy with respect to Affected Employees or shall adopt
a vacation policy covering Affected Employees with identical terms for the
balance of the calendar year in which the Closing Date occurs.
Section 6.5 Notice and Cure. Omnicom or the Purchaser will notify the
Sellers in writing of any and all information or documents relating to, and will
use all commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practicable after it becomes known to
Omnicom or the Purchaser, occurring after the Execution Date that causes or will
cause any covenant or agreement of Omnicom or the Purchaser under this Agreement
to be breached or that renders or will render untrue any representation or
warranty of Omnicom or the Purchaser contained in this Agreement as if the same
were made on or as of the date of such event, transaction or circumstance.
Omnicom or the Purchaser also will notify the Sellers in writing of, and will
use all commercially reasonable efforts to cure, before the Closing, any other
violation or breach, as soon as practicable after it becomes known to Omnicom or
the Purchaser, of any representation, warranty, covenant or agreement made by
Omnicom or the Purchaser in this Agreement. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein.
Section 6.6 Fulfillment of Conditions. Omnicom and the Purchaser will
execute and deliver or cause the execution and delivery at the Closing each
agreement that Omnicom and the Purchaser or one of their affiliates is hereby
required to execute and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed diligently and
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in good faith to satisfy each other condition to the obligations of the Sellers
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
Section 6.7 Blue Sky; New York Stock Exchange Listing. Omnicom and the
Purchaser will use their best efforts to (a) obtain all necessary state
securities and blue sky authorizations required to issue the Omnicom Stock as
contemplated by this Agreement and (b) cause such shares of Omnicom Stock to be
listed on the New York Stock Exchange, subject only to official notice of
issuance.
Section 6.8 Access to Books and Records. For a period of seven years from
the Closing Date, Omnicom and the Purchaser shall provide, free of charge, to
the Company (or, upon its dissolution, the Liquidating Trustee) and their
respective representatives, upon reasonable advance notice and during normal
business hours, access to all books and records of the Company and Advertising
purchased by the Purchaser hereunder.
Section 6.9 Purchases of Omnicom Stock. Omnicom will not, and will not
permit the Purchaser or any other of its subsidiaries to, purchase any Omnicom
Stock (whether pursuant to open-market purchases or otherwise) during the 20
consecutive trading days ending three business days immediately prior to the
Closing Date.
Section 6.10 Financial Results of Combined Businesses. In the event the
Closing Date occurs prior to August 31, 1995, Omnicom agrees to prepare and on
or before October 30, 1995 to make publicly available as required by the
accounting rules referred to below, combined interim financial results of
Omnicom and the Businesses of the Company and Advertising acquired hereunder
satisfying all applicable FASB pooling-of-interests requirements, which
financial results shall cover a 30-day period (or such shorter period as may be
allowed, or longer period if required, by such accounting requirements at the
time) immediately following the Closing Date (provided such period is a normal,
complete fiscal period of Omnicom). In the event that Omnicom determines prior
to the Closing that it will not be able to publish such financial results by
October 30, 1995, Omnicom shall postpone the Closing Date and, subject to the
provisions of Section 10.8, reschedule it to a date after October 31, 1995.
Section 6.11 Chiat Art Lease; Insurance. At the Closing, the Purchaser
shall enter into a lease with Jay Chiat in substantially the form previously
approved by Jay Chiat and Omnicom pursuant to which the Purchaser will lease
from Jay Chiat the art works described in such lease for the sum of $1 per year.
Such lease will terminate on the date which is seven years from the Closing
Date, provided that either party may terminate the lease upon 30 days prior
written notice. The lease will provide, and the Purchaser hereby agrees, that
the Purchaser will maintain and pay all premiums due under the art insurance
policies described in such lease during the term of the lease.
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Section 6.12 Exchange Act Filings. For a period of three years immediately
following the Closing Date, Omnicom shall file in a timely manner all reports
required to be filed pursuant to and in accordance with Section 13 and Section
15(d) of the Securities Exchange Act of 1934, as amended.
Section 6.13 Mojo Receivable. Omnicom and the Purchaser agree to use their
respective reasonable best efforts to recover, as promptly as practicable, all
amounts remaining due after the Closing Date in respect of the Mojo Receivable,
including any set-off or holdback in respect of payments made prior to the
Closing Date.
ARTICLE VII
MUTUAL COVENANTS
Omnicom, the Purchaser and the Sellers mutually covenant and agree with
each other as follows:
Section 7.1 Preparation of Registration Statement. Omnicom and the Company
shall prepare the Registration Statement to be filed with the SEC under the
Securities Act for the registration of the Omnicom Stock to be issued in
connection with this Agreement. The Registration Statement and the related
Information Statement and prospectus forming a part of the Registration
Statement shall be mailed to stockholders of the Company in connection with the
special meeting of stockholders, more fully described in Section 5.10, to be
held for the purpose of authorizing the transactions contemplated by this
Agreement (the Registration Statement and the Information Statement and
prospectus are hereinafter referred to collectively as the "Prospectus
Materials"). Omnicom and the Company shall cooperate with each other in the
preparation of the Prospectus Materials and any related filings as shall be
necessary under the securities laws of any state. Omnicom shall prepare and file
the Registration Statement and shall use its best efforts to cause it to become
effective as promptly as possible. Omnicom shall use its best efforts to keep
the Registration Statement continuously effective until 60 days after the
Distribution Date. The Registration Statement will cover resales by the trustee
of the Liquidating Trust and by the escrow agent of the Liquidating Trust Escrow
Fund to be effected within the 60-day period following the Distribution Date.
Omnicom, the Purchaser and the Company shall furnish all information relating to
Omnicom, the Purchaser or the Company and its Subsidiaries, as the case may be,
necessary in order to prepare the Prospectus Materials. None of the information
supplied by Omnicom, the Purchaser or the Company for inclusion or incorporation
by reference in (i) the Registration Statement will, at the time it is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the Prospectus Materials will, at the date mailed to
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
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they are made, not misleading. Each of the Company, the Purchaser and Omnicom,
with respect to the materials to be furnished by it (and in the case of the
Company, also with respect to the Liquidating Trust, the Liquidating Trust
Escrow Fund and the sales of Omnicom Stock to be made by the respective trustee
and escrow agent thereof) for inclusion in the Prospectus Materials, will ensure
that such materials are presented in such a form as to comply in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder, except that no representation is made by a party with respect to
statements made in such document based on information supplied by the other
party for inclusion therein. Omnicom shall indemnify the Company and its
directors, officers, agents, "controlling persons" as defined by the Securities
Act, and the Stockholders and EAR and EPU holders against any liability, damage,
cost, loss, or expense to them or any of them arising solely out of any untrue
statement or alleged untrue statement of a material fact expressly furnished by
Omnicom or the Purchaser for inclusion in the Prospectus Materials, or caused by
any omission or alleged omission to furnish a material fact concerning Omnicom
or the Purchaser that is required to be stated therein or that is necessary to
make the statements furnished by Omnicom or the Purchaser not misleading.
Independent of its obligations under Article XI, the Company shall indemnify
Omnicom, the Purchaser and their respective directors, officers, agents,
"controlling persons" as defined by the Securities Act, and attorneys against
any liability, damage, cost, loss, or expense to them or any of them arising
solely out of any untrue statement or alleged untrue statement of a material
fact expressly furnished by the Company for inclusion in the Prospectus
Materials, or caused by any omission or alleged omission to furnish a material
fact concerning the Company and its Subsidiaries or the Liquidating Trust or
Liquidating Trust Escrow Fund that is required to be stated therein or that is
necessary to make the statements furnished by the Company not misleading.
Omnicom will advise the Company, promptly after it receives notice thereof, of
the time when the Registration Statement has become effective or any supplement
or amendment has been filed, of the issuance of any stop order by the SEC or by
any securities regulatory commission of any state, of the suspension of the
qualification of Omnicom Stock that is issuable in connection with this
Agreement for offering and sale in any jurisdiction, of the initiation or threat
of any proceeding for any such purpose, and of any request by the SEC or any
such state commission for the amendment or supplement of the Registration
Statement or for additional information. Subject to Section 1.1.3(iv), each of
the Sellers and the Purchaser shall bear the fees and expenses of their
respective counsel, accountants and financial advisors in connection with the
preparation of the Prospectus Materials; provided that all fees, costs and
expenses relating to the filing, printing and distribution of the Registration
Statement, "blue sky" fees and registration of the Omnicom Stock shall be borne
by Omnicom.
Section 7.2 Affiliates' Letters. Prior to the Closing Date, the Company
shall furnish Omnicom with a list identifying all persons who may be considered,
in its opinion, to be "affiliates" of the Company, as the term "affiliates" is
used in Paragraphs (c) and (d) of Rule 145 under the Securities Act or in SEC
ASR No. 135 (the "Company Affiliates"). The Company shall use its best efforts
to cause each Person who it has identified as a Company Affiliate and each
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additional Person, if any, that Omnicom has identified in writing to the Company
as a Company Affiliate, to deliver to Omnicom on or before the Closing Date the
affiliates representation letter attached hereto as Exhibit B; provided,
however, nothing contained in this provision shall prohibit the Company or
Advertising from transferring shares of Omnicom Stock delivered to it at the
Closing to the Stockholders, the holders of EARs and EPUs, the Escrow Agent and
the Liquidating Trust, as the case may be, or to The Chase Manhattan Bank, N.A.,
as Deposit Agent, under the Deposit and Pledge Agreement.
Section 7.3 Reasonable Efforts to Consummate Transaction. Omnicom, the
Purchaser and the Sellers will each use its reasonable efforts and will fully
cooperate with each other to consummate the transactions contemplated by this
Agreement.
Section 7.4 Sales Tax Liability. The Purchaser and the Sellers shall obtain
all necessary sales tax exemptions and take all such other action as may be
necessary or advisable to cause the transfer of the Assets to the Purchaser not
to be subject to sales tax. To the extent that, despite all such actions, the
transfer of any of the Assets to the Purchaser gives rise to sales tax liability
or other transfer, purchase or recordation documentary taxes and fees
(collectively, "Sales Taxes"), the Purchaser shall promptly pay to the
appropriate tax authorities up to the first $200,000 of the Sales Taxes incurred
by the Company and Advertising. Any such liability in excess of $200,000 shall
be shared equally between the Purchaser and the Sellers; the Sellers shall
determine between them the allocation of any amounts so contributed by the
Purchaser in respect of such Sales Taxes.
Section 7.5 Financial Transactions. Omnicom, the Purchaser and the Sellers
agree that between the Execution Date and the Closing Date they shall cause the
following transactions to occur: (i) the Purchaser shall lend the Company
$55,000,000 and lend Advertising $1,000,000 on reasonable commercial terms and
pursuant to financing documents reasonably acceptable to the parties thereto and
in substantially the form of the Amended and Restated Credit Agreement and the
documents ancillary thereto; (ii) the Company shall make a capital contribution
of not less than $55,000,000 to Advertising; and (iii) Advertising shall repay
in full all outstanding principal, together with accrued interest, of the 8.17%
Junior Subordinated Installment Notes, the 13.25% Junior Subordinated Notes, the
13.25% Senior Subordinated Notes and the notes issued under the Amended and
Restated Credit Agreement. Upon the repayment in full of amounts outstanding
under the Amended and Restated Credit Agreement in accordance with clause (iii)
above and prior to the Closing, Omnicom agrees to release or cause to be
released (by, among other things, filing UCC termination statements in all
appropriate jurisdictions) all Liens granted to secure the obligations of the
Company and Advertising thereunder.
Section 7.6 Calculation of Revenues.
7.6.1 Delivery of Revenues Statement. The chief financial officer of the
Company shall prepare an unaudited statement of the Annualized Revenues (as
hereinafter defined) of the Company and its Subsidiaries as at the month ending
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immediately following the Execution Date (the "Revenues Statement"); and shall
prepare an updated Revenues Statement as at the end of each succeeding month
until the Closing Date (each such month, a "Measuring Month"). A copy of each
such Revenues Statement shall be delivered to Omnicom not later than five days
after the end of each such month. If Omnicom (on behalf of itself and the
Purchaser) does not agree that the Revenues Statement as at the earlier of (x)
the last day of the month immediately preceding the Closing Date and (y) October
31, 1995, correctly sets forth the Annualized Revenues, then within ten days
after delivery to it of such Revenues Statement, Omnicom shall give written
notice to the Company of any exceptions thereto. If the Company and Omnicom do
not reconcile their differences within five days thereafter the items in dispute
shall be submitted to the Arbitrator in accordance with Section 10.7, and the
Annualized Revenues as determined by the Arbitrator shall be final, conclusive
and binding upon all of the parties hereto. The books and records of the Company
and its Subsidiaries, and the work papers of the Company's accountants, shall be
made available at the Company's principal offices to Omnicom and its
representatives and the Arbitrator, for the purpose of reviewing the Annualized
Revenues.
7.6.2 Definition of Annualized Revenues. The "Annualized Revenues" shall be
the commissions and fees of the Company and its Subsidiaries for the fiscal year
commencing November 1, 1994 and ending October 31, 1995 (the "Measuring
Period"), calculated as follows:
(a) There shall be calculated as of the end of the applicable Measuring
Month a forecast of the amount of commissions and fees to be earned by the
Company and its Subsidiaries during the Measuring Period from those clients of
the Company and its Subsidiaries that were such on October 31, 1994 ("Original
Clients"). Such calculation shall separately state the commissions and fees to
be earned from the twenty largest clients as of the Execution Date, and the
aggregate of the commissions and fees to be earned from all other clients.
(b) The amount as so calculated shall be adjusted as follows:
(i) there shall be added, the annualized amount of commissions and
fees which would have been earned by the Company and its Subsidiaries from
any new clients won since November 1, 1994 ("New Clients"), had such New
Clients been clients during the entire Measuring Period;
(ii) there shall be excluded any commissions and fees from any clients
lost since November 1, 1994 ("Lost Clients"), whether Original Clients or
New Clients; and
(iii) Fruitopia/Cherry Coke shall be deemed a Lost Client.
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The forecast of any unearned commissions and fees shall be made in good faith
and upon a reasonable basis. The determination of earned commissions and fees
shall be made in accordance with GAAP consistent with the accounting principles
and practices used in preparing the Balance Sheet.
Section 7.7 Public Announcements. Omnicom, the Purchaser and the Sellers
will consult with each other before issuing any press releases or otherwise
making any public statements with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any such press release or
make any public statement without the prior consent of the other parties which
shall not be unreasonably withheld, except as may be required by law or by
obligations pursuant to any listing agreements with any national securities
exchange.
Section 7.8 Renegotiation of Purchase Price. In the event that on the
Closing Date as initially scheduled pursuant to Section 2.2, the Annualized
Revenues of the Company and its Subsidiaries exceed $100,000,000, and the EBIT
as defined and as calculated in accordance with Schedule 7.8 to this Agreement
("EBIT") for the Company's fiscal year ending October 31, 1995 is reasonably
expected to exceed $17,200,000, then each of the parties hereto agrees to
negotiate in good faith an upward adjustment to the Purchase Price, and if
agreement thereon is reached, to amend this Agreement and any documents
incidental or ancillary hereto to the extent necessary to reflect such
adjustment. Notwithstanding the foregoing, each of the parties hereto agrees
that the failure to reach a renegotiated Purchase Price, regardless of the
reason therefor, shall not be deemed a breach of this Agreement by any party
hereto and accordingly, may not be the basis for any action or claim for
damages. During any period of negotiation pursuant to this Section 7.8, the
scheduled Closing Date shall be postponed to accommodate such negotiation
efforts and rescheduled in the event an agreement to proceed to Closing (whether
at an increased Purchase Price or otherwise) is reached.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF OMNICOM AND THE PURCHASER
The obligations of the Purchaser hereunder to purchase the Assets and to
assume and pay, perform and discharge the Assumed Liabilities are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(except with respect to Section 8.8 and the first sentence of Section 8.10, all
or any of which may be waived in whole or in part by Omnicom, on behalf of
itself and the Purchaser, in its sole discretion):
Section 8.1 Representations and Warranties. The representations and
warranties made by the Sellers in this Agreement, or in any Schedule delivered
pursuant hereto, shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
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and Sellers shall have delivered to Omnicom and the Purchaser a certificate,
dated the Closing Date, to such effect.
Section 8.2 Good Standing Certificates. The Sellers shall have delivered to
Omnicom and the Purchaser a certificate from the Secretary of State (or
comparable official) of each jurisdiction in which a Subsidiary whose stock is
being acquired by the Purchaser under this Agreement is organized or qualified
to do business, to the effect that such Subsidiary is in good standing in such
jurisdiction.
Section 8.3 Performance. The Sellers shall have performed and complied with
the agreements, covenants and obligations required by this Agreement to be so
performed or complied with by the Sellers at or before the Closing (it being
agreed that the Purchaser shall not be required to close either the Company
Asset purchase or the Advertising Asset purchase unless both such Asset
purchases are simultaneously closed), including without limitation, the
execution and delivery of the conveyance documents referred to in Section
2.2(b), and the Sellers shall have delivered to Omnicom and the Purchaser a
certificate, dated the Closing Date, to such effect.
Section 8.4 Certified Resolutions. The Sellers shall have delivered to
Omnicom and the Purchaser copies of resolutions of the boards of directors and
of the stockholders of the Sellers authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated hereby,
certified to by the respective secretaries of the Company and Advertising.
Section 8.5 No Litigation. There shall not be pending any litigation,
proceeding, investigation, review, arbitration or claim by governmental
representatives or authorities, and no preliminary or permanent injunction or
other order shall have been issued, to restrain or invalidate the consummation
by the Sellers of this Agreement and the transactions contemplated hereby, and
no material litigation shall be pending or to the best knowledge, information
and belief of the Sellers, threatened against the Company or any of its
Subsidiaries or any of their respective directors, officers or stockholders (a)
with respect to this Agreement or the transactions contemplated hereby or
arising out of the actions required or permitted to be taken by any of them
pursuant to this Agreement, or (b) against or affecting either Seller or any of
the Subsidiaries or any of their properties or rights which, if adversely
determined, would be reasonably likely to have a Material Adverse Effect.
Section 8.6 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any governmental or regulatory authority
necessary to permit Omnicom, the Purchaser and the Sellers to perform their
obligations under this Agreement and to consummate the transactions contemplated
hereby shall have been duly obtained, made or given and shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any governmental or regulatory authority necessary for the consummation of the
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transactions contemplated by this Agreement, including under the HSR Act, shall
have occurred.
Section 8.7 Registration Statement; New York Stock Exchange Listing. The
Registration Statement shall have been declared effective by the SEC and on the
Closing Date shall remain effective and shall not be subject to a stop order or
any threatened stop orders. All necessary state securities and blue sky
authorizations required to carry out the transactions contemplated by this
Agreement shall have been obtained. The Omnicom Stock issuable in connection
with this Agreement shall have been duly listed on the New York Stock Exchange,
subject only to official notice of issuance.
Section 8.8 Company Stockholder Approval. The special meeting of
stockholders of the Company shall have been duly held and at such meeting the
requisite affirmative vote of the Company stockholders shall have been recorded
to authorize and to approve the transactions contemplated hereby in accordance
with applicable provisions of Delaware law, including the matters set forth in
Section 5.10 hereof and such other matters presented to the Stockholders for
approval.
Section 8.9 Required Approvals, Notices and Consents. The Sellers shall
have obtained or given, as the case may be, at no expense to Omnicom or the
Purchaser and there shall not have been withdrawn or modified any notices,
consents, approvals or other actions listed on Schedule 3.24 hereof (except as
otherwise contemplated by Section 3.24). Each such consent shall be in form
reasonably satisfactory to counsel for Omnicom and the Purchaser.
Section 8.10 Pooling of Interests Accounting. The SEC shall not have
objected to Omnicom's treatment of the purchase of the Assets as a
pooling-of-interests for accounting purposes. Omnicom shall have received a
letter from each of Coopers & Lybrand LLP and Arthur Andersen LLP substantially
in the forms of Exhibit D and Exhibit E hereto, respectively, confirming that
the Company and the Purchaser are poolable entities as provided in APB No. 16.
Section 8.11 Opinion of Counsel. Omnicom and the Purchaser shall have
received the opinion of Simpson Thacher & Bartlett, special counsel to the
Sellers, dated the Closing Date, substantially in the form and to the effect of
Exhibit C hereto.
Section 8.12 Escrow Agreements. The Sellers and the Escrow Agent shall have
entered into the Escrow Agreement.
Section 8.13 Employment Agreements. The Purchaser and/or one of its
affiliates and each of Steve Hancock, Adelaide Horton, Robert Kuperman, Ira
Matathia, Tom Patty and Robert Wolf shall have entered into an employment
agreement, each in a form previously approved by such party and the Purchaser.
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Section 8.14 Non-Competition Agreements. Each of Leland Clow, Steve
Hancock, Adelaide Horton, Robert Kuperman, Ira Matathia, Tom Patty and Robert
Wolf shall have entered into a non-competition agreement in substantially the
form of Exhibit F hereto; and Jay Chiat shall have entered into a
non-competition agreement substantially in the form of Exhibit G hereto.
Section 8.15 Employment/Consulting Agreements. Jay Chiat shall have entered
into the Chiat Consulting Agreement and Leland Clow shall have entered into the
Clow Employment Agreement and each shall have agreed to the assumption thereof
by the Purchaser; and the Sellers shall have delivered to Omnicom and the
Purchaser a certificate dated the Closing Date to the effect that the Chiat
Consulting Agreement and the Clow Employment Agreement are in full force and
effect, that Jay Chiat and Leland Clow are full-time employees of the Company,
and no party to either such agreement has declared or threatened to declare, nor
has any basis to declare the other party thereto in default thereunder. In
addition, Jay Chiat and Leland Clow shall have each delivered to the Purchaser
his written consent that the term "Group" as used in Section 7(a) of the Chiat
Consulting Agreement and Clow Employment Agreement, as the case may be, shall on
and after the Closing Date mean all companies operating within the combined
Chiat/Day and TBWA International network.
Section 8.16 Loss of Client Account. Advertising shall not have ceased to
be or received notice that it will cease to be, (x) the advertising agency in
the United States for the U.S. Nissan and/or Infiniti divisions of Nissan Motor
Corp., or (y) the advertising agency for two or more of the following accounts:
Eveready, Home Savings, NYNEX, Midland Bank, NY Life or Shoppers Drug Mart;
provided, however, that the Sellers shall have been deemed to satisfy the
condition under clause (y) in the event that Advertising replaces the lost
account with an account of similar size (measured by revenues).
Section 8.17 Affiliates Representation Letters. Each of the Company
Affiliates shall have executed and delivered to Omnicom the affiliates
representation letter referred to in Section 7.2.
Section 8.18 EAR and EPU Holders. Holders of EARs and EPUs who own in the
aggregate at least 83% of the outstanding EARs and EPUs on the Closing Date,
which group must include each holder of EARs or EPUs who is also a Stockholder
of the Company, shall have executed and delivered to the Company written consent
to the actions described in Section 2.7, substantially in the form of Exhibit H
hereto. The Company shall have delivered a copy of all such Consent Letters to
Omnicom.
Section 8.19 Closing of Profit Sharing Plan Purchase Agreement. The
transactions contemplated by the Profit Sharing Plan Purchase Agreement shall
have been completed.
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Section 8.20 Repayment of Indebtedness. The Company shall have made
adequate arrangements so that within 90 days after Closing, all indebtedness of
directors, officers and employees of the Company or any Subsidiary to the
Company or any Subsidiary shall have been repaid in full, other than routine
travel and expense advances or relocation allowances or other loans to
employees, in each case made (x) in the ordinary course of business, (y) within
the prior 90 days, and (z) consistent in amount with past practice and
individually not exceeding $5,000, and the Sellers shall have delivered to
Omnicom and the Purchaser a certificate, dated the Closing Date, to such effect.
Section 8.21 Material Adverse Effect. Except for the execution and delivery
of this Agreement and the transactions required or permitted to take place
pursuant hereto on or prior to the Closing Date, since the Execution Date there
shall not have occurred any Material Adverse Effect, or any event or development
which, individually or together with such events, could reasonably be expected
to result in a Material Adverse Effect. Without limiting the generality of the
foregoing, the Purchaser shall have received reasonable assurances and financial
data to demonstrate that (i) if the Closing is on or prior to August 31, 1995,
EBIT for the nine months ended July 31, 1995 is $7,500,000 and EBIT for the
Company's fiscal year ending October 31, 1995 is reasonably expected to exceed
$13,500,000; and (ii) if the Closing is on or after November 1, 1995, EBIT for
the Company's fiscal year ended October 31, 1995 is $13,500,000.
Section 8.22 Proceedings. All proceedings to be taken on the part of the
Sellers in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Omnicom and the Purchaser, and Omnicom and the Purchaser shall have
received copies of all such documents and other evidences as Omnicom and the
Purchaser may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
Section 8.23 Financial Transactions. Each of the transactions required
under Section 7.5(ii) and (iii) shall have been consummated.
Section 8.24 Deposit and Pledge Agreement. The Sellers and the deposit
agent shall have entered into a deposit and pledge agreement in a form
previously approved by such parties and the Purchaser (the "Deposit and Pledge
Agreement").
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers hereunder to sell the Assets are subject to
the fulfillment, at or before the Closing, of each of the following conditions
(except with respect to Section 9.8, all or any of which may be waived in whole
or in part by the Sellers in their sole discretion):
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Section 9.1 Representations and Warranties. The representations and
warranties made by Omnicom and the Purchaser in this Agreement, taken as a
whole, shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date, and Omnicom and the Purchaser shall have delivered to the Sellers
a certificate, dated the Closing Date, to such effect.
Section 9.2 Good Standing Certificates. Omnicom shall have delivered to the
Sellers a certificate from the Secretary of State of the State of New York to
the effect that Omnicom is in good standing in such state and a certificate from
the Secretary of State (or comparable official) of each state in which it is
qualified to do business, to the effect that it is in good standing in such
jurisdiction. The Purchaser shall have delivered to the Sellers a certificate
from the Secretary of State of the State of Delaware to the effect that the
Purchaser is in good standing in such state and a certificate from the Secretary
of State (or comparable official) of each state in which it is qualified to do
business to the effect that it is in good standing in such jurisdiction.
Section 9.3 Performance. Omnicom and the Purchaser shall have performed and
complied with the agreements, covenants and obligations required by this
Agreement to be so performed or complied with by Omnicom and the Purchaser at or
before the Closing (it being agreed that the Sellers shall not be required to
close either the Company Asset sale or the Advertising Asset sale unless both
such Asset sales are simultaneously closed), including without limitation, the
execution and delivery of the assumption documents referred to in Section
2.2(c), and Omnicom and the Purchaser shall have delivered to the Sellers a
certificate, dated the Closing Date, to such effect.
Section 9.4 Certified Resolutions. Omnicom and the Purchaser shall have
delivered to the Sellers a copy of the resolutions of the boards of directors of
each of Omnicom and the Purchaser authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated hereby,
certified to by the secretary or assistant secretary of Omnicom and the
Purchaser, respectively.
Section 9.5 No Litigation. There shall not be pending any litigation,
proceeding, investigation, review, arbitration or claim by governmental
representatives or authorities, and no preliminary or permanent injunction or
other order shall have been issued to restrain or invalidate the consummation by
Omnicom or the Purchaser of this Agreement and the transactions contemplated
hereby, and Omnicom and the Purchaser shall have delivered to the Sellers a
certificate, dated the Closing Date, to such effect. No material litigation
shall be pending or threatened against the Company or any of its Subsidiaries or
any of their respective directors, officers or stockholders arising out of the
actions required or permitted to be taken by any of them pursuant to this
Agreement.
Section 9.6 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any governmental or regulatory authority
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necessary to permit the Sellers, Omnicom and the Purchaser to perform their
obligations under this Agreement and to consummate the transactions contemplated
hereby shall have been duly obtained, made or given and shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any governmental or regulatory authority necessary for the consummation of the
transactions contemplated by this Agreement, including under the HSR Act, shall
have occurred.
Section 9.7 Registration Statement, New York Stock Exchange Listing. The
Registration Statement shall have been declared effective by the SEC and on the
Closing Date shall remain effective and shall not be subject to a stop order or
any threatened stop orders. All material necessary state securities and blue sky
authorizations required to carry out the transactions contemplated by this
Agreement shall have been obtained. The Omnicom Stock issuable in connection
with this Agreement shall have been duly listed on the New York Stock Exchange,
subject only to official notice of issuance.
Section 9.8 Company Stockholder Approval. The special meeting of
stockholders of the Company shall have been duly held and at such meeting the
requisite affirmative vote of the Company stockholders shall have been recorded
to authorize and to approve the transactions contemplated hereby in accordance
with applicable provisions of Delaware law, including, without limitation, the
matters set forth in Section 5.10 hereof and such other matters presented to the
Stockholders for approval.
Section 9.9 Opinion of Counsel. The Sellers shall have received the opinion
of Davis & Gilbert, counsel to Omnicom and the Purchaser, dated the Closing
Date, substantially in the form and to the effect of Exhibit I hereto.
Section 9.10 Employment Agreements. The Purchaser and/or one of its
affiliates, and each of Steve Hancock, Adelaide Horton, Robert Kuperman, Ira
Matathia, Tom Patty and Robert Wolf shall have entered into an employment
agreement, each in a form previously approved by such party and the Purchaser.
Section 9.11 Employment/Consulting Agreements. The Purchaser shall have
validly assumed each of the Chiat Consulting Agreement and the Clow Employment
Agreement pursuant to an assumption agreement in a form previously approved by
the Company and Omnicom, and the Chiat Consulting Agreement shall have been
validly assigned by the Purchaser to Omnicom.
Section 9.12 Increased Revenues of the Sellers. The Annualized Revenues of
the Company and its Subsidiaries shall not be greater than $100,000,000 and EBIT
for the Company's fiscal year ending October 31, 1995 shall not be reasonably
expected to be greater than $17,200,000.
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Section 9.13 Proceedings. All proceedings to be taken on the part of
Omnicom and the Purchaser in connection with the transactions contemplated by
this Agreement and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Sellers, and the Sellers shall have
received copies of all such documents and other evidences as the Sellers may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
Section 9.14 Financial Transactions. Each of the transactions required
under Section 7.5(i) shall have been consummated.
Section 9.15 Incentive Agreement. The Purchaser shall have validly assumed
the Richard Sittig incentive agreement referred to on Schedule 3.8.
Section 9.16 Escrow Agreement. The Purchaser and the Escrow Agent shall
have entered into the Escrow Agreement.
Section 9.17 Closing of Profit Sharing Plan Purchase Agreement. The
transactions contemplated by the Profit Sharing Plan Purchase Agreement shall
have been completed.
Section 9.18 Material Adverse Effect. Since the Execution Date there shall
not have occurred any material adverse change, or any event or development
which, individually or together with such events, could reasonably be expected
to result in a material adverse change, on the financial condition, results of
operations, assets, properties or businesses of Omnicom and its subsidiaries
taken as a whole, and Omnicom shall have delivered to the Sellers a certificate,
dated the Closing Date, to such effect.
ARTICLE X
ADDITIONAL AGREEMENTS
Section 10.1 Change of Name of Sellers. At the Closing, (i) the Company
shall execute appropriate documents to change its corporate name to a name not
including the "Chiat/Day" designation, or any variation thereof, and promptly
thereafter shall file such documents with the Secretary of State of the State of
Delaware and each other jurisdiction in which it is qualified to do business,
(ii) Advertising shall execute appropriate documents to change its corporate
name to a name not including the "Chiat/Day designation, or any variation
thereof, and promptly thereafter shall file such documents with the Secretary of
State of the State of Delaware and each other jurisdiction in which it is
qualified to do business, and (iii) each Inactive Subsidiary shall execute
appropriate documents to change its corporate name to a name not including the
"Chiat/Day" designation, or any variation thereof, and promptly thereafter shall
file such documents with the appropriate governmental authorities of the
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jurisdiction of its incorporation and each other jurisdiction in which it is
qualified to do business.
Section 10.2 Change of Name of TBWA Advertising Inc. It is expressly agreed
that, effective upon the Closing, the Purchaser and its affiliates shall have
full and exclusive ownership of the corporate name and trade name "Chiat/Day"
and shall have the right to use such corporate name and trade name anywhere in
the world, and as promptly as practicable after the Closing, Omnicom will cause
the companies operating as part of the TBWA International network in North
America who currently include the designation "TBWA" as part of their corporate
names, to change their corporate names to include the designation "TBWA
Chiat/Day" by filing appropriate documents with the appropriate governmental
authorities. Each of Omnicom and the Purchaser agrees that until December 31,
1998, without the consent of the Company (or after its dissolution, the
Liquidating Trustee), it will not authorize the deletion of the "Chiat/Day"
designation from the corporate name of any such entity. Nothing contained herein
shall require Omnicom or the Purchaser to cause any company operating within the
TBWA International network outside of North America to include the "Chiat/Day"
designation in its corporate name or trade name.
Section 10.3 Allocation of Purchase Price. The Sellers, Omnicom and the
Purchaser agree that the Purchase Price shall be allocated in accordance with
Section 1060 of the Code, as set forth on an allocation schedule (the "Purchase
Price Allocation") to be agreed by the Sellers, Omnicom and the Purchaser prior
to the Closing Date; provided, however, that the Purchaser at its sole expense
may obtain an appraisal of the tangible assets including leasehold improvements
of the Sellers from an independent appraiser of recognized standing, which
appraisal shall be used for purposes of allocating the Purchase Price to such
tangible assets. The Sellers, Omnicom and the Purchaser agree that they shall
report the allocation of the Purchase Price in a manner entirely consistent with
Purchase Price Allocation in all tax returns and forms (including without
limitation, Forms 8594 filed with Omnicom's or the Purchaser's and the Company's
respective federal income tax returns for the taxable year that includes the
Closing Date) and in the course of any tax audit, tax review or tax litigation
relating thereto unless otherwise required under applicable law. The Sellers,
Omnicom and the Purchaser shall cooperate with each other to prepare the Forms
8594 in the manner required by this Section 10.3. The Sellers, Omnicom and the
Purchaser shall each deliver to the other a copy of the Form 8594 it files with
its respective federal income tax return.
Section 10.4 Future Tax Returns. The Sellers, Omnicom and the Purchaser
will report the transactions contemplated by this Agreement as a taxable
purchase of the Assets of each of the Company and Advertising for federal,
state, local and foreign income tax purposes and will not take any federal,
state, local or foreign tax reporting position which is inconsistent with the
treatment of such transactions as taxable for federal income tax purposes unless
otherwise required under applicable law. The Sellers will deliver to Omnicom all
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federal, state, local, and foreign tax returns which will be filed by either of
the Sellers with respect to the taxable year of the Sellers beginning November
1, 1994, 10 days prior to the filing of any such returns with any taxing
authority. Each return shall be in final form as it will be filed with the
respective taxing authority. The Sellers, Omnicom and the Purchaser agree to
cooperate fully in connection with any audit of any tax return filed by the
Sellers, Omnicom or the Purchaser reporting the transactions contemplated by
this Agreement (or administrative or judicial proceedings resulting therefrom),
including without limitation the furnishing or making available of records,
books of account, or personnel reasonably required in connection with such audit
or proceeding. Each party shall bear its own out-of-pocket costs incurred in
furnishing such cooperation.
Section 10.5 Tax Elections. If requested by Omnicom, the Company agrees to
join with Omnicom in an election under ss.338(h)(10) of the Code with respect to
the Purchaser's acquisition of the stock of any Subsidiary. If so requested, the
Company shall deliver to Omnicom a duly executed and completed Internal Revenue
Service Form 8023 and similar forms under applicable state and local tax law
with respect to each such sale no later than 60 days prior to the date each such
Form is required to be filed.
Section 10.6 Canadian Elections. Advertising and the Purchaser agree to
elect jointly in prescribed form pursuant to Section 167 of the Excise Tax Act
(Canada) so that no goods and services tax is payable by the Purchaser in
respect of the purchase of any Advertising Assets located in Canada. Advertising
and the Purchaser agree to elect jointly in prescribed form pursuant to section
22 of the Income Tax Act (Canada) and the corresponding provisions of any other
provincial tax legislation in respect of the amount of the consideration
allocated to the accounts receivable attributable to the Canadian business
operations of Advertising transferred to the Purchaser pursuant to this
Agreement. Advertising agrees to deliver to the Purchaser on or before the
Closing Date a certificate issued by the Minister of National Revenue under
subsection 116(2) of the Income Tax Act (Canada) specifying a certificate limit
not less than the Purchase Price allocated to the Advertising Assets located in
Canada. Advertising agrees to deliver a certificate under Section 6 of the
Retail Sales Tax Act (Ontario) issued by the Minister of Finance that all taxes
payable or collectable by Advertising under that Act have been paid or are
otherwise satisfactorily secured.
Section 10.7 Dispute Resolution. In the event of a disagreement with
respect to Sections 8.16, the last sentence of Section 8.21, or Section 9.12,
the items in dispute shall be submitted to the New York City office of KPMG Peat
Marwick, and if they refuse or are otherwise unable to serve, the New York City
office of Deloitte & Touche (the "Arbitrator"), and the determination of the
Arbitrator shall become final and conclusive upon the parties hereto and
enforceable in a court of law. The Arbitrator shall consider only the items in
dispute and shall be instructed to act within ten days to resolve all items in
dispute. The Arbitrator shall determine the party (i.e. Omnicom and the
Purchaser, on the one hand, or the Sellers, on the other hand, as the case may
be) whose asserted positions before the Arbitrator are in the aggregate further
from the aggregate resolutions determined by the Arbitrator, which
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non-prevailing party shall pay the fees and expenses of the Arbitrator. Any such
fees and expenses borne by the Sellers shall be deemed to be Transaction Costs.
Section 10.8 Termination. This Agreement may be terminated and the sale of
Assets and other transactions contemplated herein may be abandoned at any time
prior to the Closing, notwithstanding the adoption of this Agreement by the
stockholders of the Company by:
(a) mutual consent of the Boards of Directors of each of the Sellers,
Omnicom and the Purchaser;
(b) either Omnicom and the Purchaser, on the one hand, or the Sellers, on
the other hand, (provided the terminating party is not then in breach hereof) if
the other party breaches its representations, warranties or covenants hereunder
in any material respect and such breach is not cured within 30 days after the
delivery of written notice thereof to such breaching party unless the breach of
any such representation, warranty, or covenant does not materially adversely
affect the business or assets of the breaching party or the ability of any or
all parties to consummate the transactions contemplated hereby;
(c) the Boards of Directors of either Omnicom and the Purchaser or the
Sellers in the event a final and nonappealable order, decree or judgment of any
court, agency, commission or governmental authority is issued or existing
against the parties or any of them or any of their directors which would enjoin
the transactions contemplated hereby; or
(d) either Omnicom and the Purchaser, on the one hand, or the Sellers, on
the other hand, if the Closing Date has not occurred prior to the close of
business on December 31, 1995; or
(e) either Omnicom and the Purchaser, on the one hand, or the Sellers, on
the other hand, at any time after October 31, 1995 if the conditions to such
parties' obligation to close set forth in Article VIII or IX, respectively,
shall have become incapable of being satisfied by the close of business on
December 31, 1995.
Section 10.9 Effect of Termination. If this Agreement is terminated as
provided in Section 10.8 hereof, this Agreement (except as otherwise herein
provided) shall forthwith become void and there shall be no liability on the
part of any party hereto or its respective officers or directors arising from
the act of such permitted termination. Nothing herein shall preclude, however,
any action or claim for damages to which any party is otherwise entitled as a
result of breach by the other party hereto.
Section 10.10Bulk Transfer Laws. The parties hereto agree that they will
comply with the provisions of Section 1141(c) of the New York State Sales and
Use Tax Law and the provisions of Sections 6811 and 6812 of the California Sales
and Use Tax Law.
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Section 10.11No Merger. Before or after the Closing, neither the Company
nor Advertising will take any action to merge or liquidate Advertising into the
Company.
Section 10.12 Transfer Tax Compliance. (a) The Sellers and the Purchaser
shall comply with Article 31-B of the New York State Tax Law (the "Gains Tax"),
relating to the New York State Real Property Transfer Gains Tax, Section 14.15
of the New York State Tax Law relating to the New York State Real Property
Transfer Tax and Chapter 21, Title 11 of the Administrative Code of the City of
New York relating the New York City Real Property Transfer Tax and any similar
taxes of other applicable jurisdictions (all such taxes collectively, the
"Transfer Taxes"). For such purposes, the Sellers, Omnicom and the Purchaser
agree that the leasehold interests of the Sellers have no value and that no
portion of the Purchase Price is allocable thereto.
(b) If transferor and transferee questionnaires are required for compliance
with the Gains Tax, the Sellers and the Purchaser shall promptly complete and
execute such questionnaires, and the Sellers shall cause the questionnaires to
be filed with the New York State Department of Taxation not later than twenty
days prior to the Closing Date. Any similar pre-Closing filing required under
the laws of any other applicable jurisdiction shall be made not later than the
due date therefor.
(c) At the Closing, the Sellers shall deliver and cause to be filed all
returns required to be filed in connection with the Transfer Taxes.
Section 10.13 Indebtedness to the Purchaser. At the Closing, the Purchaser
will assume any indebtedness owing by the Company or Advertising to the
Purchaser. Any such indebtedness shall be deemed discharged immediately after
the Closing.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
Section 11.1 Survival. Subject to the limitations set forth in Sections
11.3 and 11.4 hereof, the respective representations, warranties, covenants and
agreements of the Sellers, Omnicom and the Purchaser contained in this Agreement
or in any Schedule, or in any certificate delivered at the Closing, shall
survive the Closing. Notwithstanding any right of any party hereto fully to
investigate the affairs of any other party, and notwithstanding any knowledge of
facts determined or determinable pursuant to such investigation or right of
investigation, each party hereto shall have the right to rely fully upon the
representations, warranties, covenants and agreements of any other party
contained in this Agreement or in any Schedule furnished by another party or in
any certificate delivered at the Closing by any other party.
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Section 11.2 Obligation of the Company to Indemnify. Subject to the
limitations set forth in Sections 11.3 and 11.4 hereof, the Company agrees to
indemnify the Purchaser and its affiliates, directors, officers and employees
(collectively the "Indemnified Parties") against, and to protect, save and keep
harmless the Indemnified Parties from, and to assume liability for, payment of
all liabilities (including liabilities for Taxes), obligations, losses, damages,
penalties, claims, actions, suits, judgments, settlements, out-of-pocket costs,
expenses and disbursements (including reasonable costs of investigation, and
reasonable attorneys', accountants' and expert witnesses' fees, whether or not
suit is brought) of whatever kind and nature, to the extent not covered by
insurance which the applicable Indemnified Parties will be entitled to obtain
the benefits of (collectively, "Losses"), that may be imposed on or incurred by
the Indemnified Parties as a consequence of or in connection with (i) any
inaccuracy or breach of any representation or warranty or covenant of either
Seller contained in or made pursuant to this Agreement, other than any
inaccuracy or breach with respect to the last sentence of Section 3.8; (ii) the
breach of or failure by either Seller to perform or discharge any of its
obligations under this Agreement or under the transactions contemplated hereby;
(iii) the assertion by any third party of any claim or cause of action relating
to any liability of either Seller not assumed by the Purchaser pursuant to this
Agreement; or (iv) any inaccuracy in or breach of the representation or warranty
contained in the last sentence of Section 3.28 hereof. The term "Losses" as used
herein is not limited to matters asserted by third parties against an
Indemnified Party but includes Losses incurred or sustained by an Indemnified
Party in the absence of third party claims.
Section 11.3 Indemnification Procedures.
11.3.1 Notice of Asserted Liability. The Purchaser shall promptly give
notice (the "Claims Notice") to the Company of any demand, claim or
circumstances which gives rise, or with the lapse of time would or might give
rise to a claim or the commencement (or threatened commencement) of any action,
proceeding or investigation that may result in any Losses (an "Asserted
Liability") without regard to the limitations on indemnification set forth in
Section 11.4 below. The Claims Notice shall describe the Asserted Liability in
reasonable detail, shall indicate the amount (estimated if necessary, and to the
extent feasible) of the Losses that have been or may be suffered by an
Indemnified Party.
11.3.2 Defense of Asserted Liability. If the facts giving rise to the claim
for indemnification shall involve any actual or threatened claim or demand by
any third party against any Indemnified Party or by an Indemnified Party against
any third party (a "Third Party Claim"), the Purchaser shall have the right to
defend or prosecute such Third Party Claim through counsel of the Purchaser's
own choosing.
11.3.3 Cooperation. The Sellers shall cooperate in the defense or
prosecution of any such claim or defense and furnish such records, information
and testimony and attend such conferences, discovery proceedings, hearings,
trials, and appeals as may be reasonably requested in connection therewith. The
Sellers shall be entitled to participate in the defense or prosecution of any
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such claim, demand or litigation at their own expense and through counsel of
their own choosing, but control thereof shall remain with the Purchaser. The
Purchaser shall cooperate in such defense or prosecution to the same extent as
the Sellers are obligated to cooperate under this Section 11.3.3.
11.3.4 Settlements. The Company will not be subject to any liability for
any settlement made without its consent (but such consent shall not be
unreasonably withheld or delayed).
Section 11.4 Limitations on Indemnification.
11.4.1 Indemnity Cushion. Except as provided in the next sentence, no
claim, action or other Asserted Liability (other than an Asserted Liability
under Section 3.27 or one of the first two sentences of Section 3.28 hereof)
with respect to Losses arising out of any of the matters referred to under
clauses (i) through (iii) of Section 11.2 may be asserted until such time as
claims, actions or other Asserted Liabilities with respect to Losses arising out
of a matter referred to in clause (i) through (iii) of Section 11.2 shall exceed
$300,000 in the aggregate (in which case the Company shall be liable for all
Losses in excess of $300,000). Losses arising out of any of the matters referred
to under clause (iv) of Section 11.2 shall be reimbursable without regard to the
$300,000 cushion.
11.4.2 Termination of Indemnification Obligations and Other Limitations.
(i) Except as otherwise provided in this Section 11.4.2 (and in
particular the provisions of clause (ii) of Sections 11.4.2), the
obligation of the Company to indemnify shall terminate and be of no further
force and effect on the "Termination Date," which shall be earlier to occur
of (x) the date of the first independent audit report, if any, of the
consolidated financial results of the Purchaser and the Businesses
following the Closing Date or (y) one year from the Closing Date; provided,
however, that (A) claims for Losses arising under clauses (i) through (iii)
of Section 11.2 asserted in writing against the Company on or prior to the
Termination Date shall survive until they are decided and are final and
binding upon the Purchaser and the Company as contemplated by the Escrow
Agreement, and (B) no claim for Losses arising under clauses (i) through
(iii) of Section 11.2 may be asserted after the Termination Date.
(ii) In that the matter identified in clause (iv) of Section 11.2 is
an asset whose collectibility cannot reasonably be assured on the Execution
Date, the limitations set forth in clause (i) of Section 11.4.2 on the
obligations of the Company to indemnify shall not apply with respect to the
matter as to which the Purchaser is entitled to be indemnified under clause
(iv) of Section 11.2. Notwithstanding the foregoing, the obligation of the
Company to indemnify for Losses arising under clause (iv) of Section 11.2
shall terminate and be of no further force and effect on the second
anniversary of the Closing Date; provided, however, that (A) claims for
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Losses arising under clause (iv) of Section 11.2 asserted in writing
against the Company on or prior to the second anniversary of the Closing
Date shall survive until they are decided and are final and binding upon
the parties hereto and (B) no claim for Losses arising under clause (iv) of
Section 11.2 may be asserted after the earlier of (x) the second
anniversary date of the Closing and (y) the date on which payments due
under the Mojo Receivable shall have been fully paid or finally settled.
(iii) The parties agree that the satisfaction of liabilities under the
Escrow Agreement, and the procedures to be followed in respect thereof, are
subject to the specific provision of such Escrow Agreement relating to the
release of the Escrow Funds.
(iv) Except as provided in Section 7.1, the rights of Omnicom and the
Purchaser set forth in this Article XI are exclusive and in lieu of any and
all other rights and remedies under this Agreement with respect to Losses,
and such Losses shall be satisfied solely from the Escrow Funds in
accordance with the provisions of this Article XI and the provisions of the
Escrow Agreement and Omnicom and the Purchaser agree that except as
provided in Section 7.1, none of the Indemnified Parties shall have any
recourse for the payment of any Losses of any kind whatsoever against the
Company or Advertising or their respective affiliates or past, present or
future directors, officers and employees, the Stockholders or the holders
of the EARs and EPUs, nor shall any of such persons be personally liable
for any such Losses, it being expressly understood that the sole remedy of
the Indemnified Parties shall be against the Escrow Funds in accordance
with the Escrow Agreement.
(v) Except as provided in Section 7.1, notwithstanding anything to the
contrary contained in this Agreement or in the Escrow Agreement, (a) any
rights of the Indemnified Parties of indemnification for Losses arising
under clauses (i) through (iii) of Section 11.2 shall be satisfied solely
from the General Escrow Fund, and the Indemnified Parties shall have no
right of indemnity for any such Losses from the Special Escrow Fund and (b)
any rights of the Indemnified Parties of indemnification for Losses arising
under clause (iv) of Section 11.2 shall be satisfied solely from the
Special Escrow Fund, and the Indemnified Parties shall have no right of
indemnity for any such Losses against the General Escrow Fund.
11.4.3 Treatment. Any payments by the Sellers to the Purchaser under this
Article XI (or under the Escrow Agreement) shall be treated by the parties as an
adjustment to Purchase Price.
11.4.4 Tax Effects. A payment due and payable by Sellers hereunder (or
under the Escrow Agreement) with respect to the matters set forth under clauses
(i) through (iii) of Section 11.2 shall be decreased to the extent of any net
actual reduction in Taxes payable by the Purchaser upon its payment of Losses,
determined at an assumed marginal tax rate equal to the highest marginal tax
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rate then in effect for corporate taxpayers in the relevant jurisdiction, and
taking into account the tax consequences to the Purchaser of the receipt of any
payment due and payable by Sellers under this Article XI (or under the Escrow
Agreement).
ARTICLE XII
MISCELLANEOUS
Section 12.1 Expenses. Except as otherwise provided under Section 1.1.3(iv)
hereof, the parties hereto shall pay all of their own expenses relating to the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of their respective counsel and financial advisors.
Section 12.2 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York without reference to its conflict of laws provisions.
Section 12.3 Jurisdiction. Except as provided in Section 10.7 and except
with respect to disputes governed by the Escrow Agreement and required to be
submitted to arbitration thereunder, any judicial proceeding brought against any
of the parties to this Agreement on any dispute arising out of this Agreement or
any matter related hereto shall be brought in the courts of the State of New
York or in the United States District Court for the Southern District of New
York, and, by execution and delivery of this Agreement, each of the parties to
this Agreement accepts for itself the process in any action or proceeding by the
mailing of copies of such process to it, at its address as set forth in Section
12.9. Each party hereto irrevocably waives to the fullest extent permitted by
law any objection that it may now or hereafter have to the laying of the venue
of any judicial proceeding brought in such courts and any claim that any such
judicial proceeding has been brought in an inconvenient forum. The foregoing
consent to jurisdiction shall not constitute general consent to service of
process in the State of New York for any purpose except as provided above and
shall not be deemed to confer rights on any person other than the respective
parties to this Agreement. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDINGS UNDER THIS AGREEMENT. In addition, the Company shall cause
the Trustee of the Liquidating Trust to agree to and be bound by the provisions
of this Section 12.3 by a written instrument addressed to the Purchaser and
executed by such Trustee in connection with any suit, action or proceeding
commenced by the Purchaser whose gravamen is a claim asserted under Article XI.
Section 12.4 "Person" Defined. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof.
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Section 12.5 "Knowledge" Defined. Where any representation and warranty
contained in this Agreement is expressly qualified by reference to knowledge,
information and belief of a party, such party confirms that it has made such due
and diligent inquiry as to the matters that are the subject of such
representations and warranties that shall be reasonable under the circumstances.
Section 12.6 "Affiliate" Defined. As used in this Agreement, an "affiliate"
of any Person, shall mean any Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with such Person.
Section 12.7 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 12.8 Confidentiality. Unless and until the Closing shall have
occurred and except as may be required in connection with (i) any public
announcement that Omnicom, the Purchaser and the Sellers have executed this
Agreement, or (ii) any governmental filings contemplated under this Agreement,
Omnicom, the Purchaser and the Sellers shall, and shall cause their respective
employees, agents, consultants and representatives to, maintain in confidence
and not otherwise use or permit the use of information, documents, and data
respecting any other party to this Agreement furnished to them, or to any person
or entity on their behalf. If this Agreement is terminated pursuant to Section
10.8 hereof or otherwise, each party shall (and Omnicom and the Purchaser shall
cause any third party to whom it has made permitted disclosures to) (i) return
to the other party or destroy all written information, documents, and data
furnished to it or to any person or entity on its behalf, and (ii) maintain in
confidence all information received by it, or by any person or entity on its
behalf, and shall not use or permit the use of such information by others except
to the extent that such information is elsewhere available to the public or
otherwise rightfully obtained without violation of this Section 12.8 or any
other agreement. Notwithstanding the foregoing, the foregoing provision shall
not apply to the extent that Omnicom is required to make any announcement or
file information relating to or arising out of this Agreement by virtue of the
federal securities laws of the United States or the rules and regulations
promulgated thereunder or other rules of the New York Stock Exchange, or any
announcement by any party pursuant to applicable law or regulations.
Section 12.9 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand, (b) three days after the date of
deposit in the mails, postage prepaid, if mailed by certified first class mail,
or (c) the next business day if sent by facsimile transmission (if receipt is
electronically confirmed) or by a prepaid overnight courier service, and in each
case at the respective addresses or numbers set forth below or such other
address or number as such party may have fixed by notice:
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If to either Omnicom or to the Purchaser, addressed to:
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
Fax: (212) 415-3536
with a copy to:
Davis & Gilbert
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian, Esq.
Fax: (212) 468-4888
If to either Advertising or to the Company, addressed to:
Chiat/Day Holdings, Inc.
180 Maiden Lane
New York, New York 10038
Attention: Chief Financial Officer
Fax: (212) 804-1200
(or following the dissolution of the Company, to the Trustee of the Liquidating
Trust at such address as the Company shall provide to Omnicom and the Purchaser)
with a copy in either case to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: James M. Cotter, Esq.
Fax: (212) 455-2502
Section 12.10 Parties in Interest. This Agreement and the rights and
obligations of the parties hereunder shall not be assignable to any Person
without the written consent of all parties, except that, without the Sellers'
consent, the Purchaser may direct either Seller to assign or transfer at the
Closing (or subsequent to the Closing the Purchaser may transfer) all or any
portion of the Assets and/or Assumed Liabilities to one or more of its
subsidiaries. Such assignment or transfer shall not relieve the Purchaser of its
obligations or diminish its rights hereunder. Subsequent to the Closing all
rights of the Company hereunder shall be assignable by it to its stockholders
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pro rata, and/or to the Liquidating Trust created for the benefit of the
Stockholders, upon the liquidation of the Company and all rights of Advertising
hereunder shall be assignable by it to the Company, its stockholder.
Section 12.11 Severability. In the event any provision of this Agreement is
found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
Section 12.12 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
Section 12.13 Entire Agreement. This Agreement, including the Annexes,
Schedules and Exhibits, and other documents referred to herein which form a part
hereof, contains the entire understanding of the parties hereto with respect to
the subject matter contained herein and therein. This Agreement supersedes all
prior oral and written agreements and understandings between the parties with
respect to such subject matter.
Section 12.14 Amendment. This Agreement and the Annexes and Schedules
attached hereto or heretofore delivered may be amended, supplemented or modified
by the parties hereto only by an agreement in writing signed on behalf of each
of the parties hereto following due authorization at any time.
Section 12.15 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto and their respective
successors and assigns as permitted under Section 12.10.
Section 12.16 Extension; Waiver. The Sellers, on the one hand, and Omnicom
(on behalf of itself and the Purchaser), on the other hand, each may, by
instrument duly authorized in writing signed on behalf of each party, (a) extend
the time for performance of any of the obligations or other acts of such other
party, (b) waive any inaccuracies in the representations and warranties of such
other party contained herein or in any document delivered pursuant hereto, or
(c) except as set forth in the first paragraph of each of Articles VIII and IX,
waive compliance with any of the agreements or conditions of such other party
contained herein. No such waiver or extension shall be effective unless in
writing (and specifically describing the provision or provisions being waived)
and signed by the party or parties sought to be bound thereby, and any such
waiver or extension on a specific occasion shall not imply a waiver or extension
on a future occasion.
Section 12.17 Exchange Rate. Where a Section of this Agreement provides
amounts in U.S. dollars for purposes of determining the disclosure required to
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be made hereunder, it is understood that the equivalent amounts in foreign
currencies shall be calculated in accordance with GAAP.
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IN WITNESS WHEREOF, Omnicom, the Purchaser, the Company and Advertising
have each caused its corporate name to be hereunto subscribed by its officer
thereunto duly authorized on the day and year first above written.
OMNICOM GROUP INC.
By: /s/ Fred Meyer
----------------------------
Name: Fred Meyer
Title: Chief Financial Officer
TBWA INTERNATIONAL INC.
By: /s/ William G. Tragos
---------------------------
Name: William G. Tragos
Title: Chief Executive Officer
CHIAT/DAY HOLDINGS, INC.
By: /s/ Jay Chiat
--------------------------
Name: Jay Chiat
Title: President and Chief
Executive Officer
CHIAT/DAY INC. ADVERTISING
By: /s/ Jay Chiat
--------------------------
Name: Jay Chiat
Title: President and Chief
Executive Officer
68
CHIAT/DAY HOLDINGS, INC.
PLAN OF COMPLETE LIQUIDATION
1. Plan of Liquidation; Closing of Transfer Books.
(a) After (i) the adoption of this Plan, (ii) the consummation of the asset
sales contemplated in that certain Asset Purchase Agreement dated
______________, 1995 among the Corporation, Chiat/Day inc. Advertising, a
Delaware corporation ("Advertising"), Omnicom Group Inc., a New York corporation
("Omnicom") and TBWA International Inc., a Delaware corporation ("TBWA") (as the
same may be amended, supplemented or otherwise modified from time to time, the
"Purchase Agreement"), and (iii) the occurrence of the Distribution Date,
CHIAT/DAY HOLDINGS, INC., a Delaware corporation (the "Corporation"), after
deposits are made into the Liquidating Trust (as defined below) and the escrows
described in paragraph 3(a) below on behalf of the Stockholders, will distribute
to its stockholders, in accordance with paragraph 4 hereof, its properties and
assets of every description, which at that time will consist entirely of shares
of common stock, par value $.50 per share, of Omnicom, received by the
Corporation (exclusive of the Contributed Stock (as defined in the Purchase
Agreement)) pursuant to the terms of the Purchase Agreement (the "Omnicom
Shares"). Capitalized terms used herein and not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
At such time, the Corporation will also cause Advertising to distribute to
the Rightsholders (as defined
<PAGE>
herein), in accordance with paragraph 5 hereof, after deposits are made
into the escrows described in paragraphs 3(b) and 3(c) below on behalf of the
Rightsholders, the Omnicom Shares received by Advertising (inclusive of the
Contributed Stock) pursuant to the Purchase Agreement; provided, that such
distribution is conditional upon and in consideration of the funding of such
escrows on behalf of the Rightsholders.
(b) On the Closing Date under the Purchase Agreement (on or immediately
following which date the Corporation shall file a Certificate of Dissolution in
accordance with the laws of the State of Delaware), the Corporation shall close
its transfer books and no transfers of Class A or Class B Common Stock of the
Corporation shall thereafter be recorded on the transfer books of the
Corporation. Such Closing Date shall be the record date for determining the
Stockholders entitled to receive any distributions described herein in respect
of the Common Stock of the Corporation.
2. Liquidating Trust.
(a) Following the Closing under the Purchase Agreement, the Corporation
shall cause to be created a liquidating trust (the "Liquidating Trust") for and
on behalf of the Class A and Class B stockholders (collectively, the
"Stockholders") of the Corporation, all pursuant to a Liquidating Trust
Agreement (the "Liquidating Trust Agreement") substantially in the form attached
hereto as Annex I. The trustees of the Liquidating Trust shall be Thomas Patty
and David C. Wiener (collectively, the "Liquidating Trustee"). Upon adoption of
this
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Plan by the Stockholders and the creation of the Liquidating Trust, the
Liquidating Trustee will be authorized (i) to receive on behalf of the
Stockholders liquidating distributions (other than the distribution described in
paragraph 4 hereof) from the Corporation, (ii) to act as the agent of the
Stockholders in connection with the administration of the Omnicom
Indemnification Escrow Agreement (and the provisions of the Purchase Agreement
relating thereto) and the Liquidating Trust Escrow Agreement (each as defined
below), (iii) to respond to the assertion of claims under, and/or to make claims
under, such escrow agreements and (iv) to complete the winding up of the affairs
of the Corporation and the payment of certain liabilities not assumed by the
Purchaser under the Purchase Agreement from the assets of the Liquidating Trust.
(b) On the Distribution Date (as defined in the Purchase Agreement), 5% of
the Omnicom Shares paid to the Corporation pursuant to Section 2.1 of the
Purchase Agreement (exclusive of the Contributed Stock) will be deposited into
the Liquidating Trust on behalf of the Stockholders. Such Omnicom Shares (and
any other Omnicom Shares received by the Liquidating Trustee from time to time)
will be sold by the Liquidating Trustee (in accordance with the Liquidating
Trust Agreement) and the net cash proceeds held in the Liquidating Trust on
behalf of the Stockholders for the purpose of liquidating contingent or other
liabilities against the Corporation which may arise in the future (other than
the liabilities assumed by TBWA pursuant to the Purchase Agreement and to the
extent required under Section
3
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281(b) of the Delaware General Corporation Law) and otherwise for
application and distribution in accordance with the terms of the Liquidating
Trust Agreement. Income earned on funds on deposit in the Liquidating Trust and
dividends paid to the Liquidating Trustee, for the benefit of the Stockholders,
in respect of Omnicom Shares on deposit under the Omnicom Indemnification Escrow
Agreement will be distributed from time to time to the Stockholders, pro rata in
accordance with their interests, in accordance with the Liquidating Trust
Agreement.
3. Escrows.
(a) On the Distribution Date, (i) 10% of the Omnicom Shares paid to the
Corporation pursuant to Section 2.1 of the Purchase Agreement (exclusive of the
Contributed Stock) will be deposited with an escrow agent (the "Omnicom
Indemnification Escrow Agent") on behalf of the Stockholders to secure certain
general indemnification obligations of the Corporation to the Purchaser and (ii)
a number of Omnicom Shares having an aggregate Market Value (as determined in
accordance with the Purchase Agreement) of $1,700,000 multiplied by a fraction,
the numerator of which is the number of shares of Class A and Class B Common
Stock outstanding on the Closing Date and the denominator of which is the sum of
the number of shares of Class A and Class B Common Stock and the number of EPUs
and EARs outstanding on the Closing Date, will be deposited with the Omnicom
Indemnification Escrow Agent on behalf of the Stockholders to secure certain
special indemnification obligations of the Corporation to the Purchaser, all
pursuant to an escrow agreement substantially in
4
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the form attached hereto as Annex II (the "Omnicom Indemnification Escrow
Agreement"). From time to time, and upon termination of each such escrow,
Omnicom Shares in such escrow shall be distributed to the Liquidating Trust, for
the benefit of the Stockholders, in accordance with the Omnicom Indemnification
Escrow Agreement. Cash and other taxable dividends on the Omnicom Shares held in
such escrows shall be paid directly to the Liquidating Trustee, for the benefit
of the Stockholders, in accordance with the Omnicom Indemnification Escrow
Agreement.
(b) On the Distribution Date, (i) 10% of the Omnicom Shares paid to
Advertising pursuant to Section 2.1 of the Purchase Agreement (inclusive of the
Contributed Stock) will be deposited with the Omnicom Indemnification Escrow
Agent on behalf of the holders of EARs and EPUs (collectively, the
"Rightsholders") to secure certain general indemnification obligations of the
Corporation to the Purchaser and (ii) a number of Omnicom Shares having an
aggregate Market Value (as determined in accordance with the Purchase Agreement)
of $1,700,000 multiplied by a fraction, the numerator of which is the number of
shares of EPUs and EARs outstanding on the Closing Date and the denominator of
which is the sum of the number of shares of Class A and Class B Common Stock and
the number of EPUs and EARs outstanding on the Closing Date, will be deposited
with the Omnicom Indemnification Escrow Agent on behalf of the Rightsholders to
secure certain special indemnification obligations of the Corporation to the
Purchaser, all pursuant to the Omnicom Indemnification Escrow Agreement. From
time to time,
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and upon termination of each such escrow, Omnicom Shares in such escrow shall be
distributed to the Liquidating Trust Escrow Agent (as defined below), for the
benefit of the Rightsholders, in accordance with the Omnicom Indemnification
Escrow Agreement. Cash and other taxable dividends on the Omnicom Shares held in
such escrows shall be paid directly to the Liquidating Trust Escrow Agent, for
the benefit of the Rightsholders, in accordance with the Omnicom Indemnification
Escrow Agreement.
(c) On the Distribution Date, 5% of the Omnicom Shares paid to Advertising
pursuant to Section 2.1 of the Purchase Agreement (inclusive of the Contributed
Stock) will be deposited with an escrow agent (the "Liquidating Trust Escrow
Agent") on behalf of the Rightsholders to reimburse the Liquidating Trust for
the Rightsholders' pro rata portion of any contingent or other liabilities of
the Corporation which may arise in the future (such escrow, the "Liquidating
Trust Escrow"), all pursuant to an escrow agreement substantially in the form
attached hereto as Annex III (the "Liquidating Trust Escrow Agreement"). The
Liquidating Trust Escrow Agent will also receive distributions of Omnicom Shares
and dividends in respect thereof, for the benefit of the Rightsholders, pursuant
to the Omnicom Indemnification Escrow Agreement. All Omnicom Shares received by
the Liquidating Trust Escrow Agent at any time will be sold and the proceeds
retained in the Liquidating Trust Escrow. From time to time, and upon
termination of the Liquidating Trust Escrow Agreement, funds on deposit in the
Liquidating Trust Escrow will be distributed to Rightsholders,
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pro rata in accordance with their interests, in accordance with the
Liquidating Trust Escrow Agreement. Income earned on funds on deposit in the
Liquidating Trust Escrow and dividends paid to the Liquidating Trust Escrow
Agent, for the benefit of the Rightsholders, in respect of Omnicom Shares on
deposit under the Omnicom Indemnification Escrow Agreement will be distributed
from time to time to the Rightsholders, pro rata in accordance with their
interests, in accordance with the Liquidating Trust Escrow Agreement.
4. Liquidating Distribution to Stockholders.
(a) As soon as practicable after the Liquidating Trust and the escrows
described in the paragraph 3(a) have been established and funded (all of which
is intended to occur on the Distribution Date), the Corporation shall make a
distribution (the "Corporation Distribution") of the remaining Omnicom Shares
paid to the Corporation pursuant to Section 2.1 of the Purchase Agreement
(exclusive of the Contributed Stock) (the "Corporation Distribution Shares")
directly to the Stockholders in accordance with subparagraph (b) hereof,
provided that (i) all creditors of the Corporation (other than the liabilities
assumed by TBWA pursuant to the Purchase Agreement and to the extent required
under Section 281(b) of the Delaware General Corporation Law) shall first be
paid in full for the amount of their claims, (ii) the proceeds of the sale of
the Omnicom Shares deposited in the Liquidating Trust will remain in the
Liquidating Trust pursuant to the terms of the Liquidating Trust Agreement,
(iii) the Omnicom Shares deposited, on behalf of the Stockholders, with the
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Omnicom Indemnification Escrow Agent will remain with such escrow agent
pursuant to the terms of the Omnicom Indemnification Escrow Agreement, (iv) no
fractional Omnicom Shares will be distributed, but rather, cash will be
distributed in an amount equal to the value of any such fractional shares on the
date of such Corporation Distribution and (v) the value of an Omnicom Share will
be calculated in accordance with the Purchase Agreement and the calculation of
such value for purposes of calculation of the Purchase Price (as defined in the
Purchase Agreement).
(b) The distribution of the Corporation Distribution Shares shall be as
follows:
(i) The Corporation Distribution Shares shall be distributed to the
holders of Class A and Class B Common Stock, pro rata in accordance with
their respective holdings, with each share of Class A Common Stock and
Class B Common Stock to be treated equally with respect to such
distribution.
(ii) Dividends paid or payable with respect to the Corporation
Distribution Shares prior to the Corporation Distribution will be retained
by the Corporation and used to satisfy expenses of the Corporation incurred
in connection with the transactions contemplated by this Plan.
The foregoing distributions in complete liquidation shall be in exchange
solely for, and in complete redemption and cancellation of, and in payment for,
all of the outstanding shares of Class A Common Stock and Class B Common Stock
of the Corporation, and the Stockholders shall, if the Board of Directors so
determines, surrender their certificates for such
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shares for recording thereon receipt of distributions prior to the Corporation
Distribution, and shall surrender such certificates for cancellation upon
receipt of the Corporation Distribution herein authorized.
5. Liquidating Distribution to Rightsholders.
(a) As soon as practicable after the escrows described in the paragraphs
3(b) and 3(c) have been established and funded (all of which is intended to
occur on the Distribution Date) and prior to the consummation of the
transactions contemplated by the Advertising Stock Sale Agreement, the
Corporation shall cause Advertising to make a distribution (the "Advertising
Distribution") of the remaining Omnicom Shares paid to Advertising pursuant to
Section 2.1 of the Purchase Agreement (inclusive of the Contributed Stock) (the
"Advertising Distribution Shares") directly to the Rightsholders in accordance
with subparagraph (b) hereof, provided that (i) all creditors of the Corporation
(other than the liabilities assumed by TBWA pursuant to the Purchase Agreement
and to the extent required under Section 281(b) of the Delaware General
Corporation Law) shall first be paid in full for the amount of their claims,
(ii) the Omnicom Shares deposited, on behalf of the Rightsholders, with the
Omnicom Indemnification Escrow Agent and the Liquidating Trust Escrow Agent will
remain with such escrow agents pursuant to the terms of the relevant escrow
agreement, (iii) no fractional Omnicom Shares will be distributed, but rather,
cash will be distributed in an amount equal to the value of any such fractional
shares on the date of such Advertising Distribution
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and (iv) the value of an Omnicom Share will be calculated in accordance
with the Purchase Agreement and the calculation of such value for purposes of
calculation of the Purchase Price (as defined in the Purchase Agreement).
(b) The distribution of the Advertising Distribution Shares shall be as
follows:
(i) The Advertising Distribution Shares shall be distributed to the
holders of EPUs and EARs, pro rata in accordance with their respective
holdings, with each EPU and EAR to be treated equally with respect to such
distribution.
(ii) Dividends paid or payable with respect to the Advertising
Distribution Shares prior to the Advertising Distribution will be retained
by the [Corporation] and used to satisfy expenses of the [Corporation]
incurred in connection with the transactions contemplated by this Plan.
The foregoing distributions in complete liquidation shall be in exchange
solely for, and in complete redemption and cancellation of, and in payment for,
all of the outstanding EPUs and EARs of the Corporation[, and the Rightsholders
shall, if the Board of Directors so determines, surrender their certificates for
such rights for recording thereon receipt of distributions prior to the
Advertising Distribution, and shall surrender such certificates for cancellation
upon receipt of the Advertising Distribution herein authorized.]
6. Sale of Stock of Advertising.
As soon as practicable after the consummation of the distributions
contemplated by Sections 4 and 5 hereof, the Corporation shall
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sell all of the common stock, par value $.01 per share, of Advertising
owned by the Corporation to Adelaide Horton pursuant to a Stock Purchase
Agreement in substantially the form attached hereto as Annex IV (the
"Advertising Stock Sale Agreement"); provided, that pursuant to the Advertising
Stock Sale Agreement, the Corporation shall indemnify the Purchaser thereunder
and Advertising for any Losses (as defined in the Purchase Agreement) arising
out of or in connection with any Retained Advertising Liabilities (as defined in
the Purchase Agreement).
7. Termination of Profit Sharing Plan.
The Corporation shall effect the termination of the Chiat/Day Profit
Sharing Plan and 401(k) Plan (the "Profit Sharing Plan") as of the Closing Date
under the Purchase Agreement and thereupon the trustees of the Profit Sharing
Plan shall distribute the assets of the Profit Sharing Plan to the beneficiaries
thereof in accordance with such plan.
8. Dissolution and Complete Liquidation.
The officers and the Board of Directors of the Corporation shall proceed
with the voluntary dissolution and complete liquidation of the Corporation in
accordance with the laws of the State of Delaware as promptly as practicable
after the adoption of this Plan and the occurrence of the Closing Date under the
Purchase Agreement.
9. Authorization to Execute and File Documents.
The officers of the Corporation are authorized, empowered and directed to
execute and file all documents which they deem necessary or advisable to carry
out the purposes and
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intentions of this Plan, including a Certificate of Dissolution under the
laws of the State of Delaware, and information returns with federal, state and
local tax officials as may be required by the applicable regulations.
10. Authorization of Necessary Acts.
The officers and directors of the Corporation are authorized, empowered and
directed to do any and all other things in the name and on behalf of the
Corporation which each of them may deem necessary or advisable in order to carry
out the purposes and intentions of this Plan. They shall be held harmless by the
Corporation for any action under this Plan taken in good faith, and any expense
or liability so incurred by them shall be that of the Corporation.
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ANNEX I
LIQUIDATING TRUST AGREEMENT
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ANNEX II
OMNICOM INDEMNIFICATION ESCROW AGREEMENT
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ANNEX III
LIQUIDATING TRUST ESCROW AGREEMENT
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ANNEX IV
ADVERTISING STOCK SALE AGREEMENT
16
Exhibit 2.3
ESCROW AGREEMENT
ESCROW AGREEMENT, dated ____________, 1995 (the "Escrow Agreement"), among
CHIAT/DAY inc. ADVERTISING, a Delaware corporation ("Advertising"); CHIAT/DAY
HOLDINGS, INC., a Delaware corporation ("Holdings"); TBWA INTERNATIONAL INC., a
Delaware corporation (the "Purchaser"); and THE CHASE MANHATTAN BANK, N.A. , as
Escrow Agent (the "Escrow Agent").
INTRODUCTION
A. Advertising, Holdings, the Purchaser and Omnicom Group Inc., a New York
corporation ("Omnicom") are parties to a certain Asset Purchase Agreement dated
May 11, 1995 (the "Purchase Agreement"), pursuant to which the Purchaser
acquired assets and liabilities and the ongoing businesses of Advertising and
Holdings. Terms defined in the Purchase Agreement that are not otherwise defined
herein are used herein with the meanings ascribed to them therein; a list of
such terms is attached hereto as Exhibit 1.
B. Under the Purchase Agreement, Holdings and Advertising have made certain
representations and warranties, and undertaken certain obligations, to the
Purchaser, and Holdings has agreed to indemnify the Purchaser against, and hold
the Purchaser harmless from, certain Losses which the Purchaser or other
Indemnified Parties may sustain or to which the Purchaser or other Indemnified
Parties may be subjected (as more fully set forth in the Purchase Agreement).
Pursuant to the Purchase Agreement, Holdings is required to secure the Purchaser
against such Losses by creating a "General Escrow Fund" and a "Special Escrow
Fund" in accordance with the terms of this Agreement. The General Escrow Fund
will consist of two separate and segregated accounts, the "Stockholders General
Escrow Fund" and the "Rightsholders General Escrow Fund"; the Special Escrow
Fund will consist of two separate and segregated accounts, the "Stockholders
Special Escrow Fund" and the "Rightsholders Special Escrow Fund," as follows:
(x) The Stockholders General Escrow Fund will contain deposits
designated for such account made by or on behalf of the Stockholders. The
Rightsholders General Escrow Fund will contain deposits designated for such
account made by or on behalf of the Rightsholders (as defined below). Any
General Claims (as defined in Section 2.1) made by the Purchaser against
the General Escrow Fund shall become reimbursable hereunder only if, and to
the extent that, they become "Final General Claims for Reimbursement", as
defined in Section 2.3 hereof.
<PAGE>
(y) The Stockholders Special Escrow Fund will contain deposits
designated for such account made by or on behalf of the Stockholders. The
Rightsholders Special Escrow Fund will contain deposits designated for such
account made by or on behalf of the Rightsholders. Any claim made by the
Purchaser against the Special Escrow Fund is called a "Purchaser Special
Claim"; any claim made by Holdings against the Special Escrow Fund is
called a "Holdings Special Claim". The Purchaser Special Claim and the
Holdings Special Claim are collectively called the "Special Claims";
however, Special Claims shall become reimbursable hereunder only if, and to
the extent that, they become "Final Special Claims for Reimbursement", as
defined in Section 4.3 hereof.
C. The Purchase Agreement provides that Holdings will liquidate and
dissolve and that, in the course of its expeditious and orderly winding up
process, Holdings shall cause to be created a liquidating trust (hereinafter,
the "Liquidating Trust" and the trustee or trustees thereof the "Liquidating
Trustee") to act as the representative for Holdings and the Stockholders.
Approval of the creation of the Liquidating Trust, as well as the identity of
(or means of selecting) the Liquidating Trustee has been favorably acted upon by
the Stockholders in their adopting, authorizing and approving the plan of
voluntary dissolution. Pursuant to such resolution, the Stockholders have
designated the Liquidating Trustee as their collective agent to act following
the dissolution of Holdings as their agent in connection with the administration
of this Escrow Agreement, including without limitation to amend, cancel or
extend, or waive the terms of this Escrow Agreement; to respond to the assertion
of any and all claims from the Escrow Funds (as hereinafter defined) by the
Purchaser against Holdings pursuant to the terms of this Escrow Agreement and
the provisions of the Purchase Agreement pertaining thereto; to assert any and
all claims against the Special Escrow Funds by Holdings pursuant to the terms of
this Escrow Agreement; to further act as their collective agent under the terms
of the Liquidating Trust; to receive on their behalf the distributions, if any,
that would otherwise be due to them upon the distribution of all or a portion of
the Stockholders General Escrow Fund and the Stockholders Special Escrow Fund;
and to complete the winding up of the affairs of Holdings.
D. There will also be created pursuant to a separate escrow agreement (the
"Liquidating Trust Escrow Agreement"; and the Escrow Agent thereunder, the
"Liquidating Trust Escrow Agent ") a separate and segregated "Liquidating Trust
Escrow Fund" (the "Liquidating Trust Escrow Fund") which shall be available
solely to fund and secure indemnification obligations of holders of EARs and
EPUs (collectively, the "Rightsholders") to the Liquidating Trust in accordance
with the Liquidating Trust Escrow Agreement. The Liquidating Trust Escrow Fund
will contain deposits designated for such fund made by or on behalf of the
Rightsholders. The Liquidating Trust Escrow Fund is expressly not intended to
fund or secure the indemnification obligations of Holdings to the Purchaser or
any other Indemnified Party described in Section 11.2 of the Purchase Agreement
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and none of Omnicom, the Purchaser or any other Indemnified Party shall have any
recourse to the Liquidating Trust Escrow Fund for any purpose whatsoever.
E. The Purchase Agreement further provides that Advertising shall
distribute to the Rightsholders pro rata in accordance with their interests, the
shares of Omnicom Stock received by it pursuant to the Purchase Agreement, less
the shares of Omnicom Stock to be transferred by Advertising to the General
Escrow Fund, to the Special Escrow Fund and to the Liquidating Trust Escrow Fund
on behalf of such Rightsholders. Advertising and the Rightsholders have
designated Holdings (or following the creation and funding of the Liquidating
Trust, the Liquidating Trustee) (such designation by Advertising, for itself and
on behalf of the Rightsholders, being made by its execution of this Escrow
Agreement), as their collective agent in connection with the administration of
the Escrow Agreement, including, without limitation, to amend, cancel or extend,
or waive the terms of this Escrow Agreement; and to respond to the assertion of
any and all claims from the Escrow Funds by the Purchaser against Holdings
pursuant to the terms of this Escrow Agreement and the provisions of the
Purchase Agreement, if any, pertaining thereto; to assert any and all claims
against the Special Escrow Funds by Holdings pursuant to the terms of this
Escrow Agreement. Advertising and the Rightsholders have designated the
Liquidating Trust Escrow Agent (such designation by Advertising, for itself and
on behalf of the Rightsholders, being made by its execution of this Escrow
Agreement) to receive on their behalf the distributions, if any, that would
otherwise be due to them upon the distribution of all or a portion of the
Rightsholders General Escrow Fund and the Rightsholders Special Escrow Fund as
herein provided.
F. References herein to Holdings as to a time following the creation and
funding of the Liquidating Trust shall be deemed to refer to the Liquidating
Trust and/or the Liquidating Trustee, as the context so requires.
Accordingly, the parties hereby agree as follows:
1. ESCROW AGENT; ESCROW FUNDS
1.1 Escrow Agent. The Purchaser and Holdings, on behalf of itself and the
Stockholders, and Advertising on behalf of itself and the Rightsholders, hereby
appoint The Chase Manhattan Bank, N.A. as, and The Chase Manhattan Bank, N.A.
hereby accepts such appointment and agrees to perform the duties of, Escrow
Agent under this Agreement.
1.2 Escrow Funds. The Escrow Agent shall establish and maintain as four
separate and segregated accounts, the Stockholders General Escrow Fund and the
Rightsholders General Escrow Fund (collectively, the "General Escrow Funds"),
and the Stockholders Special Escrow Fund and the Rightsholders Special Escrow
Fund (collectively, the "Special Escrow Funds" and together with the General
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Escrow Funds the "Escrow Funds"). The Escrow Funds shall be held by the Escrow
Agent and shall be dealt with by the Escrow Agent in accordance with the terms
and conditions of this Escrow Agreement. This Escrow Agreement shall terminate
at such time as the entirety of the Escrow Funds shall have been distributed by
the Escrow Agent in accordance with the terms of this Escrow Agreement.
1.2.1. The General Escrow Funds Deposit.
(a) Stockholders General Escrow Fund. Pursuant to the Purchase
Agreement, Holdings shall deposit (or cause to be deposited) on the
"Funding Date" (which shall be the Distribution Date under the
Purchase Agreement) into the Stockholders General Escrow Fund on
behalf of Holdings and the Stockholders, certificates registered in
the name of the Liquidating Trustee representing ________(1) shares of
Common Stock, par value $.50 per share, of Omnicom ("Common Stock"),
together with stock powers duly executed in blank in respect of such
certificates.
(b) Rightsholders General Escrow Fund. Pursuant to the Purchase
Agreement, Advertising shall deposit (or cause to be deposited) on the
Funding Date into the Rightsholders General Escrow Fund on behalf of
Advertising and the Rightsholders, certificates registered in the name
of the Liquidating Trust Escrow Agent representing _________(2) shares
of Common Stock, together with stock powers duly executed in blank in
respect of such certificates.
1.2.2 The Special Escrow Funds Deposit.
(a) Stockholders Special Escrow Fund. Pursuant to the Purchase
Agreement, Holdings shall deposit (or cause to be deposited) on the
Funding Date into the Stockholders Special Escrow Fund on behalf of
Holdings and the Stockholders, certificates registered in the name of
the Liquidating Trustee representing _________(3) shares of Common
Stock, together with stock powers duly executed in blank in respect of
such certificates.
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(1) The Stockholders General Escrow Fund shall consist of 10% of the Omnicom
Stock issued to Holdings under Section 2.1.1(a) of the Purchase Agreement
(exclusive of the Contributed Stock, as defined in the Purchase Agreement).
(2) The Rightsholders General Escrow Fund shall consist of 10% of the Omnicom
Stock issued to Advertising under Section 2.1.1(c) of the Purchase Agreement
(inclusive of the Contributed Stock).
(3) The Stockholders Special Escrow Fund shall consist of shares of Omnicom
Stock having an aggregate Market Value equal to the Stockholders' pro rata share
of $1,700,000.
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(b) Rightsholders Special Escrow Fund. Pursuant to the Purchase
Agreement, Advertising shall deposit (or cause to be deposited) on the
Funding Date into the Rightsholders Special Escrow Fund on behalf of
Advertising and the Rightsholders, certificates registered in the name
of the Liquidating Trust Escrow Agent representing ______________(4)
shares of Common Stock, together with stock powers duly executed in
blank in respect of such certificates.
2. PROCEDURES WITH RESPECT TO GENERAL CLAIMS
2.1 General Claims. If an Indemnified Party has a Claim which arises under
clauses (i) through (iii) of Section 11.2 of the Purchase Agreement (a "General
Claim"), the Purchaser shall promptly give notice thereof (the "General Claims
Notice") substantially in the form of Exhibit 2 hereto to Holdings and to the
Escrow Agent in the manner set forth in the Purchase Agreement. The General
Claims Notice shall describe the General Claim in reasonable detail, shall
indicate the amount (estimated, if necessary, and to the extent feasible) of the
Losses that have been or may be suffered by the applicable Indemnified Party,
and shall identify which of such Indemnified Parties is alleged to have suffered
the Losses in question. Losses which arise under clauses (i) through (iii) of
Section 11.2 of the Purchase Agreement are hereinafter referred to as "General
Losses"; and General Losses shall be reimbursed solely out of the General Escrow
Funds.
2.2 Final General Claims for Reimbursement. A General Claim asserted in a
General Claims Notice shall become a "Final General Claim for Reimbursement"
whenever there shall be delivered to the Escrow Agent either:
(a) a certificate substantially in the form of Exhibit 3 hereto signed
by the Purchaser and Holdings certifying to, or
(b) a certified copy of an arbitration award rendered pursuant to the
provisions of Section 14 hereof determining,
the amount that is due to the Purchaser (on behalf of the applicable Indemnified
Party) from the General Escrow Funds in respect of such General Claim.
2.3 Limitation of General Claims. Notwithstanding anything to the contrary
herein;
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(4) The Rightsholders Special Escrow Fund shall consist of shares of Omnicom
Stock having an aggregate Market Value equal to the Rightholders' pro rata share
of $1,700,000.
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(a) None of the General Escrow Funds will be released and delivered to
the Purchaser pursuant to any Asserted Liability arising under clauses
(i), (ii) or (iii) of Section 11.2 of the Purchase Agreement (other
than with respect to Asserted Liabilities under Section 3.27 or one of
the first two sentences of Section 3.28 of the Purchase Agreement)
except to the extent that the aggregate amount of all Final General
Claims for Reimbursement (as defined below) exceeds the sum of
$300,000, and then only to the extent of such excess.
(b) Any payment to be made from, or any reservation to be made in or
against, the General Escrow Funds in accordance with Section 3 hereof
shall be reduced to the extent of any net actual reduction in Taxes
payable by the Purchaser upon its payment of General Losses,
determined at an assumed marginal tax rate equal to the highest
marginal tax rate then in effect for corporate taxpayers in the
relevant jurisdiction, and taking into account the tax consequences to
the Purchaser of the receipt of any payment due and payable to the
Purchaser under this Escrow Agreement.
(c) No General Claim may be asserted for the first time hereunder,
pursuant to a General Claims Notice or otherwise, after the First
General Distribution Date (as defined below), and no General Claim
shall become a Final General Claim for Reimbursement, if such General
Claim would be invalid under Article XI (including, in particular,
Section 11.4) of the Purchase Agreement.
As a Claim becomes a Final General Claim for Reimbursement, the Purchaser and
Holdings (or the arbitrator, as the case may be) shall provide the Escrow Agent
with a certificate with respect to the compliance of the Final General Claim for
Reimbursement with (a), (b) and (c).
3. DISTRIBUTIONS FROM GENERAL ESCROW FUNDS
3.1 Definitions. As used herein: "First General Distribution Date" shall
mean the business day next following the earlier of (i) the date following the
first independent audit report, if any, of the consolidated financial results of
the Purchaser and the Businesses following the date hereof or (ii) one year from
the date hereof; and "Final General Distribution Date" shall mean the first
business day on which all matters reserved against, as set forth in Section 3.3,
shall have been finally determined or settled or withdrawn. The Purchaser shall
give notice to the Escrow Agent, with a copy to Holdings, five business days
prior to the occurrence of the First Distribution Date.
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3.2 Reimbursement of Final General Claims for Reimbursement Before or On
First General Distribution Date. From the date of this Escrow Agreement to and
including the First Distribution Date, the Escrow Agent from time to time shall
(subject to Section 2.3) transfer and deliver to the Purchaser such number of
shares of Common Stock forming the General Escrow Funds as shall have a value
(computed in accordance with Section 5.1 hereof) equal to the Final General
Claims for Reimbursement which have not previously been paid to the Purchaser;
provided that any such distribution to be made from the General Escrow Funds
shall be made __% from the Stockholders General Escrow Fund and __% from the
Rightsholders General Escrow Funds; and provided, further, that in no event
shall the Purchaser receive any distribution from the General Escrow Funds prior
to such time as Omnicom releases and publishes financial results of the combined
operations of Omnicom and the Businesses covering a period of at least 30 days
after the Closing Date of the Purchase Agreement. The Purchaser shall promptly
give notice to the Escrow Agent, with a copy to Holdings, of the release and
publishing of such financial results.
3.3 Reservation of Amounts for Pending General Claims at First General
Distribution Date. Subject in all cases to the limitations described in Section
2.3 hereof and receipt of the certifications described in (i) and (ii) below, on
the First General Distribution Date, the Escrow Agent shall reserve in the
General Escrow Fund such number of shares of Common Stock as shall have a value
(computed in accordance with Section 5.1 hereof) equal to the sum of (i) amounts
previously claimed in General Claims Notices given pursuant to Section 2.1
hereof which have not become Final General Claims for Reimbursement ("Pending
General Claims") to the extent such Pending General Claims have become
liquidated as to amount and such amounts have actually been paid by the
Purchaser, all as certified in writing to the Escrow Agent by the chief
financial officer of the Purchaser; (ii) an amount in respect of Pending General
Claims (other than those which have become liquidated and have been previously
paid by the Purchaser) to be determined in good faith by the Purchaser and
Holdings, such amount to be based upon the amount which Purchaser has a
reasonable expectation of becoming payable with respect to such Pending General
Claims and to be set forth in a certificate signed by the Purchaser and Holdings
and delivered to the Escrow Agent; provided, that if the Purchaser and Holdings
cannot agree on such amount, the dispute shall be submitted by Holdings to the
arbitration panel in accordance with Section 14 hereof within 10 days after the
First General Distribution Date and the determination of the arbitration panel
shall be final and conclusive (it being agreed, however, that pending the
determination of the arbitration panel, the amount to be reserved shall be the
amount certified in writing to the Escrow Agent by the chief financial officer
of the Purchaser); and (iii) the aggregate amount of all Final General Claims
for Reimbursement not theretofore paid to the Purchaser; provided, that the
amount of any reserve made in respect of any Pending General Claim shall
not be determinative of the amount (if any) to be reimbursed in respect
of such Pending General Claim if it becomes a Final General Claim for
Reimbursement. Such reservation shall be made in each of the Stock-
holders General Escrow Fund and the Rightsholders General Escrow Fund pro
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rata in accordance with the number of shares of Common Stock then on deposit in
each such Fund. Holdings agrees that it will not object to the amount of the
Common Stock to be reserved in respect of any Pending General Claim except as
otherwise provided in Section 3.3(ii).
3.4 Distribution at First General Distribution Date. On the First General
Distribution Date, the Escrow Agent shall (a) deliver to Holdings, on behalf of
the Stockholders, that portion of the Stockholders General Escrow Fund equal to
the entire amount of the Stockholders General Escrow Fund as originally
deposited in accordance with Section 1 hereof (together with any
distributions described in Section 6.2 hereof), less the sum of (i) all amounts
theretofore delivered from the Stockholders General Escrow Fund to the Purchaser
pursuant to Section 3.2 hereof and (ii) the amount of the Stockholders General
Escrow Fund reserved pursuant to Section 3.3 hereof, (provided that if the
foregoing calculation results in a negative amount, no portion of the
Stockholders General Escrow Fund shall be delivered to Holdings at the First
General Distribution Date) and (b) deliver to the Liquidating Trust Escrow Fund,
on behalf of the Rightsholders, that portion of the Rightsholders General Escrow
Fund equal to the entire amount of the Rightsholders General Escrow Fund as
originally deposited in accordance with Section 1 hereof (together with any
distributions described in Section 6.2 hereof), less the sum of (i) all amounts
theretofore delivered from the Rightsholders General Escrow Fund to the
Purchaser pursuant to Section 3.2 hereof and (ii) the amount of the
Rightsholders General Escrow Fund reserved pursuant to Section 3.3 hereof
(provided that if the foregoing calculation results in a negative amount, no
portion of the Rightsholders General Escrow Fund shall be delivered to the
Liquidating Trust Escrow Fund at the First General Distribution Date).
3.5 Distributions as to Pending General Claims after the First General
Distribution Date. After the First General Distribution Date, as each Pending
General Claim reserved for on the First General Distribution Date becomes (x) a
Final General Claim for Reimbursement, or (y) is withdrawn by the Purchaser
pursuant to notice given substantially in the form of Exhibit 4 hereto (a
"Withdrawn General Claim"), or (z) is determined pursuant to an arbitration
award rendered pursuant to Section 14 hereof not to be a proper Claim, the
Escrow Agent shall subject to Section 2.3 deliver (a) to the Purchaser, from the
General Escrow Fund such number of shares of Common Stock as shall have a value
(computed in accordance with Section 5.1 hereof) equal to any Final General
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Claim for Reimbursement which results from the determination of such Pending
General Claim (and not previously paid to the Purchaser), provided that any such
distribution to be made from the General Escrow Fund shall be made from the
Stockholders General Escrow Fund and the Rightsholders General Escrow Fund pro
rata in accordance with the number of shares of Common Stock then on deposit in
each such fund, (b) to Holdings, on behalf of the Stockholders, such number of
shares of Common Stock on deposit in the Stockholders General Escrow Fund as
shall have a value (computed in accordance with Section 5.1 hereof) equal to the
amount, if any, of the excess of the reserve for such Pending General Claim
taken against the Stockholders General Escrow Fund over the Stockholders General
Escrow Fund's "allocable share" of the amount, if any, of the Final General
Claim for Reimbursement or Withdrawn General Claim with respect to such Pending
General Claim, provided, however, that no delivery shall be made hereunder to
Holdings unless the value (computed in accordance with Section 5.1 hereof) of
the aggregate number of shares of Common Stock reserved in the Stockholders
General Escrow Fund (after giving effect to such delivery) for all remaining
Pending General Claims, is at least equal to the Stockholders General Escrow
Fund's allocable share of the aggregate amount of such remaining Pending General
Claims and (c) to the Liquidating Trust Escrow Fund, on behalf of the
Rightsholders, such number of shares of Common Stock on deposit in the
Rightsholders General Escrow Fund as shall have a value (computed in accordance
with Section 5.1 hereof) equal to the amount, if any, of the excess of the
reserve for such Pending General Claim taken against the Rightsholders General
Escrow Fund over the Rightsholders General Escrow Fund's allocable share of the
amount, if any, of the Final General Claim for Reimbursement or Withdrawn
General Claim with respect to such Pending General Claim, provided, however,
that no delivery shall be made hereunder to the Liquidating Trust Escrow Fund
unless the value (computed in accordance with Section 5.1 hereof) of the
aggregate number of shares of Common Stock reserved in the Rightsholders General
Escrow Fund (after giving effect to such delivery) for all remaining Pending
General Claims is at least equal to the Rightsholders General Escrow Fund's
allocable share of the aggregate amount of such remaining Pending General
Claims. As used herein, the term "allocable share" means, with respect to either
the Stockholders General Escrow Fund or the Rightsholders General Escrow Fund,
such fund's pro rata share based on the number of shares of Common Stock then on
deposit in each such fund.
3.6 Distribution at Final General Distribution Date. On the Final General
Distribution Date, the Escrow Agent shall (a) deliver to the Purchaser from the
General Escrow Fund such number of shares of Common Stock as shall have a value
(computed in accordance with Section 5.1 hereof and subject to Section 2.3
hereof) equal to the Final General Claims for Reimbursement which have not
previously been paid to the Purchaser, provided that any such distribution to be
made from the General Escrow Fund shall be made from the Stockholders General
Escrow Fund and the Rightsholders General Escrow Fund pro rata in accordance
with the number of shares of Common Stock then on deposit in each such fund, (b)
deliver to Holdings, on behalf of the Stockholders, the balance, if any, of the
Stockholders General Escrow Fund and (c) shall deliver to the Liquidating Trust
Escrow Fund, on behalf of the Rightsholders, the balance, if any, of the
Rightsholders General Escrow Fund.
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4. DISTRIBUTIONS FROM SPECIAL ESCROW FUNDS
4.1 Definitions. As used herein, "Special Distribution Date" shall mean the
earlier of (x) the date on which payments due under the Chiat/Day Debt
Restructuring Agreement dated February 16, 1993 among Holdings, FCB
International Inc. and Foote Cone & Belding Communications Inc. and Venice
Holdings Pty. Limited (the "Mojo Receivable") shall have been fully paid or
finally settled between the parties (the "Mojo Determination Date") and (y)
__________, 1997 [insert date 2 years after Closing Date], the latest date by
which the parties expect the outcome of such matter to have been finally
determined.
4.2 Special Claims. On the Special Distribution Date, the Purchaser shall
give notice (the "Special Notice") to Holdings and to the Escrow Agent setting
forth the exact amount of payments recovered, between the Execution Date of the
Purchase Agreement and the giving of the Special Notice, by Holdings or
Purchaser or any of their respective affiliates in respect of the Mojo
Receivable (the "Mojo Proceeds"), together with an accounting of the costs and
expenses incurred in connection with recovering any such payments by Holdings or
any Subsidiary and by Purchaser or its affiliates between the Execution Date of
the Purchase Agreement and the giving of the Special Notice ("Mojo Costs"). The
Purchaser shall have a Purchaser Special Claim in the amount of any Mojo Costs;
Holdings shall have a Holdings Special Claim in an amount equal to (i) the
amount of the Mojo Proceeds, less (ii) the amount of the Purchaser Special
Claim, less (iii) the sum of $250,000 if the Mojo Determination Date occurs on
or before ____________ [insert date one year after the Closing Date], or the sum
of $300,000 if the Mojo Determination Date occurs after __________ [insert date
one year after the Closing Date].
4.3 Final Special Claims for Reimbursement. The Special Claims shall become
"Final Special Claims for Reimbursement" whenever there shall be delivered to
the Escrow Agent either:
(a) a certificate substantially in the form of Exhibit 5 hereto signed
by the Purchaser and Holdings certifying to , or
(b) a certified copy of an arbitration award rendered pursuant to the
provisions of Section 14 hereof determining,
the amount that is due to Holdings and/or the Purchaser, as the case may be,
from the Special Escrow Funds in respect of their respective Special Claims.
Special Claims shall be reimbursed solely out of the Special Escrow Funds.
4.4 Reimbursement of Final Special Claims for Reimbursement. At such time
as both the Purchaser Special Claim and the Holdings Special Claim shall have
become Final Special Claims for Reimbursement, the Escrow Agent shall: (a) first
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deliver to the Purchaser from the Special Escrow Funds such number of shares of
Common Stock as shall have a value (computed in accordance with Section 5.1
hereof) equal to the Final Special Claim for Reimbursement arising out of the
Purchaser Special Claim (with any such distribution to be made from the
Stockholders Special Escrow Fund and the Rightsholders Special Escrow Fund pro
rata in accordance with the number of shares of Common Stock then on deposit in
each such fund); (b) then deliver to (i) Holdings, on behalf of the
Stockholders, such number of shares of Common Stock from the Stockholders
Special Escrow Fund as shall have a value (computed in accordance with Section
5.1 hereof) equal to the Stockholders Special Escrow Fund's allocable share of
the Final Special Claim for Reimbursement arising out of the Holdings Special
Claim, and (ii) to the Liquidating Trust Escrow Fund, on behalf of the
Rightsholders, such number of shares of Common Stock from the Rightsholders
Special Escrow Fund as shall have a value (computed in accordance with Section
5.1 hereof) equal to the Rightsholders Special Escrow Fund's allocable share of
the Final Special Claim for Reimbursement arising out of the Holdings Special
Claim; and (c) then deliver to the Purchaser any amounts then remaining in the
Special Escrow Funds; provided, that in no event shall any distributions be made
from the Special Escrow Funds prior to such time as Omnicom releases and
publishes financial results of the combined operations of Omnicom and the
Businesses covering a period of at least 30 days after the Closing Date of the
Purchase Agreement. As used herein, the term "allocable share" means, with
respect to either the Stockholders Special Escrow Fund or the Rightsholders
Special Escrow Fund, such fund's pro rata share based on the number of shares of
Common Stock then on deposit in each such fund.
5. PROCEDURES WITH RESPECT TO DISTRIBUTIONS.
5.1 Valuation. For all purposes of this Escrow Agreement, each share of
Common Stock shall be valued at $[insert Market Value as determined under
Section 2.1.1 of the Purchase Agreement]. If, at any time after the Closing Date
and prior to the date of any distribution of Common Stock, Omnicom shall effect
a stock dividend, stock split or combination of the shares of Common Stock, or
other recapitalization affecting the shares of Common Stock, or shall effect a
distribution (other than a distribution of cash dividends as described in
Section 6.1 hereof) with respect to the shares of Common Stock, or if Omnicom
shall fix a record date falling on or prior to the date of any distribution of
Common Stock from any Escrow Fund for any such stock dividend, stock split,
combination, recapitalization, or distribution to take place after the date of
such distribution, the foregoing valuation shall be adjusted appropriately by
the Purchaser.
5.2 Fractional Shares. No fractional shares of the Common Stock shall be
issued or delivered pursuant to any provision of this Escrow Agreement. In
making delivery of the Common Stock to any Person pursuant to this Escrow
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Agreement, the Escrow Agent shall round off any fractional share resulting from
any calculation hereunder to the nearest whole share.
5.3 No Transfer of Escrowed Property. While any Common Stock shall continue
to be held by the Escrow Agent, except as provided by this Escrow Agreement
neither Holdings, Advertising nor any Stockholder or Rightsholder nor the
Liquidating Trustee will transfer, sell, pledge, create a security interest in
or otherwise dispose of their rights to any distributions with respect to the
General Escrow Fund or with respect to the Special Escrow Fund, except by will,
the laws of intestacy or other operation of law.
5.4 Distribution Consent. Any other provision of this Escrow Agreement to
the contrary notwithstanding, the Escrow Agent shall distribute the General
Escrow Funds and the Special Escrow Funds, in such manner at such time or times
as the Purchaser and Holdings may, in writing, jointly direct.
5.5 Limitation to Escrow Funds; No Recourse. If the aggregate of all Final
General Claims For Reimbursement exceeds the value of the General Escrow Funds
(computed in accordance with Section 5.1) then the total balance of such Final
General Claims For Reimbursement shall be deemed to be satisfied on the release
by the Escrow Agent to the Purchaser of all of the Common Stock out of the
General Escrow Funds. Except as otherwise provided under Section 7.1 of the
Purchase Agreement, it is understood and agreed that anything contained in this
Escrow Agreement to the contrary notwithstanding, none of the Indemnified
Parties shall have any recourse for the payment of any General Losses under
Article XI of the Purchase Agreement of any kind whatsoever against Holdings or
Advertising or their respective affiliates or past, present or future directors,
officers and employees, the Stockholders or the Rightsholders, nor shall any of
such persons be personally liable for any such General Losses, it being
expressly understood that the sole remedy of the Indemnified Parties for General
Losses shall be against the General Escrow Funds in accordance with this Escrow
Agreement. Anything contained in this Escrow Agreement to the contrary
notwithstanding, none of the Indemnified Parties shall have any recourse for the
payment of any Special Claims of any kind whatsoever against Holdings or
Advertising or their respective affiliates or past, present or future directors,
officers and employees, the Stockholders or the Rightsholders, nor shall any of
such persons be personally liable for any such Special Claims, it being
expressly understood that the sole remedy of the Indemnified Parties for Special
Claims shall be against the Special Escrow Funds in accordance with this Escrow
Agreement.
5.6 No Certificates. No rights of the Purchaser, Holdings, Advertising, the
Liquidating Trust, the Stockholders or the Rightsholders in, to and under the
General Escrow Funds or the Special Escrow Funds (as the case may be) shall be
represented by any form of certificate or instrument.
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6. DIVIDENDS AND OTHER DISTRIBUTIONS
ON COMMON STOCK; VOTING RIGHTS
6.1 Cash Dividends.
(a) All cash dividends in respect of the Common Stock still then held in
the Stockholders General Escrow Fund or the Rightsholders General Escrow Fund,
and all other distributions in respect of the Common Stock still then held in
such funds that are taxable dividends for Federal income tax purposes (net of
any taxes required to be withheld from such cash dividends or other
distributions by Omnicom), shall be paid directly by Omnicom to the Liquidating
Trustee (in the case of the Stockholders) or to the Liquidating Trust Escrow
Agent (in the case of the Rightsholders). If any such dividends are paid to the
Escrow Agent, such dividends shall be promptly delivered by the Escrow Agent to
the Liquidating Trustee or to the Liquidating Trust Escrow Agent, as the case
may be.
(b) All cash dividends in respect of the Common Stock still then held in
the Stockholders Special Escrow Fund or the Rightsholders Special Escrow Fund,
and all other distributions in respect of the Common Stock still then held in
such funds that are taxable dividends for Federal income tax purposes (net of
any taxes required to be withheld from such cash dividends or other
distributions by Omnicom), shall be paid directly by Omnicom to the Liquidating
Trustee (in the case of the Stockholders) or to the Liquidating Trust Escrow
Agent (in the case of the Rightsholders). If any such dividends are made to the
Escrow Agent, such dividends shall be promptly delivered by the Escrow Agent to
the Liquidating Trustee or to the Liquidating Trust Escrow Agent, as the case
may be.
6.2 Distributions. Distributions on the Common Stock of any kind, other
than those described in Section 6.1, shall be made by Omnicom directly to the
Escrow Agent or, if made to Holdings or Advertising, shall be delivered by it to
the Escrow Agent forthwith upon its receipt thereof. All distributions shall be
held in escrow pursuant to the provisions of this Escrow Agreement, but the
Escrow Agent shall have no duty or obligation whatsoever to require that such
distributions be delivered to it. Any delivery of the Common Stock to any Person
pursuant to this Escrow Agreement after any such distribution shall be
appropriately adjusted so that the distributee will be in the same position as
if such distributee had been, on any record date for any such distribution with
respect to the Common Stock, the holder of record of the number of shares of
Omnicom Stock distributable to it prior to any such distributions. The Purchaser
shall give notice to the Escrow Agent, with a copy to Holdings, of the
occurrence of any such distributions, at least five business days prior to the
occurrence thereof.
6.3 Voting. The Stockholders and the Rightsholders shall be entitled to
exercise all voting rights with respect to the Common Stock constituting the
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Escrow Funds, and the Escrow Agent shall deliver to Holdings (for further
distribution to the Stockholders in accordance with their respective interests)
and the Rightsholders (in accordance with their respective interests) any
proxies with respect thereto which the Escrow Agent receives.
7. SECURITY INTEREST
7.1 Grant of Interest. Holdings on behalf of itself and the Stockholders,
and Advertising on behalf of itself and the Rightsholders, hereby grant to the
Purchaser a first priority perfected security interest in the Escrow Funds to
secure the performance of the contingent obligations and indemnification
obligations of Holdings, the Stockholders and the Rightsholders under the
Purchase Agreement and the performance of their obligations under this Escrow
Agreement. The Escrow Agreement shall constitute a security agreement under
applicable law.
7.2 Attachment and Perfection. The parties agree that this security
interest shall attach as of the execution of this Escrow Agreement. The parties
agree that, for the purpose of perfecting the Purchaser's security interest in
the above designated Escrow Funds held by the Escrow Agent pursuant to this
Escrow Agreement, the Purchaser designates the Escrow Agent to acquire and
maintain possession of the Escrow Funds and act as bailee for the Purchaser with
notice of the Purchaser's security interest in said property under the Uniform
Commercial Code and that by possession of the Escrow Funds, the Escrow Agent
acknowledges that it holds the Escrow Funds for the Purchaser for purposes of
perfecting the security interest. Holdings and the Stockholders, Advertising and
the Rightsholders, and the Escrow Agent shall take all other actions requested
by the Purchaser to maintain the perfection and priority of the security
interest in the Escrow Funds; provided that the Escrow Agent does not make any
representation or warranty with regard to the creation or perfection, hereunder
or otherwise, of any such security interest, and shall have no responsibility at
any time to ascertain whether or not any security interest exists.
7.3 Release. The Purchaser shall release the security interest herein
granted and the security interest shall be terminated to the extent of any
disbursement of the Escrow Funds hereunder by Escrow Agent in accordance with
the terms of this Escrow Agreement. Upon final disbursement of the Escrow Funds
to the Purchaser, Holdings, the Liquidating Trustee or the Liquidating Trust
Escrow Fund, the Purchaser shall do all acts and things reasonably necessary to
release and extinguish such security interest. Holdings on behalf of itself and
the Stockholders, and Advertising on behalf of itself and the Rightsholders, and
the Purchaser, hereby specifically agree that the grant of this security
interest pursuant to this Section 7 shall not in any way modify the procedures
the parties hereto must follow with respect to the release of Common Stock from
the Escrow Funds.
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8. ESCROW AGENT'S DUTIES AND FEES
8.1 Duties Limited. The Escrow Agent undertakes to perform only such duties
as are expressly set forth herein. The Escrow Agent shall not be bound by, or
have any responsibility with respect to, any other agreement between any of the
parties (other than an agreement to which the Escrow Agent is a party). The
Escrow Agent shall have no duty or responsibility with regard to any loss
resulting from the decline in the market value of the Escrow Funds in accordance
with the terms of this Agreement. The Escrow Agent need not maintain any
insurance with respect to the Escrow Funds.
8.2 Reliance. The Escrow Agent, acting (or refraining from acting) in good
faith, shall not be liable for any mistake of fact or error of judgment by it or
for any acts or omissions by it of any kind unless caused by gross negligence or
willful misconduct, and the Escrow Agent may rely, and shall be protected in
acting or refraining from acting, upon any written notice, instruction or
request furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper party or parties; provided that, as set
forth below, modification of this Escrow Agreement shall be signed by all of the
parties hereto. The Escrow Agent is hereby authorized to comply with any
judicial order or legal process which stays, enjoins, directs or otherwise
affects the transfer or delivery of any Escrow Funds to any party hereto and
shall incur no liability for any delay or loss which may occur as a result of
such compliance.
8.3 Good Faith. Holdings on behalf of itself and the Stockholders, and
Advertising on behalf of itself and the Rightsholders, and the Purchaser hereby
agree, jointly and severally, to indemnify the Escrow Agent for, and to hold it
harmless against, any loss, liability, expense (including reasonable attorneys'
fees and expenses), third party claim and demand, incurred by it without gross
negligence or bad faith on its part, arising out of or in connection with its
entering into this Escrow Agreement and the carrying out of its duties hereunder
and in any event its liability shall be limited to direct damages and shall not
include special or consequential damages. The Escrow Agent may consult with
counsel of its own choice, and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. The foregoing indemnification shall
survive the resignation of the Escrow Agent or the termination of this Escrow
Agreement.
8.4 Successor Escrow Agents. The Escrow Agent may resign and be discharged
from its duties or obligations hereunder at any time by giving 30 days' notice
in writing of such resignation to Holdings and the Purchaser. Holdings and the
Purchaser, together, shall have the right to terminate the appointment of the
Escrow Agent hereunder by giving to it notice in writing of such termination
specifying the date upon which such termination shall take effect. In either
such event, Holdings and the Purchaser hereby agree to promptly appoint a
successor escrow agent; if Holdings and the Purchaser are unable to appoint a
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successor Escrow Agent within 25 days after the Escrow Agent's notice of
resignation, the Escrow Agent may petition a court of competent jurisdiction to
appoint a successor. The parties hereto agree that, upon demand of such
successor escrow agent, all property held by the Escrow Agent hereunder shall be
turned over and delivered to such successor escrow agent, which thereupon shall
become bound by all of the provisions hereof.
8.5 Fees and Expenses. The Purchaser, on the one hand, and Holdings, on the
other hand, agree, jointly and severally, to pay on an equal basis to the Escrow
Agent the fees determined in accordance with, and payable as specified in, the
Schedule of Fees attached hereto as Attachment 1 (the "Fee Schedule") as
compensation for the services to be rendered by it hereunder and to pay to or
reimburse the Escrow Agent for all reasonable expenses, disbursements and
advances (including reasonable attorneys' fees) incurred or made by it in
connection with the carrying out of its duties hereunder.
9. WAIVERS
This Escrow Agreement may be amended, superseded or canceled, and any of
the terms or conditions hereof may be waived, only by a written instrument
executed by the parties hereto or, in the case of a waiver, by the party waiving
compliance (or his agent). The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such party at a later time to enforce the same. No waiver of any nature,
whether by conduct or otherwise in any one or more instances, of any provision
hereof, shall be deemed to be, or construed as, a further or continuing waiver
of any such provision or of another provision hereof.
10. NOTICES
Any notice or other communication required or which may be given hereunder
(including without limitation the delivery of Common Stock to any Person out of
the Escrow Funds) shall be in writing and either delivered personally or mailed
by certified or registered mail, postage prepaid, or sent by facsimile
transmission, and shall be deemed given when so delivered personally, mailed or
sent by facsimile, as follows:
If to the Purchaser, to Omnicom at:
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
Fax No.: 212-415-3536
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with a copy to:
Davis & Gilbert
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian, Esq.
Fax No.: 212-468-4888
If to Advertising or Holdings, to Holdings at:
Chiat/Day Holdings, Inc.
180 Maiden Lane
New York, New York 10038
Attention: Chief Financial Officer
Fax No.: 212-804-1200
(or following the creation and funding of the Liquidating
Trust to the Trustee of the Liquidating Trust at such address
as Holdings shall provide to the Purchaser and the Escrow
Agent)
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: James Cotter, Esq.
Fax No.: 212-455-2502
If to the Liquidating Trust Escrow Agent, to it at:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
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with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: James Cotter, Esq.
Fax No.: 212-455-2502
If to the Escrow Agent, to
The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center, 3rd Floor
Brooklyn, New York 11245
Attention: Escrow Department
Fax No.: 718-242-3529
Any party may change the persons and addresses to which notices, payments,
instructions or other communications are to be sent to such party by giving
written notice of any such change in the manner provided herein for giving
notice. Notices sent by facsimile transmission shall be confirmed in writing by
registered or certified mail, return receipt requested.
11. GOVERNING LAW
This Escrow Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.
12. NO ASSIGNMENT
This Escrow Agreement shall be binding upon, and inure to the benefit of,
the successors and assigns of Holdings, Advertising, the Purchaser, and the
Escrow Agent, but, except as otherwise provided or permitted in this Escrow
Agreement, no delegation of any obligations provided for herein may be made by
any party hereto without the express written consent of the other parties
hereto, except for the provisions of Section 6.4 hereof respecting successor
escrow agents.
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13. SECTION HEADINGS
The section headings contained in this Escrow Agreement are inserted for
convenience of reference only, and shall not affect the meaning or
interpretation of this Escrow Agreement.
14. ARBITRATION
Subject to the provisions of Section 3.3 hereof, any dispute, claim or
controversy between the Purchaser and Holdings in respect of any Claim or other
matter in dispute under this Agreement, shall be settled by arbitration in
accordance with the rules and regulations thus pertaining of the American
Arbitration Association. The arbitration panel shall consist of three
arbitrators, one nominated by the Purchaser, one nominated by Holdings and the
third to be selected by the other two. In the event the three arbitrators shall
not have been nominated within 30 days following a notice by either Purchaser or
Holdings to the other of its intention to arbitrate, an arbitrator for the party
who has not nominated an arbitrator (if applicable) and the third arbitrator
shall be chosen by the American Arbitration Association in New York City
pursuant to its rules and regulations. The determination of the arbitrators
shall be final and binding upon the parties to this Agreement, the Stockholders
and the Rightsholders, without the right to appeal. The arbitration shall be
held in New York City. The arbitrator shall consider only the items in dispute
and shall be instructed to act within 30 days to resolve all disputes. The
arbitration panel shall determine the party (the Purchaser or Holdings, as the
case may be), whose asserted positions before the arbitration panel are in the
aggregate further from the aggregate resolutions determined by the arbitrators,
which non-prevailing party shall pay the costs and expenses of the arbitrators,
together with the reasonable attorney's fees and disbursements of the prevailing
party in the arbitration (as determined by the arbitrators).
15. JURY WAIVER.
All parties to this Agreement waive any rights they may have to a jury
trial.
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WITNESS the execution of this Escrow Agreement as of the date first above
written.
TBWA INTERNATIONAL INC.
By: _______________________
CHIAT/DAY HOLDINGS, INC.
By: _______________________
CHIAT/DAY inc ADVERTISING
By: _______________________
THE CHASE MANHATTAN BANK, N.A.
By: _______________________
20
CHIAT/DAY HOLDINGS, INC.
LIQUIDATING TRUST AGREEMENT
THIS LIQUIDATING TRUST AGREEMENT (this "Trust Agreement"), made as of
____________ __, 1995, by and between Chiat/Day Holdings, Inc., a Delaware
corporation (the "Corporation"), on behalf of its stockholders, and Thomas Patty
and David C. Wiener (collectively, the "Trustees").
W I T N E S E T H:
WHEREAS, the Class A and Class B common stockholders of the Corporation
(collectively, the "Stockholders") adopted a Plan of Liquidation (the "Plan") at
a Special Meeting of Stockholders held on _________ __, 1995;
WHEREAS, pursuant to the Plan, the liquidation and dissolution of the
Corporation shall be completed as soon as practicable after the date of adoption
of the Plan;
WHEREAS, there are or may be contingent or other liabilities against the
Corporation which may arise in the future;
WHEREAS, the Stockholders at said Special Meeting authorized the proper
officers of the Corporation to transfer for their benefit a part or all of the
Corporation's assets to the Trustees;
WHEREAS, the form of this Trust Agreement and the trust hereby created (the
"Trust") have been approved by a majority vote of the Stockholders at said
Special Meeting;
WHEREAS, the Corporation is party to a certain escrow agreement, dated
________, 1995, among the Corporation, Chiat/Day
<PAGE>
inc. Advertising ("Advertising"), TBWA International Inc. and The Chase
Manhattan Bank, N.A., as escrow agent (the "Omnicom Indemnification Escrow
Agreement"), pursuant to which the Trust may receive, on behalf of the
Stockholders, distributions from time to time of shares of common stock, par
value $.50 per share, of Omnicom Group Inc. ("Omnicom Stock"); and
WHEREAS, the Corporation is party to a certain escrow agreement, dated
_______, 1995, among the Corporation, Advertising and _________, as escrow agent
(the "Liquidating Trust Escrow Agent"; such agreement, the "Liquidating Trust
Escrow Agreement"), pursuant to which the Trust shall be entitled to request
funds for the purpose of paying a portion of any contingent or other liabilities
of the Corporation which may arise in the future, all in accordance with the
further terms of this Trust Agreement and the Liquidating Trust Escrow
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein:
ARTICLE I.
Transfer To Trustees
1.1. Transfer to Trustees; Sale of Omnicom Stock; Trust Income. (a) On the
Distribution Date under (as defined in) that certain Asset Purchase Agreement
dated ___________, 1995 among Omnicom Group Inc., TBWA International Inc.,
Advertising and the Corporation (the "Purchase Agreement"), the Corporation
shall, on behalf of the Stockholders, hereby transfer and assign to the
Trustees, and the Trustees shall hereby accept, the Corporation's
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entire right, title and interest in and to the Omnicom Stock described in
Schedule A attached hereto and made a part hereof (the "Trust Property") and all
income from investment and reinvestment (in accordance with Section 4.2 hereof)
in respect thereof (the "Trust Income"). The Trust Property shall include all
Omnicom Stock received from time to time by the Trustees, on behalf of the
Stockholders, as distributions pursuant to the Omnicom Indemnification Escrow
Agreement and all funds received from the Liquidating Trust Escrow Fund pursuant
to Liquidating Trustee Requests in accordance with Section 3.4 hereof.
(b) The Trustees shall, forthwith upon receipt of any Omnicom Stock
(whether pursuant to Section 1.1(a), pursuant to the Omnicom Indemnification
Escrow Agreement or otherwise) sell such Omnicom Stock and retain the cash
proceeds of such sale, net of reasonable and customary brokers fees and other
costs and expenses of such sale, as Trust Property for application in accordance
with this Trust Agreement. The Trustees shall liquidate any other type of
property received for deposit in the Trust in such manner as they deem
appropriate and retain the cash proceeds of such sale, net of reasonable costs
and expenses of such sale, as part of the Trust Property for application in
accordance with this Trust Agreement.
(c) The Trust Income shall include any cash and other taxable dividends
paid to the Trustees, on behalf of the Stockholders, in respect of Omnicom Stock
on deposit under the Omnicom Indemnification Escrow Agreement. The Trust Income
shall
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be segregated from the Trust Property and maintained, invested and distributed
by the Trustees in accordance with this Trust Agreement.
1.2. Intention of Parties. It is the intention of the parties that the
Trustees shall acquire title to the Trust Property so that the liquidation and
dissolution of the Corporation shall be completed as soon as is practicable.
Although the Corporation has transferred the Trust Property directly to the
Trustees, the parties intend that, for Federal income tax purposes only, such
transfer is to be considered in substance a transfer from the Corporation to the
Former Stockholders (as hereinafter defined) and from them to the Trustees. The
Trust Property is transferred and assigned to the Trustees, and the Trustees
shall hold and deal with the Trust Property, in trust for the sole benefit of
the Beneficiaries (as hereinafter defined), on the terms and conditions herein
set forth.
ARTICLE II.
Beneficiaries
2.1. Stockholders as Beneficiaries. A list of the Stockholders as of the
date of the closing of the transfer books of the Corporation (which date shall
be the Closing Date under the Purchase Agreement) (collectively, the "Former
Stockholders") is set forth in Schedule B attached hereto and made a part
hereof. The Former Stockholders shall be the initial Beneficiaries with the same
beneficial interest ("Beneficial
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Interest") in the Trust as shown on Schedule B. For this purpose, the term
Beneficial Interest shall mean, for each Beneficiary, the percentage determined
by dividing the number of Class A and Class B shares of common stock of the
Corporation (the "Common Stock") held by the Beneficiary on the date of the
closing of the transfer books of the Corporation by the total number of shares
of Common Stock outstanding on such date. For ease of administration, the
Trustees may, if they so elect, express the Beneficial Interest of each
Stockholder in terms of units. Each distribution by the Trustees to the
Beneficiaries shall be made to the Former Stockholders, or their legal
representatives or successor in interest authorized by Section 2.3 (together
with the Former Stockholders, the "Beneficiaries"), pro rata according to their
Beneficial Interest in the Trust.
2.2. Record of Beneficiaries.The Trustees shall maintain at their place of
business a record of the names of each Beneficiary and his Beneficial Interest
in the Trust.
2.3. Surrender of Stock Certificates; No Trust Certificates. (a) Each
Beneficiary must surrender his certificates representing ownership of Common
Stock (the "Stock Certificates") as a condition to his entitlement to any
distribution from the Trust. If and to the extent that a Beneficiary fails to
surrender his Stock Certificate(s), his share of any distribution will be
retained by the Trustees until he surrenders his Stock Certificate(s), or until
he furnishes an
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indemnity bond or evidence of loss or destruction satisfactory to the
Trustees in the event of loss or destruction thereof.
(b) The rights of Beneficiaries in to and under the Trust Property and the
Trust Income shall not be represented by any form of certificate or instrument.
2.4. Transfer of Interests. The Beneficial Interest of a Beneficiary in
the Trust may not be transferred in any manner whatsoever (including, without
limitation, by sale, exchanges, gift, pledge or creation of a security
interest), except (a) by bequest or inheritance in the case of an individual
Beneficiary, or (b) by operation of law.
2.5. Missing Beneficiaries. A "Missing Beneficiary" shall be defined as (a)
a Stockholder who has neither surrendered his Stock Certificates nor provided
the Trustees with an indemnity bond in the event of loss or destruction thereof,
or (b) a Beneficiary who has not cashed one or more checks issued to him by the
Corporation in payment of liquidating distributions or has not receipted for the
delivery of property addressed to him as part of a liquidating distribution. If
a notice or distribution is mailed by the Trustees to a Beneficiary and either
the notice is returned by the United States Postal Service to the Trustee as
undeliverable or any check included in such notice is not cashed within a
reasonable period of time, such Beneficiary shall thereafter be a Missing
Beneficiary.
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ARTICLE III
.
Purpose, Limitations and Distribution to Beneficiaries
3.1. Purpose of Trust. This Trust is established for the sole purposes of:
(a) holding the Trust Property transferred to it by the Corporation on behalf of
the Beneficiaries, enforcing the rights of the Beneficiaries thereto; (b)
collecting the income thereon; (c) satisfying the following liabilities
(collectively, "Trust Liabilities") of the Corporation (in each case other than
the liabilities assumed by TBWA International Inc. pursuant to the Purchase
Agreement): (i) all claims and obligations, including all contingent,
conditional or unmatured contractual claims, known to the Corporation or the
Trustees, (ii) any claim which is the subject of a pending action, suit or
proceeding against the Corporation and (iii) claims which, based on facts known
to the Corporation or the Trustees, are likely to arise or become known to the
Corporation or the Trustees within 10 years after the date hereof; (d)
distributing the Trust Property and the Trust Income to the Beneficiaries; and
(e) taking such other action as is necessary to conserve and protect the Trust
Property and the Trust Income and to provide for the orderly liquidation of any
and all of the Trust Property. Under no circumstances shall the Trust or the
Trustees hereunder (1) have any power to engage in any trade or business, or in
any other activity except as is necessary to the orderly liquidation of any and
all of the Trust Property, and (2) except for the receipt of Omnicom Stock, on
behalf of the Stockholders, pursuant
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to the Omnicom Indemnification Escrow Agreement or Section 1.1(a) hereof,
receive transfers of any listed stocks or securities, any readily-marketable
assets or any operating assets of an on-going business.
3.2. Operation of Trust; Notice Under Liquidating Trust Escrow Agreement.
The Trustees shall receive and hold all the Trust Property and shall from time
to time pay over to the Beneficiaries any cash which is received as the result
of the (a) collection of any Trust Income, and (b) any disposition of the Trust
Property (which cash proceeds shall constitute Trust Property). Such
distributions shall be made at least (a) once annually with respect to Trust
Property and (b) at the end of each fiscal quarter with respect to Trust Income,
in each case pro rata according to the Beneficiaries' respective Beneficial
Interest in the Trust, provided, however, that no distribution of Trust Property
shall be made to Beneficiaries without first satisfying or adequately providing
for (i) a reserve for all remaining Trust Liabilities, (ii) a reserve for the
reasonable expenses incurred or to be incurred by the Trustees, and (iii) a
reasonable reserve for payments to be paid to Missing Beneficiaries.
Pursuant to Section 2.1 of the Liquidating Trust Escrow Agreement, the
Trustees shall give the Liquidating Trust Escrow Agent three business days prior
notice before making any distribution of Trust Property to the Stockholders, and
the
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Trustee shall indicate to the Liquidating Trust Escrow Agent the pro rata
portion of the Trust Property to be so distributed.
3.3. No Payment to the Corporation. In no event shall the Trustees convey
to the Corporation any Trust Property or Trust Income.
3.4 Requests for Funds Pursuant to the Liquidating Trust Escrow Agreement.
Pursuant to Section 2.2 of the Liquidating Trust Escrow Agreement, three
business days prior to the making of any payment in respect of any Trust
Liability pursuant to this Trust Agreement, the Liquidating Trustee shall
deliver a request (a "Liquidating Trustee Request") to the Liquidating Trust
Escrow Agent specifying the total amount of the payment to be made under this
Trust Agreement (and setting forth the calculations described below), requesting
reimbursement for a specified portion of such payment from the "Liquidating
Trust Escrow Fund" maintained pursuant to the Liquidating Trust Escrow Agreement
and certifying that such liability has become due and payable. The amount of
funds so requested shall be equal to (x) the total amount of the payment to be
made under this Trust Agreement multiplied by (y) a fraction, the numerator of
which equals the total amount of funds then on deposit in the Liquidating Trust
Escrow Fund (before making the requested payment) and the denominator of which
equals (1) the numerator plus (2) the amount of Trust Property then on deposit
(before making the required payment). Pursuant to Section 2.2 of the Liquidating
Trust Escrow Agreement, the Liquidating Trust Escrow
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Agent shall provide the Trustees with any information requested by it for
the purposes of making the foregoing calculation. The Liquidating Trust Escrow
Agent shall promptly distribute to the Trustees from the Liquidating Trust
Escrow Fund the funds requested in any such validly made Liquidating Trustee
Request; provided that if insufficient assets remain in the Liquidating Trust
Escrow Fund to satisfy such request, the Liquidating Trust Escrow Agent shall
distribute all such remaining assets to the Trustees and the Liquidating Trustee
Request shall be deemed to be satisfied in full by such distribution.
ARTICLE IV.
Authority of Trustees
4.1. Authority of Trustees. Among the other powers stated herein, in
connection with the administration of this Trust, the Trustees in their
fiduciary capacity may exercise the following powers, authority and discretion:
(a) to hold legal title to any and all rights of the Beneficiaries in
or arising from the sale of any Trust Property, and to receive and collect
any and all payments due in connection with any such sales;
(b) to receive, hold, maintain, grant, sell, exchange, convey,
release, assign or otherwise transfer legal title to any Trust Property;
(c) to execute and deliver, upon proper payment, partial and complete
releases of any third-party obligations transferred to the Trust;
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(d) to protect and enforce the rights vested in the Trustees to the
Trust Property by this Trust Agreement by any method deemed appropriate,
including, without limitation, by judicial proceedings;
(e) to take any steps necessary to establish clear title to any Trust
Property;
(f) to employ legal counsel, accountants, advisors, custodians and
other agents in connection with the administration or termination of this
Trust, to delegate to them any powers of the Trustees, and to pay out of
the Trust Property to such legal counsel, accountants, advisors, custodians
and other agents reasonable compensation for services rendered;
(g) to file, if necessary, any and all tax returns in connection with
the Trust created hereby and to pay any taxes properly payable by the
Trust, if any, out of the Trust Property;
(h) to select a fiscal year for the Trust;
(i) to satisfy any and all liabilities of the Corporation which are
not paid or otherwise discharged;
(j) to continue to indemnify the officers, directors, employees and
agents (including, without limitation, the Trustees hereunder) of the
Corporation, as provided in its Certificate of Incorporation or By-Laws and
the laws of the State of Delaware, and to obtain and maintain such
insurance (the cost of such insurance to be deemed a Trust Liability
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for purposes of this Trust Agreement) covering the Corporation's
obligations to indemnify as they, in their discretion deem necessary,
desirable or appropriate;
(k) to serve as the party designated to act for the Corporation and
for and on behalf of the Stockholders under each of the Omnicom
Indemnification Escrow Agreement and the Liquidating Trust Escrow
Agreement, to make claims under each such agreement and to respond to the
assertion of claims for indemnification under the Omnicom Indemnification
Escrow Agreement;
(l) to compromise, adjust, arbitrate, sue on or defend, abandon or
otherwise deal with and settle claims in favor of or against this Trust as
the Trustees shall deem best; and
(m) to take any steps necessary to enforce the choice of law
provisions set forth in Section 11.2 of this Trust Agreement.
4.2. Limitation of Trustees' Investment Authority. The Trustees shall not
engage in any income producing activity, except that the Trustees may keep the
Trust Property and the Trust Income invested in (a) obligations of, or
obligations which are guaranteed by, the United States of America, (b)
obligations issued or guaranteed by any instrumentality or agency of the United
States of America or the District of Columbia and (c) banker's acceptances of,
or certificates of deposit or prime commercial paper issued by, time deposits or
a money market
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account with, any commercial bank having undivided capital and surplus
aggregating at least $100,000,000, in each case which have a maturity of 90 days
or less.
ARTICLE V.
The Trustees
5.1. Generally. The Trustees shall perform such duties, and only such
duties, as are specifically set forth in this Trust Agreement or are reasonably
implied for the administration of this Trust. All actions to be taken by the
Trustees shall be by the affirmative consent of a majority of the Trustees then
serving. A nonconcurring Trustee shall not be liable for any act or failure to
act of the other Trustees.
5.2. Liability of Trustees. No provision of this Trust Agreement shall be
construed to relieve the Trustees from liability for their own negligent
actions, their own negligent failure to act or their own fraud or willful
misconduct, except that:
(a) the Trustees shall be liable only for the performance of such
duties and obligations as are specifically set forth in this Trust
Agreement; and
(b) the Trustees shall not be liable for any error of judgment made in
good faith, or with respect to any action taken or omitted to be taken in
good faith, unless the Trustees were grossly negligent.
5.3. Reliance by Trustees. Except as otherwise provided in Section 5.2:
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(a) the Trustees may rely, and shall be protected in acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order or other paper of document believed by them to be
genuine and to have been signed or presented by the proper party or
parties;
(b) the Trustees may consult with legal counsel to be selected by
them, and the Trustees shall not be liable for any action taken or omitted
to be taken by them in accordance with the advice of such counsel; and
(c) persons dealing with the Trustees shall look only to the Trust
Property to satisfy any liability incurred by the Trustees to such person
in carrying out the terms of this Trust, and the Trustees shall have no
personal obligation to satisfy any such liability.
5.4. Safekeeping of Trust Assets. All moneys and other assets received by
the Trustees shall, until distributed or paid over as herein provided, be held
in trust for the benefit of the Beneficiaries, but need not be segregated from
other trust assets, unless and to the extent required by law and except that the
Trust Income shall be segregated pursuant to Section 1.1(c) hereof. The Trustees
shall be under no liability for interest or producing income on any moneys
received by them hereunder and held for distribution or payment to the
Beneficiaries, except as such interest shall actually be received by the
Trustees.
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5.5. Expense Reimbursement and Compensation.The Trustees shall be entitled
to reimburse themselves out of the Trust Property and the Trust Income, against
and from any and all loss, liability, expense or damage which the Trustees may
sustain in good faith and without willful misconduct, gross negligence or fraud
in the exercise and performance of any of the powers and duties of the Trustees
under this Trust Agreement, and may receive reasonable compensation out of the
Trust Property and the Trust Income for serving as Trustees hereunder.
5.6. No Bond. The Trustees shall serve without bond.
5.7. Indemnification of Trustees. The Trustees shall be indemnified to the
maximum extent permissible by the laws of the State of Delaware to officers and
directors incorporated in that State, and may reimburse themselves out of the
Trust Property and the Trust Income, against and from any and all loss,
liability, expense or damage which the Trustees may sustain in good faith and
without willful misconduct, gross negligence or fraud in the exercise and
performance of any of the powers and duties of the Trustees under this Trust
Agreement.
ARTICLE VI.
Successor Trustee
6.1. Specific Successors. In the event of the death, disability,
resignation or removal of Thomas Patty, or in the event he is otherwise unable
to service as a Trustee, _________ shall replace him as a successor Trustee. In
the event of the death, disability, resignation or removal of David C. Wiener,
or
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if he is otherwise unable to serve as a Trustee, _____________
shall replace him as a successor Trustee.
6.2. Resignation and Removal. Any Trustee may resign by giving not less
than sixty days' prior written notice thereof to the remaining Trustee(s). Such
resignation shall become effective on the day specified in such notice or upon
the appointment of a successor and the acceptance by such successor of such
appointment, whichever is earlier. Any Trustee may be removed at any time, with
or without cause, by Beneficiaries having an aggregate Beneficial Interest of
more than 50 percent.
6.3. Appointment of Successor. Subject to the provisions of Section 6.1 in
the event of any vacancy in the office of Trustee, a successor Trustee shall be
appointed by Beneficiaries having an aggregate Beneficial Interest of more than
50 percent.
6.4. Acceptance of Appointment by Successor Trustee. Any successor Trustee
appointed hereunder shall execute an instrument accepting such appointment
hereunder and shall file such acceptance with the Trust records. Thereupon, such
successor Trustee shall, without any further act, become vested with all the
estates, properties, rights, powers, trusts and duties of his predecessor in the
Trust with the like effect as if originally named herein; provided, however,
that a retiring Trustee shall, nevertheless, when requested in writing by the
successor Trustee, execute and deliver an instrument or instruments conveying
and transferring to such successor Trustee
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under the Trust all the estates, properties, rights, powers and trusts of such
predecessor Trustee.
ARTICLE VII.
Reports to Beneficiaries
7.1. Reports to Beneficiaries.As soon as practicable after the end of each
calendar year, and upon termination of the Trust, the Trustees shall submit a
written report and account to the Beneficiaries showing (i) the assets and
liabilities of the Trust at the end of such calendar year or upon such
termination and the receipts and disbursements of the Trustees for such period,
(ii) any changes in the Trust Property or Trust Income not previously reported,
and (iii) any action taken by the Trustees in the performance of their duties
which materially affects the Trust. The Trustees may submit similar reports for
such interim periods as they deem advisable. In addition, as soon as practicable
after the close of each calendar year, the Trustees shall supply each
Beneficiary with a statement reflecting information which may be helpful in
determining the amount of taxable income from the Trust that the Beneficiary
should include in his Federal income tax return.
ARTICLE VIII.
Termination of Trust
8.1. Termination of Trust. This Trust Agreement shall terminate upon the
later of (a) three years and six months from the date of this Trust Agreement or
upon the payment to the Beneficiaries of all of the Trust Property and Trust
Income,
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whichever is earlier and (b) the termination of the Omnicom Indemnification
Escrow Agreement; provided, however, that Trust Property and Trust Income which
would otherwise be distributed to Missing Beneficiaries shall continue to be
held by the Trustees until each Missing Beneficiary is located and distribution
can be made to him, or until such earlier time as the Trustees, acting pursuant
to and in accordance with applicable law, shall distribute the Trust Property
and Trust Income theretofore held in trust for the Missing Beneficiaries;
provided further, however, that this Trust Agreement shall continue to exist for
a reasonable period beyond the date on which this Trust Agreement would
otherwise terminate for the limited purpose of discharging any Trust
Liabilities.
ARTICLE IX.
Amendment
9.1. Method of Amendment. The Beneficiaries shall have the right at any
time by vote of Beneficiaries having an aggregate Beneficial Interest of more
than 50 percent to alter, amend or revoke this Trust Agreement in whole or in
part, provided, however, that (i) any such alteration or amendment which shall
affect the duties of the Trustees hereunder shall not become effective until
consented to by each of the Trustees in writing, (ii) no such alteration or
amendment shall cause any of the Trust Property or the Trust Income to be
reconveyed to the Corporation, cause the Trustees to engage in any activity
other than that appropriate for liquidating trustees or prejudice the
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rights of creditors of the Corporation and (iii) for so long as the Omnicom
Indemnification Escrow Agreement remains in effect, no such alteration or
amendment shall cause the Trustees (or any duly appointed successor) to cease in
its capacity as agent for the Stockholders under the Omnicom Indemnification
Escrow Agreement.
9.2. Effect of Revocation.In the case of revocation, the Trustees, as soon
as is practicable and in no event later than one (1) year from the date of their
receipt of written notice thereof, shall distribute all cash held in trust to
the Beneficiaries pro rata according to their respective Beneficial Interest and
distribute the rights to any other Trust Property and the Trust Income held by
the Trustees to the Beneficiaries by whatever means they shall deem appropriate,
and in this latter regard, reliance on opinion of counsel shall be full and
complete authorization and protection for any such action taken hereunder;
provided, however, that any Trust Property or the Trust Income which would
otherwise be distributable to Missing Beneficiaries shall continue to be held by
the Trustees until each such Missing Beneficiary is located and distribution can
be made to him, or until such earlier time as the Trustees acting pursuant to
and in accordance with applicable law shall distribute the Trust Property and
the Trust Income theretofore held in trust for such Missing Beneficiaries. In
the case of revocation, the Trustees shall be authorized to pay out of the Trust
Property and the Trust Income the reasonable costs, including attorneys' fees,
of
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effecting the complete distribution of the Trust Property and the
Trust Income to the Beneficiaries.
ARTICLE X.
Meetings of Beneficiaries
10.1. Purpose of Meetings. Meetings of Beneficiaries may be called at any
time and from time to time pursuant to the provisions of this Article X for the
purpose of taking any action which Beneficiaries are required or permitted to
take under the terms of this Agreement or applicable law.
10.2. Meetings Called by Trustees. The Trustees may at any time call a
meeting of the Beneficiaries to be held at such time and at such place as the
Trustees shall determine. Notice of any meeting of the Beneficiaries shall be
given by the Trustees (or by the Beneficiaries in the event the Trustees shall
fail to give notice after a request by the Beneficiaries pursuant to Section
10.3). Such notice shall set forth the time and place of the meeting and in
general terms the action to be proposed at the meeting, and shall be mailed not
more than 60 nor less than 10 days before the meeting is to be held to all of
the Beneficiaries as of a record date not more than 60 days before the date of
the meeting.
10.3. Meetings Called on Request of Beneficiaries. Within 30 days after
request to the Trustees by Beneficiaries having an aggregate Beneficial Interest
of at least 25 percent to call a meeting of all of the Beneficiaries, which
request shall specify in reasonable detail the action to be proposed, the
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Trustees shall call a meeting of the Beneficiaries pursuant to Section
10.2. If the Trustees fail to call such meeting within such 30-day period, such
meeting may be noticed by Beneficiaries having an aggregate Beneficial Interest
of at least 25 percent, or by their designated representative.
10.4. Persons Entitled to Vote at Meetings of Beneficiaries. Each
Beneficiary as of the record date shall be entitled to vote at a meeting of the
Beneficiaries, either in person or by his proxy duly authorized in writing. The
signature of the Beneficiary on such written authorization need not be witnessed
or notarized.
10.5. Quorum. At any meeting of Beneficiaries, the presence of
Beneficiaries having an aggregate Beneficial Interest of at least 50 percent of
the aggregate Beneficial Interest of all Beneficiaries shall be necessary to
constitute a quorum. If less than a quorum is present, Beneficiaries having an
aggregate Beneficial Interest of more than 50 percent of the aggregate
Beneficial Interest of all Beneficiaries represented at the meeting may adjourn
such meeting with the same effect and for all intents and purposes as though a
quorum had been present.
10.6. Adjournment of Meetings. Any meeting of Beneficiaries may be
adjourned from time to time and a meeting may be held at such adjourned time and
place without further notice.
10.7. Conduct of Meetings. The Trustees shall appoint a Chairperson and a
Secretary of the meeting. The vote upon any
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resolution submitted to any meeting of Beneficiaries shall be by written
ballot. Two Inspectors of Votes, appointed by the Chairperson of the Meeting,
shall count all votes cast at the meeting for or against any resolution and
shall make and file with the Secretary of the meeting their verified written
report.
10.8. Record of Meetings. A record of the proceedings of each meeting of
Beneficiaries shall be prepared by the Secretary of the meeting. The record
shall be signed and verified by the Secretary of the meeting and shall be
delivered to the Trustees to be preserved by them. Any record so signed and
verified shall be conclusive evidence of the matters therein stated.
ARTICLE XI.
Miscellaneous Provisions
11.1. Intention of Parties to Establish Trust. This Trust Agreement is not
intended to create, and shall not be interpreted as creating, an association,
partnership or joint venture of any kind. It is intended as a trust to be
governed and construed in all respects as a trust.
11.2. Laws as to Construction. This Trust Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware.
11.3. Separability. In the event any provision of this Trust Agreement or
the application thereof to any person or circumstances shall be finally
determined by a court of proper jurisdiction to be invalid or unenforceable to
any extent, the
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remainder of this Trust Agreement, or the application of such provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each provision of this Trust
Agreement shall be valid and enforced to the fullest extent permitted by law.
11.4. Notices. Any notice or other communication hereunder shall be deemed
to have been sufficiently given, for all purposes, if deposited, postage
prepaid, in a post office or letter box addressed to the person for whom such
notice is intended at his address last known to the person giving such notice.
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IN WITNESS WHEREOF, the parties hereto have either executed and
acknowledged this Trust Agreement, or caused it to be executed and acknowledged
on their behalf by their duly authorized officers, all as of the date first
above written.
CHIAT/DAY HOLDINGS, INC.
on behalf of its stockholders
By: ______________________________
------------------------------
Thomas Patty, as Trustee
------------------------------
David C. Wiener, as Trustee
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STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On the __th day of _________, 1995 before me personally came ___________ to
me known, who, being by me duly sworn, did depose and say that he resides at
________________, ________, ________; that he is the _________ of Chiat/Day
Holdings, Inc., the corporation described in and which executed the above
instrument; and that he signed his name thereto by order to the board of
directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On the __th day of _________, 1995 before me personally came Thomas Patty
and David C. Wiener, respectively, to me known, and known to me to be the
persons described in and who executed the foregoing instrument, and they
acknowledged to me that they executed the same.
------------------------------
Notary Public
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SCHEDULE A
TRUST PROPERTY
26
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SCHEDULE B
STOCKHOLDER LIST
27
DEPOSIT AND PLEDGE AGREEMENT
DEPOSIT AND PLEDGE AGREEMENT, dated ____________, 1995 (the "Agreement"),
among CHIAT/DAY INC. ADVERTISING, a Delaware corporation ("Advertising");
CHIAT/DAY HOLDINGS, INC., a Delaware corporation ("Holdings"); OMNICOM GROUP
INC., a New York corporation ("Omnicom"); TBWA INTERNATIONAL INC., a Delaware
corporation ("TBWA"); and THE CHASE MANHATTAN BANK, N.A., as Deposit Agent (in
such capacity, the "Deposit Agent").
INTRODUCTION
A. Advertising, Holdings, TBWA and Omnicom are parties to a certain Asset
Purchase Agreement dated __________, 1995 (the "Purchase Agreement"), pursuant
to which TBWA acquired the assets and liabilities and the ongoing businesses of
Advertising and Holdings. Terms defined in the Purchase Agreement that are not
otherwise defined herein are used herein with the meanings ascribed to them
therein.
B. Pursuant to the Purchase Agreement, Holdings, Advertising and TBWA have
entered into an escrow agreement of even date herewith (the "Omnicom
Indemnification Escrow Agreement"; and the escrow agent thereunder, the "Omnicom
Indemnification Escrow Agent") to secure TBWA against certain Losses (as more
fully set forth in the Purchase Agreement). There will be created pursuant to
the Omnicom Indemnification Escrow Agreement a "General Escrow Fund" which will
consist of two separate and segregated sub-accounts, the "Stockholders General
Escrow Fund" and the "Rightsholders General Escrow Fund", and a "Special Escrow
Fund" which will consist of two separate and segregated sub-accounts, the
"Stockholders Special Escrow Fund" and the "Rightsholders Special Escrow Fund".
C. The Purchase Agreement provides that Holdings will liquidate and
dissolve and that, in the course of its expeditious and orderly winding up
process, Holdings shall cause to be created a liquidating trust (hereinafter,
the "Liquidating Trust", and the trustees thereof, collectively, the
"Liquidating Trustee") to act as the representative for Holdings and the
Stockholders, all in accordance with that certain liquidating trust agreement
entered into between Holdings and the Liquidating Trustee (the "Liquidating
Trust Agreement").
D. Holdings and Advertising have also entered into a separate escrow
agreement, (the "Liquidating Trust Escrow Agreement"; the fund created
thereunder, the "Liquidating Trust Escrow Fund"; and the escrow agent
thereunder, the "Liquidating Trust Escrow Agent") which shall be available
solely to fund and secure reimbursement obligations of holders of EARs and EPUs
(collectively, the "Rightsholders") to the Liquidating Trust.
<PAGE>
E. The Purchase Agreement further provides that, on the Distribution Date,
(i) the shares of Omnicom Common Stock, par value $.50 per share ("Omnicom
Stock"), paid to Holdings pursuant to Section 2.1 of the Purchase Agreement
(exclusive of the Contributed Stock) will be distributed (in the proportions set
forth in the Purchase Agreement and as further described herein) to the
Stockholders and, on behalf of the Stockholders, to the Liquidating Trust, the
Stockholders General Escrow Fund and the Stockholders Special Escrow Fund and
(ii) the shares of Omnicom Stock paid to Advertising pursuant to Section 2.1 of
the Purchase Agreement (inclusive of the Contributed Stock) will be distributed
(in the proportions set forth in the Purchase Agreement and as further described
herein) to the Rightsholders and, on behalf of the Rightsholders, to the
Liquidating Trust Escrow Fund, the Rightsholders General Escrow Fund and the
Rightsholders Special Escrow Fund. The Deposit Agent, pursuant to this
Agreement, shall effect the foregoing distributions on the Distribution Date
from the Omnicom Stock deposited in the Deposit Funds (as defined below), all in
accordance with the terms of this Agreement.
F. There shall be created, pursuant to this Agreement, eight separate
deposit funds: (i) the "Stockholders Deposit Fund"; (ii) the "Rightsholders
Deposit Fund"; (iii) the "Liquidating Trust Deposit Fund"; (iv) the "Liquidating
Trust Escrow Deposit Fund"; (v) the "Stockholders General Escrow Deposit Fund";
(vi) the "Stockholders Special Escrow Deposit Fund"; (vii) the "Rightsholders
General Escrow Deposit Fund"; and (viii) the "Rightsholders Special Escrow
Deposit Fund" (collectively, the "Deposit Funds"; the Deposit Funds listed in
clauses (i) through (iv), the "Unsecured Deposit Funds"; and the Deposit Funds
listed in clauses (v) through (viii), the "Secured Deposit Funds"). Each of the
Deposit Funds will contain shares of Omnicom Stock to be deposited by or on
behalf of Holdings or Advertising, all as set forth in Article I of this
Agreement.
G. The Unsecured Deposit Funds are being created to insure the timely and
orderly distribution of shares of Omnicom Stock received by Holdings and
Advertising pursuant to the Purchase Agreement to the recipients described
above. The Secured Deposit Funds are being created to secure the obligations of
Holdings and Advertising to deposit shares of Omnicom Stock, on behalf of the
Stockholders and Rightsholders, respectively, into the General Escrow Funds and
the Special Escrow Funds pursuant to the Purchase Agreement and the Omnicom
Indemnification Escrow Agreement.
Accordingly, the parties hereby agree as follows:
I. DEPOSIT AGENT; ESCROW FUND
1.1. Deposit Agent. Holdings, on behalf of itself and the Stockholders,
and Advertising, on behalf of itself and the Rightsholders, hereby appoint
The Chase Manhattan Bank, N.A. as,
2
<PAGE>
and The Chase Manhattan Bank, N.A. hereby accepts such appointment and
agrees to perform the duties of, Deposit Agent under this Agreement.
1.2. Deposit Funds. The Deposit Agent shall establish and maintain each of
the Deposit Funds. The Deposit Funds shall be held by the Deposit Agent and
shall be dealt with by the Deposit Agent in accordance with the terms and
conditions of this Agreement. This Agreement shall terminate at such time as the
entirety of the Deposit Funds shall have been distributed by the Deposit Agent
in accordance with the terms of this Agreement.
1.3. Deposits Into Unsecured Deposit Funds. (a) On the Closing Date,
Holdings shall deposit into (i) the Stockholders Deposit Fund, on behalf of the
Stockholders, certificates registered in the name of Holdings representing an
aggregate of _______ shares of Omnicom Stock and (ii) the Liquidating Trust
Deposit Fund, on behalf of the Stockholders, certificates registered in the name
of Holdings representing an aggregate of ________ shares of Omnicom Stock, in
each case together with stock powers duly executed in blank in respect of such
certificates.
(b) On the Closing Date, Advertising shall deposit into (i) the
Rightsholders Deposit Fund, on behalf of the Rightsholders, certificates
registered in the name of Advertising representing an aggregate of _______
shares of Omnicom Stock and (ii) the Liquidating Trust Escrow Deposit Fund, on
behalf of the Rightsholders, certificates registered in the name of Advertising
representing an aggregate of ________ shares of Omnicom Stock, in each case
together with stock powers duly executed in blank in respect of such
certificates.
1.4. Deposits Into Secured Deposit Funds. (a) On the Closing Date,
Holdings shall deposit into (i) the Stockholders General Escrow Deposit
Fund, on behalf of Holdings and the Stockholders, certificates registered in the
name of Holdings representing an aggregate of _______ shares of Omnicom Stock
and (ii) the Stockholders Special Escrow Deposit Fund, on behalf of Holdings and
the Stockholders, certificates registered in the name of Holdings representing
an aggregate of ________ shares of Omnicom Stock, in each case together with
stock powers duly executed in blank in respect of such certificates.
(b) On the Closing Date, Advertising shall deposit into (i) the
Rightsholders General Escrow Deposit Fund, on behalf of Advertising and the
Rightsholders, certificates registered in the name of Advertising representing
an aggregate of _______ shares of Omnicom Stock and (ii) the Rightsholders
Special Escrow Deposit Fund, on behalf of Advertising and the Rightsholders,
certificates registered in the name of Advertising representing an aggregate of
________ shares of Omnicom Stock, in each case together with stock powers duly
executed in blank in respect of such certificates.
3
<PAGE>
II. RE-REGISTRATION OF SHARE CERTIFICATES; DISTRIBUTIONS FROM
THE DEPOSIT FUNDS
2.1. Re-Registration of Share Certificates. Five business days prior to
the Distribution Date, the Deposit Agent shall instruct Chemical Bank N.A.
[ADDRESS], in its capacity as transfer agent and registrar of the Omnicom Stock,
to effect the re-registration of the stock certificates in the Deposit Funds as
follows (such re-registration to be made effective as of the opening of business
on the Distribution Date):
(i) The shares of Omnicom Stock represented by the stock certificate
in the Stockholders Deposit Fund shall be registered in the names of the
Stockholders and in the denominations set forth on Schedule I hereto;
(ii) The shares of Omnicom Stock represented by the stock certificate
in the Rightsholders Deposit Fund shall be registered in the names of the
Rightsholders and in the denominations set forth on Schedule II hereto;
(iii) The stock certificate in the Liquidating Trust Deposit Fund
shall be registered in the name of ["Thomas Patty and David C. Wiener, as
Trustees of the Chiat/Day Holdings, Inc. Liquidating Trust"];
(iv) The stock certificate in the Liquidating Trust Escrow Deposit
Fund shall be registered in the name of ["____________, as Liquidating
Trust Escrow Agent"];
(v) The stock certificate in the Stockholders General Escrow Deposit
Fund shall be registered in the name of ["Thomas Patty and David C. Wiener,
as Trustees of the Chiat/Day Holdings, Inc. Liquidating Trust"];
(vi) The stock certificate in the Stockholders Special Escrow Deposit
Fund shall be registered in the name of ["Thomas Patty and David C. Wiener,
as Trustees of the Chiat/Day Holdings, Inc. Liquidating Trust"];
(vii) The stock certificate in the Rightsholders General Escrow
Deposit Fund shall be registered in the name of ["____________, as
Liquidating Trust Escrow Agent"]; and
(viii) The stock certificate in the Rightsholders Special Escrow
Deposit Fund shall be registered in the name of ["____________, as
Liquidating Trust Escrow Agent"].(1)
- --------
(1) For (v) through (viii), the Omnicom Indemnification Escrow Agreement
will need to provide for new stock powers to be given by the
Liquidating Trustee and the Liquidating Trust Escrow Agent.
4
<PAGE>
2.2. Distributions from the Deposit Funds. On the Distribution Date,
following the re-registration of the stock certificates pursuant to Section 2.1,
the Deposit Agent shall distribute all of the shares of Omnicom Stock in each of
the Deposit Funds as follows, provided that the Deposit Agent shall make the
following distributions on October 30, 1995 if Holdings and TBWA do not notify
the Deposit Agent of an earlier Distribution Date(2):
(i) The shares of Omnicom Stock in the Stockholders Deposit Fund shall
be distributed to the Stockholders in accordance with Schedule I;
(ii) The shares of Omnicom Stock in the Rightsholders Deposit Fund
shall be distributed to the Rightsholders in accordance with Schedule II;
(iii) The shares of Omnicom Stock in the Liquidating Trust Deposit
Fund shall be distributed to the Liquidating Trustee for deposit into the
Liquidating Trust and application in accordance with the Liquidating Trust
Agreement;
(iv) The shares of Omnicom Stock in the Liquidating Trust Escrow
Deposit Fund shall be distributed to the Liquidating Trust Escrow Agent for
deposit into the Liquidating Trust and application in accordance with the
Liquidating Trust Escrow Agreement;
(v) The shares of Omnicom Stock in the Stockholders General Escrow
Deposit Fund shall be distributed to the Omnicom Indemnification Escrow
Agent for deposit into the Stockholders General Escrow Fund and application
in accordance with the Omnicom Indemnification Escrow Agreement;
(vi) The shares of Omnicom Stock in the Stockholders Special Escrow
Deposit Fund shall be distributed to the Omnicom Indemnification Escrow
Agent for deposit into the Stockholders Special Escrow Fund and application
in accordance with the Omnicom Indemnification Escrow Agreement;
(vii) The shares of Omnicom Stock in the Rightsholders General Escrow
Deposit Fund shall be distributed to the Omnicom Indemnification Escrow
Agent for deposit into the Rightsholders General Escrow Fund and
application in accordance with the Omnicom Indemnification Escrow
Agreement; and
- --------
(2) This proviso will be modified if the Closing Date will be after
October 31, 1995.
5
<PAGE>
(viii) The shares of Omnicom Stock in the Rightsholders Special Escrow
Deposit Fund shall be distributed to the Omnicom Indemnification Escrow
Agent for deposit into the Rightsholders Special Escrow Fund and
application in accordance with the Omnicom Indemnification Escrow
Agreement.
2.3. No Transfer of Deposit Funds. While any shares of Omnicom Stock
remain on deposit in the Deposit Funds, except as required pursuant to this
Agreement, none of Holdings, the Liquidating Trustee, [the Liquidating Trust
Escrow Agent], Advertising, any Stockholder or any Rightsholder will transfer,
sell, pledge, create a security interest in or otherwise dispose of their rights
to any distributions with respect to the Deposit Funds, except by will, the laws
of intestacy or by other operation of law.
2.4. No Certificates. No rights of any Person in to and under any of the
Deposit Funds shall be represented by any form of certificate or instrument.
2.5. Dividends on Omnicom Stock. All dividends in respect of any Omnicom
Stock held in the Deposit Funds shall be paid directly to the record holders of
such stock (as recorded in the records of the Transfer Agent and Registrar). In
the event any such dividends are paid to the Deposit Agent, such dividends shall
be promptly delivered to such record holders.
2.6. Voting. The record holders described in Section 2.5 above shall be
entitled to exercise all voting rights with respect to the Omnicom Stock on
deposit in the Deposit Funds and the Deposit Agent shall deliver to such record
holders any proxies with respect thereto which the Deposit Agent receives.
III. SECURITY INTEREST.
(a) Holdings on behalf of itself and the Stockholders hereby grants to TBWA
a first priority perfected security interest in each of the Stockholders General
Escrow Deposit Fund and the Stockholders Special Escrow Deposit Fund, and
Advertising on behalf of itself and the Rightsholders hereby grants to TBWA a
first priority perfected security interest in each of the Rightsholders General
Escrow Deposit Fund and the Rightsholders Special Escrow Deposit Fund, in each
case solely to secure their respective obligations to deposit Omnicom Stock into
the General Escrow Fund and the Special Escrow Fund pursuant to the Purchase
Agreement the Omnicom Indemnification Escrow Agreement. To the extent provided
in the immediately foregoing sentence, this Agreement shall constitute a
security agreement under applicable law. No security interest is being created
or granted hereby with respect to the Unsecured Deposit Funds.
(b) The parties agree that the above-granted security interest shall attach
as of the execution of this Agreement. The
6
<PAGE>
parties agree that, for the purpose of perfecting TBWA's security interest
in the above designated Secured Deposit Funds held by the Deposit Agent pursuant
to this Agreement, TBWA designates the Deposit Agent to acquire and maintain
possession of the Secured Deposit Funds and act as bailee for TBWA with notice
of TBWA's security interest in said property under the Uniform Commercial Code
and that possession of the Secured Deposit Funds by the Deposit Agent
acknowledges that it holds the Secured Deposit Funds for TBWA for purposes of
perfecting the security interest. Holdings, Advertising and the Deposit Agent
shall take all other actions requested by TBWA to maintain the perfection and
priority of the security interest in the Secured Deposit Funds; provided that
the Deposit Agent does not make any representation or warranty with regard to
the creation or perfection, hereunder or otherwise, of any such security
interest, and shall have no responsibility at any time to ascertain whether or
not any security interest exists.
(c) TBWA shall release the security interest herein granted and the
security interest shall be terminated upon the distribution of the Omnicom Stock
on deposit in the Secured Deposit Funds in accordance with the terms of this
Agreement. Upon such distribution, TBWA shall do all acts and things reasonably
necessary to release and extinguish such security interest. Holdings on behalf
of itself and the Stockholders, Advertising on behalf of itself and the
Rightsholders, Omnicom and TBWA hereby specifically agree that the grant of this
security interest pursuant to this Article III shall not in any way modify the
procedures the parties hereto must follow with respect to the release of Omnicom
Stock from the Secured Deposit Funds.
IV. DEPOSIT AGENT'S DUTIES AND FEES
4.1. Duties Limited. The Deposit Agent undertakes to perform only such
duties as are expressly set forth herein. The Deposit Agent shall not be bound
by, or have any responsibility with respect to, any other agreement between any
of the parties (other than an agreement to which the Deposit Agent is a party).
The Escrow Agent shall have no duty or responsibility with regard to any loss or
resulting from the transfer or other disposition of the Omnicom Stock on deposit
in the Deposit Funds in accordance with the terms of this Agreement. The Deposit
Agent need not maintain insurance with respect to the Deposit Funds.
4.2. Reliance. The Deposit Agent, acting (or refraining from acting) in
good faith, shall not be liable for any mistake of fact or error of judgment by
it or for any acts or omissions by it of any kind unless caused by gross
negligence or willful misconduct, and the Deposit Agent may rely, and shall be
protected in acting or refraining from acting, upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties;
provided that, as set forth
7
<PAGE>
below, modification of this Agreement shall be signed by all of the parties
hereto. The Deposit Agent is hereby authorized to comply with any judicial order
or legal process which stays, enjoins, directs or otherwise affects the transfer
or delivery of any part of the Deposit Funds or any party hereto and shall incur
no liability for any delay or loss which may occur as a result of such
compliance.
4.3. Good Faith. Holdings on behalf of itself and the Stockholders,
Advertising on behalf of itself and the Rightsholders, Omnicom and TBWA hereby
agree to indemnify the Deposit Agent for, and to hold it harmless against, any
loss, liability, expense (including reasonable attorneys' fees and expenses),
third party claim and demand, incurred by it without gross negligence or bad
faith on its part, arising out of or in connection with its entering into this
Agreement and the carrying out of its duties hereunder. The Deposit Agent may
consult with counsel of its own choice, and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel. The foregoing
indemnification shall survive the resignation of the Deposit Agent or the
termination of this Agreement.
4.4. Successor Deposit Agents. The Deposit Agent may resign and be
discharged from its duties or obligations hereunder at any time by giving 30
days' notice in writing of such resignation to Holdings and TBWA. Holdings and
TBWA, together, shall have the right to terminate the appointment of the Deposit
Agent hereunder by giving to it notice in writing of such termination specifying
the date upon which such termination shall take effect. In either such event,
Holdings and TBWA hereby agree to promptly appoint a successor deposit agent; if
Holdings and TBWA are unable to appoint a successor Deposit Agent within 25 days
after the Deposit Agent's notice of resignation, the Deposit Agent may petition
a court of competent jurisdiction to appoint a successor. The parties hereto
agree that, upon demand of such successor deposit agent, all property in the
Deposit Funds shall be turned over and delivered to such successor deposit
agent, which thereupon shall become bound by all of the provisions hereof.
4.5. Fees and Expenses. TBWA, on the one hand, and Holdings and
Advertising, on the other hand, agree to pay [on the Distribution Date] on an
equal basis to the Deposit Agent, a fee of $____________ for the services to be
rendered by it hereunder and for the reasonable expenses, disbursements and
advances (including reasonable attorneys' fees) to be incurred or made by it in
connection with the carrying out of its duties hereunder.
V. WAIVERS
This Agreement may be amended, superseded or canceled, and any of the terms
or conditions hereof may be waived, only by
8
<PAGE>
a written instrument executed by the parties hereto or, in the case of a
waiver, by the party waiving compliance (or his agent). The failure of any party
at any time or times to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same. No
waiver of any nature, whether by conduct or otherwise in any one or more
instances, of any provision hereof, shall be deemed to be, or construed as, a
further or continuing waiver of any such provision or of another provision
hereof.
VI. NOTICES
Any notice or other communication required or which may be given hereunder
(including without limitation the delivery of Omnicom Stock to any Person out of
the Deposit Funds) shall be in writing and either delivered personally (if so
requested by the Person entitled to such notice or distribution) or mailed by
certified or registered mail, postage prepaid, or sent by facsimile
transmission, and shall be deemed given when so delivered personally, mailed or
sent by facsimile, as follows:
If to Holdings or Advertising, to Holdings at:
Chiat/Day Holdings, Inc.
180 Maiden Lane
New York, New York 10038
Attention: Chief Financial Officer
Fax No.: (212-804-1200)
(or following the dissolution of
Holdings to the Liquidating
Trustee at the address set forth
below)
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: James Cotter, Esq.
Fax No.: 212-455-2502
If to the Liquidating Trustee, to:
----------------------------
----------------------------
----------------------------
Fax No.:
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
9
<PAGE>
New York, New York 10017
Attention: James Cotter, Esq.
Fax No.: 212-455-2502
If to the Liquidating Trust Escrow Agent, to:
---------------------------
---------------------------
---------------------------
Fax No.:
If to Omnicom or TBWA, to Omnicom at:
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
Fax No.: 212-415-3536
If to the Deposit Agent or the Omnicom Indemnification
Escrow Agent, to:
The Chase Manhattan Bank, N.A.
-------------------------------------
-------------------------------------
-------------------------------------
Fax No.:
Any party may change the persons and addresses to which notices, payments,
instructions or other communications are to be sent to such party by giving
written notice of any such change in the manner provided herein for giving
notice. Notices sent by facsimile transmission shall be confirmed in writing by
registered or certified mail, return receipt requested.
VII. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York applicable to agreements made and to be performed
entirely within such State.
VIII. NO ASSIGNMENT
This Agreement shall be binding upon, and inure to the benefit of, the
successors and assigns of Holdings, Advertising, Omnicom, TBWA and the Deposit
Agent, but, except for as otherwise provided or permitted in this Agreement, no
delegation of any obligations provided for herein may be made by any party
hereto without the express written consent of the other parties hereto, except
for the provisions of Section 4.4 hereof respecting successor deposit agents.
10
<PAGE>
IX. SECTION HEADINGS
The section headings contained in this Agreement are inserted for
convenience of reference only, and shall not affect the meaning or
interpretation of this Agreement.
WITNESS the execution of this Agreement as of the date first above written.
CHIAT/DAY HOLDINGS, INC.
By: ________________________
CHIAT/DAY INC. ADVERTISING
By: ________________________
OMNICOM GROUP INC.
By:_________________________
TBWA INTERNATIONAL INC.
By:_________________________
THE CHASE MANHATTAN BANK,
N.A.,
as Deposit Agent
By: ________________________
11
<PAGE>
Schedule I
NAMES AND DENOMINATIONS FOR STOCKHOLDERS STOCK CERTIFICATES
12
<PAGE>
Schedule II
NAMES AND DENOMINATIONS FOR RIGHTSHOLDERS STOCK CERTIFICATES
13
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into between
Adelaide Horton (the "Purchaser"), and Chiat/Day Holdings, Inc., a Delaware
corporation (the "Seller"), as of the 11th day of May, 1995.
The Seller and the Purchaser hereby agree as follows:
1. Sale and Purchase of the Shares; Purchase Price; the Closing. (a) The
Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase
from the Seller, on the Closing Date (as hereinafter defined), 100 shares of
Common Stock (the "Shares"), par value $.01 share, of Chiat/Day inc.
Advertising, a Delaware Corporation ("Advertising"), representing all of the
shares of Common Stock of Advertising owned by the Seller.
(b) The aggregate purchase price (the "Purchase Price") for the Shares
shall be $250,000.
(c) The sale and purchase of the Shares shall take place at a closing at
the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York 10017 (or at such other place as the parties may determine) at 10:00 a.m.,
New York City time, on or as soon as practicable after the Distribution Date
under (and as defined in) that certain Asset Purchase Agreement (the "Asset
Purchase Agreement") of even date herewith by and among Omnicom Group Inc.
("Omnicom"), TBWA International Inc. ("TBWA"), the Seller and Advertising,
provided that if the Closing under (and as defined in) the Asset Purchase
Agreement occurs on or prior to October 31, 1995, the closing hereunder shall
occur on or prior to October 31, 1995 (the "Closing Date"). On the Closing Date,
(i) the Purchaser shall deliver a bank or certified check to the Seller in the
amount of the Purchase Price against delivery by the Seller of certificates
representing the Shares and (ii) the Seller shall deliver to the Purchaser,
against delivery by the Purchaser of the Purchase Price, certificates
representing the Shares, properly endorsed by the Seller and accompanied by such
stock powers and other documents as may be necessary to transfer record
ownership of the Shares into such names as Purchaser shall request on the
transfer books of Advertising, together with evidence of payment of all
applicable transfer and documentary stamp taxes and other fees.
2. Conditions Precedent. (a) The obligation of Purchaser to purchase the
Shares pursuant to this Agreement are subject to the fulfillment (or waiver by
the Purchaser) of each of the following conditions: (i) the Closing under the
Asset Purchase Agreement shall have occurred; (ii) Advertising shall have full
and exclusive rights (either directly or indirectly through the ownership of all
outstanding capital stock of
<PAGE>
Chiat/Day Direct Marketing, Inc.) in, to and under that certain lawsuit
entitled Chiat/Day Direct Marketing, Inc. f/k/a Perkins/Butler Direct Marketing,
Inc. v. National Car Rental Systems, Inc., No. 93 Civ. 2717 (S.D.N.Y.) (the
"National Car Suit") including, without limitation, all damages which may be
awarded to the plaintiffs thereunder and none of such rights shall have been
transferred to Omnicom, TBWA or any other person or entity pursuant to the Asset
Purchase Agreement or otherwise; and (iii) the Seller shall have, or shall have
caused Advertising to have, taken all actions reasonably necessary to preserve
Advertising's rights in, to and under the National Car Suit prior to the Closing
Date including, without limitation, making timely payment for all costs and
expenses (including reasonable attorneys' fees) due and payable by it in respect
of such suit.
(b) The obligation of the Seller to sell the Shares pursuant to this
Agreement is subject to the fulfillment of the following condition (which
condition may not be waived by the Seller): the distribution of Omnicom Stock
(as defined in the Asset Purchase Agreement) by each of Seller and Advertising
contemplated by Sections 2.6 and 2.7 of the Asset Purchase Agreement shall have
been completed.
3. Assignments.This Agreement shall not be assignable, except that (i) the
Purchaser may assign its rights under this Agreement, including the right to the
delivery of some or all of the Shares, to any person, and (ii) the Seller may
assign its rights under this Agreement, including the right to receive payment
of some or all of the Purchase Price, to any person (it being understood that
the Seller intends to assign such rights to the Purchase Price to TBWA pursuant
to the Asset Purchase Agreement). This Agreement shall be binding upon, inure to
the benefit of and be enforceable by and against the parties hereto and their
successors.
4. Indemnification. Seller agrees to indemnify the Purchaser and
Advertising and to protect, save and keep harmless the Purchaser and Advertising
from, and to assume liability for, payment of all Losses (as defined in the
Asset Purchase Agreement) that may be imposed on or incurred by the Purchaser or
Advertising arising out of or in connection with any Retained Advertising
Liabilities (as defined in the Asset Purchase Agreement).
5. Further Action. Upon the terms and subject to the conditions hereof,
each of the parties hereto agrees to use its reasonable best efforts to do, or
cause to be done, all things necessary, proper or advisable as are necessary for
the consummation of the transactions contemplated hereby.
6. Amendments. No amendment or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by or on
behalf of the Purchaser and on behalf of the Seller.
2
<PAGE>
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but both of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
ADELAIDE HORTON
/s/ ADELAIDE HORTON
----------------------------------
CHIAT/DAY HOLDINGS, INC.
By:/S/ IRA MATATHIA
-----------------------------------
Name: Ira Matathia
Title: Director
3
PROFIT SHARING PLAN PURCHASE AGREEMENT
PROFIT SHARING PLAN PURCHASE AGREEMENT dated as of May 9, 1995 by and
between Chiat/Day Holdings, Inc. (the "Company") and Michael Kooper (the
"Trustee").
WITNESSETH
WHEREAS, the Company contemplates selling substantially all its assets and
the assets of Chiat/Day inc. Advertising ("Advertising") to TBWA International
Inc. ("TBWA") (the "Transaction") pursuant to an asset purchase agreement by and
among the Company, Advertising, Omnicom Group Inc. ("Omnicom") and TBWA (the
"Purchase Agreement"); and
WHEREAS, TBWA is not willing to assume liabilities related to the Chiat/Day
Profit Sharing and 401(k) Plan (the "Plan" and assets of the Plan will not be
transferred to a plan sponsored by TBWA in connection with the Transaction; and
WHEREAS, the majority of the Plan assets consist of the Company's preferred
stock ("Company Preferred Stock") and Class B common stock ("Company Common
Stock")(collectively, "Company Stock"), and the sale of Company Stock
contemplated by this Agreement will significantly improve the liquidity and
increase the value of the Plan's assets; and
WHEREAS, if the sale of Company Stock contemplated by this Agreement is
consummated, the Plan will receive, on the dates described below, cash in an
amount which is greater than or equal to the fair market value of the Company
Stock, in lieu of the Omnicom stock which will be paid to other shareholders of
Company Common Stock on or about October 26, 1995 in connection with the
Transaction, which payment of the Omnicom Stock will be subject to holdback and
escrow requirements, and which payment of the Omnicom Stock would otherwise be
payable to the Plan; and
WHEREAS, the sale of Company Preferred Stock contemplated by this Agreement
on the date described below shall be binding on the parties hereto even in the
event that the Purchase Agreement is terminated in accordance with its terms
after such date.
NOW, THEREFORE, in accordance with Section 2.3(a) of the Purchase
Agreement, the Company and the Trustee hereby agree as follows:
1. In light of the foregoing facts, the Company and the Trustee hereby
agree that the following actions are in the best interests of Plan participants
and beneficiaries:
<PAGE>
(a) (i) On or about July 1, 1995 but no later than July 10, 1995, the
Plan shall sell all Company Preferred Stock held by the Plan on such date
to the Company for an amount in cash of $14,081,773.93, which amount will
be equal to the face amount of such Company Preferred Stock (the "Preferred
Stock Payment"), and (ii) as soon as practicable after receipt of an
appraisal as described in paragraph 2 hereof, the Plan shall sell all
Company Common Stock to the Company for an amount in cash equal to $350,000
("the Common Stock Payment").
(b) Neither the Preferred Stock Payment nor the Common Stock Payment
shall be subject to any commission, holdback, adjustment or any other
condition applicable to payments made to holders of Company Stock other
than the Plan in connection with the Transaction.
(c) All Plan participants shall become fully vested in their accounts
under the Plan upon the closing of the Transaction (the "Closing Date").
(d) The Purchase Agreement shall provide that after the Transaction,
former company employees shall receive the benefits listed on Schedule 6.4
thereto, which benefits have been designated and approved by the Company.
(e) The Plan shall be terminated by the Company at its expense as of
the Closing Date, and all Plan assets will be distributed to Plan
participants as soon as practicable thereafter.
(f) All legal, accounting, appraisal and other expenses, expended or
accrued in connection with the transactions contemplated hereby shall be
borne by the Plan.
2. The Company and the Trustee agree that the sales of Company Stock to the
Company contemplated by this Agreement shall be contingent upon receipt by the
Trustee of an appraisal from an independent appraisal firm which indicates that
the fair market value (as defined in Section 3(18) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) of the Company Preferred
Stock and the Company Common Stock is less than or equal to (i) the Preferred
Stock Payment and the Common Stock Payment, respectively, on the applicable
sales date, and (ii) the valuation on a per share basis of the Company Preferred
Stock and the Company Common Stock, as the case may be, as determined by Duff &
Phelps Financial Consulting Co. ("Duff & Phelps") in its valuation analysis as
of October 31, 1993 as set forth in that certain letter dated April 14, 1994
from Duff & Phelps to the former trustee of the Plan.
3. Notwithstanding the foregoing, if the Purchase Agreement is terminated
in accordance with its terms on or prior
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to July 1, 1995, this Agreement shall be of no further force and effect,
and if the Purchase Agreement is terminated in accordance with its terms prior
to the consummation of the sale of the Company Common Stock, the provisions in
this Agreement which pertain to Company Common Stock shall be of no further
force and effect. In addition, it shall be a condition to the obligations set
forth in this Agreement that the Company shall have obtained on terms and
conditions satisfactory to the Company in its sole discretion, financing
sufficient for the Company to consummate the transactions contemplated hereby.
4. As a material inducement to the Trustee to execute, deliver and perform
under this Agreement, the Company represents and warrants to the Trustee that
the statements contained in this Section 4 are true, correct and complete as of
the date of this Agreement and will be true, correct and complete as of the date
of the Preferred Stock Payment and the Common Stock Payment as though made then
and as though each such date were substituted for the date of this Agreement
throughout this Section 4:
(i) The Company is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
(ii) The Company has all requisite power and authority under its
Certificate of Incorporation and by-laws and applicable laws to execute and
deliver this Agreement and to carry out all actions required of it pursuant
to the terms of this Agreement. The Company has all requisite power and
authority to carry on its business and to own and operate its properties as
are now conducted.
(iii) The Company will have obtained all necessary authorizations and
approvals from its Board of Directors and stockholders required for the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement when duly executed and
delivered by the Company will constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and by the application of general principles of
equity, regardless of whether considered in a proceeding at law or in
equity.
(iv) The execution, delivery and performance of this Agreement by the
Company will not constitute a violation of, or be in conflict with, or
result in the breach of, or constitute or create a default under, result in
the acceleration of, create in any person the right to accelerate,
terminate, modify or cancel, or require any notice pursuant to, (a) the
Certificate of Incorporation or by-laws of the Company, as amended to date;
(b) any
3
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agreement or commitment to which the Company is a party or to which
the Company is subject; or (c) other than ERISA or the Internal Revenue
Code of 1986, as amended, in respect of which no representation is being
made, any statute, regulation or rule or any judgment, decree, order,
ruling, charge or other restriction of any court, governmental agency or
governmental authority.
(v) No consent, approval or authorization of, or registration,
qualification or filing with, any governmental agency or authority or any
other third party is required for the execution, delivery and performance
of this Agreement by the Company. No order, writ, injunction or decree has
been issued, or threatened to be issued, by any court or governmental
agency which would adversely affect the consummation of the transactions
contemplated by this Agreement.
(vi) The terms of the employment agreements, non-competition
agreements and employment/consulting agreements to be entered into pursuant
to Sections 8.14, 8.15 and 8.16 of the Purchase Agreement are not
materially more advantageous to the covered executives than the terms of
employment, non-competition and consulting currently in effect with respect
to each such executive.
(vii) Schedule A annexed hereto and made a part hereof sets forth the
following: (a) an audited consolidated balance sheet of the Company and its
subsidiaries as at October 31, 1992, 1993 and 1994, and the related
statements of operations, stockholders' equity (deficit) and cash flow for
the years then ended, reported on by Coopers & Lybrand, independent
certified public accountants, (b) consolidated balance sheets of the
Company and Chiat/Day Inc. Advertising ("Advertising") as at October 31,
1994 (such consolidated balance sheets of the Company and Advertising are
referred to herein as the "Company Balance Sheets" and the "Advertising
Balance Sheet," respectively), (c) consolidated balance sheets as at
October 31, 1994 of the U.S. offices of Advertising, the Toronto office of
Advertising and the London office of Chiat/Day Inc. Advertising
International. The consolidated balance sheet of the Company and its
subsidiaries as at October 31, 1994 is referred to in this Agreement as the
"Balance Sheet". Such financial statements, including the footnotes
thereto, are true and correct in all material respects and have been
prepared in accordance with U.S. generally accepted accounting principles
("GAAP") consistently applied throughout the periods indicated. Each of the
consolidated balance sheets of the Company and its subsidiaries fairly
presents the consolidated financial position of the Company and its
subsidiaries at the respective date thereof and reflects all claims against
and all debts and liabilities of the Company and its subsidiaries, fixed or
contingent, as at the date
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thereof, required to be shown thereon under GAAP, and the related
statements of operations, stockholders' equity (deficit) and cash flow
fairly present the consolidated results of operations of the Company and
its subsidiaries, retained earnings and the cash flow for the respective
periods indicated. Each of the consolidated balance sheets as at October
31, 1994 fairly presents the financial condition of the applicable
operating unit at the Balance Sheet Date and reflects all claims against
and all debts and liabilities of such operating unit, fixed and contingent,
as at such date, required to be shown thereon under GAAP. Since October 31,
1994 (the "Balance Sheet Date"), except for the execution and delivery of
the Purchase Agreement and the transactions required or permitted to take
place pursuant thereto on or prior to the closing date thereof, there has
been no material change in the assets or liabilities, or in the business or
condition, financial or otherwise, in the results of operations of the
Company and its subsidiaries which in the aggregate would materially
increase the net worth of the Company.
5. All notices, requests, demands and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed, first class
mail, postage prepaid, return receipt requested, as follows:
(a) If to the Company:
Chiat/Day Holdings Inc.
180 Maiden Lane
New York, New York 10038
Attn: Chief Financial Officer
Fax: (212) 804-1200
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: James M. Cotter, Esq.
Fax: (212) 455-2502
(b) If to the Trustee:
Michael Kooper
The Kooper Group
770 Lexington Avenue
New York, New York 10021
Fax: (212) 755-0831
with a copy to:
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Mandel and Resnik, P.C.
220 East 42nd Street
New York, New York 10017
Attn: Barry H. Mandel, Esq.
Fax: (212) 573-0067
or to such other address or to the attention of such other person as any
party shall have specified by notice in writing to the other parties. All such
notices, requests, demands and communications shall be deemed to have been
received on the date of personal delivery or on the third business day after the
mailing thereof.
6. Nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
7. This Agreement may be amended, supplemented or otherwise modified only
by a written instrument executed by the parties hereto. No waiver by either
party of any of the provisions hereof shall be effective unless explicitly set
forth in writing and executed by the party so waiving. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any covenants or agreements contained herein and in any documents delivered or
to be delivered pursuant to this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
8. If any provision of this Agreement shall be declared by any court of
competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this Agreement shall not be affected and shall remain in full
force and effect.
9. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
10. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to conflicts of laws principles
thereof except to the extent that issues hereunder are preempted by ERISA.
11. This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein. This Agreement supersedes
all prior oral and written agreements and understandings between the parties
with respect to such subject matter.
6
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12. This Agreement may be amended, supplemented or modified by the parties
hereto only by an agreement in writing signed on behalf of each of the parties
hereto following due authorization at any time.
13. Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
CHIAT/DAY HOLDINGS INC.
By:/S/ JAY CHIAT
--------------------------------
Title: President/CEO
/s/ MICHAEL KOOPER
--------------------------------
Michael Kooper
8
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report, dated February 20,
1995 included in the Omnicom Group Inc. Form 10-K for the year ended December
31, 1994 and to all references to our Firm included in this Registration
Statement.
/s/ ARTHUR ANDERSEN LLP
New York, New York
June 7, 1995
Consent of Independent Accountants
We consent to the inclusion in this Prospectus/Information Statement and
the Registration Statement of which this Prospectus/Information Statement is a
part on Form S-4 (File No.___________) of our report, which includes an
explanatory paragraph concerning the Company's ability to continue as a going
concern dated April 7, 1995, except for Note 10 as to which the date is June 7,
1995, on our audit of the consolidated financial statements of Chiat/Day
Holdings, Inc. We also consent to the reference to our firm under the caption
"Experts".
Coopers & Lybrand L.L.P.
Sherman Oaks, California
June 9, 1995
