<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
AMENDMENT NO. 12 TO
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
TRUE NORTH COMMUNICATIONS INC.
(Name of Subject Company)
PUBLICIS S.A.
(Bidder)
COMMON STOCK, PAR VALUE $.33-1/3 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
897844 10 6
(CUSIP Number of Class of Securities)
JEAN-PAUL MORIN
c/o PUBLICIS S.A.
133, AVENUE DES CHAMPS ELYSEES
75380 PARIS, FRANCE
TELEPHONE: 011-33-1-44-43-70-00
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
THOMAS J. KUHN, ESQ.
HOWARD, DARBY & LEVIN
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 841-1000
<PAGE> 2
CALCULATION OF FILING FEE
===========================================================================
<TABLE>
<S> <C>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
---------------------- ----------------------
$269,357,312 $53,871.46
</TABLE>
===========================================================================
* For purposes of calculating the filing fee only. This calculation
assumes the purchase of an aggregate of 9,619,904 shares of Common Stock,
par value $.33-1/3 per share, of True North Communications, Inc. at $28
net per share in cash.
** 1/50 of one percent of the Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or ___ the Form or Schedule and date of its filing.
Amount Previously Paid: Not Applicable
Form or Registration No.: Not Applicable
Filing Party: Not Applicable
Date Filed: Not Applicable
Page 1 of 9 pages
Exhibit Index begins on Page 7
<PAGE> 3
14D-1
CUSIP No. 897844 10 6 Page 2 of 9 pages
1) Name of Reporting Persons: PUBLICIS S.A.
S.S. or I.R.S. Identification Nos. of Above Person: THIS OPTIONAL
INFORMATION HAS BEEN EXCLUDED TO MAINTAIN THE FILER'S PRIVACY.
- --------------------------------------------------------------------------------
- --------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See Instructions).
[ ] (a)
[ ] (b)
- --------------------------------------------------------------------------------
- --------------------------------------------------
3) SEC Use Only.
- --------------------------------------------------------------------------------
- --------------------------------------------------
4) Sources of Funds (See Instructions): OO
- --------------------------------------------------------------------------------
- --------------------------------------------------
5) [ ] Check box if Disclosure of Legal Proceedings is Required pursuant to
Items 2(e) or 2(f).
- --------------------------------------------------------------------------------
- --------------------------------------------------
6) Citizenship or Place of Organization:
FRANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------
7) Aggregate Amount Beneficially Owned by Each Reporting Person:
4,658,000 SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------
8) [ ] Check box if the Aggregate Amount in Row 7 Excludes Certain Shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------
9) Percent of Class Represented by Amount in Row 7:
APPROXIMATELY 18.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------
10) Type of Reporting Person (See Instructions):
HC, CO
<PAGE> 4
14D-1
CUSIP No. 897844 10 6 Page 3 of 9 pages
1) Name of Reporting Persons: PUBLICIS COMMUNICATION
S.S. or I.R.S. Identification Nos. of Above Person: THIS OPTIONAL
INFORMATION HAS BEEN EXCLUDED TO MAINTAIN THE FILER'S PRIVACY.
- --------------------------------------------------------------------------------
- --------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See Instructions).
[ ] (a)
[ ] (b)
- --------------------------------------------------------------------------------
- --------------------------------------------------
3) SEC Use Only.
- --------------------------------------------------------------------------------
- --------------------------------------------------
4) Sources of Funds (See Instructions): OO
- --------------------------------------------------------------------------------
- --------------------------------------------------
5) [ ] Check box if Disclosure of Legal Proceedings is Required pursuant to
Items 2(e) or 2(f).
- --------------------------------------------------------------------------------
- --------------------------------------------------
6) Citizenship or Place of Organization:
FRANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------
7) Aggregate Amount Beneficially Owned by Each Reporting Person:
4,658,000 SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------
8) [ ] Check box if the Aggregate Amount in Row 7 Excludes Certain Shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------
9) Percent of Class Represented by Amount in Row 7:
APPROXIMATELY 18.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------
10) Type of Reporting Person (See Instructions):
CO
<PAGE> 5
This Statement on Schedule 14D-1 also constitutes Amendment No. 12 to the
Schedule 13D with respect to the beneficial ownership of 4,658,000 Shares (as
defined below) by Publicis S.A. and Publicis Communication. The item numbers
and responses thereto below are in accordance with the requirements of Schedule
14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is True North Communications Inc., a
Delaware corporation (the "Company"). The address of the Company's principal
executive offices is 101 East Erie Street, Chicago, Illinois 60611.
(b) This Statement on Schedule 14D-1 relates to the offer by Publicis
S.A., a societe anonyme organized under the laws of France (the "Purchaser"),
to purchase 9,619,904 shares of Common Stock, par value $.33-1/3 per share (the
"Shares"), of the Company, or such greater number of Shares which, when added
to the number of Shares owned by the Purchaser and its affiliates, constitutes
a majority of the total number of Shares outstanding on a fully diluted basis
(assuming the exercise or conversion, as applicable, of all outstanding
options, rights and convertible securities (if any) and the issuance of all
Shares that the Company is obligated to issue) as of the expiration of the
Offer (as defined below), and (unless and until the Purchaser declares that the
Rights Condition (as defined in the Offer to Purchase (as defined below)) has
been satisfied, the associated Series A Junior Participating Preferred Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement (as
defined in the Offer to Purchase), at a purchase price of $28 per Share (and
associated Right), net to the seller in cash, without interest thereon, in each
case upon the terms and subject to the conditions set forth in the Offer to
Purchase (the "Offer to Purchase") and the related Letter of Transmittal,
copies of which are attached to and filed with this Schedule 14D-1 as Exhibits
(a)(1) and (a)(2) (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"). According to the Company's Registration
Statement under the Securities Act of 1933, on Form S-4, filed on November 26,
1997, as of November 18, 1997, there were 25,271,533 Shares outstanding. The
information set forth in the "Introduction" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of the Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed by the Purchaser. The
information set forth in the "Introduction," Section 9 ("Certain Information
Concerning the Purchaser") and Schedule I ("Directors and Executive Officers of
the Purchaser") of the Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five years, neither the Purchaser, nor Somarel,
Societe Civile Familiale, nor, to the best of its knowledge, any of the persons
listed in Schedule I ("Directors and Executive Officers of the Purchaser") of
the Offer to Purchase has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
4
<PAGE> 6
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "Introduction," Section 9
("Certain Information Concerning the Purchaser"), Section 10 ("Background of
the Offer; Contacts with the Company"), Section 11 ("Purpose of the Offer and
the Proposed Publicis Combination; Plans for the Company") of the Offer to
Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 12 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "Introduction," Section 10
("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose
of the Offer and the Proposed Publicis Combination; Plans for the Company") of
the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 ("Possible Effects of the
Offer on the Market for the Shares; Stock Exchange Listing; Exchange Act
Registration; Margin Regulations") of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "Introduction," Section 9
("Certain Information Concerning the Purchaser"), Section 10 ("Background of
the Offer; Contacts with the Company") and Schedule I ("Directors and Executive
Officers of the Purchaser") of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "Introduction," Section 9 ("Certain
Information Concerning the Purchaser"), Section 10 ("Background of the Offer;
Contacts with the Company"), Section 11 ("Purpose of the Offer and the Proposed
Publicis Combination; Plans for the Company") and Section 13 ("Dividends and
Distributions") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and Section 16 ("Certain
Fees and Expenses") of the Offer to Purchase is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information required by Item 9 is set forth as Exhibit (g)(l) hereto
and is incorporated herein by reference.
5
<PAGE> 7
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser") and Section 10 ("Background of the Offer; Contacts
with the Company") and is incorporated herein by reference.
(b)-(c) The information set forth in the "Introduction," Section 11
("Purpose of the Offer and the Proposed Publicis Combination; Plans for the
Company") and Section 15 ("Certain Legal Matters; Required Regulatory
Approvals") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Possible Effects of the Offer
on the Market for the Shares; Stock Exchange Listing; Exchange Act
Registration; Margin Regulations") is incorporated herein by reference.
(e) The information set forth in the "Introduction," Section 10
("Background of the Offer; Contacts with the Company") and Section 15 ("Certain
Legal Matters; Required Regulatory Approvals") of the Offer to Purchase is
incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal is incorporated herein by reference.
6
<PAGE> 8
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase, dated December 15, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(5) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees.
(a)(6) Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(b)(1) Credit Agreement, dated April 30, 1997, between Credit Lyonnais and the Purchaser.
(b)(2) Credit Facility, dated May 2, 1997, between Banque Paribas and the Purchaser.
(b)(3) Agreement, dated May 2, 1997, between Banque Nationale de Paris and the Purchaser.
(b)(4) Credit Agreement, dated May 2, 1997, between Banque Francaise Du Commerce
Exterieur and the Purchaser.
(b)(5) Contract, dated May 2, 1997, between Union de Credit Pour Le Developpement
Regional and the Purchaser.
(b)(6) Line of Credit, dated May 2, 1997, between Banque OBC-Odier Bungener Courvoisier
and the Purchaser.
(b)(7) Line of Credit, dated April 9, 1997, between CIC-Paris and the Purchaser.
(c)(1) Master Alliance Agreement and FCB Stockholders Agreement, each dated January 1,
1989, between Publicis Communication and Foote, Cone & Belding Communications,
Inc. ("FCB").
(c)(2) Memorandum of Agreement, dated February 19, 1997, among the Purchaser, Publicis
Communication, and Publicis-FCB Europe B.V. ("PBV"), on the one hand, and the
Company, FCB and FCB International, Inc. ("FCBI"), on the other hand.
(c)(3) Agreement, dated as of May 19, 1997, among the Purchaser, Publicis Communication,
and PBV, on the one hand, and the Company, FCBI and True North Holdings
Netherlands B.V., on the other hand.
</TABLE>
7
<PAGE> 9
<TABLE>
<S> <C>
(c)(4) Pooling Agreement, dated as of May 19, 1997, by and among the Purchaser, Publicis
Communication and the Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Audited consolidated financial statements and notes thereto of the Purchaser for
the three years ended December 31, 1996, 1995 and 1994 and unaudited
consolidated financial statements of the Purchaser for the six-month periods
ended June 30, 1997 and 1996.
(h)(1) Complaint of Publicis Communication seeking Declaratory and Injunctive Relief
filed with the United States District Court for the Northern District of
Illinois, Eastern Division on November 26, 1997
(h)(2) Notice of Arbitration of True North in Connection with the May 1997 Agreements
filed with the London Court of International Arbitration on December 3, 1997
(h)(3) Answer and Counterclaims of True North seeking Declaratory and Injunctive Relief
and Damages filed with the United States District Court for the Northern District
of Illinois, Eastern Division on December 3, 1997
(h)(4) True North's Motion for an Emergency Temporary Restraining Order, filed with the
United States District Court for the Northern District of Illinois, Eastern
Division on December 5, 1997
(h)(5) Preliminary Injunction Order of the United States District Court for the Northern
District of Illinois, Eastern Division, dated December 10, 1997.
(h)(6) Publicis' Amended and Supplemental Complaint filed with the United States
District Court for the Northern District of Illinois, Eastern Division on
December 11, 1997
(h)(7) Decision of the Seventh Circuit Court of Appeals, dated December 15, 1997
</TABLE>
8
<PAGE> 10
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
PUBLICIS S.A.
By: /s/ Maurice Levy
____________________________________
Name: Maurice Levy
Title: President
PUBLICIS COMMUNICATION
By: /s/ Jean-Paul Morin
____________________________________
Name: Jean-Paul Morin
Title: Secretaire General
Dated: December 15, 1997
9
<PAGE> 1
OFFER TO PURCHASE FOR CASH
9,619,904 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
TRUE NORTH COMMUNICATIONS INC.
AT
$28 NET PER SHARE
BY
PUBLICIS S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS HEREINAFTER DEFINED)
A NUMBER OF SHARES (AS HEREINAFTER DEFINED), INCLUDING THE RIGHTS (AS
HEREINAFTER DEFINED) ASSOCIATED THEREWITH, WHICH, WHEN ADDED TO THE NUMBER OF
SHARES (AND RIGHTS) BENEFICIALLY OWNED BY PUBLICIS S.A. (THE "PURCHASER") AND
ITS AFFILIATES, CONSTITUTES A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES
(AND RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. (THE "COMPANY") ON A FULLY
DILUTED BASIS, (2) THE COMPANY HAVING ENTERED INTO A DEFINITIVE AGREEMENT WITH
THE PURCHASER, PUBLICIS COMMUNICATION AND PUBLICIS WORLDWIDE B.V. (BOTH OF WHICH
ARE SUBSIDIARIES OF THE PURCHASER) TO EFFECT THE PROPOSED PUBLICIS COMBINATION
(AS HEREINAFTER DEFINED), (3) THE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
PURCHASE RIGHTS (COLLECTIVELY, THE "RIGHTS") OF THE COMPANY HAVING BEEN REDEEMED
BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER BEING SATISFIED THAT
THE RIGHTS HAVE BEEN INVALIDATED OR OTHERWISE ARE INAPPLICABLE TO THE OFFER AND
THE PROPOSED PUBLICIS COMBINATION, (4) THE PURCHASER BEING SATISFIED THAT
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW HAS BEEN COMPLIED WITH IN
CONNECTION WITH THE OFFER AND THE PROPOSED PUBLICIS COMBINATION OR IS
INAPPLICABLE TO THE PURCHASER IN CONNECTION WITH THE OFFER AND THE PROPOSED
PUBLICIS COMBINATION AND (5) THE AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY
30, 1997 (THE "BOZELL MERGER AGREEMENT"), AMONG THE COMPANY, CHEROKEE
ACQUISITION CORPORATION AND BOZELL, JACOBS, KENYON & ECKHARDT, INC. ("BOZELL")
HAVING BEEN TERMINATED WITHOUT ANY PAYMENTS BY OR PENALTIES TO THE COMPANY
(OTHER THAN ANY APPLICABLE PAYMENTS PURSUANT TO SECTION 5.7(c) OF THE BOZELL
MERGER AGREEMENT) AND THE COMPANY NOT HAVING ENTERED INTO OR EFFECTUATED ANY NEW
OR AMENDED AGREEMENTS WITH BOZELL OR ANY OTHER PERSON OR ENTITY HAVING THE
EFFECT OF IMPAIRING THE ABILITY OF THE PURCHASER TO CONSUMMATE THE OFFER OR THE
PROPOSED PUBLICIS COMBINATION OR OTHERWISE DIMINISHING THE EXPECTED ECONOMIC
VALUE TO THE PURCHASER OF THE SHARES PURCHASED IN THE OFFER OR THE PROPOSED
PUBLICIS COMBINATION. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND
15.
THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING.
------------------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
December 16, 1997
<PAGE> 2
IMPORTANT
The Purchaser intends to continue to seek to negotiate with the Company
with respect to the Proposed Publicis Combination. The Purchaser reserves the
right to amend the Offer (including amending the number of Shares to be
purchased, the purchase price and the consideration in the Proposed Publicis
Combination) upon entry into an acquisition agreement or other agreement
regarding a business combination with the Company or otherwise or to negotiate
an acquisition agreement or other agreement regarding a business combination
with the Company not involving a tender offer. The Purchaser and its subsidiary,
Publicis Communication, a societe anonyme organized under the laws of France,
are soliciting revocations and conditional proxies in opposition to the
transactions contemplated by the Bozell Merger Agreement and reserve the right
to solicit the consents, proxies or revocations of the stockholders of the
Company at any subsequent annual or special meeting of such stockholders.
Any stockholder desiring to tender all or any portion of his Shares, and
the associated Rights, should either (a) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and mail or deliver it together with the certificate(s)
representing tendered Shares and, if separate, the certificate(s) representing
the associated Rights, and any other required documents, to the Depositary or
tender such Shares (and associated Rights, if applicable) pursuant to the
procedures for book-entry transfer set forth in Section 3 or (b) request his
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for him. A stockholder whose Shares and, if applicable, associated
Rights are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if he desires to tender such Shares and, if
applicable, the associated Rights. Unless and until the Purchaser declares that
the Rights Condition (as hereinafter defined) is satisfied, stockholders will be
required to tender one associated Right for each Share tendered in order to
effect a valid tender of such Share.
A stockholder who desires to tender his Shares and associated Rights, and
whose certificates representing such Shares (and, if applicable, associated
Rights) are not immediately available or who cannot comply with the procedures
for book-entry transfer on a timely basis may tender such Shares (and, if
applicable, associated Rights) by following the procedures for guaranteed
delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.......................................................................... 1
THE TENDER OFFER...................................................................... 7
1. Terms of the Offer............................................................... 7
2. Acceptance for Payment and Payment............................................... 9
3. Procedures for Accepting the Offer and Tendering Shares and Rights............... 10
4. Withdrawal Rights................................................................ 14
5. Certain United States Tax Consequences........................................... 15
6. Price Range of the Shares; Dividends............................................. 16
7. Possible Effects of the Offer on the Market for the Shares; Stock Exchange
Listing; Exchange Act Registration; Margin Regulations........................... 17
8. Certain Information Concerning the Company....................................... 18
9. Certain Information Concerning the Purchaser..................................... 21
10. Background of the Offer; Contacts with the Company............................... 25
11. Purpose of the Offer and the Proposed Publicis Combination; Plans for the
Company.......................................................................... 35
12. Source and Amount of Funds....................................................... 41
13. Dividends and Distributions...................................................... 43
14. Certain Conditions of the Offer.................................................. 43
15. Certain Legal Matters; Required Regulatory Approvals............................. 47
16. Certain Fees and Expenses........................................................ 50
17. Miscellaneous.................................................................... 51
Schedule I -- Directors and Executive Officers of the Purchaser..................... 52
Schedule II -- Summary of Differences between Accounting Policies Generally Accepted
in the United States and France....................................... 54
Schedule III -- Unaudited Pro Forma Combined Financial Information.................... 58
</TABLE>
<PAGE> 4
To: All Holders of Shares of Common Stock (Including the Associated Preferred
Stock Purchase Rights) of True North Communications Inc.:
INTRODUCTION
Publicis S.A., a societe anonyme organized under the laws of France (the
"Purchaser"), hereby offers to purchase 9,619,904 shares of Common Stock, par
value $.33 1/3 per share (the "Shares"), of True North Communications Inc., a
Delaware corporation (the "Company"), or such greater number of Shares which,
when added to the number of Shares beneficially owned by the Purchaser and its
affiliates, constitutes a majority of the total number of Shares outstanding on
a fully diluted basis (assuming the exercise or conversion, as applicable, of
all outstanding options, rights and convertible securities (if any) and the
issuance of all Shares that the Company is obligated to issue) as of the
Expiration Date (as hereinafter defined) (the greater of such numbers of Shares
being the "Maximum Number") and (unless and until the Purchaser declares that
the Rights Condition (as hereinafter defined) has been satisfied) the associated
Series A Junior Participating Preferred Stock Purchase Rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of November 16, 1988, between
the Company and Harris Trust and Savings Bank, as Rights Agent (as the same may
be amended, the "Rights Agreement"), at a purchase price of $28 per Share (and
associated Right), net to the seller in cash, without interest thereon, in each
case upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). Unless the context otherwise requires, (i) all references to
"Publicis" herein shall mean the group of companies of which the Purchaser is
the parent company, including Publicis Communication, a societe anonyme
organized under the laws of France ("Publicis Communication"), and Publicis
Worldwide B.V., a company organized and existing under the laws of the
Netherlands ("Publicis Worldwide"), (ii) all references to "Shares" shall
include the associated Rights, and (iii) all references to the "Rights" shall
include all benefits that may inure to holders of the Rights pursuant to the
Rights Agreement.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares or Rights by the
Purchaser pursuant to the Offer. However, any tendering stockholder or other
payee who fails to complete and sign the Substitute Form W-9 that is included in
the Letter of Transmittal may be subject to a required backup federal income tax
withholding of 31% of the gross proceeds payable to such stockholder or other
payee pursuant to the Offer. See Section 3. The Purchaser will pay all charges
and expenses of Lazard Freres & Co. LLC, as Dealer Manager (the "Dealer
Manager"), IBJ Schroder Bank & Trust Company, as Depositary (the "Depositary"),
and MacKenzie Partners, Inc., as Information Agent (the "Information Agent"),
incurred in connection with the Offer. See Section 16.
The purpose of the Offer is to acquire a majority of the total number of
Shares outstanding on a fully diluted basis as the first step in consummating
the Proposed Publicis Combination (as defined below). The Purchaser intends, as
soon as practicable following consummation of the Offer, to effect the Proposed
Publicis Combination. The purpose of the Proposed Publicis Combination is to
contribute to the Company all of the advertising-related businesses owned
directly and indirectly by the Purchaser in exchange for the issuance of
additional Shares to the Purchaser.
In order to effect the Proposed Publicis Combination, the Purchaser is
seeking to negotiate a business combination with the Company pursuant to which,
as soon as practicable following consummation of the Offer, each of Publicis
Communication and Publicis Worldwide would be merged with and into the Company
with the Company being the surviving corporation (the "Proposed Publicis
Combination"). Publicis Communication and Publicis Worldwide own all of the
Purchaser's global advertising-related businesses. The outstanding capital stock
of Publicis Communication is owned 73.5% by the Purchaser and 26.5% by the
Company, and the outstanding capital stock of Publicis Worldwide is owned 100%
by the Purchaser. The Purchaser intends that in the Proposed Publicis
Combination, (i) each Share that is issued and outstanding immediately prior to
the effective time of the Proposed Publicis Combination would remain outstanding
<PAGE> 5
(other than the 4,658,000 Shares owned by Publicis Communication, which would
become treasury shares of the Company and cease to be outstanding) and (ii) the
issued and outstanding shares of capital stock of Publicis Communication and
Publicis Worldwide (other than the shares of capital stock of Publicis
Communication held by the Company, which shares shall be canceled by operation
of the merger) would be converted into an estimated 26,587,937 Shares. Following
consummation of the transactions contemplated by the Offer and the Proposed
Publicis Combination, the Purchaser estimates that it would own approximately
71.8% of the outstanding Shares on a fully diluted basis, with the remaining
28.2% of the Shares being owned by the stockholders of the Company immediately
prior to the effective time of the Proposed Publicis Combination. Following the
consummation of the Proposed Publicis Combination, the Purchaser expects that
the Shares would continue to be listed on the New York Stock Exchange, Inc. (the
"NYSE"). See Sections 9 and 11. The Purchaser estimates that on a pro forma
basis, the Company's earnings per Share will be enhanced substantially as a
result of the Proposed Publicis Combination. Set forth in Schedule III of this
Offer to Purchase is unaudited Pro Forma Combined Financial Information of the
Company for 1996, 1997 and 1998 after giving effect to the Offer and the
Proposed Publicis Combination and to certain pro forma adjustments described in
the accompanying notes thereto. Assuming consummation of the Offer and the
Proposed Publicis Combination, in 1998 the Purchaser estimates that the
Company's earnings per Share on a fully diluted basis will increase by
approximately 17%, based on 1998 net income estimates for the Company on a
stand-alone basis, published on July 1, 1997 by Merrill Lynch, Pierce, Fenner &
Smith, Incorporated ("Merrill Lynch") (financial advisor to Bozell), prior to
the announcement of the Bozell Merger (as hereinafter defined). The exchange
ratio for the Shares to be issued to the Purchaser in the Proposed Publicis
Combination has been set with the intention of yielding a post-merger common
equity valuation of the Company of $28 per Share. See Section 11.
The strategic purpose of the Proposed Publicis Combination is to
consolidate the Company's and Publicis' worldwide advertising agency networks
within one corporate structure under the general control of one management
comprised of the most talented executives of the Purchaser and the Company. The
agreement effecting the Proposed Publicis Combination is expected to provide
that, upon consummation of the Offer, the Purchaser will be entitled to
designate a majority of the directors on the Company's Board of Directors. Such
agreement is also expected to provide that the Company will use its best efforts
to cause the Purchaser's designees to be elected as directors of the Company,
including increasing the size of the Company's Board of Directors or securing
the resignations of incumbent directors, or both.
On July 31, 1997, the Company announced that the Company and Cherokee
Acquisition Corporation, a wholly-owned subsidiary of the Company ("CAC"), had
entered into an Agreement and Plan of Merger, dated as of July 30, 1997 (the
"Bozell Merger Agreement"), with Bozell, Jacobs, Kenyon & Eckhardt, Inc.
("Bozell"). Under the Bozell Merger Agreement, the Company has proposed to
acquire Bozell in exchange for the issuance to Bozell stockholders of
approximately 18,627,141 Shares (the "Bozell Merger"). The Purchaser believes
that the Bozell Merger is contrary to the best interests of the stockholders of
the Company, of which Publicis is the largest, holding approximately 18.4% of
the outstanding Shares.
Pursuant to the Bozell Merger Agreement, CAC would be merged with and into
Bozell, with Bozell continuing as the surviving corporation and a wholly-owned
subsidiary of the Company. As a result of the Bozell Merger, the separate
corporate existence of CAC would cease, and the surviving corporation would
possess the assets and liabilities of CAC and Bozell by operation of law at the
effective time of the Bozell Merger. Subject to the terms and conditions of the
Bozell Merger Agreement, and without any further action on the part of any
stockholder of Bozell or CAC, each share of the common stock of Bozell
outstanding immediately prior to the effective time of the Bozell Merger would
be converted into 0.51 Shares, including the corresponding percentage of a
Right. Consummation of the Bozell Merger pursuant to the Bozell Merger Agreement
is subject to certain conditions, including the approval by the stockholders of
the Company and Bozell.
On November 10, 1997, Publicis proposed a business combination between
Publicis and the Company under which each Share would be valued at $28 and which
Publicis believed would result in significantly increased stockholder value.
That proposal was summarily rejected by the Board of Directors of the Company,
2
<PAGE> 6
which refused to meet with Publicis or to seriously consider Publicis' proposed
alternative to the Bozell Merger. As a result of the Board of Directors' refusal
to negotiate, the Purchaser has now commenced the Offer and put forth the
Proposed Publicis Combination.
Publicis believes that the Bozell Merger significantly overvalues Bozell
and that it undervalues the Company. The information in the proxy statement with
respect to the Bozell Merger (the "Company Proxy") indicates that the Company is
paying too high a price for a deal that does nothing to address the Company's
basic strategic weakness: the lack of an international presence. The proposed
Bozell Merger fails to address this basic flaw, and instead devotes additional
resources to expanding the Company's already significant presence in the
domestic market. Further, by undervaluing the Company and over-valuing Bozell,
the Company proposes to pay dearly for this unnecessary acquisition.
The Company's failure to establish a global network is a fundamental
shortcoming. As global marketers have increasingly demanded worldwide coverage,
the Company has continued to focus on the United States and, as a result,
Publicis believes that the Company has placed itself at a significant
competitive disadvantage to its global competitors.
The Offer and the Proposed Publicis Combination directly address the
Company's weakness by providing access to the type of integrated global network
that today's international advertisers demand. The combination of Publicis with
the Company would create a powerful and creative presence in most of the world's
significant markets. Publicis believes that the resulting international network
would be a market leader in both the United States and Europe with tremendous
opportunities for growth around the world and that the strategic benefits of the
Proposed Publicis Combination are undeniable and far superior to the Bozell
Merger, which ignores the imperatives of the Company's businesses and wastes
value upon an unnecessary transaction.
Although the Purchaser recognizes that it has had disagreements in the past
with the Company, those disagreements have been limited to disagreements with
senior management at the holding company level concerning corporate policy. The
Purchaser believes that its relations with operational and creative personnel at
Foote, Cone & Belding, the Company's principal operating unit, have always been
excellent. The Purchaser believes that the mutual interests of both companies'
shareholders now require that the differences of senior management be set aside
and that the parties work together to maximize stockholder value. The Proposed
Publicis Combination contemplates the consolidation of the Company and the
Purchaser under one management. In this way, the combined entity will have the
tremendous advantage of a strong U.S. and international network, as today's
market requires. This structure avoids, however, the difficulties inherent in
the joint venture, formed by the Company and the Purchaser in 1989, in which the
two companies combined certain of their European operations, which did not
achieve its potential because it lacked a clear chain of command and a fully
integrated structure.
On December 3, 1997, the Board of Directors of the Purchaser approved the
commencement of a tender offer for 9,619,904 Shares (the "Initial Offer"). On
December 4, 1997, the Purchaser sent a letter to the Board of Directors of the
Company informing the Board of the Initial Offer and the Proposed Publicis
Combination. The Initial Offer, and the proposal set forth in such letter, were
withdrawn prior to commencement because of the Preliminary Injunction Order
issued on December 9, 1997 by Judge Joan B. Gottschall of the United States
District Court for the Northern District of Illinois (the "District Court"). See
Section 10. After the Preliminary Injunction Order was vacated by the United
States Court of Appeals for the Seventh Circuit (the "Court of Appeals") on
December 15, 1997, the Purchaser commenced the Offer. See Section 10.
The making of the Offer will enable the Purchaser to commence the process
of seeking regulatory approvals for its acquisition of the Company. See Section
15. In addition, by tendering Shares into the Offer, the Company's stockholders
effectively will be given the opportunity to express to the Board of Directors
of the Company that they wish to be able to accept the Offer and to approve the
Proposed Publicis Combination or a similar transaction with the Company.
3
<PAGE> 7
In order to facilitate the consummation of the Offer and the Proposed
Publicis Combination, the Purchaser is currently soliciting revocations and
conditional proxies of the Company's stockholders in opposition to the
consummation of the Bozell Merger and related proposals. Such solicitation is
being made only pursuant to separate solicitation materials, preliminary copies
of which were filed with the Securities and Exchange Commission (the
"Commission") on December 4, 1997 and, after the Court of Appeals vacated the
District Court's Preliminary Injunction Order, amended on December 16, 1997.
Such solicitation materials comply with the requirements of Section 14(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder.
The Bozell Merger Agreement provides, among other things, that the Company
will not, and will not permit any of its or its subsidiaries' officers,
directors or employees, and will use its reasonable best efforts to cause all of
its and its subsidiaries' attorneys, financial advisors, agents and other
representatives not to, directly or indirectly, solicit, initiate or knowingly
encourage (including by way of furnishing information) any Parent Takeover
Proposal (as hereinafter defined) or engage in or continue discussions or
negotiations relating thereto; provided that the Company may engage in
discussions or negotiations with, or furnish information concerning it and its
business, properties or assets to, any third party which makes a Parent Takeover
Proposal if the Board of Directors of the Company determines, in its good faith
judgment, that such third party may ultimately propose a Superior Parent
Takeover Proposal (as hereinafter defined); provided, further, that nothing
shall prevent the Company or its Board of Directors from taking, and disclosing
to its stockholders, a position with regard to any Parent Takeover Proposal. As
used in the Bozell Merger Agreement, (i) a "Parent Takeover Proposal" means any
proposal or offer, for a tender or exchange offer, a merger, consolidation or
other business combination involving the Company or any of its significant
subsidiaries or any proposal to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets of, the Company or any of
its significant subsidiaries; and (ii) "Superior Parent Takeover Proposal" means
a bona fide proposal or offer made by a third party to acquire the Company
pursuant to an exchange offer, a merger, consolidation or other business
combination or sale of all or substantially all of the assets of the Company and
its subsidiaries in which the sole consideration to be received by the
stockholders of the Company (other than cash for fractional shares or other
consideration which is non-material in amount) is the common stock of a
widely-held public company which, immediately after the consummation of the
transaction, will own (directly or indirectly) all or substantially all of the
equity or assets of the Company on terms which a majority of the members of the
Board of Directors of the Company, having received the advice of an independent
financial advisor, determines in their good faith reasonable judgment to be more
favorable to the Company's stockholders than the terms of the transactions
contemplated by the Bozell Merger Agreement. Publicis believes that the
definition of "Superior Parent Takeover Proposal" set forth in the Bozell Merger
Agreement is not enforceable under applicable law and is seeking to invalidate
that provision of the Bozell Merger Agreement. See Section 10.
The Bozell Merger Agreement further provides that the Company or Bozell may
terminate the agreement if (i) the stockholders of the Company do not approve an
amendment to the Company's Restated Certificate of Incorporation increasing the
number of authorized Shares from 50,000,000 to 90,000,000, the issuance of
Shares in the Bozell Merger and the election of directors to the Company's Board
of Directors or (ii) the Board of Directors of the Company has reasonably
determined that a Parent Takeover Proposal constitutes a Superior Parent
Takeover Proposal; provided that the Company may not terminate the Bozell Merger
Agreement pursuant to this provision unless and until (A) five business days
have elapsed following delivery to Bozell of a written notice of such
determination by the Board of Directors of the Company or (B) a tender offer or
exchange offer for 30% or more of the outstanding Shares is commenced and the
Board of Directors of the Company fails within ten business days following such
commencement to recommend against acceptance of such tender offer or exchange
offer by its stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders);
provided, further, that the Company may not terminate the Bozell Merger
Agreement pursuant to clause (A) or (B) above unless, simultaneously with such
termination, the Company pays to Bozell $15,000,000.
Section 5.7(c) of the Bozell Merger Agreement also provides for the payment
by the Company to Bozell of a termination fee of $15,000,000 upon demand if (A)
the Company terminates the Bozell Merger Agreement pursuant to clause (i) in the
immediately preceding paragraph and within six months following
4
<PAGE> 8
any such termination a Third Party Parent Acquisition Event (as hereinafter
defined) occurs; (B) the Company terminates the Bozell Merger Agreement pursuant
to clause (ii) in the immediately preceding paragraph; or (C) the Bozell Merger
Agreement is terminated and prior thereto a Third Party Parent Acquisition Event
occurred. As used in the Bozell Merger Agreement, a "Third Party Parent
Acquisition Event" means any of the following events: (i) any person,
corporation, partnership or other entity or group (such person, corporation,
partnership or other entity or group being referred to hereinafter, singularly
or collectively, as a "Person"), other than Bozell or its subsidiaries, acquires
or becomes the beneficial owner of 30% or more of the outstanding Shares; (ii)
any new group is formed which, at the time of formation, beneficially owns 30%
or more of the outstanding shares (other than a group which includes or may
reasonably be deemed to include Bozell or any of its subsidiaries); (iii) the
Company enters into an agreement providing for a merger or other business
combination involving the Company or the acquisition of a substantial interest
in, or substantial portion of the assets, business or operations of, the Company
and its subsidiaries (other than the Bozell Merger); or (iv) any Person (other
than Bozell or its subsidiaries) is granted any option or right, conditional or
otherwise, to acquire or otherwise become the beneficial owner of Shares that
results or would result in such Person being the beneficial owner of 30% or more
of the outstanding Shares.
The Purchaser intends to continue to seek to negotiate with the Company
with respect to the Proposed Publicis Combination. The Purchaser reserves the
right to amend the Offer (including amending the number of Shares to be
purchased, the purchase price and the consideration in the Proposed Publicis
Combination) upon entry into an acquisition agreement or other agreement
regarding a business combination with the Company or otherwise or to negotiate
an acquisition agreement or other agreement regarding a business combination
with the Company not involving a tender offer. See Section 14.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR THE SPECIAL
MEETING OF THE COMPANY'S STOCKHOLDERS. THE PURCHASER IS CURRENTLY SOLICITING
REVOCATIONS AND CONDITIONAL PROXIES OF THE COMPANY'S STOCKHOLDERS IN OPPOSITION
TO THE CONSUMMATION OF THE BOZELL MERGER AND RELATED PROPOSALS. SUCH
SOLICITATION IS BEING MADE ONLY PURSUANT TO SEPARATE SOLICITATION MATERIALS,
PRELIMINARY COPIES OF WHICH WERE FILED WITH THE COMMISSION ON DECEMBER 4, 1997,
AND AMENDED ON DECEMBER 15, 1997, WHICH COMPLY WITH ALL APPLICABLE REQUIREMENTS
OF SECTION 14(a) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
CERTAIN CONDITIONS TO THE OFFER
The Offer is subject to the fulfillment of certain conditions, including
the following:
Minimum Condition. CONSUMMATION OF THE OFFER IS CONDITIONED (THE "MINIMUM
CONDITION") UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION DATE (AS DEFINED IN SECTION 1) SHARES, TOGETHER WITH THE SHARES OWNED
BY THE PURCHASER AND ITS AFFILIATES, REPRESENTING A MAJORITY OF THE TOTAL NUMBER
OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS (ASSUMING THE EXERCISE OR
CONVERSION, AS APPLICABLE, OF ALL OUTSTANDING OPTIONS, RIGHTS AND CONVERTIBLE
SECURITIES (IF ANY) AND THE ISSUANCE OF ALL SHARES THAT THE COMPANY IS OBLIGATED
TO ISSUE).
According to the Company's Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act"), on Form S-4 dated November 26, 1997
(the "Company S-4"), as of November 18, 1997, there were 25,271,533 Shares
outstanding. In addition, according to the Company S-4, as of September 1, 1997,
3,227,278 Shares were reserved for issuance upon exercise of outstanding
options. Publicis Communication owns 4,658,000 Shares. Substantially all of
these Shares were acquired as newly issued Shares in January 1989 at the time
that the parties formed their European joint venture. From time to time,
Publicis Communication has acquired Shares, but no such acquisitions have
occurred in the last two years. See Section 10.
5
<PAGE> 9
Based on the foregoing and assuming no additional options or rights
exercisable for, or securities convertible into, Shares have been issued since
September 1, 1997 and no additional Shares have been issued since November 18,
1997 (other than Shares issued pursuant to the exercise of options issued on or
before September 1, 1997), the Purchaser believes that the Minimum Condition
would be satisfied if at least 9,619,904 Shares were validly tendered and not
withdrawn prior to the Expiration Date.
Definitive Agreement Condition. CONSUMMATION OF THE OFFER IS CONDITIONED
UPON THE COMPANY ENTERING INTO A DEFINITIVE AGREEMENT WITH THE PURCHASER,
PUBLICIS COMMUNICATION AND PUBLICIS WORLDWIDE THAT WOULD PROVIDE FOR THE
PROPOSED PUBLICIS COMBINATION (THE "DEFINITIVE AGREEMENT CONDITION").
The Purchaser currently intends to extend the Offer from time to time until
the Definitive Agreement Condition is satisfied or the Purchaser determines, in
its sole discretion, that such condition is not reasonably likely to be
satisfied under then current circumstances. The Purchaser may also determine,
whether or not the Offer is then pending, to conduct a proxy contest in
connection with the Company's 1998 annual meeting of stockholders seeking to
remove the current members of the Board of Directors of the Company and elect a
new slate of directors designated by the Purchaser.
Rights Condition. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE RIGHTS
HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER
BEING SATISFIED THAT THE RIGHTS HAVE BEEN INVALIDATED OR OTHERWISE ARE
INAPPLICABLE TO THE OFFER AND THE PROPOSED PUBLICIS COMBINATION (THE "RIGHTS
CONDITION"). THE RIGHTS ARE DESCRIBED IN THE COMPANY'S REGISTRATION STATEMENT
UNDER THE EXCHANGE ACT ON FORM 8-A DATED NOVEMBER 17, 1988 (THE "COMPANY 8-A"),
AND SUCH DESCRIPTION IS SUMMARIZED IN SECTION 11.
According to the Company 8-A, at any time prior to the tenth business day
(subject to extension) after the Shares Acquisition Date (as defined in Section
11), the Company may redeem the Rights in whole, but not in part, at a
redemption price of $.005 per Right (such price being the price as adjusted for
a two-for-one stock split which was announced by the Company on February 17,
1995 (the "1995 Stock Split")). According to the Company 8-A, until the
Distribution Date (as defined in Section 11), the Rights will be represented by
and transferred with the associated Shares. According to the Company 8-A, until
the Distribution Date (or earlier redemption of the Rights), the surrender for
transfer of any certificates representing the Shares will constitute the
transfer of the Rights associated with the Shares represented by such
certificate. According to the Company 8-A, following the Distribution Date, the
Rights become exercisable, and separate certificates evidencing the Rights
("Rights Certificates") will be mailed to the holders of record of the
outstanding Shares.
Based on publicly available information, the Purchaser believes that as of
December 16, 1997, the Rights were not exercisable, Rights Certificates had not
been issued and the Rights were evidenced by the Shares. The Purchaser believes
that, as a result of the announcement by the Purchaser of the Initial Offer, the
Distribution Date will be December 18, 1997, unless prior to such date the
Company's Board of Directors redeems the Rights or takes action to delay the
Distribution Date. The Distribution Date may also occur sooner. See Section 11.
Section 203 Condition. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE
PURCHASER BEING SATISFIED THAT SECTION 203 OF THE DELAWARE LAW HAS BEEN COMPLIED
WITH IN CONNECTION WITH THE OFFER AND THE PROPOSED PUBLICIS COMBINATION OR IS
INAPPLICABLE TO THE PURCHASER IN CONNECTION WITH THE OFFER AND THE PROPOSED
PUBLICIS COMBINATION (THE "SECTION 203 CONDITION").
Section 203 of the Delaware Law provides that a Delaware corporation such
as the Company may not engage in any "Business Combination" (defined to include
a variety of transactions, including a merger) with any "Interested Stockholder"
(defined generally as a person that directly or indirectly beneficially owns 15%
or more of the corporation's outstanding voting stock), or any affiliate of an
Interested Stockholder, for three
6
<PAGE> 10
years after the date on which the Interested Stockholder became an Interested
Stockholder, unless (i) prior to the date such Interested Stockholder became an
Interested Stockholder, the board of directors of such corporation approved
either the Business Combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
for purposes of determining the number of shares outstanding those shares held
by persons who are directors and also officers of the corporation and employee
stock plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer) or (iii) on or subsequent to the date the stockholder
becomes an Interested Stockholder, the Business Combination is (a) approved by
the board of directors of the corporation and (b) authorized at an annual or
special meeting of stockholders by the affirmative vote of the holders of at
least 66 2/3% of the outstanding voting stock of the corporation which is not
owned by the Interested Stockholder. See Section 11.
While the Purchaser believes that Section 203 of the Delaware Law may be
inapplicable to the Offer and the Proposed Publicis Combination, the Purchaser
is hereby requesting that the Company's Board of Directors adopt a resolution
approving the Offer and the Proposed Publicis Combination for purposes of
Section 203 of the Delaware Law. However, there can be no assurance that the
Company's Board of Directors will do so.
No Impediments Condition. CONSUMMATION OF THE OFFER IS CONDITIONED UPON
THE BOZELL MERGER AGREEMENT HAVING BEEN TERMINATED WITHOUT ANY PAYMENTS BY OR
PENALTIES TO THE COMPANY (OTHER THAN ANY APPLICABLE PAYMENTS PURSUANT TO SECTION
5.7(c) OF THE BOZELL MERGER AGREEMENT) AND THE COMPANY NOT HAVING ENTERED INTO
OR EFFECTUATED ANY NEW OR AMENDED AGREEMENTS WITH BOZELL OR ANY OTHER PERSON OR
ENTITY HAVING THE EFFECT OF IMPAIRING THE ABILITY OF THE PURCHASER TO CONSUMMATE
THE OFFER OR THE PROPOSED PUBLICIS COMBINATION OR OTHERWISE DIMINISHING THE
EXPECTED ECONOMIC VALUE TO THE PURCHASER OF THE SHARES PURCHASED IN THE OFFER OR
THE PROPOSED PUBLICIS COMBINATION (THE "NO IMPEDIMENTS CONDITION").
Certain other conditions to the consummation of the Offer are described in
Section 14. The Purchaser expressly reserves the right to waive any one or more
of the conditions to the Offer. See Sections 14 and 15.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser will accept for
payment and thereby purchase the Maximum Number of Shares validly tendered and
not withdrawn in accordance with the procedures set forth in Section 4 on or
prior to the Expiration Date (as hereinafter defined). The term "Expiration
Date" means 12:00 Midnight, New York City time, on Thursday, January 15, 1998,
unless and until the Purchaser, in its sole discretion, shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the time and date at which the Offer, as so extended by the
Purchaser, shall expire.
Upon the terms and subject to the conditions of the Offer, if more than the
Maximum Number of Shares shall be validly tendered and not withdrawn prior to
the Expiration Date, the Purchaser will purchase the Maximum Number of Shares on
a pro rata basis (with adjustments to avoid purchases of fractional Shares)
based upon the number of Shares validly tendered and not withdrawn prior to the
Expiration Date.
Because of the difficulty of determining the precise number of Shares
properly tendered and not withdrawn, if proration is required, the Purchaser may
not be able to announce the final proration factor until approximately six NYSE
trading days after the Expiration Date. Preliminary results of proration will be
7
<PAGE> 11
announced by press release as promptly as practicable after the Expiration Date.
Stockholders may obtain such preliminary information from the Information Agent
and may be able to obtain such information from brokers, dealers, commercial
banks and trust companies. The Purchaser will not pay for any Shares accepted
for payment pursuant to the Offer until the final proration factor is known.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period during which the Offer is open
for any reason, including the occurrence of any of the events specified in
Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer and subject to the right of a
tendering stockholder to withdraw such stockholder's Shares. See Section 4.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion, at any time or from time
to time, to (i) delay acceptance for payment of or, regardless of whether such
Shares were theretofore accepted for payment, payment for any Shares pending
receipt of any regulatory or governmental approvals specified in Section 15,
(ii) terminate the Offer (whether or not any Shares have theretofore been
accepted for payment) if any condition referred to in Section 14 has not been
satisfied or upon the occurrence of any event specified in Section 14 and (iii)
waive any condition or otherwise amend the Offer in any respect, in each case,
by giving oral or written notice of such delay, termination, waiver or amendment
to the Depositary and, other than in the case of any such waiver, by making a
public announcement thereof. The Purchaser acknowledges that (i) Rule 14e-1(c)
under the Exchange Act requires the Purchaser to pay the consideration offered
or return the Shares tendered promptly after the termination or withdrawal of
the Offer and (ii) the Purchaser may not delay acceptance for payment of, or
payment for (except as provided in clause (i) of the preceding sentence or if
proration is required as described above), any Shares upon the occurrence of any
event specified in Section 14 without extending the period of time during which
the Offer is open.
The rights reserved by the Purchaser in the preceding paragraph are in
addition to the Purchaser's rights pursuant to Section 14. Any such extension,
delay, termination or amendment will be followed as promptly as practicable by
public announcement thereof, and such announcement in the case of an extension
will be made no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Without limiting the manner
in which the Purchaser may choose to make any public announcement, subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to holders of
Shares), the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer, or if
it waives a material condition to the Offer, the Purchaser will extend the Offer
and disseminate additional tender offer materials to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in percentage of
securities sought or a change in any dealer's soliciting fee, will depend upon
the facts and circumstances, including the materiality, of the changes. In the
Commission's view, an offer should remain open for a minimum of five business
days from the date the material change is first published, sent or given to
stockholders, and, if material changes are made with respect to information that
approaches the significance of price and the percentage of securities sought, a
minimum of ten business days may be required to allow for adequate dissemination
and investor response. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, a minimum ten business day period from the date of such
change is generally required to allow for adequate dissemination to
stockholders. The Purchaser reserves the right (but shall not be obligated) to
accept for payment more than the Maximum Number of Shares pursuant to the Offer.
The Purchaser has no present intention of exercising such right. If a number of
additional Shares in excess of two percent of the outstanding Shares is to be
accepted for payment, and, at the time notice of the Purchaser's decision to
accept for payment such additional Shares is first published, sent or given to
holders of Shares, the Offer is scheduled to expire at any time earlier than the
tenth business day from the date that such notice is so published, sent or
given, the Offer will be extended until the expiration of such period of ten
business days. Additionally, if prior to the
8
<PAGE> 12
Expiration Date, the Purchaser increases or decreases the number of Shares being
sought, or increases or decreases the consideration offered pursuant to the
Offer, and if the Offer is scheduled to expire at any time earlier than the
period ending on the tenth business day from the date that notice of such
increase or decrease is first published, sent or given to holders of Shares, the
Offer will be extended at least until the expiration of such ten business day
period. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from 12:01
a.m. through 12:00 Midnight, New York City time.
Unless and until the Purchaser declares that the Rights Condition is
satisfied, stockholders will be required to tender one associated Right for each
Share tendered to effect a valid tender of such Share. See Sections 3 and 11.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OF THE
MINIMUM CONDITION, THE DEFINITIVE AGREEMENT CONDITION, THE RIGHTS CONDITION, THE
SECTION 203 CONDITION AND THE NO IMPEDIMENTS CONDITION. SEE SECTION 14. The
Purchaser reserves the right (but shall not be obligated), in accordance with
applicable rules and regulations of the Commission, to waive any or all of such
conditions. If, by the Expiration Date, any or all of such conditions have not
been satisfied, the Purchaser may, in its sole discretion, elect to (i) extend
the Offer and, subject to applicable withdrawal rights, retain all tendered
Shares until the expiration of the Offer, as extended, subject to the terms of
the Offer, (ii) waive all of the unsatisfied conditions and, subject to
complying with applicable rules and regulations of the Commission, accept for
payment all Shares so tendered and not extend the Offer or (iii) terminate the
Offer and not accept for payment any Shares and return all tendered Shares to
tendering stockholders. In the event that the Purchaser waives any condition set
forth in Section 14, the Commission may, if the waiver is deemed to constitute a
material change to the information previously provided to the stockholders,
require that the Offer remain open for an additional period of time and/or that
the Purchaser disseminate information concerning such waiver.
On November 19, 1997, Publicis made a request to the Company pursuant to
the Delaware Law for the use of the Company's stockholder list, its list of
holders of Rights and security position listings for the purpose of
disseminating the Offer to holders of Shares. Upon compliance by the Company
with such request, this Offer to Purchase and the related Letter of Transmittal
and, if required, other relevant materials will be mailed to record holders of
Shares and Rights and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list and list of holders of Rights, if applicable, or
who are listed as participants in a clearing agency's security position listing
for subsequent transmittal to beneficial owners of Shares and Rights.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of the Offer as so extended or amended), the Purchaser will
purchase, by accepting for payment, and will pay for, the Maximum Number of
Shares validly tendered and not withdrawn (as permitted by Section 4) prior to
the Expiration Date promptly after the later to occur of (i) the Expiration Date
and (ii) the satisfaction or waiver of the conditions to the Offer set forth in
Section 14. In addition, subject to applicable rules of the Commission, the
Purchaser expressly reserves the right to delay acceptance for payment of, or
payment for, Shares pending receipt of any regulatory or governmental approvals
specified in Section 15.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and the European Community
Regulation 4064/89 (the "EC Merger Regulation"), see Section 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) Share Certificates for
such Shares and, if applicable, Rights Certificates for the associated Rights,
or, in the case of Shares, timely confirmation (a "Book-Entry Confirmation") of
the book-entry transfer of such Shares and, if applicable, Rights into the
Depositary's account at The Depository Trust Company or Philadelphia Depository
Trust Company (collectively, the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in Section 3, (ii) the Letter of Transmittal (or a
facsimile thereof),
9
<PAGE> 13
properly completed and duly executed, with any required signature guarantees,
or, in the case of Shares, an Agent's Message (as defined below) in connection
with a book-entry transfer and (iii) any other documents required by the Letter
of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares and, if applicable, the Rights which are
the subject of such Book-Entry Confirmation that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
Payment for the Shares accepted for payment pursuant to the Offer will be
delayed in the event of proration due to the difficulty of determining the
number of Shares validly tendered and not withdrawn. See Section 1.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
as, if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares purchased pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to validly tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE
PURCHASER.
If any tendered Shares are not purchased pursuant to the Offer for any
reason (including proration due to tenders of Shares pursuant to the Offer in
excess of the Maximum Number of Shares), or if Share Certificates are submitted
representing more Shares than are tendered, Share Certificates representing
unpurchased or untendered Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares delivered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedures set forth in Section 3, such Shares will be credited
to an account maintained within such Book-Entry Transfer Facility), as promptly
as practicable following the expiration, termination or withdrawal of the Offer.
In the event separate Rights Certificates are issued, similar action will be
taken with respect to unpurchased and untendered Rights.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED
CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT
TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of the Purchaser's subsidiaries or
affiliates the right to purchase all or any portion of the Shares and Rights
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the rights
of tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES AND RIGHTS.
VALID TENDER OF SHARES AND RIGHTS
Except as set forth below, in order for Shares and (prior to the
Distribution Date) Rights to be validly tendered pursuant to the Offer, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or, in the case of
Shares, an Agent's Message in connection with a book-entry delivery of Shares
and (prior to the Distribution Date) Rights, and any other documents required by
the Letter of Transmittal must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date and either (i) Share Certificates and, if applicable, Rights
Certificates representing tendered Shares and Rights must be received
10
<PAGE> 14
by the Depositary, or such Shares and Rights must be tendered pursuant to the
procedure for book-entry transfer set forth below and Book-Entry Confirmation
must be received by the Depositary, in each case on or prior to the Expiration
Date, or (ii) the guaranteed delivery procedures set forth below must be
complied with.
IF THE PURCHASER DECLARES THAT THE RIGHTS CONDITION IS SATISFIED, THE
PURCHASER WILL NOT REQUIRE DELIVERY OF RIGHTS, UNLESS AND UNTIL THE PURCHASER
DECLARES THAT THE RIGHTS CONDITION IS SATISFIED, HOLDERS OF SHARES WILL BE
REQUIRED TO TENDER ONE ASSOCIATED RIGHT FOR EACH SHARE TENDERED IN ORDER TO
EFFECT A VALID TENDER OF SUCH SHARE.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF
APPLICABLE), THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
SEPARATE DELIVERY OF RIGHTS CERTIFICATES
If the Distribution Date does not occur prior to the Expiration Date, a
tender of Shares will also constitute a tender of the associated Rights. If the
Distribution Date occurs and Rights Certificates are distributed by the Company
to holders of Shares prior to the time a holder's Shares are tendered pursuant
to the Offer, in order for Rights (and the corresponding Shares) to be validly
tendered, Rights Certificates representing a number of Rights equal to the
number of Shares tendered must be delivered to the Depositary or, if available
in the case of Rights, a Book-Entry Confirmation received by the Depositary with
respect thereto. If the Distribution Date occurs and Rights Certificates are not
distributed prior to the time Shares are tendered pursuant to the Offer, Rights
may be tendered prior to a stockholder receiving Rights Certificates by use of
the guaranteed delivery procedure described below. In any case, a tender of
Shares constitutes an agreement by the tendering stockholder to deliver Rights
Certificates representing a number of Rights equal to the number of Shares
tendered pursuant to the Offer to the Depositary within three business days
after the date Rights Certificates are distributed. The Purchaser reserves the
right to require that the Depositary receive Rights Certificates, or a
Book-Entry Confirmation, if available in the case of Rights, with respect to
such Rights, prior to accepting the related Shares for payment pursuant to the
Offer if the Distribution Date occurs prior to the Expiration Date.
BOOK-ENTRY TRANSFER
The Depositary will make a request to establish accounts with respect to
the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of any Book-Entry
Transfer Facility may make Book-Entry delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer into the Depositary's account
at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedure set forth below must be complied with.
If the Distribution Date occurs, the Depositary will also make a request to
establish an account with respect to the Rights at each of the Book-Entry
Transfer Facilities, but no assurance can be given that book-entry delivery of
Rights will be available. If book-entry delivery of Rights is available, the
foregoing book-entry transfer procedures will also apply to Rights. Otherwise,
if Rights Certificates have been issued, a tendering
11
<PAGE> 15
stockholder will be required to tender Rights by means of physical delivery to
the Depositary of Rights Certificates (in which event references in this Offer
to Purchase to Book-Entry Confirmations with respect to Rights will be
inapplicable) or pursuant to the guaranteed delivery procedure set forth below.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
SIGNATURE GUARANTEES
Signatures on all Letters of Transmittal must be guaranteed by a firm that
is a bank, broker, dealer, credit union, savings association or other entity
which is a member in good standing of the Securities Transfer Agents Medallion
Program (an "Eligible Institution"), unless the Shares and Rights tendered
thereby are tendered (i) by a registered holder of Shares and Rights who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates or Rights Certificates are registered in the name
of a person other than the signer of the Letter of Transmittal, or if payment is
to be made to, or Share Certificates or Rights Certificates for unpurchased
Shares or Rights are to be issued or returned to, a person other than the
registered holder, then the tendered certificates must be endorsed or
accompanied by appropriate stock powers, signed exactly as the name or names of
the registered holder or holders appear on the certificates, with the signatures
on the certificates or stock powers guaranteed by an Eligible Institution as
provided in the appropriate Letter of Transmittal. See Instructions 1 and 5 of
the Letter of Transmittal.
If the Share Certificates and Rights Certificates are forwarded separately
to the Depositary, a properly completed and duly executed appropriate Letter of
Transmittal (or facsimile thereof) must accompany each such delivery.
GUARANTEED DELIVERY
If a stockholder desires to tender Shares and Rights pursuant to the Offer
and such stockholder's Share Certificates or, if applicable, Rights Certificates
are not immediately available (including, if the Distribution Date has occurred,
because Rights Certificates have not yet been distributed by the Company) or
time will not permit all required documents to reach the Depositary on or prior
to the Expiration Date, or, in the case of Shares, the procedures for book-entry
transfer cannot be completed on a timely basis, such Shares or Rights may
nevertheless be tendered if all of the following guaranteed delivery procedures
are duly complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates and Rights Certificates (or, in the case
of book entry transfer of Shares and, if available, Rights, a Book-Entry
Confirmation) representing all tendered Shares and Rights, in proper form
for transfer together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees
(or, in the case of a book-entry transfer of Shares and, if available,
Rights, an Agent's Message) and any other documents required by the Letter
of Transmittal are received by the Depositary within (x) in the case of
Shares, three NYSE trading days after the date of execution of such Notice
of Guaranteed Delivery or (y) in the case of Rights, a period ending on the
later of (1) three NYSE trading days after the date of execution of such
Notice of Guaranteed Delivery and (2) three business days after the date
Rights Certificates are distributed to stockholders by the Company.
12
<PAGE> 16
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or, in the case of Shares,
of Book-Entry Confirmation with respect to, such Shares, and if the Distribution
Date has occurred, Rights Certificates for, or a Book-Entry Confirmation, if
available, with respect to, the associated Rights (unless the Purchaser elects,
in its sole discretion, to make payment for such Shares pending receipt of the
Rights Certificates for, or a Book-Entry Confirmation, if available, with
respect to, such Rights), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees (or, in the case of a book-entry transfer of Shares or, if available,
Rights, an Agent's Message) and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
stockholders at the same time, and will depend upon when Share Certificates (or
Rights Certificates) are received by the Depositary or Book-Entry Confirmations
of the Shares (or Rights, if available) are received into the Depositary's
account at a Book-Entry Transfer Facility.
If the Rights Condition is satisfied, the guaranteed delivery procedure
with respect to Rights Certificates and the requirement for the tender of Rights
will no longer apply.
BACKUP FEDERAL INCOME TAX WITHHOLDING
UNDER THE BACKUP FEDERAL INCOME TAX WITHHOLDING APPLICABLE TO CERTAIN
STOCKHOLDERS (OTHER THAN CERTAIN EXEMPT STOCKHOLDERS, INCLUDING, AMONG OTHERS,
ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS), THE DEPOSITARY MAY BE
REQUIRED TO WITHHOLD 31% OF THE AMOUNT OF ANY PAYMENTS MADE TO SUCH STOCKHOLDERS
PURSUANT TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING, EACH
SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT
TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT
TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.
APPOINTMENT AS PROXY
By executing the Letter of Transmittal, a tendering stockholder irrevocably
appoints designees of the Purchaser, and each of them, as such stockholder's
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares and, if applicable, Rights tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or Rights and other securities or rights issued or issuable
in respect of such Shares and Rights on or after the date of this Offer to
Purchase. All such powers of attorney and proxies shall be considered
irrevocable and coupled with an interest in the tendered Shares and Rights. Such
appointment will be effective upon the acceptance for payment of such Shares and
Rights by the Purchaser in accordance with the terms of the Offer. Upon such
acceptance for payment, all other powers of attorney and proxies given by such
stockholder with respect to such Shares, Rights, and such other securities or
rights prior to such payment will be revoked, without further action, and no
subsequent powers of attorney and proxies may be given by such stockholder (and,
if given, will not be deemed effective). The designees of the Purchaser will,
with respect to the Shares and Rights and such other securities and rights for
which such appointment is effective, be empowered to exercise all voting and
other rights of such stockholder as they in their sole discretion may deem
proper at any annual or special meeting of the Company's stockholders, or any
adjournment or postponement thereof, or by consent in lieu of any such meeting
or otherwise. In order for Shares and Rights to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares and Rights, the
Purchaser or its designee must be able to exercise full voting rights with
respect to such Shares, Rights and other securities, including voting at any
meeting of stockholders.
13
<PAGE> 17
DETERMINATION OF VALIDITY
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
or Rights will be determined by the Purchaser, in its sole discretion, whose
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any or all tenders determined by it not to be in
proper form or the acceptance of or payment for which may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right
to waive any of the conditions of the Offer or any defect or irregularity in any
tender of Shares or Rights of any particular stockholder whether or not similar
defects or irregularities are waived in the case of other stockholders.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of Shares or Rights will be deemed to have been validly
made until all defects and irregularities with respect to such tender have been
cured or waived by the Purchaser. None of the Purchaser or any of its affiliates
or assigns, the Dealer Manager, the Depositary, the Information Agent or any
other person or entity will be under any duty to give any notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification.
The Purchaser's acceptance for payment of Shares and, if applicable, Rights
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares and Rights made pursuant to the Offer are irrevocable. Shares
and Rights tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment as
provided herein, may also be withdrawn at any time after February 13, 1998 (or
such later date as may apply in case the Offer is extended). A withdrawal of
Shares will also constitute a withdrawal of the associated Rights. Rights may
not be withdrawn unless the associated Shares are also withdrawn.
If, for any reason whatsoever, acceptance for payment of any Shares and
Rights tendered pursuant to the Offer is delayed, or the Purchaser is unable to
accept for payment or pay for Shares and Rights tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights set forth herein, the
Depositary may, nevertheless, on behalf of the Purchaser and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Shares and Rights and such
Shares and Rights may not be withdrawn except to the extent that the tendering
stockholder is entitled to and duly exercises withdrawal rights as described in
this Section 4. Any such delay will be by an extension of the Offer to the
extent required by law.
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares and Rights to be withdrawn, the number of Shares and Rights to be
withdrawn, and (if Share Certificates and Rights Certificates have been
tendered) the name of the registered holder of the Shares and Rights as set
forth in the Share Certificate and Rights Certificate, if different from that of
the person who tendered such Shares and Rights. If Share Certificates and Rights
Certificates have been delivered or otherwise identified to the Depositary, then
prior to the physical release of such certificates, the tendering stockholder
must submit the serial numbers shown on the particular certificates evidencing
the Shares and Rights to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case of
Shares and Rights tendered for the account of an Eligible Institution. If Shares
and Rights have been tendered pursuant to the procedures for book-entry transfer
set forth in Section 3, the notice of withdrawal must specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Shares and Rights, in which case a notice of
withdrawal will be effective if delivered to the Depositary by any method of
delivery described in the first sentence of this paragraph. Withdrawals of
Shares and Rights may not be rescinded. Any Shares and Rights properly withdrawn
will be deemed not validly tendered for purposes of the Offer, but may be
retendered at any subsequent time prior to the Expiration Date by following any
of the procedures described in Section 3.
14
<PAGE> 18
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser or any of its affiliates or assigns, the Dealer Manager, the
Depositary, the Information Agent or any other person or entity will be under
any duty to give any notification of any defects or irregularities in any notice
of withdrawal or incur any liability for failure to give any such notification.
5. CERTAIN UNITED STATES TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under applicable state, local,
foreign and other tax laws. For federal income tax purposes, each selling
stockholder would generally recognize gain or loss equal to the difference
between the amount of cash received and such stockholder's adjusted tax basis
for the sold Shares (together with the Rights). Such gain or loss will be
capital gain or loss (assuming the Shares are held as a capital asset) and any
such capital gain or loss will be long term if, as of the date of sale, the
Shares were held for more than one year or will be short term if, as of such
date, the Shares were held for one year or less. For individuals and certain
other non-corporate taxpayers, there is also a mid-term holding period of more
than one year, but not more than 18 months.
The Proposed Publicis Combination will be a reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"). Under the
Code and the Treasury Regulations promulgated thereunder (the "Treasury
Regulations") currently in force, the Proposed Publicis Combination will not be
a taxable transaction for the Company or its stockholders.
For United States federal income tax purposes, it is unclear whether
amounts received with respect to the redemption of Rights by the Company should
be treated as additional consideration for the Shares or as a dividend or other
ordinary income or as capital gain.
The foregoing discussion may not be applicable to certain stockholders of
the Company, including persons who acquired Shares pursuant to the exercise of
employee stock options or otherwise as compensation, individuals who are not
citizens or residents of the United States and foreign corporations, persons
holding Shares in a straddle, hedging, or conversion transaction, and entities
that are otherwise subject to special tax treatment (such as broker-dealers,
insurance companies, tax-exempt organizations, financial institutions and
passthrough entities).
Unless a stockholder complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the Code and
Treasury Regulations, such stockholder may be subject to withholding tax of 31%
with respect to any cash payments received pursuant to the Offer. Stockholders
should consult their brokers or the Depositary to ensure compliance with such
procedures. Foreign stockholders should consult with their own tax advisors
regarding withholding taxes in general.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND IS BASED ON THE CODE AND TREASURY REGULATIONS
CURRENTLY IN FORCE WHICH MAY BE AMENDED AT ANY TIME, POSSIBLY WITH RETROACTIVE
EFFECT. EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE OFFER AND PROPOSED
PUBLICIS COMBINATION, INCLUDING FEDERAL, STATE, LOCAL, AND FOREIGN TAX
CONSEQUENCES.
15
<PAGE> 19
6. PRICE RANGE OF THE SHARES; DIVIDENDS. According to the Company S-4,
the Shares are listed and traded on the NYSE under the symbol "TNO." The
following table sets forth, for the periods indicated, the reported high and low
sales prices for the Shares on the NYSE Composite Tape and the amount of cash
dividends paid per Share, as reported in the Company S-4 with respect to periods
occurring before the fourth quarter of 1997, and as reported by published
financial sources with respect to the fourth quarter of 1997.
TRUE NORTH COMMUNICATIONS INC.
<TABLE>
<CAPTION>
CASH
HIGH LOW DIVIDENDS
---- ---- ---------
<S> <C> <C> <C>
1995
First Quarter.............................................. $ 21 13/16 $ 15 3/4 $ .15
Second Quarter............................................. 20 1/4 7 5/8 .15
Third Quarter.............................................. 20 1/2 19 .15
Fourth Quarter............................................. 20 5/8 18 .15
1996
First Quarter.............................................. 25 16 3/8 .15
Second Quarter............................................. 27 22 1/4 .15
Third Quarter.............................................. 23 3/4 16 3/4 .15
Fourth Quarter............................................. 24 19 1/2 .15
1997
First Quarter.............................................. 22 3/8 18 .15
Second Quarter............................................. 24 3/4 17 .15
Third Quarter.............................................. 26 3/4 22 1/4 .15
Fourth Quarter (through December 12, 1997)................. 26 7/8 22 9/16 .15
</TABLE>
On July 30, 1997, the last trading day prior to the public announcement of
the execution of the Bozell Merger Agreement, according to the Company S-4, the
last reported sale price on the NYSE Composite Tape for the Shares was $23 1/16
per Share. On November 14, 1997, the last full day of trading prior to the
announcement by Publicis of its opposition to the Bozell Merger and its proposal
for a business combination with the Company at a value of $28 per Share,
according to published financial sources, the last reported sale price on the
NYSE Composite Tape for the Shares was $23 3/8 per Share. On December 3, 1997,
the last full day of trading prior to the announcement of the Offer, according
to published financial sources, the last reported sale price on the NYSE
Composite Tape for the Shares was $25 1/8 per Share. On December 9, 1997, the
last full day of trading prior to the issuance of the District Court's
Preliminary Injunction Order enjoining the Initial Offer, according to published
financial sources, the last reported sale price on the NYSE Composite Tape for
the Shares was $26 5/16 per Share. On December 12, 1997, the last full day of
trading before the Court of Appeals vacated the District Court's Preliminary
Injunction Order enjoining the Initial Offer, according to published financial
sources, the last reported sale price on the NYSE Composite Tape for the Shares
was $24 15/16 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
The Purchaser believes, based upon publicly available information, that as
of the date of this Offer to Purchase, the Rights are listed on the NYSE and all
Rights are attached to the associated Shares and are not traded separately. As a
result, the sale prices per Share set forth above are also the high and low sale
prices per Share and associated Right during all such periods. Upon the
occurrence of the Distribution Date, the Rights are to detach, and may trade
separately, from the Shares. See Section 11. The Purchaser believes that, as a
result of the announcement by the Purchaser of the Initial Offer, the
Distribution Date will be December 18, 1997, unless prior to such date the
Company's Board of Directors redeems the Rights or takes action to delay the
Distribution Date. The Distribution Date may also occur sooner. See Section 11.
IF THE DISTRIBUTION DATE OCCURS AND THE RIGHTS BEGIN TO TRADE SEPARATELY FROM
THE SHARES, STOCKHOLDERS ARE ALSO URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THE RIGHTS.
16
<PAGE> 20
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK
EXCHANGE LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could adversely affect the
liquidity and market value of the remaining Shares held by the public. The
purchase of Shares pursuant to the Offer can also be expected to reduce the
number of holders of Shares. The Purchaser cannot predict whether the reduction
in the number of Shares that might otherwise trade publicly would have an
adverse or beneficial effect on the market price for or marketability of the
Shares or whether it would cause future market prices to be greater or less than
the Offer price therefor.
STOCK EXCHANGE LISTING
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors, their immediate families and
other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should
fall below 600,000 or the aggregate market value of publicly held Shares
(exclusive of NYSE Excluded Holdings) should fall below $5,000,000.
The Purchaser believes that following the consummation of the Offer and the
Proposed Publicis Combination, the Shares will continue to meet the requirements
for listing on the NYSE.
In the event, however, that the Shares were no longer listed or traded on
the NYSE, it is possible that the Shares would trade on another securities
exchange or in the over-the-counter market and that price quotations would be
reported by such exchange, through the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or other sources. Such trading and
the availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of the Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act as described below and other factors.
EXCHANGE ACT REGISTRATION
The Shares are currently registered under the Exchange Act. The Purchaser
believes that following the consummation of the Offer and the Proposed Publicis
Combination, the Shares will continue to be registered under the Exchange Act.
Registration of the Shares, however, may be terminated upon application by the
Company to the Commission if the Shares are not listed on a "national securities
exchange" and there are fewer than 300 record holders of Shares. The Purchaser
does not intend to cause the Company to make application to the Commission to
deregister the Shares. Termination of registration of the Shares under the
Exchange Act would substantially reduce the information required to be furnished
by the Company to its stockholders and the Commission and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirements of furnishing a proxy statement
in connection with stockholders' meetings pursuant to Section 14(a) or 14(c) and
the related requirement of an annual report, no longer applicable to the
Company. If the Shares are no longer registered under the Exchange Act, the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions would no longer be applicable to the Company. Furthermore,
the ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act may be impaired or, with respect to certain
persons, eliminated. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or eligible for
stock exchange listing or NASDAQ reporting.
Based upon publicly available information, the Purchaser believes that, as
of the date of this Offer to Purchase, the Rights are registered under the
Exchange Act and are listed on the NYSE, but are attached to the Shares and are
not separately transferable. The Purchaser believes that, as a result of the
announcement
17
<PAGE> 21
by the Purchaser of the Initial Offer, the Distribution Date will be December
18, 1997, unless prior to such date the Company's Board of Directors redeems the
Rights or takes action to delay the Distribution Date. The Distribution Date may
also occur sooner. See Section 11. According to the Company 8-A, following the
Distribution Date, certificates evidencing the Rights will be sent to all
holders of Rights and Rights will become transferable apart from the Shares. See
Section 11. If the Distribution Date occurs and the Rights separate from the
Shares, the foregoing discussion with respect to the effect of the Offer on the
market for the Shares, stock exchange listings and Exchange Act registration
would apply to the Rights in a similar manner.
MARGIN REGULATIONS
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System, which have the effect, among
other things, of allowing brokers to extend credit on the collateral of such
Shares for the purpose of buying, carrying or trading in securities. The
Purchaser does not believe that the consummation of the Offer or the Proposed
Publicis Combination will have any effect on the status of the Shares as "margin
securities".
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a Delaware
corporation with its principal executive offices located at 101 East Erie
Street, Chicago, Illinois, 60611. The following description of the Company's
business has been taken from the Company S-4:
True North is a communications company which is the holding
company for Foote, Cone & Belding, a global advertising agency
network, and certain additional marketing services agencies or
companies. True North's other operating units are TN Technologies
Holdings, Inc. and True North Associated Communications Companies. TN
Technologies Holdings, Inc. is a digital interactive marketing holding
company for Modem Media Advertising Limited Partnership, RGA
Interactive and Cf2GS. True North Associated Communications Companies
are stand-alone companies specializing in marketing services. The
companies include Wahlstrom, a yellow pages and directory agency
network with six offices; Tierney & Partners, the largest advertising
agency in Philadelphia; Borders, Perrin & Norrander, an advertising
agency in the Pacific Northwest; and Market Growth Resources, a sales
promotion agency with a niche in retail specific programs.
The selected financial information of the Company and its consolidated
subsidiaries set forth below has been excerpted and derived from the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997. More comprehensive financial and other information is included in such
reports (including management's discussion and analysis of results of operations
and financial position) and in other reports and documents filed by the Company
with the Commission and the financial information set forth below is qualified
in its entirety by reference to such reports and documents filed with the
Commission and all of the financial statements and related notes contained
therein. These reports and other documents may be examined and copies thereof
may be obtained in the manner set forth below.
18
<PAGE> 22
SELECTED FINANCIAL DATA OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996
1996 1995 1994 (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES.......................... $493,050 $439,053 $403,690 $ 444,551 $ 350,166
Costs and Expenses:
Salaries and Employee
Benefits..................... 318,539 280,619 248,955 286,321 230,623
Office and General Expenses..... 150,115 128,459 116,903 133,180 109,586
Other (Income) Expense, Net..... 5,182 15,224 1,836 6,686 2,162
-------- -------- -------- -------- --------
$473,836 $424,302 $367,694 $ 426,187 $ 342,371
-------- -------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME
TAXES........................... $ 19,214 $ 14,751 $ 35,996 $ 18,364 $ 7,795
Provision for Federal, Foreign and
State Income Taxes.............. 9,697 3,705 16,068 8,778 3,914
-------- -------- -------- -------- --------
$ 9,517 $ 11,046 $ 19,928 $ 9,586 $ 3,881
Minority Interest Income
(Expense)....................... 31 (558) 146 (786) 358
Equity in Earnings of Affiliated
Companies....................... 18,286 9,165 10,203 5,423 7,121
-------- -------- -------- -------- --------
NET INCOME........................ $ 27,834 $ 19,653 $ 30,277 $ 14,223 $ 11,360
======== ======== ======== ======== ========
Net Income Per Share.............. $ 1.20 $ .87 $ 1.34 $ .58 $ .49
======== ======== ======== ======== ========
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding..................... 23,254 22,542 22,678 24,397 23,228
======== ======== ======== ======== ========
</TABLE>
19
<PAGE> 23
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, 1997
1996 1995 (UNAUDITED)
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
Cash and Short-term Investments...................... $ 56,996 $ 56,981 $ 43,101
Accounts Receivable, Net............................. 402,786 333,038 481,226
Other Current Assets................................. 44,464 39,970 65,774
-------- -------- ----------
Total Current Assets................................. $504,246 $429,989 $ 590,101
Property and Equipment, Net.......................... 61,369 54,626 63,699
Goodwill............................................. 151,640 84,934 230,543
Investment in Affiliated Companies................... 202,397 187,456 163,135
Other Noncurrent Assets.............................. 13,008 9,097 19,492
-------- -------- ----------
Total Assets......................................... $932,660 $766,102 $ 1,066,970
======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accruals........................ $417,054 $371,767 $ 568,550
Short-term Bank Borrowings........................... 79,698 49,982 67,015
Liability for Federal and Foreign Taxes on Income.... 2,312 1,810 --
Current Portion of Long-term Debt.................... 270 199 1,524
Accrued Expenses..................................... 53,857 52,734 --
-------- -------- ----------
Total Current Liabilities............................ $553,191 $476,492 $ 637,089
-------- -------- ----------
Long-term Debt....................................... $ 31,513 $ 5,402 $ 65,885
Liability for Deferred Compensation.................. 44,501 36,538 41,837
Other Noncurrent Liabilities......................... 37,727 25,576 47,004
Obligation to Modem Media Partners................... 24,387 -- --
-------- -------- ----------
Total Noncurrent Liabilities......................... $138,128 $ 67,516 $ 154,726
-------- -------- ----------
Common Stock......................................... $ 7,957 $ 7,830 $ 8,480
Paid-in Capital...................................... 123,740 116,483 156,416
Retained Earnings.................................... 119,399 105,800 122,368
Less-Treasury Stock.................................. (4,553) (2,661) (5,155)
Cumulative Translation Adjustment.................... (5,202) (5,358) (6,954)
-------- -------- ----------
Total Stockholders' Equity........................... $241,341 $222,094 $ 275,155
-------- -------- ----------
Total Liabilities and Stockholders' Equity........... $932,660 $766,102 $ 1,066,970
======== ======== ==========
</TABLE>
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning the Company's business, principal physical
properties, capital structure, material pending legal proceedings, operating
results, financial condition, directors and officers (including their
remuneration and the stock options granted to them), the principal holders of
the Company's securities, any material interests of such persons in transactions
with the Company and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to the Company's stockholders and
filed with the Commission. Such reports, proxy statements and other information
may be inspected and copied at the Commission's public reference facilities at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also
be available for inspection at the following regional offices of the Commission:
7 World Trade Center, New York, New York 10048; and 500 West Madison Street,
Chicago, Illinois 60661-2511; and copies may be obtained by mail at prescribed
rates from the principal office of the Commission at 450 Fifth Street,
20
<PAGE> 24
N.W., Washington, D.C. 20549. The Commission maintains a Website on the Internet
that contains reports, proxy statements and other information
(http://www.sec.gov). Reports, proxy statements and other information concerning
the Company also should be available for inspection at the NYSE, 20 Broad
Street, New York, New York 10005.
Although the Purchaser has no knowledge that any such information is
untrue, the Purchaser takes no responsibility for the accuracy or completeness
of information contained in this Offer to Purchase with respect to the Company
or any of its subsidiaries or affiliates or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER.
The Purchaser is a societe anonyme organized under the laws of France with
its principal executive offices located at 133, Avenue des Champs Elysees, 75008
Paris, France. The Purchaser controls one of Europe's largest advertising
networks, with offices in 58 countries and 99 cities. Publicis Communication and
Publicis Worldwide are the holding companies for the Purchaser's advertising
activities. Principal shareholdings of Publicis Communication and Publicis
Worldwide include Publicis Conseil Group (umbrella unit for all agencies and
specialized firms in France), Publicis FCB Europe Group (European agency
network), Publicis/Bloom (US agency), Publicis Centre Media (media buying arm in
France), and Publicis Consultants (new business strategy consultancy). The group
of companies owned by Publicis Communication and Publicis Worldwide provide
global advertising services in France and abroad. In addition to traditional
advertising agency services, customers of Publicis are also provided a range of
support services, including research, crisis management, public relations,
financial advertising, design, in-house communications and recruitment
advertising, direct marketing, sales promotion, and graphic and artwork
services.
The Purchaser is not subject to the information and reporting requirements
of the Exchange Act and therefore does not file periodic reports or other
information with the Commission relating to its business, financial condition or
other matters. Set forth below is certain selected consolidated financial data
with respect to the Purchaser and its subsidiaries excerpted or derived from
audited consolidated financial statements and notes thereto published by the
Purchaser for the three years ended December 31, 1996, 1995 and 1994 and from
unaudited consolidated financial statements published by the Purchaser for the
six-month periods ended June 30, 1997 and 1996 (collectively, the "Purchaser
Financial Statements"). The following summary of the Purchaser Financial
Statements is qualified in its entirety by reference to the full text of the
Purchaser Financial Statements, copies of which are attached as exhibits to the
Schedule 14D-1/13D Amendment of the Purchaser filed with the Commission in
connection with the Offer (the "Schedule 14D-1") and are incorporated in this
Offer to Purchase by reference and may be inspected in the same manner as set
forth with respect to the Company in Section 8.
The Purchaser Financial Statements are presented in French francs ("FFR")
and are prepared in accordance with accounting principles generally accepted in
France ("French GAAP") and not in accordance with accounting principles
generally accepted in the United States ("U.S. GAAP"). French GAAP differs in
certain respects from U.S. GAAP. A summary description of the principal
differences between French GAAP and U.S. GAAP relevant to the Purchaser is set
forth in Schedule II of this Offer to Purchase. On December 31, 1996, December
29, 1995, December 30, 1994, June 30, 1997 and June 28, 1996, respectively, the
noon US dollar buying rate in New York City for cable transfers in FFR, as
certified for customs purposes by the Federal Reserve Bank of New York, was US
$1.0 per FFR 5.193, FFR 4.898, FFR 5.345, FFR 5.875 and FFR 5.144, respectively.
21
<PAGE> 25
SELECTED FINANCIAL DATA OF THE PURCHASER AND ITS CONSOLIDATED SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(FFR IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
YEAR ENDED YEAR ENDED YEAR ENDED JUNE 30, JUNE 30,
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996
1996 1995 1994 (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
French GAAP:
REVENUES............ FFR 3,746,074 FFR 3,649,355 FFR 3,438,714 FFR 2,030,192 FFR 1,828,444
Payroll expenses.... (2,033,681) (1,992,398) (1,850,426) (1,157,791) (995,586)
Administrative
expenses.......... (1,096,932) (1,073,203) (1,006,654) (597,416) (528,429)
Total expenses...... (3,130,613) (3,065,601) (2,857,080) (1,755,207) (1,524,015)
Other operating
income............ 62,492 77,003 76,389 29,755 32,521
EARNINGS BEFORE
DEPRECIATION,
INTEREST AND
TAXES............. 677,953 660,757 658,023 304,740 336,950
Current income...... 461,053 453,876 427,541 148,690 148,977
Total net income.... 338,588 308,389 221,586 148,690 153,977
GROUP NET INCOME
(EXCLUDING
MINORITY
INTERESTS)........ 185,531 152,726 120,456 92,935 78,611
US GAAP:
GROUP NET INCOME
(EXCLUDING
MINORITY
INTERESTS)........ 171,369 139,948 128,248 85,891 69,886
</TABLE>
22
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
(FFR IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, DECEMBER 31, 1997
1996 1995 (UNAUDITED)
------------- ------------- -------------
<S> <C> <C> <C>
French GAAP:
ASSETS
Fixed assets................................ FFR 1,785,704 FFR 1,634,341 FFR 2,006,185
Intangible and tangible fixed assets, net... 1,224,908 1,284,452 1,568,457
Long-term investments, net.................. 560,796 349,889 437,728
Current assets.............................. 5,753,259 5,607,947 6,140,041
Prepaid expenses............................ 72,485 78,766 79,829
Total Assets................................ 7,611,448 7,321,054 8,226,055
LIABILITIES AND SHAREHOLDERS' EQUITY
Consolidated shareholders' equity........... FFR 2,397,066 FFR 2,180,288 FFR 2,319,805
Shareholders' equity........................ 1,558,736 1,421,971 1,764,539
Minority interests.......................... 838,330 758,317 555,266
Loss and contingency provisions............. 363,334 395,108 395,029
Current liabilities......................... 4,753,894 4,654,365 5,320,938
Other accruals.............................. 97,154 91,293 190,283
Total liabilities........................... 7,611,448 7,321,054 8,226,055
US GAAP:
Consolidated shareholders' equity........... 1,553,746 1,409,944 1,752,802
</TABLE>
The largest shareholder of the Purchaser is Somarel, Societe Civile
Familiale ("Somarel"), which is a family-held private company organized under
the laws of France with its principal office located at 23, rue Alberic Majnard,
75016 Paris, France. Somarel is a company organized by the founder of Publicis
and exists solely for the purpose of holding 3,095,640 shares of capital stock
of the Purchaser, which shares represent 38.23% and 47.20% of the outstanding
ownership and voting rights, respectively, of the Purchaser.
The name, business address, citizenship, present principal occupation and
employment history for the past five years of each of the directors and
executive officers of the Purchaser and Somarel are set forth in Schedule I of
this Offer to Purchase.
In 1989, Publicis and the Company formed a joint venture in which the two
companies combined certain of their European operations. As part of the
formation of the joint venture, the parties became stockholders of one another.
Publicis Communication became a 20% stockholder of the Company, and the Company
became a 26% stockholder of Publicis Communication. With respect to the joint
venture and the cross stockholders of Publicis Communication and the Company,
the parties entered into, among other agreements, a Master Alliance Agreement
and a Stockholders Agreement, each dated January 1, 1989 (together, the "Joint
Venture Agreements").
As of the date of this Offer to Purchase, Publicis Communication, owns
4,658,000 Shares. Substantially all of these Shares were acquired as newly
issued Shares in January 1989 at the time that the parties formed their European
joint venture. From time to time, Publicis Communication has acquired Shares,
but no such additional acquisitions have occurred in the last two years.
In the years following the formation of the Publicis/Company joint venture,
the parties had significant disagreements concerning the nature and scope of
their joint efforts. In February 1997, the Company and Publicis announced a
settlement of their disputes (the "February 1997 Settlement"), and on May 19,
1997, the parties signed a series of agreements which unwound their European
joint venture (the "May 1997 Agreements"). After consummation of the
transactions contemplated by the May 1997 Agreements, Publicis
23
<PAGE> 27
Communication remained an 18.5% owner of the Company, and the Company became a
26.5% owner of Publicis Communication.
The May 1997 Agreements contain certain provisions and understandings
between the parties concerning their cross stockholdings and certain other
matters of common interest. Pursuant to the May 1997 Agreements, Publicis
transferred its ownership of certain agencies in France, the United Kingdom,
Portugal and Greece to the Company. In exchange, the Company transferred its
ownership of 49% of the parties' joint venture to Publicis for an additional
equity stake in Publicis Communication, which raised its ownership of Publicis
Communication to 26.5%. In addition, the Company transferred to Publicis its
ownership of certain agencies in Germany, Australia and New Zealand and entered
into certain other agreements with respect to agencies in India, Thailand and
Argentina. The May 1997 Agreements also address other relationships between the
parties, including, but not limited to: certain put, call and sale arrangements
with respect to the Company's equity stake in Publicis Communication; the
parties rights, under certain circumstances to maintain their percentage equity
ownership of the other party; certain financial reporting requirements of each
of the parties; the ownership and use of the respective companies' agency brand
names; the servicing of clients of one party by the other in certain specified
markets; and the rights of each party to have a member on the board of directors
of the other party under certain circumstances.
The May 1997 Agreements also required the Purchaser to deliver to the
Company a customary "affiliate letter" with respect to pooling of interests
accounting treatment for the Bozell Merger. On October 17, 1997, the Purchaser
delivered its affiliate letter to the Company. The affiliate letter delivered by
the Purchaser provides that, among other things, the Purchaser will not sell,
transfer or otherwise dispose of, or reduce its risk with respect to, the Shares
owned by it for a specified period prior to and following consummation of the
Bozell Merger. The Purchaser may withdraw such letter if a majority vote of the
outstanding Shares in favor of the Bozell Merger is not obtained within 60 days
of November 26, 1997. If the Bozell Merger is not approved by January 25, 1998
or if the vote obtained at the Special Meeting of the stockholders of the
Company to be held on December 30, 1997, and any adjournments and postponements
thereof (the "Special Meeting"), is less than a majority of the outstanding
Shares, the Purchaser currently intends to withdraw its affiliate letter. In the
event the Bozell Merger is approved by less than a majority of the outstanding
Shares and the Company nonetheless seeks to effect the Bozell Merger, the
Purchaser will reassess its investment in the Company. Because the Purchaser
believes that consummation of the Bozell Merger will diminish the value of the
surviving company, the Purchaser may sell its Shares. Certain actions which the
Purchaser might take in this regard could have the effect of precluding the use
of "pooling-of-interests" accounting treatment for the Bozell Merger. Such
actions include a sale, transfer or other disposition of, or other reduction of
its risk with respect to, all or part of the Shares then owned by the Purchaser.
If the Company is required to treat the Bozell Merger as a purchase for
accounting purposes, the Purchaser believes that the resulting goodwill charge
would substantially dilute the Company's earnings per Share even if the Company
achieves the pro forma financial projections set forth in the Company Proxy.
The foregoing summary of the Joint Venture Agreements, the February 1997
Settlement and the principal May 1997 Agreements is qualified in its entirety by
reference to the text thereof, copies of which are filed as exhibits to the
Schedule 14D-1 and are incorporated in this Offer to Purchase by reference and
may be inspected in the manner as set forth with respect to the Company in
Section 8.
Except as set forth elsewhere in this Offer to Purchase: (i) neither the
Purchaser nor Somarel nor, to the knowledge of the Purchaser, any of the persons
or entities listed in Schedule I hereof or any associate or majority-owned
subsidiary of the Purchaser or any of the persons so listed, beneficially owns
or has a right to acquire any Shares or any other equity securities of the
Company; (ii) neither the Purchaser nor Somarel nor, to the knowledge of the
Purchaser, any of the persons or entities referred to in clause (i) above or any
of their executive officers, directors or subsidiaries has effected any
transaction in the Shares or any other equity securities of the Company during
the past 60 days; (iii) neither the Purchaser nor Somarel nor, to the knowledge
of the Purchaser, any of the persons or entities listed in Schedule I hereof,
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company (including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls,
24
<PAGE> 28
guaranties of loans, guaranties against loss or the giving or withholding of
proxies, consents or authorizations); (iv) since January 1, 1994, there have
been no transactions which would require reporting under the rules and
regulations of the Commission between the Purchaser or Somarel or any of their
respective subsidiaries or, to the knowledge of the Purchaser, any of the
persons or entities listed in Schedule I hereof, on the one hand, and the
Company or any of its executive officers, directors or affiliates, on the other
hand; and (v) since January 1, 1994, there have been no contacts, negotiations
or transactions between the Purchaser or Somarel or any of their respective
subsidiaries or, to the knowledge of the Purchaser, any of the persons or
entities listed in Schedule I hereof, on the one hand, and the Company or any of
its subsidiaries or affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. As described
above, in 1989, Publicis and the Company formed a joint venture in which the two
companies combined certain of their European operations. As part of the
formation of the joint venture, the parties also became stockholders of one
another. Publicis Communication became a 20% stockholder of the Company, and the
Company became a 26% stockholder of Publicis Communication.
In the years following the formation of the Publicis/Company joint venture,
the parties had significant disagreements concerning the nature and scope of
their joint efforts. During the period of September 1994 through May 1997, the
Company and Publicis were involved in international arbitration proceedings
concerning their European joint venture. The parties alleged that each had
breached certain provisions of their agreements, and, in February 1995, Publicis
rescinded the master agreement governing the parties' arrangements.
Throughout the period of their dispute, directors and senior management of
both Publicis and the Company met to discuss various aspects of the parties'
disagreements and, in November 1995, Maurice Levy, the Chief Executive Officer
of Publicis, presented to the Board of Directors of the Company a proposal to
merge the two companies' advertising businesses. No substantive merger
discussions between the parties followed that presentation.
During 1996, Publicis and the Company at various times held discussions and
exchanged correspondence concerning the parties' joint venture and the
possibility of unwinding the parties' cross-stockholdings or merging the two
companies.
In February 1997, the Company and Publicis announced the settlement of
their disputes and executed a binding Memorandum of Agreement which provided for
the dissolution of the joint venture, the transfer of certain agencies to each
of the parties and the cross-shareholdings which exist as of the date of this
Offer to Purchase. That Memorandum of Agreement contemplated the negotiation and
signing of definitive agreements, which were executed on May 19, 1997. Those
agreements are referred to herein as the "May 1997 Agreements" and are described
in "Certain Information Concerning the Purchaser." After consummation of the
transactions contemplated by the May 1997 Agreements, Publicis Communication
remained an 18.5% owner of the Company, and the Company became a 26.5% owner of
Publicis Communication.
On July 31, 1997, the Company announced that the Company and CAC had
entered into the Bozell Merger Agreement. See "Introduction" for a description
of certain terms of the Bozell Merger Agreement. The Company's largest
stockholder, Publicis, was not consulted with respect to the Bozell Merger, and,
since the July announcement, neither Publicis nor the other stockholders of the
Company had been provided with detailed information with respect to the Bozell
Merger until the dissemination of the Company Proxy on December 1, 1997.
On November 10, 1997, Publicis sent the following letter to the Board of
Directors of the Company:
Board of Directors
True North Communications
101 East Erie Street
Chicago, IL 60611
USA
25
<PAGE> 29
Members of the Board:
Publicis was disappointed in August when we learned of True North's
agreement to merge with Bozell. Publicis believes that True North's
transaction with Bozell is contrary to the best interests of True
North's stockholders, of which Publicis is by far the largest with 18.5%
of True North's common stock. The acquisition does not solve True
North's fundamental strategic weakness, which has been its failure to
establish a global presence. Bozell is primarily a U.S.-based business
with a weak international presence, and Publicis believes that its
acquisition by True North will compound, rather than solve, True North's
strategic weaknesses. As global marketers have increasingly demanded
worldwide coverage, True North has continued to focus on its U.S.
business and as a result, we believe that True North now finds itself at
a significant competitive disadvantage. In short, True North's proposed
acquisition of Bozell does nothing to solve these problems, and we
believe (based on the limited information that has been made available
to date) that the price to be paid for Bozell significantly exceeds the
value of Bozell's business. For these reasons, Publicis intends to
oppose and vote against the merger of Bozell and True North.
As many of you know, Publicis has for some time believed that a
combination of Publicis Communication's businesses with those of True
North would create a powerful global presence with tremendous
opportunities for growth. In November 1995, I made a presentation to the
Board of True North in which the significant benefits of combining our
two networks were clearly outlined. We at Publicis continue to believe
that a merger between Publicis Communication and True North is in the
best interests of both True North's and Publicis' stockholders and their
respective clients and employees.
Merging our two companies' networks would create a combined entity with
a very strong and creative presence in most of the world's significant
markets, enabling us to deliver a complete range of services to global
clients. Combining Publicis Communication and True North solves True
North's fundamental strategic weakness by adding a strong international
network which is a market leader in Europe. Although our two companies
have had disagreements in the past, the mutual interests of our
respective stockholders require us to put those differences aside and to
work together to maximize the values that can be achieved by combining
True North's and Publicis Communication's businesses.
After considering our options and reviewing the information that is
available to us, we have concluded that the strategic advantages of a
Publicis Communication/True North combination are too compelling for
Publicis to ignore. Accordingly, I am writing to inform you that
Publicis is prepared to propose a business combination between Publicis
Communication and True North in which each outstanding share of True
North would be valued at US$28. Publicis is prepared to discuss with
True North and its representatives the details of our proposal,
including the cash and stock components of our US$28 valuation. We are
ready to meet with the Board and its advisors to present our plans and
to discuss transaction structures which maximize value for both True
North's and Publicis' stockholders.
As I have repeatedly indicated to this Board and to senior management of
True North, a combination of Publicis Communication and True North would
be a strategically perfect fit. The two companies would represent a
worldwide structure, better able to serve current clients and ideally
positioned to offer the full range of services that today's global
marketers expect. Publicis is prepared to discuss with you as soon as
possible business combination transactions which would, we believe,
create significantly greater short- and long-term value for True North's
stockholders than your current merger with Bozell. We are prepared to
leave our past disagreements behind us in order to pursue this
opportunity, and we urge you to do the same for the benefit of the
stockholders of both of our companies.
We hope that you will view our proposal as we do -- a unique opportunity
for the stockholders of True North to maximize the value of their
shares. The strategic benefits of the combination are undeniable and, we
believe, far superior to the Bozell transaction which ignores the
strategic
26
<PAGE> 30
imperatives of our respective businesses. We would be willing to meet
with you and your advisors at your earliest convenience to discuss our
proposal and to answer any questions you may have. Our preferred course
would be to negotiate a transaction that can be presented to our
respective stockholders and clients as the amicable and joint effort of
Publicis, True North and each of the companies' Boards of Directors and
senior management.
I hope that each of you will give our proposal serious consideration,
and I look forward to your reply. We stand ready to meet with the Board
to present our plans.
Very truly yours,
Maurice Levy
Publicis' proposal contemplates the consolidation of the Company and
Publicis under one management. See "Purpose of the Offer and the Proposed
Publicis Combination; Plans for the Company." In this way, the combined entity
will have the tremendous advantage of a strong U.S. and international network,
as today's market requires. This structure avoids, however, the difficulties
inherent in the joint venture, which did not achieve its potential because it
lacked a clear chain of command and a fully integrated structure.
The Company did not disclose Publicis' letter or the prior Publicis
overture to merge to the public. Instead, the Company -- perhaps recognizing
that Publicis' opposition and counter-offer would seriously threaten the Bozell
Merger - hastily set a record date for the Special Meeting (the date used to
determine who is entitled to vote at the Special Meeting) without giving
adequate prior notice to the stockholders of the Company. Without revealing to
the NYSE or to the public the highly material information that it had received
from Publicis, the Company set a record date of Tuesday, November 18, 1997.
Because trades of securities take three business days to settle, every
stockholder of the Company who purchased Shares after Thursday, November 13,
1997 -- including persons who purchased at higher prices that prevailed after
the public announcement of Publicis' opposition and counter-proposal -- has been
disenfranchised.
The Board of Directors of the Company met on November 12, 1997 at a
regularly scheduled meeting. The Board of Directors of the Company did not,
however, respond to the Publicis letter and, instead, remained silent. After a
week without any response to its offer, on November 17, 1997, Publicis publicly
released the text of its November 10, 1997 letter.
Also on November 17, 1997, the Company filed a complaint in the Delaware
Court of Chancery against Publicis and issued the following press release:
True North Files for Injunction
Chicago, IL -- True North Communications Inc. (TNO)
disclosed that it filed, in Delaware Chancery Court, a request
for a preliminary injunction against Publicis Communication to
provide customary historical financial documentation it is
contractually obligated to give to True North under the terms of
the settlement agreement, dated May 19, 1997, that dissolved the
alliance between True North and Publicis.
This financial documentation will be part of the historical
information supplied to the SEC in regard to True North's
intended acquisition of Bozell, Jacobs, Kenyon & Eckhardt. In
the May 19, 1997 settlement agreement Publicis and True North
contractually committed to cooperate with each other in such
transactions.
By its lawsuit, the Company sought to enjoin Publicis to instruct its
accountants, Mazars & Guerard, to deliver to the Company all the documents,
comments and information requested by the Company in order to obtain the
Commission's approval of the Company Proxy. Publicis disputed both the
underlying factual allegations of the lawsuit as well as the Company's claim to
relief. Nonetheless, in order to defuse any
27
<PAGE> 31
miscommunication, shortly after receiving the Company's papers containing this
request, Publicis expedited the process of providing certain routine accounting
information to the Company.
During the course of the day on November 17, 1997, and in response to the
Publicis announcement of its November 10, 1997 letter, the trading price of the
Shares on the NYSE rose to $26 (from $23 3/8 per Share at the close of trading
on November 16, 1997). After the close of trading on November 17, 1997, the
Company issued the following response to Publicis' November 10, 1997 merger
proposal:
Mr. Maurice Levy
Publicis
133 Champs-Elysees
75008 Paris
France
Dear Maurice:
The Board of Directors of True North considered your unsolicited
letter dated November 10, 1997 at our regularly scheduled board
meeting held on November 12. Your letter was discussed at length
and the Board had the benefit of counsel from its legal and
financial advisors -- Sidley & Austin and Morgan Stanley. We
have been asked by the Board to respond to your letter.
The Board unanimously (with Ali Wambold, your Publicis designee,
recusing himself and Mike Murphy absent due to illness) resolved
to decline your invitation to meet to discuss the transaction
which you are prepared to propose. Among other things:
- The Board reaffirmed its desire to pursue the pending
merger transaction with BJK&E (Bozell) because we feel it
is in the best interests of our shareholders.
- As best as the Board can understand the financial terms
of your letter, they are not materially different from
other strategic alternatives which the Board has
explicitly considered and turned down in the past.
- The Board believes it is unrealistic to ignore a decade
of difficulties between our two companies, which (if they
were to persist) would directly and adversely affect the
value of any combination you propose, and further
believes any such combination could cause significant
fallout of key clients and key employees.
- The Board concluded after being advised by counsel that
your letter does not provide a basis which would allow
us, in keeping with our contractual obligations to
Bozell, to engage in discussions.
- The Board has been advised that your letter stating that
you are prepared to make a proposal would require
significant discussion and time to define and execute,
thereby significantly jeopardizing our timetable for
other considerations.
The Board remains committed to the Bozell deal and must point
out that our progress in moving toward closing it is being
delayed by lack of responsiveness from Publicis in providing the
information it is contractually required to provide for our SEC
filing. While Publicis is obviously free to vote in any manner
it chooses, we urge that it carefully, fully and promptly comply
with its obligations under the May 19, 1997 Agreement wherein it
promised to take reasonably requested action in support of a
True North acquisition. We believe that, when Publicis reviews
the information contained in the proxy statement, it will
ultimately conclude that the True North/Bozell transaction will
benefit the existing stockholders.
Very truly yours,
Bruce Mason
Rick Braddock
28
<PAGE> 32
On November 18, 1997, Publicis issued the following press release:
Publicis Responds to True North's Rejection of Its Proposal
Paris, November 18, 1997 -- Publicis S.A. announced today that
it was disappointed by the response it had received from the
Board of Directors of True North Communications Inc. to
Publicis' letter of November 10.
Publicis continues to believe that its proposal for a business
combination with True North, which would value each True North
share at US$28, is financially and strategically superior to the
pending Bozell transaction. Publicis reiterated its opposition
to the Bozell merger and reaffirmed its intention to vote its
True North shares against the transaction.
In light of the True North's Board's summary rejection of the
Publicis offer, Publicis is considering all options available to
it to enable the stockholders of True North to realize the full
value of their investment.
On November 21, 1997, William D. Perez, the President and Chief Executive
Officer of S.C. Johnson & Son, Inc. (a privately-held consumer products company
and a client of both the Company and Publicis), wrote a letter to Maurice Levy
concerning Publicis' November 10, 1997 proposal. In his letter, Mr. Perez
expressed support for senior management of the Company and advised Mr. Levy that
the S.C. Johnson account might not stay with the Company following a change of
control of the Company. On November 26, 1997, Mr. Levy responded to Mr. Perez's
letter by explaining the position that Publicis had taken with respect to the
Bozell Merger and by setting forth the reasons for Publicis' November 10, 1997
proposal.
On November 26, 1997, Publicis commenced a lawsuit against the Company and
its directors in the District Court for breach of their fiduciary obligations:
(i) by interfering with the stockholders' franchise in setting a premature
record date for the Special Meeting; (ii) for the directors' failure to
reasonably inform themselves and to maximize stockholder value; (iii) for the
directors' failure to place the stockholders' interest ahead of their own; and
(iv) for the Company's unreasonable and disproportional response to Publicis and
Publicis' proposal to the Company. Publicis seeks preliminary and permanent
injunction relief and damages. Publicis also has filed a motion for a
preliminary injunction and expedited discovery. Discovery has commenced, but the
District Court has not yet ruled on Publicis' motion.
On December 3, 1997, Publicis received a letter from the Company requesting
that, pursuant to the May 1997 Agreements, Publicis support the Bozell Merger
and refrain from taking actions against it. Publicis does not believe that the
May 1997 Agreements require Publicis to support the Bozell Merger or refrain
from taking action against it.
On December 3, 1997, the Company filed an answer to the complaint filed by
the Purchaser in the District Court. In addition, the Company filed a
counterclaim (the "Counterclaim") against the Purchaser, Publicis Communication
and Maurice Levy, the President and Chief Executive Officer of the Purchaser.
The Counterclaim alleges that the Purchaser's publication of its November 10,
1997 letter to the Company and the Purchaser's related comments are false and
misleading in violation of the federal proxy rules. The Counterclaim states,
among other things: "Publicis' supposed proposal to acquire the Company is
nothing more than a ruse designed to interfere with the proposed Bozell
acquisition and to mislead the stockholders of the Company. Publicis has
indicated . . . that the 'combination' Publicis referred to in the November 10,
1997 letter was in actuality an acquisition of the Purchaser by [the Company]."
The Counterclaim also alleges that Publicis Communication, the Purchaser
and Mr. Levy tortiously interfered with the exercise by one or more of the
Company's directors of their fiduciary duties, breached the May 1997 Agreements,
and tortiously interfered with the current and expected business relationship
between the Company and Bozell. The Counterclaim states: "Though Publicis has
publicly stated that it is opposing the True North-Bozell transaction in the
interests of shareholder value, its actions have not been consistent with the
best interests of an open shareholder vote. Its real intention is to block the
True North-Bozell transaction by any means . . . ." The Counterclaim seeks an
order for corrective disclosures, injunctive relief, compensatory and punitive
damages and reimbursement of court costs and attorneys' fees.
29
<PAGE> 33
Also on December 3, 1997, the Board of Directors of Publicis approved the
terms of the Initial Offer and the Proposed Publicis Combination.
On the morning of December 4, 1997, Maurice Levy placed calls to each of
Bruce Mason and Richard Braddock to inform them of the Initial Offer and the
Proposed Publicis Combination. Also on December 4, 1997, Publicis sent the
following letter to the Board of Directors of the Company:
Board of Directors
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
USA
Members of the Board:
As you know, on November 10, 1997, I wrote to you to propose a
business combination between Publicis and True North in which
each outstanding share of True North would be valued at $28. We
were therefore disappointed when True North notified us on
November 17 that the Board had declined Publicis' invitation to
discuss the transaction.
Since that date, True North's Proxy Statement/Prospectus with
respect to the pending merger with Bozell has been made public.
The information set forth in that document confirms our strong
conviction that the Bozell transaction is contrary to the
interests of True North's stockholders. Publicis' view that the
Bozell merger does nothing to address True North's strategic
imperatives has only been compounded by your recent disclosure
of the financial aspects of the Bozell deal. Not only does the
acquisition magnify True North's international weaknesses, but
it does so at a price that is far in excess of any reasonable
valuations of Bozell's businesses.
After an intensive review of True North, we have concluded that
the financial and strategic imperatives of combining our two
companies are too compelling to ignore. Accordingly, I am
writing to inform you of Publicis' intention to commence an
all-cash tender offer for 9,619,904 shares of True North stock
at a price of $28 per share. We believe that this represents an
exceptionally attractive opportunity for your share
owners -- specifically, our all-cash offer represents a 20%
premium over the price of the True North stock on the day prior
to the announcement of our $28 proposal.
After consummation of the tender offer, Publicis and its
affiliates would be the beneficial owners of a majority of the
issued and outstanding True North shares. Publicis would then
consummate a business combination with True North in which
Publicis' worldwide advertising network would be combined with
True North's.
In the combination of our two businesses, True North would
become the owner of all of Publicis' advertising-related assets
and the proposed transaction would effectively consolidate the
True North and Publicis agency networks under True North's
control. Following consummation of those transactions, the True
North common stock would continue to be outstanding and listed
on the New York Stock Exchange. In exchange for the transfer of
Publicis' businesses to True North, True North would issue to
Publicis additional shares. In the proposed transaction,
Publicis' businesses would be transferred to True North at a
valuation for such businesses which would yield an estimated
post-transaction value of $28 per True North share.
The transaction we propose represents a unique opportunity to
build a combined enterprise capable of delivering the worldwide
services that today's global marketers demand. Together, our
businesses would have annual revenue of over $1.2 billion and
would have operations in 77 countries around the world. The fit
between our two companies is perfect, and we at Publicis have
nothing but the highest respect for the senior agency personnel
and
30
<PAGE> 34
other creative staff at the True North agencies, the vast
majority of whom we intend to retain following consummation of
the transaction.
Our offer is not subject to any financing contingencies. The
offer is, of course, subject to the termination of the Bozell
Merger Agreement in accordance with its terms. Publicis intends
to solicit proxies against the Bozell merger and has today filed
with the SEC preliminary proxy materials in opposition to your
pending transaction. We are committed to maximizing the value of
the stockholders' investment in True North. Therefore, even if
you refuse to consider our offer, we intend to demand that the
Board solicit competing proposals for the sale of True North.
Publicis is prepared to participate in such an auction by making
an offer for the company at least equal in value to our current
proposal. If a competing bidder makes an offer for True North at
better terms than those of our final bid, Publicis intends to
support such an offer.
Sincerely,
Maurice Levy
Also on December 4, 1997, the Purchaser and Publicis Communication filed
preliminary solicitation materials with the Commission seeking revocations and
conditional proxies from the stockholders of the Company in opposition to the
Bozell Merger.
On December 5, 1997, the Company moved for a temporary restraining order
from the District Court enjoining the Purchaser from engaging in any conduct
that is not in support of the Bozell Merger (other than voting against the
Bozell Merger), including by commencing the Initial Offer and by soliciting the
stockholders of the Company to vote against the Bozell Merger. On December 8,
1997, the Purchaser sent the following letter to the Company's Board of
Directors:
Board of Directors
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
USA
Members of the Board:
As you know, I wrote to the Board on November 10, 1997 to propose a
business combination between Publicis and True North in which each
outstanding share of True North would be valued at $28. After being
notified by True North that the Board had declined our invitation to
discuss the transaction and after analyzing the information set forth in
True North's Proxy Statement/Prospectus relating to the pending Bozell
merger, we decided to take our proposal directly to True North
stockholders by announcing our intention to commence a tender offer for
9,619,904 True North shares at a price of $28 per share in cash and by
opposing the pending Bozell merger at the special meeting of True North
stockholders.
Through the tender offer and the solicitation of revocations and
conditional proxies in opposition to the Bozell merger, we are seeking
to give True North stockholders the opportunity to decide for themselves
whether they wish to receive a premium for their True North shares or
pay a premium for Bozell. While Publicis has been going to great lengths
to give True North stockholders this opportunity to evaluate and choose,
True North has been going to even greater lengths to deny True North
stockholders this choice.
On December 5, 1997, True North publicly released a letter addressed to
its stockholders that stated, in part, that "[y]our Board will carefully
consider Publicis' offer and report its recommendation to True North
stockholders" and that "you are urged not to act hastily with respect to
your investment
31
<PAGE> 35
in True North, but to await the findings and conclusions of your Board
to ensure that your decision is fully informed." The letter concluded by
stating that "[w]e will endeavor to keep you informed promptly of
further significant developments in this matter." At the same time that
it was publicly announcing its commitment to consider Publicis' offer
and to keep its stockholders promptly informed, True North without
disclosure to its stockholders was seeking on an expedited basis a
Federal court order enjoining the Publicis tender offer and solicitation
in opposition to the Bozell merger.
Based upon the recent actions of True North management in seeking to
deny its stockholders the opportunity to choose between the Publicis
offer and the Bozell merger, we believe that a conflict of interest may
exist between management members of the Board and True North
stockholders. We therefore strongly feel that it is in the best
interests of True North and its stockholders for a special committee of
independent directors of True North (with separate legal and financial
advisors) to be appointed and vested with the authority to negotiate
with Publicis with respect to Publicis' proposal or with any other
serious bidder for True North.
As the largest stockholder of True North, Publicis believes that True
North should immediately stop wasting corporate funds in its attempt to
have Publicis enjoined from making its tender offer and solicitation in
opposition to the Bozell merger without legitimate grounds. As you well
know, the pooling provision at issue in the litigation was never
intended to preclude Publicis from exercising its rights as a True North
stockholder or from offering to purchase additional True North shares at
a premium.
As we have previously indicated, we stand ready to meet with you and
your advisors at any time to discuss a combination of Publicis with True
North. We are willing to discuss and negotiate all aspects of our offer,
including price and structure. We also remain committed to maximizing
True North stockholder value including, if necessary, through an auction
of True North, in which we are prepared to participate.
Sincerely,
Maurice Levy
The Company did not respond to the Purchaser's December 8, 1997 letter, and
on December 9, 1997, the Purchaser sent the following letter to the Company's
Board of Directors:
Board of Directors
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
USA
Members of the Board:
I am writing to communicate directly to each of you Publicis' deep
offense at your attorneys' argument in court yesterday that the pooling
agreement gives True North a blank check to force Publicis to "support"
the Bozell deal.
It is ludicrous to believe or take the position that Publicis would
commit itself to supporting a transaction that it has opposed since even
before the February 1997 Memorandum of Understanding. As we have said
for a long time, the deal fails to address True North's basic strategic
weakness, which is its lack of any significant international presence,
and comes at a very high price to True North.
32
<PAGE> 36
If True North succeeds in denying its stockholders the opportunity to
decide for themselves whether they wish to receive a premium for their
True North shares or pay a premium for Bozell, we intend to make certain
that the True North Board is held accountable for its breaches of
fiduciary duty if, as we expect, the Bozell deal proves to be a very
costly failure.
Despite our past differences and the recent courtroom events, we
continue to stand ready to meet with you and your advisors at any time
to discuss a combination of Publicis with True North. As we stated in
our December 8 letter to the Board, we are willing to discuss and
negotiate all aspects of our offer, including price and structure, and
remain committed to maximizing True North stockholder value including,
if necessary, through an auction of True North, in which we are prepared
to participate.
Sincerely,
Maurice Levy
On December 10, 1997, the District Court ruled in favor of the Company on
its motion for injunctive relief upon a finding that one of the May 1997
Agreements -- titled "Pooling Agreement" (the "Pooling Agreement") -- prohibits
the Purchaser from taking actions that do not "support" the Bozell Merger (other
than voting against the Bozell Merger) including making the Initial Offer and
soliciting revocations and conditional proxies in opposition to the Bozell
Merger. Accordingly, the District Court preliminarily enjoined Publicis, Mr.
Levy and their respective officers, agents and employees from announcing,
commencing or further proceeding with any tender offer for the Shares;
soliciting, contacting or otherwise communicating in any way with any record or
beneficial holder of the Shares, by means of soliciting proxies or otherwise, to
urge stockholders to vote against the Bozell Merger or related proposals or to
urge stockholders not to vote on the Bozell Merger; or inducing, assisting or
encouraging third parties to take actions in opposition to the Bozell Merger.
Also on December 10, 1997, the Purchaser issued the following press release:
Publicis Announces Withdrawal of its
Tender Offer for True North Shares
Paris, December 10, 1997 -- Publicis S.A. announced today that, as
result of today's order by U.S. District Judge Joan Gottschall enjoining
it from making or continuing any tender offer for True North, it is
withdrawing its previously announced tender offer for 9,619,904 shares
of common stock of True North Communications Inc. Publicis stated that
it intends to seek an emergency appeal and a stay of the preliminary
injunction pending the appeal. A hearing on Publicis' motion to enjoin
the proposed merger between True North and Bozell, Jacobs, Kenyon &
Eckhardt has been scheduled for December 18, 1997. Publicis further
stated that, pending the outcome of these court proceedings, it is
considering all of its options in connection with its proposal for a
business combination with True North.
Also on December 10, 1997, the Company sent the following letter to the
Purchaser:
Mr. Maurice Levy
Publicis S.A. and Publicis Communication
133, avenue des Champs-Elysees
75380 Paris Cedex 08
FRANCE
Dear Maurice:
By now you should be absorbing the full significance of our victory in
obtaining a preliminary injunction. You are also, no doubt,
contemplating whether or not you wish to continue to expend time, energy
and money on trying to figure out how you might circumvent the judge's
ruling,
33
<PAGE> 37
appealing that ruling or (in the unlikely event that the ruling is
overturned), pursuing your campaign of disruption.
As you ponder these matters, you and your boards should know that:
- The True North Board is fully united in its determination
to publicly reject the offer described in your December 4
letter, when and if you are ever allowed to make it. This
view is based upon our board's conclusions, after careful
consideration in two separate meetings with the benefit
of financial and legal advice, that
-- We believe that the Bozell deal would yield more in
value than the Publicis offer, and the acquisition of
Bozell allows us to realize our long-standing
strategic vision for a multi-brand architecture.
-- We believe that a proper takeover premium for True
North, even without Bozell, would yield more than $28
and have a written "inadequacy opinion" from Morgan
Stanley to that effect.
-- We believe that the offer you attempted to make is
best understood as a conditional, partial offer for up
to 38% of our stock followed by an indefinitely valued
second step transaction in which no additional
consideration will flow directly to our shareholders.
Even before the second step is completed, True North's
public shareholders would become minority holders of a
Publicis subsidiary. We believe the "blended value" to
our shareholders of these two steps would likely be
less then $28.
-- As fiduciaries, we have grave concerns about
delivering control to Publicis of our company if it
were to have a continuing public minority.
- You are seriously mistaken in your belief that your
relationship problems are limited to senior management at
the holding company level. Your ten years of disruptive
antics, which have reached a crescendo in the past few
weeks, have alienated key people throughout the
organization. Indeed, the seven-member board of FCB
management, our principal operating subsidiary, fully
supports the decision of True North Board to reject the
offer you attempted to make.
- We vehemently disagree with your assertion that True
North lacks the global capacity to serve multinational
clients. In short, we don't need Publicis for strategic
reasons.
- Our response to your contract breaches will not be
limited to an injunction. We will press for a recovery of
full compensatory damages -- as well as punitive damages.
Further, to the extent that Publicis Communication, in
which we are a 26.5% shareholder, bears any expense or
loss, we will seek damages from PSA and personally from
the Publicis Communication directors who are responsible
for that loss.
- In fact, you will put Publicis and its directors,
individually, into greater financial risk if the Bozell
deal doesn't go forward on account of your breaches
before the judge ruled. In that instance, the measure of
damages to True North and to Bozell would expand
dramatically.
Finally we wish to acknowledge receipt of additional
correspondence from you dated December 8 and 9, 1997. At
the present time, those letters seem moot. However, for the
record, we should note that we disagree with your various
assertions.
Sincerely,
Bruce Mason
Richard S. Braddock
34
<PAGE> 38
On December 11, 1997, Publicis was granted leave to file and filed a
supplemental and amended complaint (the "Amended Complaint"), amending the
complaint filed by Publicis in the District Court on November 26, 1997. In
addition to restating the allegations in the initial complaint, the Amended
Complaint asserts, among other things, misrepresentations and omissions in the
Company Proxy. The Amended Complaint also seeks to force the Company to redeem
the Rights Agreement or to amend the Rights Agreement so that it is not
triggered by the Offer. The Amended Complaint alleges, among other things, that
the Company Proxy does not provide information about certain offers received or
combinations discussed that would allow the Company's stockholders to compare
the Publicis proposals and the Bozell Merger with prior offers or proposed
combinations. The Amended Complaint also alleges that the Company Proxy suggests
that the "Other Interested Party's" proposed transaction was of less value to
the Company's stockholders than the Bozell Merger by stating that the closing
price of Shares on November 25, 1997, the day before the date of the Company
Proxy, was above the "Other Interested Party's" final tentative offering price
but fails to disclose to the Company's stockholders that "the price on November
25, 1997 reflected the $2.63 jump in the Company's share value on November 17,
1997, when Publicis disclosed its proposed offer."
The Amended Complaint further alleges that a letter included in the Company
Proxy dated December 2, 1997 originally directed to the Company's stockholders
who are also the Company's employees "erroneously states that 'Publicis
withh[eld] some obligatory financial documentation [from True North]' and blames
Publicis for causing an alleged delay in obtaining SEC approval of the Company's
proxy solicitation materials." According to the Amended Complaint, (i) the
Company did not ask Publicis for "financial documentation," such as financial
statements, but for a statement from its accountants as to which standards had
been applied to certain financial statements of Publicis Communication, and (ii)
Publicis did not withhold anything, but requested its accountants to comply. The
Amended Complaint also alleges that any delay in the Commission declaring the
Company Proxy effective was not caused by Publicis' purported delay in providing
the accountants' statements requested by the Company.
Finally, the Amended Complaint alleges that the Company has tried to
mislead its stockholders into believing that the results of the proxy
solicitation, and the Bozell Merger, are a forgone conclusion. In particular,
the Amended Complaint complains of statements allegedly made by Bruce Mason,
Chairman and Chief Executive Officer of the Company, on the CNBC network's
"Power Lunch" program to the effect that the Company expected the Bozell Merger
to be completed by December 31, 1997 (which would be possible only if the
Company stockholders were to approve the Bozell Merger at the Special Meeting)
and in an interview to the Paris daily newspaper Le Figaro, in which Mr. Mason
allegedly predicted that the Bozell Merger was a near certainty, stating that
the Company and Bozell "are going to constitute" a very powerful combination.
Discovery has commenced with respect to the Counterclaim, but the District Court
has not ruled on the matter.
On December 15, 1997, the Court of Appeals vacated the District Court's
Preliminary Injunction Order, holding that the Preliminary Injunction Order had
been issued in violation of a provision of the Pooling Agreement that requires
disputes concerning this agreement to be decided solely in courts located in
Delaware.
Also on December 16, 1997, Publicis amended its preliminary solicitation
materials. The purpose of the solicitation is to oppose the Bozell Merger and
facilitate the Offer and the Proposed Publicis Combination. The solicitation is
being made only pursuant to such separate solicitation materials which comply
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
Also on December 16, 1997, the Purchaser commenced the Offer.
11. PURPOSE OF THE OFFER AND THE PROPOSED PUBLICIS COMBINATION; PLANS FOR
THE COMPANY.
PURPOSE OF THE OFFER AND THE PROPOSED PUBLICIS COMBINATION.
Since the inception of the parties' joint venture in 1989, the Purchaser
has believed that the combination of the Company and Publicis would represent a
strong, dynamic and strategic force in the U.S. and international markets. In
November 1995, Maurice Levy, the Chief Executive Officer of Publicis, made a
presentation to the Company's Board of Directors in which he described in detail
the significant benefits of
35
<PAGE> 39
combining the two companies. The Purchaser continues to believe that a
combination between the Company and Publicis is in the best interests of both
the Company's and the Purchaser's stockholders and their respective clients and
employees. Publicis' November 10, 1997 letter to the Company's Board of
Directors sought to initiate discussions with respect to a business combination
between Publicis and the Company (in a manner consistent with the provisions of
the Bozell Merger Agreement). The Company's belated response was to decline to
seriously consider the Publicis proposal or to meet with Publicis or its
representatives.
The purpose of the Offer is to acquire a majority of the total number of
Shares outstanding on a fully diluted basis as the first step in consummating
the Proposed Publicis Combination. The Purchaser intends, as soon as practicable
following consummation of the Offer, to effect the Proposed Publicis
Combination. The purpose of the Proposed Publicis Combination is to contribute
to the Company all of the advertising-related businesses owned directly and
indirectly by the Purchaser in exchange for the issuance of additional Shares to
the Purchaser, creating a combined Company to be run by the most talented
executives of Publicis and the Company with a powerful international presence.
In order to effect the Proposed Publicis Combination, the Purchaser is
seeking to negotiate the terms of a definitive agreement with the Company
pursuant to which the Proposed Publicis Combination would be consummated as soon
as practicable following consummation of the Offer. The Purchaser intends that
in the Proposed Publicis Combination, (i) each Share that is issued and
outstanding immediately prior to the effective time of the Proposed Publicis
Combination would remain outstanding (other than the 4,658,000 Shares owned by
Publicis Communication, which would become treasury shares of the Company and
cease to be outstanding) and (ii) the issued and outstanding shares of capital
stock of Publicis Communication and Publicis Worldwide (other than the shares of
capital stock of Publicis Communication held by the Company, which shares shall
be canceled by operation of the merger) would be converted into an estimated
26,587,937 Shares. Following consummation of the transactions contemplated by
the Offer and the Proposed Publicis Combination, the Purchaser estimates that it
would own approximately 71.8% of the outstanding Shares on a fully diluted
basis, with the remaining 28.2% of the Shares being owned by the stockholders of
the Company immediately prior to the effective time of the Proposed Publicis
Combination. Following the consummation of the Proposed Publicis Combination,
the Purchaser expects that the Shares would continue to be listed on the NYSE.
Publicis Communication and Publicis Worldwide own all of the Purchaser's global
advertising related businesses. See Section 9. The exchange ratio for the Shares
to be issued to the Purchaser in the Proposed Publicis Combination has been set
with the intention of yielding a post-merger common equity valuation of the
Company of $28 per Share.
The Purchaser has made certain assumptions as to the pro forma effect of
the Offer and the Proposed Publicis Combination on the Company. Unaudited Pro
Forma Combined Financial Information for the Company for 1996, 1997 and 1998
following the Offer and the Proposed Publicis Combination is set forth in
Schedule III of this Offer to Purchase. Based on the Purchaser's estimates, the
Proposed Publicis Combination would result in 1998 pro forma earnings per Share
for the Company of approximately $1.70 on a fully diluted basis. In order for
the post merger common equity valuation of the Company to trade at $28.00 or
more per Share, the Company would need to trade at a stock price multiple of not
less than 16.5 times 1998 earnings per Share. The comparable publicly traded
companies selected by Morgan Stanley, as financial advisor to the Company, in
connection with the fairness opinion it delivered to the Board of Directors of
the Company relating to the Bozell Merger, include Grey Advertising, Interpublic
Group, Ominicom and WPP Group PLC. These companies' stock prices are currently
trading at multiples that range from 14.4 to 22.7 times 1998 estimated earnings
per share (assuming Institutional Brokers Estimate System ("IBES") estimates),
with a median of 21.3 times (IBES does not publish a 1998 estimate for Grey
Advertising) and a midpoint of 19.5 times. The Purchaser believes that the
Proposed Publicis Combination would enhance the Company's strategic position in
the increasingly global advertising market, which should result in superior
growth prospects and an increased trading multiple over the level at which the
Shares currently trade (the Shares currently trade at a multiple of 15.5 times
1998 estimated earnings per Share (assuming IBES estimates)). If, following the
Proposed Publicis Combination, the Company trades at a multiple of 1998 pro
forma earnings per Share of the midpoint multiple of such comparable companies,
the resultant Share price would exceed $28.00 per Share by a significant amount.
36
<PAGE> 40
The strategic purpose of the Proposed Publicis Combination is to
consolidate the Company's and Publicis' worldwide advertising agency networks
within one corporate structure under the general control of one management. The
agreement effecting the Proposed Publicis Combination is expected to provide
that, upon consummation of the Offer, the Purchaser will be entitled to
designate a majority of the directors on the Company's Board of Directors. Such
agreement is also expected to provide that the Company will use its best efforts
to cause the Purchaser's designees to be elected as directors of the Company,
including increasing the size of the Company's Board of Directors or securing
the resignations of incumbent directors, or both.
Consummation of the Proposed Publicis Combination and the issuance of
additional Shares to the Purchaser in connection therewith will require approval
by the Board of Directors of the Company and the affirmative vote of the holders
of a majority of the outstanding Shares. If the Purchaser purchases Shares
pursuant to the Offer and the Minimum Condition is satisfied, the Purchaser
would have a sufficient number of Shares to approve the Proposed Publicis
Combination and the issuance of additional Shares to the Purchaser in connection
therewith without the affirmative vote of any other holder of Shares and to
elect directors as described above. Although the Purchaser would seek
consummation of the Proposed Publicis Combination as soon as practicable
following the purchase of the Shares pursuant to the Offer, the exact timing and
details of the Proposed Publicis Combination will depend on a variety of factors
and legal requirements, including, among others things, whether the conditions
to the Offer have been satisfied or waived.
The Offer is conditioned upon, among other things, the Company, the
Purchaser, Publicis Communication and Publicis Worldwide entering into a
definitive agreement to effect the Proposed Publicis Combination. Although the
Purchaser has sought to enter into negotiations with the Company with respect to
the Proposed Publicis Combination and continues to pursue such negotiations,
there can be no assurance that such negotiations will occur or, if such
negotiations occur, as to the outcome thereof. The Purchaser reserves the right
to amend the Offer (including amending the number of Shares to be purchased, the
purchase price and the consideration in the Proposed Publicis Combination) upon
entry into an acquisition agreement or other agreement regarding a business
combination with the Company or otherwise or to negotiate an acquisition
agreement or other agreement regarding a business combination with the Company
not involving a tender offer. See Section 14.
In connection with the Offer and during its pendency, or in the event the
Offer is terminated or not consummated, in accordance applicable law and subject
to the terms of any acquisition or other agreement that it may enter into with
the Company, the Purchaser may explore any and all options which may be
available to it. In this regard, to facilitate the consummation of the Offer and
the Proposed Publicis Combination, the Purchaser intends, through the
solicitation of proxies, to oppose the consummation of the transactions
contemplated by the Bozell Merger Agreement. Such solicitation will be made
pursuant to separate proxy materials complying with the requirements of Section
14(a) of the Exchange Act, and the rules and regulations promulgated thereunder.
The Purchaser may also determine, whether or not the Offer is then pending, to
conduct a proxy contest in connection with the Company's 1998 annual meeting of
stockholders seeking to remove the current members of the Board of Directors of
the Company and elect a new slate of directors designated by the Purchaser.
The making of the Offer will enable the Purchaser to commence the process
of seeking regulatory approvals for its acquisition of the Company. See Section
15. In addition, by tendering Shares into the Offer, the Company's stockholders
effectively will be given the opportunity to express to the Company's Board that
they wish to be able to accept the Offer and to approve the Proposed Publicis
Combination or a similar transaction with Parent.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR THE SPECIAL
MEETING OF THE COMPANY'S STOCKHOLDERS. THE PURCHASER IS CURRENTLY SOLICITING
REVOCATIONS AND CONDITIONAL PROXIES OF THE COMPANY'S STOCKHOLDERS IN OPPOSITION
TO THE CONSUMMATION OF THE BOZELL MERGER AND RELATED PROPOSALS. SUCH
SOLICITATION IS BEING MADE ONLY PURSUANT TO SEPARATE SOLICITATION MATERIALS,
PRELIMINARY COPIES OF WHICH WERE FILED
37
<PAGE> 41
WITH THE COMMISSION, WHICH COMPLY WITH ALL APPLICABLE REQUIREMENTS OF SECTION
14(a) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
PLANS FOR THE COMPANY
Following consummation of the Offer and the Proposed Publicis Combination,
the Company would become the owner of all of Publicis' advertising-related
assets. Publicis believes that the consolidation of Publicis' and the Company's
agency networks under the Company's control will create a worldwide business
better able to meet the demands of global marketers and one which has tremendous
opportunities for growth around the world.
Following consummation of the Offer and the Proposed Publicis Combination,
the Purchaser intends to conduct a further review of the Company and its
subsidiaries and their respective assets, businesses, corporate structure,
capitalization, operations, properties, policies, management and personnel.
After such review, the Purchaser will determine what actions or changes, if any,
would be desirable in light of the circumstances which then exist, and reserves
the right to effect such actions or changes. The Purchaser's decisions could be
affected by information hereafter obtained, changes in general economic or
market conditions or in the business of the Company or its subsidiaries, actions
by the Company or its subsidiaries and other factors.
Except as described in this Offer to Purchase, the Purchaser has no present
plans or proposals that would relate to or would result in (i) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, (ii) a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries, (iii) any
change in the present Board of Directors or management of the Company, (iv) any
material changes in the present capitalization or dividend policy of the
Company, (v) any other material change in the Company's corporate structure or
business, (vi) causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association or
(vii) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act.
The Purchaser intends to consummate the Proposed Publicis Combination as
soon as practicable following consummation of the Offer.
STATUTORY REQUIREMENTS
Delaware Business Combination Law. Section 203 of the Delaware Law
provides that a Delaware corporation such as the Company may not engage in any
"Business Combination" (defined to include a variety of transactions, including
a merger) with any "Interested Stockholder" (defined generally as a person that
directly or indirectly beneficially owns 15% or more of the corporation's
outstanding voting stock), or any affiliate of an Interested Stockholder, for
three years after the date on which the Interested Stockholder becomes an
Interested Stockholder. The three-year prohibition on Business Combinations with
Interested Stockholders (the "Business Combination Prohibition") does not apply
if certain conditions, described below, are satisfied. Section 203 of the
Delaware Law provides that a "beneficial owner" of voting stock includes any
person who, individually or together with any of its affiliates or associates,
has (i) the right to acquire voting stock (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise, (ii) the right to vote such stock
pursuant to any agreement, arrangement or understanding, or (iii) any agreement,
arrangement or understanding for the purposes of acquiring, holding, voting or
disposing of such stock with any other person that beneficially owns, directly
or indirectly, such stock.
The Business Combination Prohibition does not apply to a particular
Business Combination between a corporation and a particular Interested
Stockholder if (i) prior to the date such Interested Stockholder became an
Interested Stockholder, the board of directors of such corporation approved
either the Business Combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, or (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
38
<PAGE> 42
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares held
by (x) persons who are directors and also officers of the corporation and (y)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to the date
the stockholder becomes an Interested Stockholder, the Business Combination is
(a) approved by the board of directors of the corporation and (b) authorized at
an annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock of the corporation which is not owned by
the Interested Stockholder. Although the Purchaser is an "Interested
Stockholder" for purposes of Section 203 of the Delaware Law, in that it owns
approximately 18.4% of the Company's outstanding Shares, as a consequence of the
timing and manner of its acquisition of such Shares, the Purchaser believes that
the Offer and the Proposed Publicis Combination are not subject to Section 203.
Section 203(b)(6) of the Delaware Law provides that the restrictions
contained in Section 203 of the Delaware Law do not apply to a Business
Combination that is proposed prior to the consummation or abandonment of and
following the announcement or notification of one of certain extraordinary
transactions (including a merger) involving the corporation which transaction
(i) is with or by a person who either was not an Interested Stockholder during
the previous three years or who became an Interested Stockholder with the
approval of the corporation's board of directors and (ii) has been approved or
has not been opposed by a majority of the members of the board of directors then
in office who were directors prior to any person becoming an Interested
Stockholder during the previous three years or were recommended for election or
elected to succeed such directors by a majority of such directors. Accordingly,
the Purchaser believes that, because the Offer and the Proposed Publicis
Combination were proposed by the Purchaser following the announcement of the
approval of the Bozell Merger Agreement by the Board of Directors of the
Company, the restrictions on Business Combinations contained in Section 203 of
the Delaware Law are inapplicable to the Proposed Publicis Combination pursuant
to Section 203(b)(6).
The foregoing summary of Section 203 of the Delaware Law does not purport
to be complete and is qualified in its entirety by reference to the provisions
of Section 203 of the Delaware Law.
APPRAISAL RIGHTS
Holders of Shares will not be entitled to statutory appraisal rights in
connection with the Offer. Stockholders who will be entitled to receive
statutory appraisal rights, if any, in connection with the Proposed Publicis
Combination (or similar business combination) will receive additional
information concerning available statutory appraisal rights and the procedures
to be followed in connection therewith before such stockholders have to take any
action relating thereto.
THE RIGHTS
According to the Company 8-A, on November 16, 1988, the Board declared a
dividend of one Right for each outstanding Share of the Company. Each Right
entitles the registered holder thereof until the earlier of November 28, 1998
and the redemption of the Rights to purchase from the Company one two-thousandth
(1/2000) (such number being the number as adjusted pursuant to the 1995 Stock
Split) of a share of Series A Junior Participating Preferred Stock, $1.00 par
value (the "Series A Preferred Stock"), of the Company at a purchase price of
$42.50 (such price being the price as adjusted pursuant to the 1995 Stock Split)
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in the Rights Agreement.
According to the Company 8-A, the Rights will not be transferable apart
from the Shares until the earlier of (i) the tenth business day after a public
announcement that a person or group (other than a Company related entity, or
Publicis Communication or any affiliate of Publicis Communication so long as
Publicis Communication or any affiliate of Publicis Communication does not
become the beneficial owner of 25% or more of the outstanding Shares of the
Company), has become the beneficial owner of 20% or more of the Shares (an
"Acquiring Person") or (ii) the tenth business day following the commencement
of, or
39
<PAGE> 43
announcement of an intention to commence, an offer, the consummation of which
would result in a person or group (other than a Company related entity or
Publicis Communication or any affiliate of Publicis Communication so long as
Publicis Communication is not, or as a result of such offer shall not be, an
Acquiring Person) beneficially owning 30% or more of the outstanding Shares (the
earlier of the dates specified in clauses (i) and (ii) being the "Distribution
Date"). According to the Company 8-A, until the Distribution Date (or earlier
redemption of the Rights), the surrender for transfer of any certificates
representing the Shares will constitute the transfer of the Rights associated
with the Shares represented by such certificate. According to the Company 8-A,
following the Distribution Date, the Rights become exercisable, and separate
certificates evidencing the Rights will be mailed to the holders of record of
the outstanding Shares.
According to the Company 8-A, in the event that on or after the first date
of public announcement by the Company or an Acquiring Person that an Acquiring
Person has become such (the "Shares Acquisition Date"), the Company is acquired
in a merger or other business combination transaction or 50% or more of its
consolidated assets or earning power are sold in one or a series of transactions
(other than the ordinary course of business), proper provision will be made so
that each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price multiplied
by the number of one two-thousandths of a share of the Series A Preferred Stock
for which a Right is then exercisable, the number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times such price. In the event that any person or group, together
with its affiliates and associates, becomes the beneficial owner of 30% or more
of the Shares then outstanding (unless such person or group becomes the owner of
85% or more of the outstanding Shares by a purchase pursuant to a cash tender
offer for all of the outstanding Shares), or in the event that the Company is
the surviving corporation in a merger with an Acquiring Person or any associate
or affiliate thereof and the Shares are not changed or exchanged, or in the
event that an Acquiring Person engages in certain self-dealing transactions
specified in the Rights Agreement, proper provision will be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter have the right to receive upon
exercise thereof at a price equal to the then current Purchase Price multiplied
by the number of one two-thousandths of a share of the Series A Preferred Stock
for which a Right is then exercisable, the number of Shares which at the time of
such transaction will have a market value of two times such price.
According to the Company 8-A, in the event a Person becomes an Acquiring
Person, proper provisions shall be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive upon exercise that number of
Shares having a market value of two times the Purchase Price of the Right.
According to the Company 8-A, at any time prior to the earlier to occur of
(i) the tenth business day (subject to extension) after the Shares Acquisition
Date or (ii) November 28, 1998, the Company may redeem the Rights in whole, but
not in part, at a redemption price of $.005 (such price being the price as
adjusted pursuant to the 1995 Stock Split) per Right (the "Redemption Price").
Promptly upon the action of the Board electing to redeem the Rights, the Company
is to make announcement thereof, and from and after the date of such election by
the Board of Directors of the Company to redeem the Rights, the right to
exercise the Rights will terminate, and the only right of holders of Rights will
be to receive the Redemption Price per Right.
According to the Company 8-A, until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
According to the Company 8-A, the terms of the Rights may be amended by the
Board of Directors of the Company in any manner (including to shorten and
lengthen any time period such as the redemption period) at any time prior to the
Distribution Date and thereafter by the Board of Directors of the Company in
certain respects, including: (a) generally to shorten and lengthen any time
period, provided that, the Rights Agreement cannot be amended to lengthen (i)
any time period (other than a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable) unless (A) approved
by a majority of the Disinterested Directors (as defined in the Rights
Agreement) and (B) such lengthening is for
40
<PAGE> 44
the benefit of the holders of the Rights. Notwithstanding the foregoing, prior
to such time as a person or group becomes an Acquiring Person, the Board of
Directors of the Company may (i) lower certain of the 20% and 30% thresholds as
indicated to not less than 10%; (ii) raise the 25% threshold for Publicis
Communication; or (iii) exclude other persons from the definition of Acquiring
Person. Pursuant to the May 1997 Agreements, the Company may not lower the
thresholds applicable to Publicis Communication or any affiliate of Publicis
Communication to below 22%.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Company 8-A and
the text of the Rights Agreement as set forth as an exhibit thereto, filed with
the Commission, copies of which may be obtained in the manner set forth in
Section 8.
If the Rights Condition is not satisfied and the Purchaser elects, in its
sole discretion, to waive the Rights Condition and consummate the Offer, and if
there are outstanding Rights which have not been acquired by the Purchaser, the
Purchaser will evaluate its alternatives. Such alternatives could include
purchasing additional Rights in the open market, in privately negotiated
transactions, in another tender or exchange offer or otherwise. Any such
additional purchase of Rights could be for cash or other consideration. Under
such circumstances, the Proposed Publicis Combination might be delayed or
abandoned as impracticable. The form and amount of consideration to be received
by the holders of Shares in the Proposed Publicis Combination, if consummated,
might be subject to adjustment to compensate the Purchaser for, among other
things, the costs of acquiring Rights and a portion of the potential dilution
cost to the Purchaser of Rights not owned by the Purchaser and its wholly-owned
subsidiaries at the time of the Proposed Publicis Combination. In such event,
the consideration paid for Shares in the Proposed Publicis Combination could be
substantially less than the consideration paid in the Offer. In addition, the
Purchaser may elect under such circumstances not to consummate the Proposed
Publicis Combination.
UNLESS AND UNTIL THE PURCHASER DECLARES THAT THE RIGHTS CONDITION IS
SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO TENDER ONE ASSOCIATED RIGHT FOR EACH
SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. IF THE
DISTRIBUTION DATE DOES NOT OCCUR PRIOR TO THE EXPIRATION DATE, A TENDER OF
SHARES WILL ALSO CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS. SEE SECTIONS 1
AND 3.
12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase Shares pursuant to the Offer and to pay related fees and
expenses is estimated to be approximately $275,000,000. The Purchaser has not
conditioned the Offer on obtaining financing. The Purchaser plans to obtain all
funds needed for the Offer (i) from its general corporate funds and (ii) by
borrowings under seven existing credit facilities dated various dates (the
"Credit Facilities") between the Purchaser and each of Union De Credit Pour Le
Development Regional ("Unicredit"), Banque Francaise Du Commerce Exterieur
("BFCE"), Banque National De Paris ("BNP"), Banque Paribas ("Paribas"), Credit
Lyonnais ("Lyonnais"), Banque OBC ("OBC") and CIC-Paris ("CIC").
The Credit Facility with Unicredit provides for borrowings on an unsecured
basis up to an aggregate of FFR 200,000,000 (subject to increase to FFR
500,000,000 upon satisfaction of certain conditions, including acceptance by the
lenders). For drawdowns of less than one month, the loans bear interest at the
average rate recorded for overnight transactions between banks in the French
interbank market, as published by the Bank of France, plus a margin of 0.0625%
per annum (increasing to 1.10% per annum upon increase of the credit line
availability) and, for drawdowns of more than one month, the loans bear interest
at the Paris interbank offering rate plus a margin of 0.0625% per annum
(increasing to 0.10% per annum upon increase of the credit line availability).
Borrowings under this Credit Facility are repayable (with a right to reborrow)
on the last day of each interest period applicable thereto, and the Credit
Facility has a term through May, 1998 (subject to annual evergreen extensions
through May, 2000, when the Credit Facility must be repaid in full). The
Purchaser is obligated to pay Unicredit a commitment fee of 0.0625% per annum on
the amount of the credit under this Credit Facility. The Unicredit Credit
Facility contains customary covenants by the Purchaser.
The Credit Facility with BFCE provides for borrowings on an unsecured basis
up to an aggregate of FFR 100,000,000 and the loans bear interest at the Paris
interbank offered rate plus a margin of 0.10% per
41
<PAGE> 45
annum (or, for borrowings in a foreign currency, at the London interbank offered
rate plus a margin of 0.10% per annum). Borrowings under this Credit Facility
are repayable (with a right to reborrow) on the last day of each interest period
applicable thereto, and the Credit Facility has a term through May, 1998 (when
the Credit Facility must be repaid in full). The Purchaser is obligated to pay
BFCE a commitment fee of 0.0625% per annum on the amount of the credit under
this Credit Facility. The BFCE Credit Facility contains customary covenants by
the Purchaser.
The Credit Facility with BNP provides for borrowings on an unsecured basis
up to an aggregate of FFR 200,000,000 and the loans bear interest at the Paris
interbank offered rate plus a margin of 0.125% per annum (or, for borrowings in
a foreign currency, at the London interbank offered rate plus a margin of 0.125%
per annum). Borrowings under this Credit Facility are repayable (with a right to
reborrow) on the last day of each interest period applicable thereto, and the
Credit Facility has a term through May, 1998 (when the Credit Facility must be
repaid in full). The Purchaser is obligated to pay BNP a commitment fee of
0.0625% per annum on the amount of the credit under this Credit Facility. The
BNP Credit Facility contains customary covenants by the Purchaser.
The Credit Facility with Paribas provides for borrowings on an unsecured
basis up to an aggregate of FFR 200,000,000 and the loans bear interest at the
Paris interbank offered rate plus a margin of 0.10% per annum. Borrowings under
this Credit Facility are repayable (with a right to reborrow) on the last day of
each interest period applicable thereto, and the Credit Facility has a term
through May, 1998 (when the Credit Facility must be repaid in full). The
Purchaser is obligated to pay Paribas a commitment fee of 0.0625% per annum on
the unused portion of the credit under this Credit Facility. The Paribas Credit
Facility contains customary covenants by the Purchaser.
The Credit Facility with Lyonnais provides for borrowings on an unsecured
basis up to an aggregate of FFR 100,000,000 (subject to increase to FFR
200,000,000 by mutual acceptance of the parties in May, 1998), and the loans
bear interest at the Paris interbank offered rate plus a margin of 0.125% per
annum. Borrowings under this Credit Facility are repayable (with a right to
reborrow) on the last day of each interest period applicable thereto, and the
Credit Facility has a term through May, 1998 (subject to annual evergreen
extensions by mutual agreement) when the Credit Facility must be repaid in full.
The Purchaser is obligated to pay Lyonnais a commitment fee of 0.0625% per annum
on the credit available under this Credit Facility. The Lyonnais Credit Facility
contains customary covenants by the Purchaser.
The Credit Facility with OBC provides for borrowings on an unsecured basis
up to an aggregate of FFR 100,000,000 and the loans bear interest at the average
rate recorded for overnight transactions between banks on the French interbank
market plus a margin of 0.10% per annum. Borrowings under this Credit Facility
are repayable in May, 1998 (when the Credit Facility must be repaid in full).
The Purchaser is obligated to pay OBC a commitment fee of 0.0625% per annum on
the authorized amount of the credit under this Credit Facility.
The Credit Facility with CIC provides for borrowings on an unsecured basis
up to an aggregate of FFR 100,000,000 and the loans bear interest at the Paris
interbank offered rate plus a margin of 0.10% per annum. Borrowings under this
Credit Facility are repayable (with a right to reborrow) on the last day of each
interest period applicable thereto, and the Credit Facility has a term through
April, 1998 (when the Credit Facility must be repaid in full). The Purchaser is
obligated to pay CIC a commitment fee of 0.0625% per annum on the unused portion
of the credit under this Credit Facility.
As of December 12, 1997, the Purchaser had (i) approximately $101,000,000
in cash, cash equivalents and marketable securities and (ii) availability to
borrow up to an additional $168,000,000 of loans under the Credit Facilities
(such amount being the approximate US dollar equivalent of FFR 1,000,000,000
(the aggregate current credit availability under the Credit Facilities), using a
rate of exchange of FFR 5.939 per US $1.0, which is the noon US dollar buying
rate in New York City for cable transfers in FFR, as certified for customs
purposes by the Federal Reserve Bank of New York on December 12, 1997). The
Purchaser has made arrangements with certain of the lenders party to the Credit
Facilities to provide financing in excess of the Purchaser's current credit
availability to the extent needed or required in connection with the Offer and
the Proposed Publicis Combination.
42
<PAGE> 46
The foregoing summary of the source and amount of funds is qualified in its
entirety by reference to the text of the Credit Facilities, copies of which are
attached as exhibits to the Schedule 14D-1 and are incorporated in this Offer to
Purchase by reference and may be inspected in the same manner as set forth with
respect to the Company in Section 8.
Although no definitive plans or arrangements for repayment of borrowings
under the Credit Facilities have been made, the Purchaser anticipates such
borrowings will be repaid with internally generated funds and from other sources
which may include the proceeds of future bank refinancings or the public or
private sale of debt or equity securities. No decision has been made concerning
the method the Purchaser will use to repay the borrowings under the Credit
Facilities. Such decision will be made based on the Purchaser's review from time
to time of the advisability of particular actions, as well as prevailing
interest rates, financial and other economic conditions and such other factors
as the Purchaser may deem appropriate.
13. DIVIDENDS AND DISTRIBUTIONS. If, on or after September 1, 1997, the
Company (i) splits, combines or otherwise changes the Shares or its
capitalization, (ii) acquires Shares or otherwise causes a reduction in the
number of Shares, (iii) issues or sells additional Shares (other than the
issuance of Shares reserved for issuance as of September 1, 1997 under option
and employee stock purchase plans in accordance with their terms as publicly
disclosed as of September 1, 1997) or any shares of any other class of capital
stock, other voting securities or any securities convertible into or
exchangeable for, or rights (other than the Rights), warrants or options,
conditional or otherwise, to acquire, any of the foregoing or (iv) discloses
that it has taken such action, then, without prejudice to the Purchaser's rights
under Section 14, the Purchaser, in its sole discretion, may make such
adjustments in the purchase price and other terms of the Offer and the Proposed
Publicis Combination as it deems appropriate to reflect such split, combination
or other change or action, including, without limitation, the Minimum Condition
or the number or type of securities offered to be purchased.
If, on or after September 1, 1997, the Company declares or pays any
dividend on the Shares (other than normal quarterly dividends declared and paid
in a manner consistent with past practice) or any distribution (including,
without limitation, the issuance of additional Shares pursuant to a stock
dividend or stock split, the issuance of other securities or the issuance of
rights (other than the separation of the Rights from the Shares) for the
purchase of any securities) with respect to the Shares or Rights (other than the
Redemption Price) that is payable or distributable to stockholders of record on
a date prior to the transfer into the name of the Purchaser or its nominees or
transferees on the Company's stock transfer records of the Shares and Rights
purchased pursuant to the Offer (except that if the Rights are redeemed by the
Company's Board of Directors, tendering stockholders who are holders of record
as of the applicable record date will be entitled to receive and retain the
Redemption Price), and if Shares are purchased in the Offer, then, without
prejudice to the Purchaser's rights under Section 14, (i) the purchase price per
Share payable by the Purchaser pursuant to the Offer shall be reduced by the
amount of any such cash dividend or cash distribution and (ii) any such non-cash
dividend, distribution, issuance, proceeds or rights to be received by the
tendering stockholders shall (a) be received and held by the tendering
stockholders for the account of the Purchaser and will be required to be
promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer or (b) at the direction of the Purchaser, be exercised
for the benefit of the Purchaser, in which case the proceeds of such exercise
will promptly be remitted to the Purchaser. Pending such remittance and subject
to applicable law, the Purchaser will be entitled to all rights and privileges
as owner of any such non-cash dividend, distribution, issuance, proceeds or
rights and may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by the Purchaser in its sole
discretion.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to
pay for or return tendered Shares promptly after expiration or termination of
the Offer), to pay for any Shares tendered, and may postpone the acceptance for
payment or, subject to the restriction referred to above, payment for any Shares
tendered, and may amend or terminate the Offer if (i) any condition to
consummation of the Offer set forth in the Introduction to this Offer to
Purchase (relating to the Minimum
43
<PAGE> 47
Condition, the Definitive Agreement Condition, the Rights Condition, the Section
203 Condition or the No Impediments Condition) has not been satisfied or (ii) at
any time on or after December 16, 1997 and before acceptance for payment of, or
payment for, such Shares any of the following events shall occur or shall be
deemed by the Purchaser to have occurred or the Purchaser shall have learned
about any such events applicable to or affecting the Company or any of its
affiliates which shall not have been previously publicly disclosed by the
Company:
(a) there shall have been threatened, instituted or pending any
action, proceeding, application, claim or counterclaim by or before any
court, government or governmental, regulatory or administrative agency,
authority or tribunal, domestic, foreign or supranational (whether brought
by the Company, an affiliate of the Company or any other person or entity),
which (i) challenges or seeks to challenge the acquisition by the Purchaser
of the Shares or Rights (or any of them), restrains, prohibits or delays or
seeks to restrain, prohibit or delay the making or consummation of the
Offer or the Proposed Publicis Combination or any other merger or business
combination involving the Purchaser or any of its affiliates and the
Company or any of its subsidiaries, restrains or prohibits or seeks to
restrain or prohibit the performance of any of the contracts or other
agreements or arrangements entered into by the Purchaser or any of its
affiliates in connection with the acquisition of the Company or the Shares
or Rights (or any of them), or seeks to obtain any damages in connection
with any of the foregoing, (ii) makes or seeks to make the purchase of or
payment for, some or all of the Shares or Rights pursuant to the Offer, the
Proposed Publicis Combination or otherwise illegal, or results in or may
result in a delay in the ability of the Purchaser to accept for payment or
pay for some or all of the Shares or Rights or to consummate the Proposed
Publicis Combination, (iii) imposes or seeks to impose limitations on the
ability of the Purchaser or the Company or any of their respective
affiliates or subsidiaries effectively to acquire or hold, or requiring the
Purchaser, the Company or any of their respective affiliates or
subsidiaries to dispose of or hold separate, any portion of the assets or
the business of the Purchaser, the Company or any of their respective
affiliates or subsidiaries or imposes or seeks to impose limitations on the
ability of the Purchaser, the Company or any of their respective affiliates
or subsidiaries to continue to conduct, own or operate all or any portion
of their businesses and assets as heretofore conducted, owned or operated,
(iv) imposes or seeks to impose or results in or may result in material
limitations on the ability of the Purchaser or any of its affiliates to
exercise full rights of ownership of the Shares or Rights purchased by
them, including, but not limited to, the right to vote the Shares purchased
by them on all matters properly presented to the stockholders of the
Company, or the right to vote any shares of capital stock of any subsidiary
directly or indirectly owned by the Company, (v) results in or may result
in a material limitation or diminution in the benefits expected to be
derived by the Purchaser as a result of the transactions contemplated by
the Offer and the Proposed Publicis Combination, (vi) imposes or seeks to
impose voting, procedural, price or other requirements in addition to those
under the Delaware Law and federal securities laws (each as in effect on
the date of this Offer to Purchase) in connection with the transactions
contemplated by the Offer and the Proposed Publicis Combination or any
material condition to the Offer that is unacceptable to the Purchaser or
(vii) otherwise directly or indirectly relates to the Offer, the Proposed
Publicis Combination or any other business combination with the Company or
which otherwise, in the sole judgment of the Purchaser, might adversely
affect the Company or any of its subsidiaries or the Purchaser or any of
its affiliates, or the value of the Shares; or
(b) other than the application of any waiting periods under the HSR
Act, the determination or deemed determination pursuant to the EC Merger
Regulation and the necessity for approvals and other actions by any
domestic, foreign or supranational governmental, administrative or
regulatory agency, authority or tribunal described in paragraph (k) below,
any statute, rule, regulation, judgment, decree, order or injunction shall
have been proposed, sought, promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Proposed Publicis Combination or
other business combination between the Purchaser or any of its affiliates
and the Company, or any other action shall have been taken, by any
domestic, foreign or supranational government or any governmental,
administrative or regulatory authority or agency or by any court or
tribunal, domestic, foreign or supranational, that might, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (vii) of paragraph (a) above; or
44
<PAGE> 48
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened in the business,
properties, assets, liabilities, capitalization, stockholders' equity,
condition (financial or otherwise), operations, licenses, franchises,
results of operations or prospects of the Company or any of its
subsidiaries, or in general political, market, economic or financial
conditions in the United States or abroad, which, in the sole judgment of
the Purchaser, is or may be materially adverse to the Company or any of its
subsidiaries or its stockholders, or the market price of, or trading in,
the Shares, or the Purchaser shall have become aware of any facts which are
or may be materially adverse with respect to the value of the Company or
any of its subsidiaries or the value of the Shares to the Purchaser or any
of its affiliates; or
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter securities market in the United States
or France or quotations for shares traded thereon, (ii) the declaration of
any banking moratorium or any suspension of payments in respect of banks in
the United States or France, (iii) any material adverse change (or any
existing or threatened condition, event or development involving a
prospective material adverse change) in the United States or France or any
other currency exchange rates or a suspension of, or a limitation on, the
markets therefor, (iv) the commencement of a war, armed hostilities or
other international or national calamity directly or indirectly involving
the United States or France, (v) any limitations (whether or not mandatory)
imposed by any governmental authority on, or any event which might have
material adverse significance with respect to, the nature or extension of
credit or further extension of credit by banks or other lending
institutions, (vi) any significant adverse change in the market price of
the Shares or in securities or financial markets in the United States or
abroad, including, without limitation, a decline of at least 15% in either
the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500
Index from that existing at the close of business on December 4, 1997 or
(vii) in the case of any of the foregoing, a material acceleration or
worsening thereof; or
(e) the Company or any of its subsidiaries shall have (i) issued,
distributed, pledged or sold, or authorized, proposed or announced the
issuance, distribution, pledge or sale of (A) any shares of capital stock
of any class (including, without limitation, the Shares), or securities
convertible into or exchangeable for any such shares, or any rights (other
than the Rights), warrants, or options to acquire any such shares or
convertible or exchangeable securities, other than the issuance of Shares
reserved for issuance on September 1, 1997 pursuant to the exercise of then
outstanding stock options or any employee stock purchase plan of the
Company (in each case in accordance with the publicly disclosed terms
thereof on such date) or (B) any other securities or rights in respect of,
in lieu of, or in substitution for, capital stock of the Company, (ii)
purchased or otherwise acquired or caused a reduction in, or proposed or
offered to purchase or otherwise acquire, any Shares or other securities of
the Company (except for redemption of the Rights in accordance with the
terms of the Rights Agreement), (iii) declared or paid, or proposed to be
declared or paid, any dividend or distribution on any shares of capital
stock (other than a distribution of the Rights Certificates in accordance
with the terms of the Rights Agreement and, in the event the Rights are
redeemed, the Redemption Price), or issued, or authorized, recommended or
proposed the issuance of, any other distribution in respect of any shares
of capital stock, whether payable in cash, securities or other property, or
altered or proposed to alter any material term of any outstanding security,
(iv) issued, distributed or sold, or authorized, announced or proposed the
issuance, distribution or sale of, any debt securities or any securities
convertible into or exchangeable for debt securities or any rights,
warrants or options entitling the holder thereof to purchase or otherwise
acquire any debt securities, or incurred, or authorized or proposed the
incurrence of, any debt other than in the ordinary course of business and
consistent with past practice, or any debt containing burdensome covenants,
(v) entered into any agreement for, or authorized, recommended, proposed,
effected or publicly announced its intention to authorize, recommend,
propose, enter into or cause (A) any merger, consolidation, liquidation,
dissolution, business combination (other than the Proposed Publicis
Combination), joint venture, acquisition of assets or securities (other
than a redemption of the Rights in accordance with the Rights Agreement) or
disposition of assets or securities other than in the ordinary course of
business, (B) any material change in its capitalization, (C) any release or
relinquishment of any material contract rights or (D) any comparable event
not in the ordinary course of business, (vi) entered into any agreement
for, or
45
<PAGE> 49
authorized, recommended, proposed, effected or announced its intention to
authorize, recommend, propose, enter into or cause, any transaction or
arrangement which could adversely affect the value of the Shares, (vii)
proposed, adopted or authorized or announced its intention to propose,
adopt or authorize any amendment to the Company's Certificate of
Incorporation or By-Laws or similar organization documents or (other than
any amendment which delays the Distribution Date) the Rights Agreement or
(viii) agreed in writing or otherwise to take any of the foregoing actions;
or
(f) a tender or exchange offer for some portion or all of any
outstanding securities of the Company or any of its subsidiaries (including
the Shares or Rights) shall have been publicly proposed to be made or shall
have been made by another person (including the Company or any of its
subsidiaries or affiliates), or it shall have been publicly disclosed or
the Purchaser shall have learned that (i) any person (including the Company
or any of its subsidiaries or affiliates), entity or "group" (as defined in
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to
acquire more than 5% of any class or series of capital stock of the Company
(including the Shares or Rights) or its subsidiaries or shall have been
granted any option or right to acquire more than 5% of any class or series
of capital stock of the Company (including the Shares or Rights) or its
subsidiaries, other than acquisitions of Shares for bona fide arbitrage
positions, or (ii) any such person, entity or group which has publicly
disclosed any such ownership of or right to acquire more than 5% of any
class or series of capital stock of the Company (including the Shares or
Rights) or its subsidiaries prior to December 16, 1997 shall have acquired
or proposed to acquire additional shares of any class or series of capital
stock of the Company (including the Shares or Rights) or its subsidiaries
constituting more than 1% of such class or series or shall have been
granted any option or right to acquire more than 1% of such class or series
of capital stock of the Company (including the Shares or Rights) or its
subsidiaries, (iii) any group shall have been formed which beneficially
owns more than 5% of any class or series of capital stock of the Company
(including the Shares or Rights) or its subsidiaries, (iv) any person,
entity or group shall have entered into a definitive agreement or an
agreement in principle or made a proposal with respect to a tender offer or
exchange offer for the Shares or Rights or a merger, consolidation or other
business combination with or involving the Company or its subsidiaries or
(v) any person, entity or group shall have filed a Premerger Notification
and Report Form under the HSR Act in order to, or made a public
announcement reflecting an intent to, acquire the Company or assets or
securities of the Company or its subsidiaries; or
(g)(i) the Company and the Purchaser shall have reached an agreement
or understanding that the Offer be terminated or amended or the purchase or
payment for Shares be postponed pursuant thereto or (ii) the Purchaser or
any of its affiliates shall have entered into a definitive agreement or
announced an agreement in principle with respect to the Proposed Publicis
Combination or any other business combination with the Company or any of
its affiliates or the purchase of any material portion of the securities or
assets of the Company or any of its subsidiaries; or
(h) the Company or any of its subsidiaries shall have entered into any
employment, severance or similar agreement, arrangement or plan with or for
the benefit of any of its employees or entered into or amended any
agreements, arrangements or plans so as to provide for increased or
accelerated compensation or payment or funding of the benefits to any such
employees as a result of or in connection with the transactions
contemplated by the Offer or the Proposed Publicis Combination or any other
business combination involving the Company or any of its subsidiaries or
otherwise amended any such agreement, arrangement or plan to make the same
more favorable to any such employee; or
(i) the Purchaser shall become aware (i) that any material contractual
right of the Company or any of its subsidiaries shall be impaired or
otherwise adversely affected or that any material amount of indebtedness of
the Company or any of its subsidiaries (other than indebtedness pursuant to
term or revolving credit arrangements provided by banks) shall become
accelerated or otherwise become due or become subject to acceleration prior
to its stated due date, in any case with or without notice or the lapse of
time or both as a result of or in connection with the transactions
contemplated by the Offer or the Proposed Publicis Combination or any other
business combination involving the Company, (ii) of any covenant, term or
condition in any of the Company's or any of its subsidiaries' instruments
or agreements that has or may have (whether considered alone or in the
aggregate with other covenants, terms or
46
<PAGE> 50
conditions), a material adverse effect on (x) the business, properties,
assets, liabilities, capitalization, stockholders' equity, condition
(financial or otherwise), operations, licenses, franchises, results of
operations or prospects of the Company or any of its subsidiaries
(including, but not limited to, any event of default that may result from
the consummation of the Offer, the acquisition of control of the Company or
any of its subsidiaries or the Proposed Publicis Combination or any other
business combination involving the Company) or (y) the value of the Shares
in the hands of the Purchaser or any of its affiliates or (z) the
consummation by the Purchaser or any of its affiliates of the Proposed
Publicis Combination or any other business combination involving the
Company or (iii) that any report, document, instrument, financial statement
or schedule of the Company or any of its subsidiaries filed with the
Commission contained, when filed, an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading; or
(j) except as may be required by law, the Company or any of its
subsidiaries shall have taken any action to terminate or amend any employee
benefit plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended) of the Company or any of its
subsidiaries; or
(k) any waiting periods under the HSR Act applicable to the purchase
of the Shares pursuant to the Offer shall not have expired or been
terminated, there shall not have been a determination or a deemed
determination pursuant to the EC Merger Regulation that the purchase of the
Shares pursuant to the Offer is compatible with the common market, or any
other approval, permit, authorization, consent or other action of any
domestic, foreign or supranational governmental, administrative or
regulatory agency, authority or tribunal (including those described in
Section 15) shall not have been obtained on terms satisfactory to the
Purchaser.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to any such condition or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion. The
failure by the Purchaser at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such rights and each such right shall be
deemed an ongoing right and may be asserted at any time and from time to time.
Any determination by the Purchaser concerning any of the events described in
this Section 14 shall be final and binding.
A public announcement may be made of a material change in, or waiver of,
such conditions and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
The Purchaser acknowledges that the Commission believes that (a) if the
Purchaser is delayed in accepting the Shares it must either extend the Offer or
terminate the Offer and promptly return the Shares and (b) the circumstances in
which a delay in payment is permitted are limited and do not include unsatisfied
conditions of the Offer, except with respect to any approval required under the
HSR Act and most other regulatory approvals.
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS. Except as set
forth in this Offer to Purchase, based on its review of publicly available
filings by the Company with the Commission and other publicly available
information regarding the Company, the Purchaser is not aware of any licenses or
regulatory permits that appear to be material to the business of the Company and
its subsidiaries, taken as a whole, and that might be adversely affected by the
Purchaser's acquisition of Shares (and the indirect acquisition of the stock of
the Company's subsidiaries) as contemplated herein, or any filings, approvals or
other actions by or with any domestic, foreign or supranational governmental
authority or administrative or regulatory agency that would be required for the
acquisition or ownership of the Shares (or the indirect acquisition of the stock
of the Company's subsidiaries) by the Purchaser pursuant to the Offer as
contemplated herein. Should any such approval or other action be required, it is
presently contemplated that such approval or action would be sought except as
described below under "State Takeover Laws." Should any such approval or other
action be required, there can be no assurance that any such approval or action,
if needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Company's or its subsidiaries' businesses,
or that certain parts of the Company's, the Purchaser's or any of their
respective subsidiaries'
47
<PAGE> 51
businesses might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or action
or in the event that such approvals were not obtained or such actions were not
taken. The Purchaser's obligation to purchase and pay for Shares is subject to
certain conditions, including conditions with respect to litigation and
governmental actions. See the Introduction and Section 14 for a description
thereof.
State Takeover Laws. A number of states (including Delaware, where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, stockholders, principal executive offices or principal places of
business therein. To the extent that certain provisions of certain of these
state takeover statutes purport to apply to the Offer or the Proposed Publicis
Combination, the Purchaser believes that such laws conflict with federal law and
constitute an unconstitutional burden on interstate commerce. In 1982, the
Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on
constitutional grounds the Illinois Business Takeovers Statute, which as a
matter of state securities law, made takeovers of corporations meeting certain
requirements more difficult, and the reasoning in such decision is likely to
apply to certain other state takeover statutes. In 1987, however, in CTS Corp.
v. Dynamics Corp. of America, the Supreme Court of the United States held that
the State of Indiana could, as a matter of corporate law and, in particular,
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders, provided
that such laws were applicable only under certain conditions. Subsequently, in
TLX Acquisition Corp. v. Telex Corp., a Federal district court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma in that they would subject such
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v.
McReynolds, a Federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of
Appeals for the Sixth Circuit. In December 1988, a Federal district court in
Florida held in Grand Metropolitan PLC v. Butterworth that the provisions of the
Florida Affiliated Transactions Act and Florida Control Share Acquisition Act
were unconstitutional as applied to corporations incorporated outside of
Florida.
The Purchaser has not attempted to comply with any state takeover statutes
in connection with the Offer or the Proposed Publicis Combination. The Purchaser
reserves the right to challenge the validity or applicability of any state law
allegedly applicable to the Offer or the Proposed Publicis Combination and
nothing in this Offer to Purchase nor any action taken in connection herewith is
intended as a waiver of that right. In the event that it is asserted that one or
more takeover statutes apply to the Offer or the Proposed Publicis Combination,
and it is not determined by an appropriate court that such statute or statutes
do not apply or are invalid as applied to the Offer or the Proposed Publicis
Combination, as applicable, the Purchaser may be required to file certain
documents with, or receive approvals from, the relevant state authorities, and
the Purchaser might be unable to accept for payment or purchase Shares tendered
pursuant to the Offer or be delayed in continuing or consummating the Offer. In
such case, the Purchaser may not be obligated to accept for purchase, or pay
for, any Shares tendered. See Section 14.
Antitrust. Under the HSR Act, and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The acquisition of Shares
pursuant to the Offer and the Proposed Publicis Combination is subject to such
requirements.
Under the provisions of the HSR Act applicable to the Offer and the
Proposed Publicis Combination, the purchase of Shares pursuant to the Offer and
the Proposed Publicis Combination may not be consummated until the expiration of
a 15-calendar-day waiting period following the filing of certain required
information and documentary material with respect to the Offer with the FTC and
the Antitrust Division, unless such waiting period is earlier terminated by the
FTC and the Antitrust Division. The Purchaser expects to file a Premerger
Notification and Report Form with the Antitrust Division and the FTC in
connection with the purchase of
48
<PAGE> 52
Shares pursuant to the Offer and the Proposed Publicis Combination under the HSR
Act on December 17, 1997, and, in such event, the required waiting period with
respect to the Offer and the Proposed Publicis Combination will expire at 11:59
p.m., New York City time, on January 1, 1998, unless earlier terminated by the
Antitrust Division or the FTC or the Purchaser receives a request for additional
information or documentary material prior thereto. If, within such
15-calendar-day waiting period, either the FTC or the Antitrust Division were to
request additional information or documentary material from the Purchaser, the
waiting period with respect to the Offer and the Proposed Publicis Combination
would be extended for an additional period of 10 calendar days following the
date of substantial compliance with such request by the Purchaser. Only one
extension of the waiting period pursuant to a request for additional information
is authorized by the rules promulgated under the HSR Act. Thereafter, the
waiting period could be extended only by court order or with the consent of the
Purchaser. The additional 10-calendar-day waiting period may be terminated
sooner by the FTC or the Antitrust Division. Although the Company is required to
file certain information and documentary material with the Antitrust Division
and the FTC in connection with the Offer, neither the Company's failure to make
such filings nor a request made to the Company from the Antitrust Division or
the FTC for additional information or documentary material will extend the
waiting period with respect to the purchase of Shares pursuant to the Offer and
the Proposed Publicis Combination.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer and the Proposed Publicis Combination. At any
time before or after the Purchaser's purchase of Shares, the Antitrust Division
or the FTC could take such action under the antitrust laws as either deems
necessary or desirable in the public interest, including seeking to enjoin the
purchase of Shares pursuant to the Offer and the Proposed Publicis Combination,
the divestiture of Shares purchased pursuant to the Offer or the divestiture of
substantial assets of the Purchaser, the Company or any of their respective
subsidiaries or affiliates. Private parties as well as state attorneys general
may also bring legal actions under the antitrust laws under certain
circumstances. See Section 14.
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, the Purchaser believes that the
acquisition of Shares pursuant to the Offer and the Proposed Publicis
Combination should not violate the applicable antitrust laws. Nevertheless,
there can be no assurance that a challenge to the Offer and the Proposed
Publicis Combination on antitrust grounds will not be made, or, if such
challenge is made, what the result will be. See Section 14.
EC Merger Regulation. According to publicly available information, the
Company may conduct substantial operations within the European Community (the
"EC") and certain of the individual member states of the EC. The EC Merger
Regulation requires that notices of concentrations with a "community dimension"
be provided to the EC Commission for review and approval prior to being put into
effect. The Offer would be deemed to have a "community dimension" if the
combined aggregate worldwide annual revenues of both the Company and the
Purchaser exceeds ECU 5 billion, if the community-wide annual revenues of each
of the Company and the Purchaser exceed ECU 250 million and if both the Company
and the Purchaser do not receive more than two-thirds of their respective
community-wide revenues from one and the same member state. Based upon publicly
available information, the Purchaser believes that the Offer would not be
considered to have a "community dimension." Depending on certain information
concerning the Company that is not publicly available, the Proposed Publicis
Combination may be considered to have a "community dimension." If the Proposed
Publicis Combination falls within the EC Merger Regulation, the EC Commission,
as opposed to individual member states, has exclusive jurisdiction to review it,
subject to certain exceptions.
Under the EC Merger Regulation, a concentration that meets the foregoing
guidelines requires the filing of a notice in a prescribed form with the EC
Commission. This filing must normally be made within seven days of the earlier
of the announcement of a public bid, the conclusion of the relevant agreement or
the acquisition of a controlling interest, although extensions of time are
sometimes granted. Transactions subject to the filing requirements of the EC
Merger Regulation are suspended automatically until three weeks after receipt of
the notice. The EC Commission may extend the suspension period for such period
as it finds necessary to make a final decision on the legality of the
transaction. In the case of a public bid, the bidder may
49
<PAGE> 53
acquire shares of the target company during the suspension period, but may not
vote such shares until after the end of the period unless the EC Commission
grants permission to do so in order to maintain the full value of the bidder's
investment.
The EC Commission must decide whether to initiate proceedings within one
month after the receipt of the notice, subject to certain extensions for EC
holidays or if an individual member state has requested a referral of the
transaction. If proceedings are initiated, the EC Commission must reach a
decision in the proceedings within four months of the commencement of the
proceedings. If the EC Commission fails to reach a decision within either of
these time periods the transaction will be deemed to be compatible with the
common market.
If the EC Commission declares the Proposed Publicis Combination to be not
compatible with the common market, it may prevent the consummation of the
transaction, order a divestiture if the transaction has already been consummated
or impose conditions or other obligations. In the event that the transaction is
found not to be subject to the EC Merger Regulation, various national merger
control regimes of the member states may apply, resulting in the possibility
that approvals may be necessary from the various national authorities.
There can be no assurance that a challenge to the Proposed Publicis
Combination will not be made pursuant to the EC Merger Regulation or,
alternatively, pursuant to the merger regulations of one or more of the various
member states, or, if such a challenge is made, what the outcome will be. See
Section 14.
Other Foreign Approvals. According to publicly available information, the
Company also owns property and conducts business in a number of other foreign
countries and jurisdictions. In connection with the acquisition of the Shares
pursuant to the Offer or the Proposed Publicis Combination, the laws of certain
of those foreign countries and jurisdictions may require the filing of
information with, or the obtaining of the approval of, governmental authorities
in such countries and jurisdictions. The governments in such countries and
jurisdictions might attempt to impose additional conditions on the Company's
operations conducted in such countries and jurisdictions as a result of the
acquisition of the Shares pursuant to the Offer or the Proposed Publicis
Combination. There can be no assurance that the Purchaser will be able to cause
the Company or its subsidiaries to satisfy or comply with such laws or that
compliance or noncompliance will not have adverse consequences for the Company
or any subsidiary after purchase of the Shares pursuant to the Offer or the
Proposed Publicis Combination.
16. CERTAIN FEES AND EXPENSES. Lazard Freres & Co. LLC ("Lazard") is
acting as Dealer Manager in connection with the Offer and as financial advisor
to the Purchaser in connection with the proposed acquisition of the Company. The
Purchaser has paid and is obligated to pay to Lazard a quarterly financial
advisory fee of FFR 500,000, which increased to FFR 1,000,000 commencing in
October, 1997. In addition, the Purchaser has agreed to reimburse Lazard for its
reasonable expenses, including reasonable fees and disbursements of its counsel,
incurred in rendering its services under its engagement agreement with the
Purchaser and has agreed to indemnify Lazard against certain liabilities and
expenses in connection with the Offer and the Proposed Publicis Combination,
including certain liabilities under the federal securities laws. Lazard from
time to time renders various investment banking services to the Purchaser and
its affiliates for which it is paid customary fees.
MacKenzie Partners, Inc. has been retained by the Purchaser as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares and Rights by mail, telephone, telex, telegraph and personal interview
and may request brokers, dealers and other nominee stockholders to forward
material relating to the Offer to beneficial owners of Shares and Rights. The
Purchaser will pay the Information Agent reasonable and customary compensation
for all such services in addition to reimbursing the Information Agent for
reasonable out-of-pocket expenses in connection therewith. The Purchaser has
agreed to indemnify the Information Agent against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws.
In addition, IBJ Schroder Bank & Trust Company has been retained as the
Depositary. The Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer, will reimburse the
Depositary for its reasonable out-of-pocket expenses in connection therewith and
will
50
<PAGE> 54
indemnify the Depositary against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
Except as set forth above, the Purchaser will not pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent and the Dealer Manager) for soliciting tenders of Shares and Rights
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
and other nominees will, upon request, be reimbursed by the Purchaser for
customary clerical and mailing expenses incurred by them in forwarding offering
materials to their customers.
17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares or Rights residing in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the securities, blue sky or other laws of such
jurisdiction. However, the Purchaser may, in its discretion, take such action as
it may deem necessary to make the Offer in any jurisdiction and extend the Offer
to holders of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by the Dealer Manager or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
Certain statements contained in this Offer to Purchase, including any
forecasts, projections and descriptions of anticipated synergies referred to
therein, including any statements contained herein regarding the development or
possible assumed future results of operations of Publicis' businesses, the
markets for Publicis' services and products, anticipated expenditures,
regulatory developments and the effects of the Offer and the Proposed Publicis
Combination, any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," or similar expressions, and other
statements contained or incorporated by reference herein regarding matters that
are not historical facts, are or may constitute forward-looking statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995).
Because such statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward-looking
statements. All subsequent written and oral forward-looking statements
attributable to the Purchaser or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements set forth or referred
to above in this paragraph. Stockholders are cautioned not to place undue
reliance on such statements, which speak only as of the date hereof. The
Purchaser undertakes no obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurence of unanticipated events.
The Purchaser has filed with the Commission a Schedule 14D-1, together with
exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. Such Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
office of the Commission in the same manner as described in Section 8 with
respect to information concerning the Company, except that they will not be
available at the regional offices of the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to the
Offer shall, under any circumstances, create any implication that there has been
no change in the affairs of the Purchaser, the Company or any of their
respective subsidiaries since the date as of which information is furnished or
the date of this Offer to Purchase.
PUBLICIS S.A.
December 16, 1997
51
<PAGE> 55
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
the Purchaser. Except as otherwise indicated below, the business address of each
such person is 133, Avenue des Champs Elysees, 75008 Paris, France, and each
such person is a citizen of France. In addition, each director and executive
officer of the Purchaser has been employed in his or her present principal
occupation listed below during the last five years. Ms. Badinter and Ms.
Bleustein-Blanchet are the only directors, executive officers or controlling
persons of Somarel.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND MATERIAL
OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND BUSINESS ADDRESS EMPLOYMENTS FOR THE PAST FIVE YEARS
- ------------------------------------------ -------------------------------------------------
<S> <C>
Elisabeth Badinter........................ Chairman, Supervisory Board (Publicis S.A.)
Manager (Somarel, Societe Civile Familiale)
Maitre de Conferences (L'Ecole Polytechnique)
Writer
Claude Marcus............................. Vice Chairman, Supervisory Board (Publicis S.A.)
Member, Management Board (Publicis Communication)
Robert Badinter........................... Member, Supervisory Board (Publicis S.A.)
Michele Bleustein-Blanchet................ Member, Supervisory Board (Publicis S.A.)
Michel David-Weill........................ Chairman of Lazard Freres & Co. LLC since
c/o Lazard Freres & Co. LLC May 1, 1995, when Lazard Freres & Co., of which
30 Rockefeller Plaza he had been Senior Partner since 1977,
New York, New York 10020 converted from a general partnership to a
limited liability company and changed its name.
General Partner of Lazard Freres et Cie., 121
Boulevard, Haussman, 75382 Paris, France.
Deputy Chairman of Lazard Brothers & Co.,
Limited, 21 Moorefields, London EC2P2HT,
England. Lazard Freres and its affiliates are
engaged in banking and investment banking.
Member, Supervisory Board (Publicis S.A.)
Henri-Calixte Suadeau..................... Member, Supervisory Board (Publicis S.A.)
Maurice Levy.............................. Chairman, Management Board, and Chief Executive
Officer (Publicis S.A.)
Chairman, Management Board (Publicis
Communication)
President and General Director (Publicis Conseil;
Societe de Gestion et d'Informatique Publicis;
TV 6)
Member of the Board (Publicis Eureka, Singapore;
Publicis Romero, Mexico; Basic et Asia Link,
Philippines)
Administrator (Societe des Petroles Shell;
Publicis Centre Media; Publicis BCP, Canada)
Permanent Representative of Publicis
Communication (Groupe Publicis Services)
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND MATERIAL
OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND BUSINESS ADDRESS EMPLOYMENTS FOR THE PAST FIVE YEARS
- ------------------------------------------ -------------------------------------------------
<S> <C>
Permanent Representative of Publicis Conseil
(Extension; Media System)
Bruno Desbarats-Bollet.................... Member, Management Board (Publicis S.A.)
Chairman of the Board of Directors (Medias &
Regies Europe S.A.)
Gerard Pedraglio.......................... Member, Management Board (Publicis S.A.)
Member, Management Board (Publicis Communication)
Jean-Paul Morin........................... General Secretary and Chief Financial Officer
(Publicis S.A.)
</TABLE>
53
<PAGE> 57
SCHEDULE II
SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING POLICIES
GENERALLY ACCEPTED IN THE UNITED STATES AND FRANCE
A. The audited consolidated financial statements of the Purchaser have been
prepared in accordance with French accounting principles which differ in certain
respects from generally accepted accounting principles in the United States. The
principal differences between French GAAP and U.S. GAAP as they relate to the
Purchaser are discussed in further detail below and in the final Note to the
audited Purchaser Financial Statements, copies of which are attached as exhibits
to the Schedule 14D-1 and which may be inspected in the same manner as set forth
with respect to the Company in Section 8.
1. GOODWILL
The Purchaser does not systematically amortize goodwill, but subjects
the asset to annual review of its market value, with a provision for loss
being recorded if the market value is less than the acquisition cost for
more than three years. Further, the utilization of tax loss carryforwards
of acquired companies is accounted for as a reduction of tax expense.
Under U.S. GAAP, the amount of goodwill would be reduced by the amount
of acquired deferred tax assets and would be amortized on a straight-line
basis over the estimated useful life of the asset, which the Purchaser has
determined to be within a range of 10 to 40 years, depending on the type of
entity acquired.
2. POST-RETIREMENT BENEFITS
As described in Note 3.11 to the audited Purchaser Financial
Statements, the Purchaser's French employees are entitled to certain
lump-sum payments upon retirement. Under French GAAP, through December 31,
1995, the Purchaser reported expense based on contributions due, and
disclosed the estimated full obligation in the footnotes to the Financial
Statements. Beginning December 31, 1996, the liability was recorded on the
balance sheet, with the accumulated effect as of January 1, 1996 being
recorded as a direct adjustment to shareholders' equity. Under U.S. GAAP,
the full actuarially defined obligation would be recorded on the balance
sheet for all periods presented and the increases to the reserve would be
recorded as a charge in the income statement.
Further, the Purchaser calculates its post-retirement benefit
obligation for French personnel only for employees over 50 years old. U.S.
GAAP requires that the estimation take into consideration all employees,
with the estimated turnover and interest rate being used.
3. RESTRUCTURING PROVISION
In 1994, the Purchaser recorded for French accounting purposes a FFR
40,000,000 provision for the restructuring of its Italian operations. This
provision did not meet the requirements as set forth in EITF 94-3 and so
would not have been recorded until 1995 under U.S. GAAP.
4. NET EXTRAORDINARY PROFIT
In 1996, the Purchaser recognized a capital gain on the sale of a
retail leasehold and an expense related to a settlement paid to a
newspaper. The net gain arising from these two transactions has been
characterized as "extraordinary" under French accounting principles. As
neither transaction meets the U.S. GAAP criteria of being "unusual and
infrequent," both would be classified elements of "net income from ordinary
operations."
54
<PAGE> 58
The approximate effects of these differences on net income and
shareholders' equity are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA) FFR FFR FFR
------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
NET INCOME AS REPORTED IN THE CONSOLIDATED
STATEMENT OF INCOME..................... 185,331 152,726 120,456
Adjustments to conform to U.S. GAAP
Amortization of goodwill................ (239) (6,136) (4,147)
Provision for post-retirement benefit
obligation........................... 1,402 (2,238) (5,228)
Restructuring provision................. 0 (8,080) 16,160
Deferred taxes acquired in business
combinations......................... (14,611) (108) 4,651
Tax on the above adjustments............ (514) 3,784 (3,644)
------- ------- -------
NET INCOME AS ADJUSTED FOR U.S. GAAP...... 171,369 139,948 128,248
------- ------- -------
EARNINGS PER SHARE AS ADJUSTED FOR U.S.
GAAP.................................... 20.52 16.90 15.38
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------
1996 1995 1994
(IN THOUSANDS) FFR FFR FFR
------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY AS REPORTED IN THE
CONSOLIDATED BALANCE SHEET.............. 1,558,736 1,421,971 1,332,593
Adjustments to conform to U.S. GAAP
Amortization of goodwill................ (36,480) (36,241) (30,105)
Provision for post-retirement benefit
obligation........................... 13,845 (16,859) (14,621)
Restructuring provision................. 8,080 8,080 16,160
Deferred taxes.......................... 17,605 29,774 29,268
Tax on the above adjustments.............. (8,040) 3,219 (513)
--------- --------- ---------
SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S.
GAAP.................................... 1,553,746 1,409,944 1,332,782
========= ========= =========
</TABLE>
5. CONSOLIDATION OF SUBSIDIARIES THAT ARE LESS THAN MAJORITY-OWNED
The principles covering the scope of consolidation under French GAAP
are set forth in Note 2.2 to the audited Purchaser Financial Statements.
Under this policy, certain companies in which the Purchaser owns 49% or 50%
and exercises control over significant financial operating policies are
consolidated.
For U.S. GAAP purposes, only majority-owned companies, based on voting
rights directly or indirectly held, are fully consolidated, and less than
majority-owned companies over which the Purchaser exercises significant
influence (generally 20% or more owned), would be included in the
consolidated financial statements using the equity method.
This difference in accounting policy has no effect on either net
income or shareholders' equity. The approximate effects on the consolidated
balance sheet at December 31, 1996, 1995 and 1994 would be to decrease
minority interest by FFR 141,124,000, FFR 123,216,000 and FFR 116,708,000,
respectively, and to record on one line the investment in companies
accounted for using the equity method of FFR 145,540,000, FFR 133,744,000
and FFR 116,708,000, respectively. The impact on working capital on
55
<PAGE> 59
all periods is not material. The principal income statement line items, if
such investments were accounted for using the equity method rather than
being consolidated, would be decreased by the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
(IN THOUSANDS) FFR FFR FFR
--------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Sales.................................. 1,933,403 1,937,557 1,985,027
Cost of sales.......................... (1,422,718) (1,446,466) (1,490,894)
Revenues............................... 510,685 491,091 494,133
Current income......................... 115,354 125,242 134,839
========= ========= =========
</TABLE>
B. The unaudited consolidated interim financial statements of the Purchaser
have been prepared in accordance with French accounting principles which differ
in certain respects from generally accepted accounting principles in the United
States. The principal differences between French GAAP and U.S. GAAP as they
relate to the Purchaser are discussed in further detail in Item A above. The
approximate effects of these differences on net income and shareholders' equity
are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA) FFR FFR
--------------------------------------------------------- ------ ------
<S> <C> <C>
NET INCOME AS REPORTED IN THE CONSOLIDATED STATEMENT OF
INCOME................................................. 92,935 78,611
Adjustments to conform to U.S. GAAP
Amortization of goodwill............................... (7,791) (3,084)
Provision for post-retirement benefit obligation....... (2,228) 701
Deferred taxes acquired in business combinations....... 2,158 (6,085)
Tax on the above adjustments........................... 817 (257)
------ ------
NET INCOME AS ADJUSTED FOR U.S. GAAP..................... 85,891 69,886
====== ======
EARNINGS PER SHARE AS ADJUSTED FOR U.S. GAAP............. 10.18 8.39
====== ======
</TABLE>
<TABLE>
<CAPTION>
AT JUNE
30, 1997
(IN THOUSANDS) FFR
------------------------------------------------------------ ---------
<S> <C>
SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE
SHEET..................................................... 1,764,539
Adjustments to conform to U.S. GAAP
Amortization of goodwill.................................. (44,271)
Provision for post-retirement benefit obligation.......... 11,617
Restructuring provision................................... 8,080
Deferred taxes acquired in business combinations.......... 20,060
Tax on the above adjustments.............................. (7,223)
---------
SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S. GAAP.............. 1,752,802
=========
</TABLE>
56
<PAGE> 60
The principal income statement line items, if less than majority-held
investments were accounted for using the equity method rather than being
consolidated, would be decreased by the following amounts:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
----------------------
1997 1996
(IN THOUSANDS) FFR FFR
---------------------------------------------------- --------- --------
<S> <C> <C>
Sales............................................... 876,716 1,017,289
Cost of sales....................................... (655,811) (762,279)
Revenues............................................ 220,905 254,410
Current income...................................... 50,261 66,002
======== ========
</TABLE>
57
<PAGE> 61
SCHEDULE III
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet information as of
June 30, 1997 combines the historical balance sheet information of Publicis
Communication and Publicis Worldwide and the Company as if the combination had
been effective on June 30, 1997, after giving effect to certain pro forma
adjustments described in the accompanying notes.
The following Unaudited Pro Forma Combined Income Statements are presented
as if the combination had been effective January 1, 1996, based on the Company's
current capital structure.
The Unaudited Pro Forma Combined Financial Information and notes thereto
reflect the accounting for the combination as an exchange of assets by entities
under the common control of the Purchaser. Under this method of accounting, the
recorded assets, liabilities, income and expenses of Publicis Communication,
Publicis Worldwide and the Company are combined and recorded at their historical
cost amounts in a manner similar to a pooling-of-interests.
The Purchaser expects that the Company will record a material pre-tax
charge following the combination to cover the direct costs of the failed merger
with Bozell, including a $15 million break-up fee. This charge, adjusted to
reflect taxes, is estimated to total approximately $19 million and has been
charged to Retained Earnings in the Unaudited Pro Forma Combined Balance Sheet
information at June 30, 1997.
The Unaudited Pro Forma Combined Financial Information included herein is
not necessarily indicative of the consolidated financial position or results of
future operations of the combined entity or the actual results that would have
been achieved had the combination been consummated at the beginning of the
periods indicated.
Historical information on Publicis Communication and Publicis Worldwide is
based on actual results. Projections are based on Management's best currently
available estimates.
Historical information on the Company is based on the Company's Annual
Report on Form 10-K, dated March 28, 1997, except that the earnings per Share
figure is adjusted to reflect the number of Shares outstanding as of November
18, 1997 plus 3,227,278 additional Shares reserved for issuance upon the
exercise of outstanding stock options as at September 1, 1997. Projections are
based on Merrill Lynch estimates, except that the earnings per Share
calculations are adjusted in the same manner as the historical earnings per
Share figure.
The following Unaudited Pro Forma Combined Financial Information and notes
thereto were not prepared with a view to complying with published guidelines of
the American Institute of Certified Public Accountants or the Commission
regarding projections and forecasts and have not been reviewed by the
Purchaser's independent auditors. In addition, because such information is based
upon a variety of estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties, many of which are
beyond the control of the Purchaser, and upon assumptions with respect to future
business decisions which are subject to change, there can be no assurance that
they will be realized, and actual results may vary materially from those
projected.
58
<PAGE> 62
<TABLE>
<CAPTION>
PRO-FORMA FINANCIAL INFORMATION - 1996
-----------------------------------------------------
PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES...................................... $669,046 $493,050 $1,162,096
------- ------- ---------
COSTS AND EXPENSES
Salaries and Benefits......................... 378,459 318,539 696,998
Office and General............................ 224,830 150,740 (20,000)(3) 355,570
Unusual Transactions.......................... 1,189 1,356 2,545
Interest (Income)/Expense..................... (5,151) 8,585 (2,190)(3) 1,244
Other (Income)................................ (1,403) (5,384) (6,787)
------- ------- ------- ---------
597,924 473,836 (22,190) 1,049,570
------- ------- ------- ---------
INCOME BEFORE TAXES........................... 71,121 19,214 22,190 112,525
------- ------- ------- ---------
Provision for Taxes........................... (30,216) (9,697) (11,095)(4) (51,008)
INCOME AFTER TAXES............................ 40,905 9,517 11,095 61,517
------- ------- ------- ---------
Minority Interest Provision................... (16,941) 31 0 (16,910)
Equity in Net Earnings of Affiliated
Companies................................... 8,493 18,286 (24,243)(2) 2,536
------- ------- ------- ---------
NET INCOME.................................... 32,457 27,834 (13,148) 47,143
======= ======= ======= =========
FULLY DILUTED NET INCOME PER SHARE............ $0.98 $0.93
======= =========
Fully Diluted weighted average number of
Common and Common Equivalent Shares
outstanding................................. 28,499 21,930(5) 50,429
</TABLE>
<TABLE>
<CAPTION>
PRO-FORMA FINANCIAL INFORMATION -- 1997
------------------------------------------------------
PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES..................................... $605,742 $639,700 $1,245,442
COSTS AND EXPENSES
Salaries and Benefits........................ 344,105 389,600 733,705
Office and General........................... 199,844 190,200 (20,000)(3) 370,044
Unusual Transactions......................... 841 0 841
Interest (Income)/Expense.................... (5,764) 0 (2,190)(3) (7,954)
Other (Income)............................... (4,177) 7,200 3,023
------- ------- ------- ---------
534,848 587,000 (22,190) 1,099,658
------- ------- ------- ---------
INCOME BEFORE TAXES.......................... 70,894 52,700 22,190 145,784
------- ------- ------- ---------
Provision for Taxes.......................... (29,418) (26,300) (11,095)(4) (66,813)
INCOME AFTER TAXES........................... 41,476 26,400 11,095 78,971
------- ------- ------- ---------
Minority Interest Provision.................. (7,293) (2,700) 0 (9,993)
Equity in Net Earnings of Affiliated
Companies.................................. 9,953 11,000 (20,394)(2) 559
------- ------- ------- ---------
NET INCOME................................... 44,136 34,700 (9,299) 69,537
======= ======= ======= =========
FULLY DILUTED NET INCOME PER SHARE........... $1.22 $1.38
======= =========
Fully Diluted weighted average number of
Common and Common Equivalent Shares
outstanding................................ 28,499 21,930(5) 50,429
</TABLE>
59
<PAGE> 63
<TABLE>
<CAPTION>
PRO-FORMA FINANCIAL INFORMATION -- 1998
------------------------------------------------------
PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES..................................... $644,444 $709,900 $1,354,344
------- ------- ---------
COSTS AND EXPENSES
Salaries and Benefits........................ 360,995 432,500 793,495
Office and General........................... 199,489 207,300 (20,000)(3) 386,789
Unusual Transactions......................... 105 0 105
Interest (Income)/Expense.................... (4,696) 0 (2,190)(3) (6,886)
Other (Income)............................... (2,269) 7,500 5,231
------- ------- ------- ---------
553,623 647,300 (22,190) 1,178,733
------- ------- ------- ---------
INCOME BEFORE TAXES.......................... 90,821 62,600 22,190 175,611
------- ------- ------- ---------
Provision for Taxes.......................... (37,450) (30,700) (11,095)(4) (79,245)
INCOME AFTER TAXES........................... 53,371 31,900 11,095 96,366
------- ------- ------- ---------
Minority Interest Provision.................. (8,554) (3,000) 0 (11,554)
Equity in Net Earnings of Affiliated
Companies.................................. 11,453 12,300 (23,069)(2) 684
------- ------- ------- ---------
NET INCOME................................... 56,271 41,200 (11,974) 85,497
======= ======= ======= =========
FULLY DILUTED NET INCOME PER SHARE........... $1.45 $1.70
======= =========
Fully Diluted weighted average number of
Common and Common Equivalent Shares
outstanding................................ 28,499 21,930(5) 50,429
</TABLE>
60
<PAGE> 64
<TABLE>
<CAPTION>
PRO-FORMA TRUE NORTH BALANCE SHEET AS AT 30TH JUNE 1997
-----------------------------------------------------------
PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Cash and Marketable securities......... $123,296 $ 60,847 $ (19,000)(3) $165,143
Short Term debt........................ 80,652 104,829 185,481
Long Term debt......................... 0 65,959 65,959
Shareholder's Equity................... 282,196 268,564 (216,656)(3)(4) 334,104
</TABLE>
61
<PAGE> 65
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
For accounting purposes, the contribution to the Company of all the
advertising-related businesses owned directly and indirectly by the Purchaser
(Publicis Communication and Publicis Worldwide) will be treated as an exchange
of assets by entities under common control. Accordingly, the accompanying
unaudited pro forma historical and forecasted financial information reflects the
transfer of Publicis Communication and Publicis Worldwide at their historical
net book values, as measured in accordance with accounting principles generally
accepted in the United States.
The financial information of Publicis Communication and Publicis Worldwide
expressed in U.S. dollars is translated from French francs at the following
rates:
<TABLE>
<CAPTION>
FFR=$1.00
---------
<S> <C>
Year ended December 31, 1996...................... 5.12
Year ended December 31, 1997...................... 5.8267
Year ended December 31, 1998...................... 5.85
At June 30, 1997.................................. 5.88
</TABLE>
2. ADJUSTMENT TO ELIMINATE THE EFFECT OF CROSS-SHAREHOLDINGS
Publicis Communication owns approximately 18.4% of the Company and accounts
for its investment using the equity method. The Company owns approximately 26.5%
of Publicis Communication and accounts for its investment using the equity
method. An adjustment has been recorded in the accompanying Unaudited Pro Forma
Combined Financial Information to eliminate the equity in net earnings of
affiliated companies recognized by each company in such investments.
3. ADJUSTMENTS TO RECORD CHARGES AND COST-SAVINGS RELATED TO THE COMBINATION
The Purchaser expects that the Company will record a material pre-tax
charge following the combination to cover the direct costs of the failed merger
with Bozell, including a $15 million break-up fee. This charge, adjusted to
reflect taxes, is estimated to total approximately $19 million and has been
charged to Retained Earnings in the Unaudited Pro Forma Combined Balance Sheet
Information at June 30, 1997.
Publicis Communication and Publicis Worldwide expect to realize pre-tax
cost-savings following the combination with the Company, principally from two
sources: synergies arising from the combination of the two complementary
management structures and reduced interest expense from the assumed repayment of
debt. The assumed repayment of debt would be financed from the proceeds to be
realized from the assumed exercise of all outstanding stock options (see Note 5)
less the cash payments to be made for the Company's estimated transaction costs,
as described above. In addition, the Purchaser expects that the Company would
record a material pre-tax charge following the combination.
4. INCOME TAXES
Estimated provisions for income taxes related to pro forma adjustments are
based on an assumed effective tax rate of approximately 50%.
5. NET INCOME PER SHARE
The unaudited pro forma combined per common share data has been computed
based on the current number of Shares outstanding of the Company as of November
18, 1997, increased by 3,227,278 additional Shares reserved for issuance upon
the exercise of outstanding stock options outstanding as of September 1, 1997,
all of which have been assumed to be exercised for purposes of this calculation.
The pro forma adjustments reflect the increase by the estimated 26,587,937 new
Shares of the Company to be issued in exchange for the assets of Publicis
Communication and Publicis Worldwide, less the 4,658,000 Shares of the Company
owned by Publicis Communication which would become treasury shares of the
Company and cease to be outstanding.
62
<PAGE> 66
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and Rights and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust company
or other nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial One State Street
Bowling Green Station institutions only): New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing
Attn: Reorganization
Department Window, Sub-cellar One
</TABLE>
Confirm Facsimile by Telephone:
(212) 858-2103
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6000
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
TRUE NORTH COMMUNICATIONS INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 16, 1997
BY
PUBLICIS S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998,
UNLESS THE OFFER IS EXTENDED
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial One State Street
Bowling Green Station institutions only): New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing
Attn: Reorganization Department Window, Sub-cellar One
</TABLE>
Confirm Facsimile by Telephone:
(212) 858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
This Letter of Transmittal is to be completed by stockholders of True North
Communications Inc. if certificates evidencing Shares and/or Rights (each as
defined in the Offer to Purchase, dated December 16, 1997 (the "Offer to
Purchase")), are to be forwarded herewith or, unless an Agent's Message (as
defined in the Offer to Purchase) is utilized, if tenders of Shares and/or
Rights are to be made by book-entry transfer to an account maintained by IBJ
Schroder Bank & Trust Company (the "Depositary") at The Depository Trust Company
("DTC") or Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry
Transfer Facility" and collectively referred to as the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to
Purchase. Stockholders who tender Shares or Rights by book-entry transfer are
referred to herein as "Book-Entry Stockholders." UNLESS AND UNTIL PUBLICIS S.A.,
A SOCIETE ANONYME ORGANIZED UNDER THE LAWS OF FRANCE (THE "PURCHASER"), DECLARES
THAT THE RIGHTS CONDITION (AS DEFINED IN THE OFFER TO PURCHASE) IS SATISFIED,
HOLDERS OF SHARES WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED
IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. If the Distribution Date (as
defined in the Offer to Purchase) does not occur prior to the Expiration Date
(as defined in the Offer to Purchase), a tender of Shares will also constitute a
tender of the associated Rights. If the Distribution Date occurs and the
certificates evidencing Rights ("Rights Certificates") are distributed by True
North Communications Inc., a Delaware corporation, to holders of Shares prior to
the time a holder's Shares are tendered pursuant to the Offer (as defined in the
Offer to Purchase), in order for Rights (and the corresponding Shares) to be
validly tendered, Rights Certificates representing a number of Rights equal to
the number of Shares tendered must be delivered to the Depositary or, if
available, a Book-Entry Confirmation (as defined in the Offer to Purchase)
received by the Depositary with respect thereto. If the Distribution Date occurs
and Rights Certificates are not distributed prior to the time Shares are
tendered pursuant to the Offer, Rights may be tendered prior to a stockholder
receiving Rights Certificates by use of the guaranteed delivery procedure
described below. In any case, a tender of Shares constitutes an agreement by the
tendering stockholder to deliver Rights Certificates representing a number of
Rights equal to the number of Shares tendered pursuant to the Offer to the
Depositary within three business days after the date Rights Certificates are
distributed. The Purchaser reserves the right to require that the Depositary
receive Rights Certificates, or a Book-Entry Confirmation, if available, with
respect to such Rights, prior to accepting the related Shares for payment
pursuant to the Offer if the Distribution Date occurs prior to the Expiration
Date. See Section 3 of the Offer to Purchase. The Purchaser will not pay any
additional consideration for any Rights tendered pursuant to the Offer.
Holders of Shares and Rights whose certificates for such Shares (the "Share
Certificates") and, if applicable, Rights Certificates, are not immediately
available (including, if the Distribution Date has occurred, but Rights
Certificates have not yet been distributed) or who cannot deliver their Share
Certificates or, if applicable, their Rights Certificates, and all other
required documents to the Depositary on or prior to the Expiration Date or who
cannot complete the procedures for book-entry transfer on a timely basis, must
tender their Shares and Rights according to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE
READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND
(PLEASE FILL IN, IF BLANK, EXACTLY AS SHARE(S) TENDERED
NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES
SHARE REPRESENTED BY NUMBER
CERTIFICATE SHARE OF SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, it will be assumed that all Shares represented
by Certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
DESCRIPTION OF RIGHTS TENDERED*
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) RIGHTS CERTIFICATE(S) AND
(PLEASE FILL IN, IF BLANK, EXACTLY AS RIGHTS TENDERED
NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
RIGHTS
RIGHTS REPRESENTED BY NUMBER
CERTIFICATE RIGHTS OF RIGHTS
NUMBER(S)** CERTIFICATE(S)** TENDERED***
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Rights
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* If the tendered Rights are represented by separate certificates, complete
the certificate numbers of such Rights Certificates. Stockholders
tendering Rights which are not represented by separate certificates should
retain a copy of this Letter of Transmittal in order to accurately
complete a Letter of Transmittal if Rights Certificates are received.
** Need not be completed by Book-Entry Stockholders.
*** Unless otherwise indicated, it will be assumed that all Rights represented
by certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
<PAGE> 4
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
Check Box of Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
-----------------------------------------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
------------------------------------------------------------------------
If Delivery by Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF RIGHTS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER (IF
AVAILABLE) MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
Check Box of Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF RIGHTS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
-----------------------------------------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
------------------------------------------------------------------------
If Delivery by Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
<PAGE> 5
Ladies and Gentlemen:
The undersigned hereby tenders to Publicis S.A., a societe anonyme
organized under the laws of France (the "Purchaser"), the above described shares
of Common Stock, par value $.33 1/3 per share (the "Shares"), of True North
Communications Inc., a Delaware corporation (the "Company"), and (unless and
until the Purchaser declares that the Rights Condition (as defined in the Offer
to Purchase) has been satisfied) the associated Series A Junior Participating
Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights
Agreement dated as of November 16, 1988 between the Company and Harris Trust and
Savings Bank, as Rights Agent (as the same may be amended, the "Rights
Agreement"), at a purchase price of $28 per Share (and associated Right), net to
the seller in cash, without interest thereon, in each case upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated December 16,
1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, together with the Offer to Purchase and any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). Unless the context otherwise requires, all references to Shares shall
include the associated Rights and all references to the Rights shall include all
benefits that may inure to holders of the Rights pursuant to the Rights
Agreement. The undersigned understands that the Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of its
subsidiaries or affiliates the right to purchase all or any portion of the
Shares and Rights tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares and Rights tendered herewith in accordance with the terms and subject
to the conditions of the Offer, the undersigned hereby sells, assigns, and
transfers to, or upon the order of, the Purchaser all right, title and interest
in and to all of the Shares and Rights that are being tendered hereby and any
and all dividends on the Shares or any distribution (including, without
limitation, the issuance of additional Shares pursuant to a stock dividend or
stock split, the issuance of other securities or the issuance of rights for the
purchase of any securities) with respect to the Shares or Rights (other than the
Redemption Price (as defined in the Offer to Purchase)) that is declared or paid
by the Company on or after September 1, 1997 and is payable or distributable to
stockholders of record on a date prior to the transfer into the name of the
Purchaser or its nominees or transferees on the Company's stock transfer records
of the Shares and Rights purchased pursuant to the Offer (except that if the
Rights are redeemed by the Company's Board of Directors, tendering stockholders
who are holders of record as of the applicable record date will be entitled to
receive and retain the Redemption Price) (a "Distribution"), and constitutes and
irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact
and proxy of the undersigned to the full extent of the undersigned's rights with
respect to such Shares and Rights (and any Distributions) with full power of
substitution (such power of attorney and proxy being deemed to be an irrevocable
power coupled with an interest), to (a) deliver Share Certificates and Rights
Certificates (as defined in the Offer to Purchase) (and any Distributions), or
transfer ownership of such Shares or Rights on the account books maintained by
the Book-Entry Transfer Facilities together in either such case with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Purchaser upon receipt by the Depositary, as the undersigned's agent, of the
purchase price, (b) present such Shares and Rights (and any Distributions) for
transfer on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares and Rights (and any
Distribution), all in accordance with the terms and subject to the conditions of
the Offer.
The undersigned understands that if the Distribution Date (as defined in
the Offer to Purchase) has occurred and Rights Certificates have been
distributed by the Company to holders of the Shares prior to the time the Shares
are tendered herewith, in order for the Rights (and the corresponding Shares) to
be validly tendered, Rights Certificates representing a number of Rights equal
to the number of Shares being tendered herewith must be delivered to the
Depositary or, if available, a Book-Entry Confirmation (as defined in
Instruction 2) must be received by the Depositary with respect thereto. If the
Distribution Date has occurred and Rights Certificates have not been distributed
prior to the time the Shares are tendered herewith, the undersigned agrees to
deliver the Rights Certificates representing a number of Rights equal to the
number of Shares tendered herewith to the Depositary within three business days
after the date such Rights Certificates are distributed. The undersigned
understands that if the Rights Condition is not satisfied, the Purchaser
reserves the right to require that the Depositary receive Rights Certificates,
or a Book-Entry Confirmation, if
<PAGE> 6
available, with respect to such Rights prior to accepting the related Shares for
payment, if the Distribution Date occurs prior to the Expiration Date. In that
event, payment for the Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of, among other
things, such Rights Certificates.
The undersigned hereby irrevocably appoints Maurice Levy and Jean-Paul
Morin, and each of them, the attorneys-in-fact and proxies of the undersigned,
each with full power of substitution, to vote in such manner as each such
attorney and proxy or his substitute shall, in his sole discretion, deem proper,
and otherwise act (including pursuant to written consent) with respect to all of
the Shares and Rights tendered hereby which have been accepted for payment by
the Purchaser prior to the time of such vote or action (and any Distributions)
which the undersigned is entitled to vote at any meeting of stockholders
(whether annual or special and whether or not an adjourned meeting) of the
Company, or by written consent in lieu of such meeting, or otherwise. This power
of attorney and proxy is coupled with an interest in the Company and in the
Shares and Rights and is irrevocable and is granted in consideration of, and is
effective upon, the acceptance for payment of such Shares and Rights by the
Purchaser in accordance with the terms of the Offer. Such acceptance for payment
shall revoke, without further action, any other power of attorney or proxy
granted by the undersigned at any time with respect to such Shares and Rights
(and any Distributions) and no subsequent powers of attorney or proxies will be
given (and if given will be deemed not to be effective) with respect thereto by
the undersigned. The undersigned understands that the Purchaser reserves the
right to require that, in order for the Shares and the Rights to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares and Rights, the Purchaser or its designees is able to exercise full
voting rights with respect to such Shares, Rights and other securities,
including voting at any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares and the
Rights tendered hereby (and any Distributions) and that, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares and
Rights tendered hereby (and any Distributions). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all other Distributions in respect of the Shares and the
Rights tendered hereby, accompanied by appropriate documentation of transfer
and, pending such remittance or appropriate assurance thereof, the Purchaser
shall be entitled to all rights and privileges as owner of any such
Distributions, and may withhold the entire purchase price or deduct from the
purchase price of Shares and Rights tendered hereby the amount or value thereof,
as determined by the Purchaser in its sole discretion.
All authority herein conferred or herein agreed to be conferred shall not
be affected by, and shall survive, the death or incapacity of the undersigned
and any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable, provided that the Shares and Rights tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment as provided in the Offer to Purchase, may also
be withdrawn at any time after February 13, 1998 (or such later date as may
apply in case the Offer is extended).
The undersigned understands that tenders of Shares and Rights pursuant to
any one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
<PAGE> 7
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates or Rights Certificates not tendered or accepted for payment in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price and/or
return any Share Certificates or Rights Certificates not tendered or accepted
for payment (and accompanying documents, as appropriate) to the undersigned at
the address shown below the undersigned's signature. In the event that both the
"Special Delivery Instructions" and the "Special Payment Instructions" are
completed, please issue the check for the purchase price and/or return any Share
Certificates or Rights Certificates not tendered or accepted for payment in the
name(s) of, and deliver said check and/or return certificates to, the person or
persons so indicated. Stockholders tendering Shares or Rights by book-entry
transfer may request that any Shares or Rights not accepted for payment be
returned by crediting such account maintained at such Book-Entry Transfer
Facility as such stockholder may designate by making an appropriate entry under
"Special Payment Instructions." The undersigned recognizes that the Purchaser
has no obligation pursuant to the "Special Payment Instructions" to transfer any
Shares and Rights from the name of the registered holder thereof if the
Purchaser does not accept for payment any of such Shares and Rights.
<PAGE> 8
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates and/or Rights Certificates not
tendered or not purchased and/or the check for the purchase price of
Shares and/or Rights purchased are to be issued in the name of someone
other than the undersigned, or if Shares and/or Rights tendered by
book-entry transfer which are not purchased are to be returned by credit
to an account maintained at a Book-Entry Transfer Facility other than that
designated on the front cover.
Issue check and/or certificates to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON BACK COVER)
[ ] Credit unpurchased Shares and/or Rights tendered by book-entry
transfer to the Book-Entry Transfer Facility account set forth below:
[ ] DTC [ ] PDTC
------------------------------------------------------------
(ACCOUNT NUMBER)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates and/or Rights Certificates not
tendered or not purchased and/or the check for the purchase price of
Shares and/or Rights purchased are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown on
the front cover.
Mail check and/or certificates to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
- ------------------------------------------------------------
<PAGE> 9
- --------------------------------------------------------------------------------
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
------------------------------
(Must be signed by the registered holder(s) exactly as name(s) appear(s)
on the Share Certificate(s) or Rights Certificate(s) or on a security
position listing or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith. If signature is by
trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, please provide the necessary information. See Instruction 5.)
Name(s):
--------------------------------------------------------------------------
--------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
--------------------------------------------------------------------------
Tax Identification or Social Security No.:
--------------------------------------------------------------------------
(SEE SUBSTITUTE W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
--------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
Name of Firm:
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
------------------------------------
Dated:
------------------------------
- --------------------------------------------------------------------------------
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder (which term, for purposes of this document, shall include any
participant in a Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Shares or Rights) of the Shares and the Rights
tendered herewith, unless such holder has completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the inside front cover hereof or (ii) if such Shares or Rights
are tendered for the account of a firm that is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program (an "Eligible Institution"). In
all other cases, all signatures on this Letter of Transmittal must be guaranteed
by an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be used either if Share Certificates or Rights Certificates
are to be forwarded herewith or, unless an Agent's Message is utilized, if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in Section 3 of the Offer of Purchase. Share Certificates, or
timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of
such Shares into the Depositary's account at a Book-Entry Transfer Facility, as
well as this Letter of Transmittal (or a facsimile hereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's Message
(as defined in the Offer to Purchase) in the case of a book-entry delivery, and
any other documents required by this Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth herein prior to the Expiration
Date and, unless and until the Purchaser declares that the Rights Condition (as
defined in the Offer to Purchase) is satisfied, Rights Certificates, or
Book-Entry Confirmation of a transfer of Rights into the Depositary's account at
a Book-Entry Transfer Facility, if available (together with, if Rights are
forwarded separately from Shares, a properly completed and duly executed Letter
of Transmittal (or a facsimile hereof) with any required signature guarantees,
or an Agent's Message in the case of a book-entry delivery, and any other
documents required by this Letter of Transmittal), must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration Date
or, if later, within three business days after the date such Rights Certificates
are distributed. Stockholders whose Share Certificates or Rights Certificates
are not immediately available (including, if the Distribution Date has occurred,
but Rights Certificates have not yet been distributed by the Company) or who
cannot deliver their Share Certificates or Rights Certificates and all other
required documents to the Depositary prior to the Expiration Date or who cannot
complete the procedures for delivery by book-entry transfer on a timely basis
may tender their Shares and Rights by properly completing and duly executing a
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i)
such tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form made available by the Purchaser, must be received by the Depositary on or
prior to the Expiration Date; and (iii) the Share Certificates or Rights
Certificates (or a Book-Entry Confirmation) representing all tendered Shares or
Rights, in proper form for transfer together with a properly completed and duly
executed Letter of Transmittal (or a facsimile hereof), with any required
signature guarantees (or, in the case of a book-entry delivery, an Agent's
Message) and any other documents required by this Letter of Transmittal, must be
received by the Depositary within (x) in the case of Shares, three New York
Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such
Notice of Guaranteed Delivery or (y) in the case of Rights, a period ending on
the later of (1) three NYSE trading days after the date of execution of such
Notice of Guaranteed Delivery and (2) three business days after the date Rights
Certificates are distributed to stockholders by the Company, all as provided in
Section 3 of the Offer to Purchase. If Share Certificates and Rights
Certificates are forwarded separately to the Depositary, a properly completed
and duly executed Letter of Transmittal (or facsimile hereof) must accompany
each such delivery.
<PAGE> 11
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF
APPLICABLE), THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND
SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares or Rights will be purchased. All tendering stockholders, by
execution of this Letter of Transmittal or facsimile hereof, waive any right to
receive any notice of the acceptance of their Shares and Rights for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and Rights and any other
required information should be listed on a separate schedule attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
4. Partial Tenders (Not Applicable to Book-Entry Stockholders). If fewer
than all the Shares or Rights evidenced by any certificate submitted are to be
tendered, fill in the number of Shares or Rights which are to be tendered in the
box entitled "Number of Shares Tendered" or "Number of Rights Tendered" as
appropriate. In such case, new certificate(s) for the remainder of the Shares or
Rights that were evidenced by your old certificate(s) will be sent to you,
unless otherwise provided in the appropriate box marked "Special Payment
Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares and
Rights represented by certificates delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
and Rights tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Shares or Rights tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares or Rights are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares or Rights listed and transmitted hereby, no endorsements of certificates
or separate stock powers are required unless payment is to be made to or
certificates for Shares or Rights not tendered or purchased are to be issued in
the name of a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares or Rights listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner(s) appear(s) on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
<PAGE> 12
6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares and Rights to it or its order pursuant
to the Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares and Rights not tendered or purchased are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such person) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check is to be issued
in the name of and/or certificates for unpurchased Shares or Rights are to be
returned to a person other than the signer of this Letter of Transmittal or if a
check is to be sent and/or such certificates are to be returned to someone other
than the signer of this Letter of Transmittal or to an address other than that
shown on the front cover hereof, the appropriate boxes on this Letter of
Transmittal should be completed. Stockholders tendering Shares or Rights by
book-entry transfer may request that Shares or Rights not purchased be credited
to such account maintained at such Book-Entry Transfer Facility as such
stockholder may designate hereon. If no such instructions are given, such Shares
or Rights not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility designated above. See Instruction 1.
8. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to the Information Agent at its addresses set forth below.
Requests for additional copies of the Offer to Purchase and this Letter of
Transmittal may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares or Rights are accepted for payment
is required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty. In addition, payments that are made
to such stockholder or other payee with respect to Shares or Rights purchased
pursuant to the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
<PAGE> 13
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or Rights or of the last transferee appearing on the transfers attached
to, or endorsed on, the Shares or Rights. If the Shares or Rights are in more
than one name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
10. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares or Rights has been lost, destroyed or stolen, the
stockholder should promptly notify the Depositary. The stockholder will then be
instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
11. Waiver of Conditions. The Conditions to the Offer may be waived, in
whole or in part, by the Purchaser in its sole discretion, at any time and from
time to time, in the case of any Shares or Rights tendered.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN
AGENT'S MESSAGE TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON
OR PRIOR TO THE EXPIRATION DATE.
<PAGE> 14
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PAYER'S NAME:
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER OR
DEPARTMENT OF THE TREASURY EMPLOYER ID NUMBER
INTERNAL REVENUE SERVICE ----------------------------
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER ("TIN")
- ---------------------------------------------------------------------------------------------------------
</TABLE>
PART 2 -- CERTIFICATES -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject
to backup withholding, do not cross out such item (2).
------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SIGNATURE ------------------------------------ DATE ------------------------------ PART 3 AWAITING TIN [ ]
</TABLE>
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 15
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature:
- ------------------------------------------------------------------------ Date:
- ---------------------
FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES
AND RIGHTS AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH
STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY
OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight
P.O. Box 84 (for eligible financial Delivery:
Bowling Green Station institutions only): One State Street
New York, New York (212) 858-2611 New York, New York 10004
10274-0084 Attn: Securities Processing
Attn: Reorganization Window, Sub-cellar One
Department
</TABLE>
Confirm Facsimile by Telephone:
(212) 858-2103
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6000
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
TRUE NORTH COMMUNICATIONS INC.
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates representing
shares of Common Stock, par value $.33 1/3 per share (the "Shares"), of True
North Communications Inc., a Delaware corporation (the "Company"), or, if
applicable, certificates ("Rights Certificates") for the associated Series A
Junior Participating Preferred Stock purchase rights (the "Rights") issued
pursuant to the Rights Agreement dated as of November 16, 1988 between the
Company and Harris Trust and Savings Bank, as Rights Agent (as the same may be
amended, the "Rights Agreement"), are not immediately available (including, if a
Distribution Date (as defined in the Offer to Purchase (as defined below)) has
occurred, but Rights Certificates have not yet been distributed by the Company)
or time will not permit all required documents to reach IBJ Schroder Bank &
Trust Company (the "Depositary") on or prior to the Expiration Date (as defined
in the Offer to Purchase), or the procedures for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission or mail to the Depositary.
See Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial One State Street
Bowling Green Station institutions only): New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing
Attn: Reorganization Department Window, Sub-cellar One
</TABLE>
Confirm Facsimile by Telephone:
(212) 858-2103
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Publicis S.A., a societe anonyme
organized under the laws of France (the "Purchaser"), upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated December 16, 1997
(the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"), receipt of each of which is hereby acknowledged, the number of Shares
and the number of Rights indicated below pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
<PAGE> 2
<TABLE>
<S> <C>
Number of
Shares: ------------------------ Shares Name(s) of Record Holder(s):
-------------------------
Number of
Rights: _________________________ Rights
------------------------------------------------
Certificate No(s). (if available):
- ------------------------------------------------- Address(es):
------------------------------------------------
- ------------------------------------------------- ------------------------------------------------
- ------------------------------------------------- ------------------------------------------------
If Share(s) or Right(s) will be tendered by book- Area Code and Telephone Number(s):
------------------------------------------------
entry transfer, check one box.
[ ] The Depository Trust Company
------------------------------------------------
[ ] Philadelphia Depository Trust Company Signature(s):
------------------------------------------------
Account Number:
- -------------------------------------------------
------------------------------------------------
Date:
- -------------------------------------------------
------------------------------------------------
</TABLE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby (a) represents that the
tender of Shares and/or Rights effected hereby complies with Rule 14e-4 under
the Securities Exchange Act of 1934, as amended, and (b) guarantees to deliver
to the Depositary, at one of its addresses set forth above, the certificates
representing all tendered Shares and/or Rights, in proper form for transfer, or,
in the case of book-entry delivery of Shares and, if available, Rights, a
Book-Entry Confirmation (as defined in the Offer to Purchase), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or, in the case of book-entry
delivery of Shares and, if available, Rights, an Agent's Message (as defined in
the Offer to Purchase), and any other documents required by the Letter of
Transmittal within (a) in the case of Shares, three New York Stock Exchange,
Inc. ("NYSE") trading days after the date of execution of this Notice of
Guaranteed Delivery or (b) in the case of Rights, a period ending on the later
of (i) three NYSE trading days after the date of execution of this Notice of
Guaranteed Delivery and (ii) three business days after the date Rights
Certificates are distributed to holders of Shares by the Company.
<TABLE>
<S> <C>
Name of Firm:
- ------------------------------------------------ -------------------------------------------------
(Authorized Signature)
Address: Title:
- ------------------------------------------------ -------------------------------------------------
Name:
-------------------------------------------------
- ------------------------------------------------
Area Code and
-------------------------------------------------
(Please type or print)
Telephone Number:
- ------------------------------------------------
Date:
-------------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR RIGHTS WITH THIS NOTICE OF
GUARANTEED DELIVERY. CERTIFICATES FOR SHARES OR RIGHTS SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
<PAGE> 1
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10020
OFFER TO PURCHASE FOR CASH
9,619,904 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
TRUE NORTH COMMUNICATIONS INC.
AT
$28 NET PER SHARE
BY
PUBLICIS S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED
DECEMBER 16, 1997
TO BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
We have been appointed by Publicis S.A., a societe anonyme organized under
the laws of France (the "Purchaser"), to act as financial advisor and Dealer
Manager in connection with the Purchaser's offer to purchase 9,619,904 shares of
Common Stock, par value $.33 1/3 per share (the "Shares"), of True North
Communications Inc., a Delaware corporation (the "Company"), and (unless and
until the Purchaser declares that the Rights Condition (as defined below) has
been satisfied) the associated Series A Junior Participating Preferred Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as
of November 16, 1988 between the Company and Harris Trust and Savings Bank, as
Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase
price of $28 per Share (and associated Right), net to the seller in cash,
without interest thereon, in each case upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 16, 1997 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the "Offer")
enclosed herewith. Unless and until the Purchaser declares that the Rights
Condition is satisfied, holders of Shares will be required to tender one
associated Right for each Share tendered in order to effect a valid tender of
such Share. If the Distribution Date (as defined in the Offer to Purchase) does
not occur prior to the Expiration Date (as defined in the Offer to Purchase), a
tender of Shares will also constitute a tender of the associated Rights. If the
Distribution Date occurs and Rights Certificates (as defined in the Offer to
Purchase) are distributed by the Company to holders of Shares prior to the time
a holder's Shares are tendered pursuant to the Offer, in order for Rights (and
the corresponding Shares) to be validly tendered, Rights Certificates
representing a number of Rights equal to the number of Shares tendered must be
delivered to the Depositary (as defined below) or, if available, a Book-Entry
Confirmation (as defined in the Offer to Purchase) received by the Depositary
with respect thereto. If the Distribution Date occurs and Rights Certificates
are not distributed prior to the time Shares are tendered pursuant to the Offer,
Rights may be tendered prior to a stockholder receiving Rights Certificates by
use of the guaranteed delivery procedure described in Section 3 of the Offer to
Purchase. In any case, a tender of Shares constitutes an agreement by the
tendering stockholder to deliver Rights Certificates representing a number of
Rights equal to the number of Shares tendered pursuant to the Offer to the
Depositary within three business days after the date Rights Certificates are
distributed. The Purchaser reserves the right to require that the Depositary
receive Rights Certificates, or a Book-Entry Confirmation, if available, with
respect to such Rights, prior to accepting the related Shares for payment
pursuant to the Offer if the Distribution Date occurs prior to the Expiration
Date. Holders of Shares and Rights whose certificates for such Shares (the
"Share Certificates") and, if applicable, Rights Certificates, are not
immediately available (including, if the Distribution Date has occurred, but
Rights
<PAGE> 2
Certificates have not yet been distributed by the Company), or who cannot
deliver their Share Certificates or, if applicable, their Rights Certificates,
and all other required documents to the Depositary on or prior to the Expiration
Date, or who cannot complete the procedures for book-entry transfer on a timely
basis, must tender their Shares and Rights according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. Unless the context
otherwise requires, all references to Shares shall include the associated Rights
and all references to the Rights shall include all benefits that may inure to
holders of the Rights pursuant to the Rights Agreement.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares or, if applicable, Rights registered in your
name or in the name of your nominee.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which, when added to the number of Shares beneficially owned by the
Purchaser and its affiliates, constitutes a majority of the total number of
outstanding Shares on a fully diluted basis (assuming the exercise or
conversion, as applicable, of all outstanding options, rights and convertible
securities (if any) and the issuance of all Shares that the Company is obligated
to issue), (2) the Company having entered into a definitive agreement with the
Purchaser, Publicis Communication and Publicis Worldwide B.V. (both of which are
subsidiaries of the Purchaser) to effect the Proposed Publicis Combination (as
defined in the Offer to Purchase), (3) the Rights having been redeemed by the
Board of Directors of the Company or the Purchaser being satisfied that the
Rights have been invalidated or otherwise are inapplicable to the Offer and the
Proposed Publicis Combination (the "Rights Condition"), (4) the Purchaser being
satisfied that Section 203 of the Delaware General Corporation Law has been
complied with in connection with the Offer and the Proposed Publicis Combination
or is inapplicable to the Purchaser in connection with the Offer and the
Proposed Publicis Combination and (5) the Agreement and Plan of Merger, dated as
of July 30, 1997 (the "Bozell Merger Agreement"), among the Company, Cherokee
Acquisition Corporation and Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell")
having been terminated without any payments by or penalties to the Company
(other than any applicable payments pursuant to Section 5.7(c) of the Bozell
Merger Agreement) and the Company not having entered into or effectuated any new
or amended agreements with Bozell or any other person or entity having the
effect of impairing the ability of the Purchaser to consummate the Offer or the
Proposed Publicis Combination or otherwise diminishing the expected economic
value to the Purchaser of the Shares purchased in the Offer or the Proposed
Publicis Combination. The Offer is also subject to other terms and conditions
contained in the Offer to Purchase. See the Introduction and Sections 1, 14 and
15 of the Offer to Purchase.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated December 16, 1997.
2. Letter of Transmittal to tender Shares and Rights for your use and
for the information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Shares and Rights.
3. The Notice of Guaranteed Delivery for Shares and Rights to be used
to accept the Offer if certificates for Shares or Rights are not
immediately available or if such certificates and all other required
documents cannot be delivered to IBJ Schroder Bank & Trust Company (the
"Depositary") by the Expiration Date or if, in the case of the Shares, the
procedure for book-entry transfer cannot be completed by the Expiration
Date.
4. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
THURSDAY, JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED.
<PAGE> 3
In order to accept the Offer, an appropriate duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares or, if available, the associated Rights, and any
other required documents should be sent to the Depositary and either Share
Certificates representing the tendered Shares (and, if applicable, Rights
Certificates representing the associated tendered Rights) should be delivered to
the Depositary, or, in the case of Shares, such Shares (and, if applicable,
associated tendered Rights) should be tendered by book-entry transfer into the
Depositary's account maintained at one of the Book Entry Transfer Facilities (as
described in the Offer to Purchase), all in accordance with the instructions set
forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or, if applicable, Rights Certificates, or
other required documents on or prior to the Expiration Date or to comply with
the book-entry transfer procedures on a timely basis, a tender may be effected
by following the guaranteed delivery procedures specified in Section 3 of the
Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager and the Information Agent, as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant to
the Offer. The Purchaser will, however, upon request, reimburse you for
customary clerical and mailing expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Purchaser will pay or cause to be paid
any stock transfer taxes payable on the transfer of Shares to it, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from, the
Dealer Manager or the Information Agent, at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
LAZARD FRERES & CO. LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE DEALER MANAGER, THE COMPANY,
THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
9,619,904 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
TRUE NORTH COMMUNICATIONS INC.
AT
$28 NET PER SHARE
BY
PUBLICIS S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998 UNLESS THE
OFFER IS EXTENDED
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated December
16, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with any amendments thereto, collectively constitute the
"Offer") relating to the offer by Publicis S.A., a societe anonyme organized
under the laws of France (the "Purchaser"), to purchase 9,619,904 shares of
Common Stock, par value $.33 1/3 per share (the "Shares"), of True North
Communications Inc., a Delaware corporation (the "Company"), and (unless and
until the Purchaser declares that the Rights Condition (as defined below) has
been satisfied) the associated Series A Junior Participating Preferred Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as
of November 16, 1988 between the Company and Harris Trust and Savings Bank, as
Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase
price of $28 per Share (and associated Right), net to the seller in cash,
without interest thereon, in each case upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal enclosed herewith. Unless and until the Purchaser declares that the
Rights Condition is satisfied, holders of Shares will be required to tender one
associated Right for each Share tendered in order to effect a valid tender of
such Share. If the Distribution Date (as defined in the Offer to Purchase) does
not occur prior to the Expiration Date (as defined in the Offer to Purchase), a
tender of Shares will also constitute a tender of the associated Rights. If the
Distribution Date occurs and Rights Certificates (as defined in the Offer to
Purchase) are distributed by the Company to holders of Shares prior to the time
a holder's Shares are tendered pursuant to the Offer, in order for Rights (and
the corresponding Shares) to be validly tendered, Rights Certificates
representing a number of Rights equal to the number of Shares tendered must be
delivered to the Depositary (as defined below) or, if available, a Book-Entry
Confirmation (as defined in the Offer to Purchase) received by the Depositary
with respect thereto. If the Distribution Date occurs and Rights Certificates
are not distributed prior to the time Shares are tendered pursuant to the Offer,
Rights may be tendered prior to a stockholder receiving Rights Certificates by
use of the guaranteed delivery procedure described in Section 3 of the Offer to
Purchase. In any case, a tender of Shares constitutes an agreement by the
tendering stockholder to deliver Rights Certificates representing a number of
Rights equal to the number of Shares tendered pursuant to the Offer to the
Depositary within three business days after the date Rights Certificates are
distributed. The Purchaser reserves the right to require that the Depositary
receive Rights
<PAGE> 2
Certificates, or a Book-Entry Confirmation, if available, with respect to such
Rights, prior to accepting the related Shares for payment pursuant to the Offer
if the Distribution Date occurs prior to the Expiration Date. Holders of Shares
and Rights whose certificates for such Shares (the "Share Certificates") and, if
applicable, Rights Certificates, are not immediately available (including, if
the Distribution Date has occurred, but Rights Certificates have not yet been
distributed by the Company), or who cannot deliver their Share Certificates or,
if applicable, their Rights Certificates, and all other required documents to
the Depositary on or prior to the Expiration Date, or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Shares
and Rights according to the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase. Unless the context otherwise requires, all
references to Shares shall include the associated Rights and all references to
the Rights shall include all benefits that may inure to holders of the Rights
pursuant to the Rights Agreement.
WE ARE THE HOLDER OF RECORD OF SHARES AND RIGHTS HELD BY US FOR YOUR
ACCOUNT. A TENDER OF SUCH SHARES AND RIGHTS CAN BE MADE ONLY BY US AS THE HOLDER
OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES AND RIGHTS HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares and Rights held by us for your account
pursuant to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $28 per Share, including the associated Right,
net to you in cash without interest thereon, upon the terms and subject to
the conditions set forth in the Offer.
2. The Offer is being made for at least a majority of all outstanding
Shares.
3. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which, when added to the number of Shares beneficially
owned by the Purchaser and its affiliates, constitutes a majority of the
total number of outstanding Shares on a fully diluted basis (assuming the
exercise or conversion, as applicable, of all outstanding options, rights
and convertible securities (if any) and the issuance of all Shares that the
Company is obligated to issue), (2) the Company having entered into a
definitive agreement with the Purchaser, Publicis Communication and
Publicis Worldwide B.V. (each of which are subsidiaries of the Purchaser)
to effect the Proposed Publicis Combination (as defined in the Offer to
Purchase), (3) the Rights having been redeemed by the Board of Directors of
the Company or the Purchaser being satisfied that the Rights have been
invalidated or otherwise are inapplicable to the Offer and the Proposed
Publicis Combination (the "Rights Condition"), (4) the Purchaser being
satisfied that Section 203 of the Delaware General Corporation Law has been
complied with in connection with the Offer and the Proposed Publicis
Combination or is inapplicable to the Purchaser in connection with the
Offer and the Proposed Publicis Combination and (5) the Agreement and Plan
of Merger, dated as of July 30, 1997 (the "Bozell Merger Agreement"), among
the Company, Cherokee Acquisition Corporation and Bozell, Jacobs, Kenyon &
Eckhardt, Inc. ("Bozell") having been terminated without any payments by or
penalties to the Company (other than any applicable payments pursuant to
Section 5.7(c) of the Bozell Merger Agreement) and the Company not having
entered into or effectuated any new or amended agreements with Bozell or
any other person or entity having the effect of impairing the ability of
the Purchaser to consummate the Offer or the Proposed Publicis Combination
or otherwise diminishing the expected economic value to the Purchaser of
the Shares purchased in the Offer or the Proposed Publicis Combination. The
Offer is also subject to other terms and conditions contained in the Offer
to Purchase. See the Introduction and Sections 1, 14 and 15 of the Offer to
Purchase.
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares or
Rights by the Purchaser pursuant to the Offer.
5. The Offer, proration period and withdrawal rights will expire at
12:00 midnight, New York City time, on Thursday, January 15, 1998, unless
the Offer is extended.
<PAGE> 3
6. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by IBJ Schroder Bank & Trust
Company (the "Depositary") of (a) Share Certificates and, if applicable,
associated Rights Certificates or, in the case of Shares, timely
confirmation of the book-entry transfer of such Shares and, if available,
Rights into the account maintained by the Depositary at The Depository
Trust Company or Philadelphia Depository Trust Company (collectively, the
"Book-Entry Transfer Facilities"), pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in the Offer to
Purchase), in connection with a book-entry delivery, and (c) any other
documents required by the appropriate Letter of Transmittal. Accordingly,
payment may not be made to all tendering stockholders at the same time
depending upon when certificates for or, in the case of Shares,
confirmations of book-entry transfer of such Shares (or associated Rights,
if available) into the Depositary's account at a Book-Entry Transfer
Facility are actually received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth on the back page of this letter. If you
authorize the tender of your Shares, all such Shares will be tendered unless
otherwise specified on the back page of this letter. An envelope to return your
instructions to us is enclosed. Your authorization to tender Shares shall be
deemed authorization to tender the associated Rights regardless of whether they
separate from the Shares. Your instructions should be forwarded to us in ample
time to permit us to submit a tender on your behalf prior to the expiration of
the Offer.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares or Rights residing in any jurisdiction in which the
making of the Offer or the acceptance thereof would not be in compliance with
the securities, blue sky or other laws of such jurisdiction. However, the
Purchaser may, in its discretion, take such action as it may deem necessary to
make the Offer in any jurisdiction and extend the Offer to holders of Shares in
such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by Lazard Freres & Co. LLC, the Dealer
Manager for the Offer, or one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH 9,619,904 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
TRUE NORTH COMMUNICATIONS INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated December 16, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with any amendments thereto,
collectively constitute the "Offer") in connection with the offer by Publicis
S.A., a societe anonyme organized under the laws of France (the "Purchaser"), to
purchase 9,619,904 shares of Common Stock, par value $.33 1/3 per share (the
"Shares"), of True North Communications Inc., a Delaware corporation (the
"Company"), and (unless and until the Purchaser declares that the Rights
Condition (as defined in the Offer to Purchase) has been satisfied) the
associated Series A Junior Participating Preferred Stock Purchase Rights (the
"Rights") issued pursuant to the Rights Agreement dated as of November 16, 1988
between the Company and Harris Trust and Savings Bank, as Rights Agent (as the
same may be amended, the "Rights Agreement"), at a purchase price of $28 per
Share (and associated Right), net to the seller in cash, without interest
thereon, in each case upon the terms and subject to the conditions set forth in
the Offer to Purchase.
<PAGE> 4
This will instruct you to tender to the Purchaser the number of Shares and
the number of Rights indicated below (or if no number is indicated below, all
Shares and Rights) which are held by you for the account of the undersigned,
upon the terms and subject to the conditions set forth in the Offer.
<TABLE>
<S> <C>
Number of Shares to Be Number of Rights to Be
Tendered: Tendered:
________ Shares ________ Rights
</TABLE>
Unless and until the Purchaser declares that the Rights Condition is
satisfied, holders of Shares are required to tender one associated Right for
each Share tendered in order to effect a valid tender of such Share. If
certificates representing Rights ("Rights Certificates") have been distributed
by the Company to holders of Shares, such holders will be required to validly
tender Rights Certificates representing a number of Rights equal to the number
of Shares being tendered in order to effect a valid tender of such Shares. If
Rights Certificates have not been distributed by the Company to holders of
Shares, a tender of Shares will also constitute a tender of the associated
Rights and only the line with respect to "Number of Shares to Be Tendered"
should be filled in. See Section 3 of the Offer to Purchase. Unless otherwise
indicated, it will be assumed that you instruct us to tender all Shares and
Rights held by us for your account and that you instruct us to tender all Rights
associated with Shares you have instructed us to tender.
SIGN HERE
Signature(s)
- --------------------------------------------------------------------------------
(Print Name(s))
- --------------------------------------------------------------------------------
(Print Address(es))
- --------------------------------------------------------------------------------
(Area Code and Telephone Number(s))
- ---------------------------------------------------------------------
(Taxpayer Identification or Social Security Number(s))
- -----------------------------------------------------
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person
7. a. The usual revocable savings trust The grantor-
account (grantor is also trustee) trustee(1)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law
8. Sole proprietorship account The owner(4)
<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>
9. A valid trust, estate or pension trust The Legal entity (Do
not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
============================================================
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- if you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
Exhibit b(1)
OPENING OF A CREDIT IN FRANCS
BETWEEN THE UNDERSIGNED
1) CREDIT LYONNAIS, a Business Corporation with capital of FRF 9,389,925,000 and
registered offices in Lyon (Rhone), 18 rue de la Republique, and main office in
PARIS (2eme), 19 Bd des Italiens, registered with the Register of
Corporations and Companies of LYON, at No. 8 954 409 741, represented by Mrs.
Claudie MARINI, Director of Champs Elysees Corporate Marketing Management Office
- - Paris West
HEREINAFTER "CREDIT LYONNAIS"
ON THE ONE HAND
2) PUBLICIS S.A., a Business Corporation with a Board of Directors and Oversight
Committee, with capital of FRF 201,528,125, and registered offices in PARIS 8eme
at 133 avenue des Champs Elysees, registered with the Register of Corporations
and Companies of PARIS at no. 8 542 080 601, represented by Mr. Jean-Paul MORIN,
General Secretary, duly authorized by virtue of the powers conferred on him by
the Board of Directors on April 7, 1997
HEREINAFTER "THE BORROWER"
ON THE OTHER
THE FOLLOWING HAS BEEN AGREED AND STIPULATED:
<PAGE> 2
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-2-
I - DEFINITIONS
The terms and words beginning with a capital letter shall, the purposes of these
presents, the meaning resulting from the following definitions:
NOTIFICATION OF DRAWDOWN: designates an original notification in accordance with
the model in Attachment No. 1 to the Contract.
CASE OF EARLY REPAYABILITY: designates any event or total default by the
Borrower as set forth in Article XI of the Contract.
CONDITIONS PRECEDENT TO THE DRAWDOWNS: designates the conditions precedent to
any Drawdown stipulated in Article 3.2 of the Contract.
CONTRACT: designates the present credit opening contract and its attachments,
its introductory part and, where applicable, its addenda which are and which
shall be an integral part thereof.
CREDIT: designates the opening of a FRF 100,000,000 (ONE HUNDRED MILLION FRENCH
FRANCS), available in French francs which CREDIT LYONNAIS undertakes to make
available to the Borrower pursuant to the terms and conditions of the Contract
and the repayment of which shall occur in accordance with the provisions of
Article 2.3 of the Contract.
EFFECTIVE DATE: designates the date of May 2, 1997.
BUSINESS DAY: designates any full day on which the interbanking market is
operating and on which banks are open the entire day in PARIS.
DRAWDOWNS: designate the use of the Credit made by the Borrower in accordance
with the provisions of Article III of the Contract.
<PAGE> 3
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-3-
II - CHARACTERISTICS OF THE CREDIT
2.1 CREDIT AMOUNT
CREDIT LYONNAIS grants the Borrower, which accepts, in accordance with the
following terms and conditions, an opening of credit in French francs, available
through Drawdowns, of a maximum amount of FRF 100,000,000 (ONE HUNDRED MILLION
FRENCH FRANCS).
This amount can be increased to FRF 200,000,000 (TWO HUNDRED MILLION FRENCH
FRANCS) at the time of the first extension of the Credit, in accordance with
Article 2.3, below.
2.2 INTENDED PURPOSE OF THE CREDIT
The Credit is intended to finance the Borrower's investments and its cash flow
needs.
2.3 TERM OF THE CREDIT
The Credit is granted reckoned from the Effective Date up to May 2, 1998 (the
"Maturity Date") and may be extended thereafter for successive periods of one
year, following mutual agreement between the parties.
In order to formalize its agreement regarding any extension, CREDIT LYONNAIS
shall send Borrower, one month prior to expiration of the Maturity Date, a
letter notifying it of its decision. It is now and henceforth stipulated that
the first extension intended to extend the Maturity Date of May 2, 1998 to May
2, 1999 shall be accompanied by a statement of the credit amount of FRF
100,000,000 (ONE HUNDRED MILLION FRENCH FRANCS) to FRF 200,000,000 (TWO HUNDRED
MILLION FRENCH FRANCS).
<PAGE> 4
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-4-
In the absence of agreement between the parties, the Borrower shall proceed to
repayment of the Credit on the Maturity Date.
III - TERMS AND CONDITIONS OF USE
3.1 Within the limits on the amount and term as defined hereinbefore, the
Borrower shall use the Credit as it sees fit, by Drawdowns, to the extent and in
accordance with its needs in the specific conditions set forth in the following.
The total amount of the Drawdowns may not exceed the Credit amount available.
Deemed available shall be the amount equal to the difference between:
- on the one hand, the maximum amount of the Credit on the dates and
for the amounts stipulated in Article II, above,
- on the other, the sum of the amount of the Drawdowns in French francs
outstanding.
3.2 Moreover, all Drawdowns shall be subject to the following conditions:
- that there be no default with respect to any of the commitments
assumed by Borrower under the Contract, except where such default shall have
been remedied within the time periods set forth in Article XI, Clause 2;
- that no Case of Early Repayability, as defined in Article XI of the
Contract, has occurred;
- that the cumulative amount of the Drawdowns requested by the Borrower
on the date of the Drawdown does not exceed the maximum amount of the Credit on
the dates and for the amounts set forth in Article II, above;
<PAGE> 5
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-5-
- that the Borrower has sent to CREDIT LYONNAIS, within the time
periods prescribed, a Notification of Drawdown.
3.3 DRAWDOWNS
Each of the Drawdowns shall be made for an amount at least equal to FRF
10,000,000 and above said amount by a full multiple of FRF 1,000,000.
The term of each of the Drawdowns shall be 1, 3 or 6 months, all other terms
being excluded. Each Drawdown shall be made on a Business Day and be the subject
of a Notification of Drawdown pursuant to the model shown in Attachment No. 1,
duly signed by Borrower.
The Notification of Drawdown shall be sent to CREDIT LYONNAIS no later than two
Business Days before the day on which the Borrower wishes to dispose of the
funds. The Notification of Drawdown shall irrevocably bind the Borrower which
shall be required to accept the depositing of the funds corresponding to said
Drawdown, in accordance with the conditions shown on the corresponding
Notification of Drawdown and with the terms and conditions of the Contract.
3.4 The transactions resulting from the operation of the Credit are excluded
from all current accounts which the Borrower may have and may come to have with
CREDIT LYONNAIS. The accounts maintained at CREDIT LYONNAIS for purposes of
retracing the transactions performed thereon in execution of the Credit, shall
consist of simple accounting instruments and shall not occasion the legal
effects attaching to current accounts.
<PAGE> 6
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-6-
IV - FEES
4.1 FEES
A usage fee of 6.25 basis points (0.0625%) per annum, calculated on the
available amount of the credit as defined in Article III, based on a 360-day
year, shall be charged quarterly at the end of each calendar quarter by CREDIT
LYONNAIS to the Borrower's current account and for the first time on June 30,
1997.
4.2 DRAWDOWNS
4.2.1 - INTEREST
The interest applicable to each of the Drawdowns shall be calculated based on
the number of exact days referenced to a 365-day year. They shall be charged
upon maturity, at the end of the period, on the date of maturity of each of the
Drawdowns, at the rate determined below.
The rate applicable to each of the Drawdowns shall be equal to the PIBOR-FRANC
(TIOP) rate for the duration of said Drawdown, increased by 12.5 basis points
(0.125%) per annum.
The TIOP of the term of the Drawdown designates the average rate, stated at an
annual rate, published by TELERATE under the auspices of the Association
Francaise des Banques (French Association of Banks, AFB) at which deposits,
payable in French francs for the same period and the same amount as said
Drawdown, are offered on the PARIS interbanking market at 11:00 a.m. of the
business day preceding the Drawdown date.
The rate thus determined the day preceding the day of the Drawdown shall be
fixed over the entire term of the latter.
<PAGE> 7
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-7-
4.2.2 - MARKET DISTURBANCE
In Paris, the spread, as displayed on the TELERATE screen, between the rate
offered and the rate asked for the French francs over the TIOP quotation
periods, is generally, for each reference bank, 1/8%.
There shall be market disturbance whenever the spread ascertained by CREDIT
LYONNAIS as well as by two banks (which, the parties agree shall be the Banque
Nationale de Paris and Banque de la Societe Generale) is, over the term of the
Drawdown requested and the rate fixing day, at 10:00 a.m., more than quadruple
the spread generally ascertained, that is, greater than 0.5%.
In the event of market disturbance, CREDIT LYONNAIS shall immediately notify the
Borrower via all means.
CREDIT LYONNAIS and Borrower shall then negotiate, within the shortest period of
time, in order to agree, based on a different fixing method, to an appropriate
rate in function of the new situation.
Failing an agreement between the Borrower and CREDIT LYONNAIS, the rate then
applicable to the Drawdown shall be equal to the average of the two highest
rates of the eight rates taken into consideration for fixing of the TIOP for the
term of the Drawdown, the business day preceding the Drawdown having been taken
into consideration, increased by 12.5 basis points (0.125%) per annum.
4.2.3 NON-PUBLICATION OF THE TIOP
<PAGE> 8
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-8-
If the TIOP, as calculated and published by the AFB, should cease, for any
reason whatsoever, to be published, CREDIT LYONNAIS shall immediately notify the
Borrower via all means and the following provisions shall apply:
- - in the event a rate replacing the TIOP is published under the auspices of the
AFB, said rate shall be immediately applicable to the new Drawdowns, the
interest rates being equal to this new rate increased by 12.5 basis points
(0.125%) per annum.
- - in the contrary case, CREDIT LYONNAIS and Borrower shall negotiate, within the
shortest period of time, in order to agree, based on a different fixing method,
to an appropriate rate. During this negotiation period, Borrower shall not be
able to effect any new Drawdown and the total amount of the Drawdowns
outstanding shall be repaid on the maturity date of each thereof.
V - AGGREGATE ACTUAL RATE
In order to comply with legal provisions governing interest rates, it is
stipulated that only use of the Credit shall permit determination of the
aggregate actual rate.
By way of example, the aggregate actual rate of the Credit applicable on April
18, 1997, for total use of the Credit, would amount to 3.59% per annum, taking
into consideration a TIOP at 6 months of 3.46484%, the rate for the period being
1.795%, the duration of the period, 6 months.
<PAGE> 9
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-9-
VI - UNFORESEEN OCCURRENCE OF NEW CIRCUMSTANCES
If, as the result of new legislative or regulatory provision or an EC directive
or change in the structure of the banking system or for any other reason, a new
tax or charge or a new assessment or fee be directly applicable to the present
Contract or to repayments of the principal or interest or fee payments, or other
amounts due by virtue of the performance of the Contract, or if the taxes,
charges, assessments (with the exception of the tax on the bank's aggregate net
revenue) or fees currently directly applicable to these repayments and payment
were to be increased, the following provisions shall apply:
(1) CREDIT LYONNAIS shall notify Borrower of the unforeseen occurrence of this
event via registered letter with return receipt and shall inform same of the
additional cost which CREDIT LYONNAIS will incur as a result of this event,
which additional cost shall be fully debited the Borrower.
(2) In the event Borrower should not agree to bear the entire amount of this
cost, the Borrower shall inform CREDIT LYONNAIS via registered letter with
return receipt within 8 calendar days, reckoned from Borrower's receipt of said
notification.
(3) If in agreement regarding the foregoing changes at the end of said
negotiation period, Borrower shall not be able to make further Drawdowns under
this Contract and the total amount of the Drawdowns outstanding at the end of
the negotiation period must be repaid in advance within a one month period.
In the event of early repayment of the Credit by virtue of the unforeseen
occurrence of new circumstances, CREDIT LYONNAIS shall be paid an
indemnification corresponding to the
<PAGE> 10
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-10-
amount resulting from the difference between the rate applicable to each of the
Drawdowns repaid in advance and the reference rate in effect on this date on the
amount of each of the Drawdowns repaid for the term of said Drawdown as yet
unlapsed.
Reference rate shall be understood to mean the PIBOR Franc (TIOP) rate, for a
term equivalent to the term of each of the Drawdowns still to lapse, rounded
off, if necessary, to the next higher number of months; the rate shall be
published by Telerate the business day preceding the day of early repayment of
said Drawdown.
VII - EARLY WAIVER
The Borrower may, at any time, waive all or part of portion of the Credit not
used, subject to one month's prior notice. All waivers shall be for an amount at
least equal to FRF 10,000,000 (TEN MILLION FRENCH FRANCS) and above said amount
by a full multiple of FRF 1,000,000. This waiver shall be irrevocable in nature
and shall reduce definitively and proportionately the limit of CREDIT LYONNAIS
obligations.
VIII -- EARLY REPAYMENT
The Borrower shall be entitled to make early repayment of one or more Drawdowns.
All early repayment of the Credit shall be for an amount at least equal to FRF
10,000,000.
Early repayments shall be the subject of a notification sent to CREDIT LYONNAIS
ten business days in advance of such repayment via registered letter and shall
give rise, where applicable, to the payment of an indemnification corresponding
to the amount resulting from the difference between
<PAGE> 11
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-11-
the rate applicable to each of the Drawdowns repaid in advance and the reference
rate in effect the date governing the amount of each of the Drawdowns repaid for
the term of said Drawdown as yet unlapsed.
The reference rate shall be understood to be the rate defined in Article VI,
subparagraph 3.
IX - REPRESENTATIONS
The Borrower represents and warrants to CREDIT LYONNAIS that, as of the date of
signature of these presents, that:
(1) it is a corporation organized in accordance with the law, enjoying the
incorporation possessing full legal capacity to conclude the Contract and to
execute and comply with its terms and conditions.
(2) that the signing and execution of the Contract have been legally authorized,
if necessary, by its corporate bodies and require no authorization from any
competent authority not already obtained.
(3) that the signing of the Contract and execution of the obligations resulting
thereinunder do not contravene either its articles of incorporation or any
commitment to which it may be bound nor does such signing and execution violate
in any manner whatsoever the laws or regulations which are applicable to it.
(4) no suit, action, case or administrative proceedings are pending or, to its
knowledge, are not about to be brought or filed, to prevent or prohibit the
signing or the execution of the Contract.
<PAGE> 12
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-12-
(5) that no event capable of seriously affecting the extent or worth of its
assets or of appreciably increasing the volume of its commitments has occurred
since the close of its last financial year and that as of this date nothing
exists which could constitute a case of early repayment, as defined in Article
XI.
(6) that the financial documents submitted to CREDIT LYONNAIS were compiled in
accordance with generally accepted accounting principles, are proper, in order
and genuine and give a faithful image of its net worth financial assets and its
profits and losses.
X - BORROWER'S OBLIGATIONS
For such time as the Borrower shall be deemed a debtor by virtue of the
Contract, the Borrower undertakes:
a) to send CREDIT LYONNAIS, following their approval by the competent corporate
bodies, on the dates and within the time periods prescribed by law and the
articles of incorporation, certified true copies of its annual financial sheets,
final accounts and attached documents, of the Auditors' General Report. After
each ordinary or extraordinary meeting, CREDIT LYONNAIS shall obtain, upon
written request by it, the minutes of said meeting once said minutes have been
prepared;
b) to inform, with due diligence, CREDIT LYONNAIS by providing it with all
substantiating documentation necessary, of all changes to its articles of
incorporation except those exclusively necessitated in order to comply with
changes to laws governing business corporations, and of all
<PAGE> 13
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-13-
facts capable of seriously affecting the extent or worth of its assets or of
appreciably increasing the volume of its commitments;
c) to apply for all authorizations of the competent authorities which may
possibly be required after Contract signing for execution by the Borrower of its
obligations pursuant to the terms and conditions thereof;
d) to notify, with due diligence, the unforeseen occurrence of any event
constituting a case of early repayability, as defined in Article XI of the
Contract, and to describe the facts relating to this event;
e) to comply, within the framework of its activities, with all legal and
regulatory provisions in effect;
f) to authorize, as security for any loan debt, present or future, or as
security for all guarantees of said debt, no real security of any nature
whatsoever without causing CREDIT LYONNAIS to benefit therefrom pari passu, with
the exception of securities authorized to allow financing the acquisition of all
capital assets to the extent the security authorized relates exclusively to the
assets in question and guarantees only the payment or the financing of this
asset.
CREDIT LYONNAIS shall be able to authorize the Borrower to waive this clause if
it deems that its debt is not compromised or if, where applicable, the Borrower
offers it an equivalent security.
XI - EARLY REPAYABILITY
In the event of court-ordered liquidation or the Borrower's ceasing to do
business, all the amounts deposited in the execution of the Credit, as well as
all interest, fees and ancillary and
<PAGE> 14
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-14-
related charges, shall be legally repayable in advance and the Borrower shall
not be able to make any other Drawdown.
The same shall apply in the event of total cessation of business activities
within the scope of joint proceedings.
Moreover, the above-indicated amounts shall, at CREDIT LYONNAIS' discretion,
become legally repayable in advance and the Borrower shall not be able to make
any other Drawdown in any of the following cases:
1) In the event of non-payment, at its maturity, of any sum whatsoever which has
become repayable under the Contract if such case has not been remedied within a
time period of ten calendar days following receipt of formal notice sent by
CREDIT LYONNAIS via registered letter with return receipt.
2) Non-performance, for any reason whatsoever, by the Borrower of any one of its
obligations referred to in Article X of the Contract and if such default has not
been remedied within a time period of ten calendar days following receipt of
said notification, via registered letter with return receipt, to Borrower by
CREDIT LYONNAIS, requesting such remedy.
3) In the event of inaccuracies, except for those resulting from a simple
material error or those not of a nature to substantially distort the evaluation
of an important aspect of the Borrower's situation, default on any of the
representations made pursuant to Article IX of the Contract, unless the
inaccuracies, capable of resulting from a situation not in conformity with the
representations, have ceased to exist.
<PAGE> 15
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-15-
4) In the event the Borrower undertakes any transaction relating to merger,
absorption, splitting or partial contribution of assets necessarily having an
unfavorable effect on its financial situation and jeopardizing its ability to
meet its financial obligations under the present Contract.
5) Failure by the Borrower to pay any debt in an amount exceeding or equal to
FRF20 million within a period of 10 days, reckoned from receipt by Borrower of
formal notice sent by the creditor, unless the Borrower has challenged in good
faith the repayability of this debt and has requested the court for a ruling on
this challenge.
If any of these hypothetical situations should materialize, CREDIT LYONNAIS
shall be able to demand the payment of all amounts owed it and this eight
calendar days following remittance of a simple notification sent, via registered
mail with return receipt to the Borrower, to the domicile elected hereinafter.
This letter shall indicate that CREDIT LYONNAIS intends to exercise the right
pursuant to this Article.
CREDIT LYONNAIS shall not be required to satisfy any other formality nor to have
the expiration of the deadline announced by the court.
Payments or settlements subsequent to this notice shall not be an impediment to
such repayability.
XII - INTEREST IN ARREARS
All sums not repaid at their normal maturity date shall bear legal interest with
the limits authorized by Law, from the day of the maturity date and up to its
complete repayment, at the Weighted
<PAGE> 16
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-16-
Average Rate of day-to-day transactions between banks, published by the Bank of
France, the next business day, increased by 200 basis points (2%) per annum. The
same shall apply for all expenses and expenditures advanced by CREDIT LYONNAIS
in connection with the Credit for any reasons whatsoever. This provision shall
not prejudice repayability without advance notification and, consequently, shall
not be deemed to constitute a deferred payment agreement. Interest shall be
capitalized, if they are owed, over an entire year, as provided for by Article
1154 of the Civil Code.
XIII - TAXES AND CHARGES
All fees, taxes, charges, present and future, of any nature whatsoever and,
generally, all costs legally justified and related to the Contract or which may
be the result or the consequence thereof shall be payable by the Borrower and,
consequently, paid by it and reimbursed by it to CREDIT LYONNAIS in the event of
their advance by the latter and shall be definitively borne by the Borrower.
XIV - PAYMENT
14.1 All payments in principal, interest, fees and ancillary charges for CREDIT
LYONNAIS' benefit shall be made by the Borrower, with good value date, to CREDIT
LYONNAIS - DIRECTION DE MARCHE ENTREPRISES PARIS OUEST - 55 avenue des Champs
Elysees -75008 PARIS.
To this effect, Borrower irrevocably authorizes CREDIT LYONNAIS to debit current
account No. 572 / 2,180 E, opened in its name in the ledgers of the Corporate
Marketing Management -
<PAGE> 17
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-17-
PARIS WEST of CREDIT LYONNAIS, 55 avenue des Champs Elysees -75008, of all sums
owed and payable by virtue of the Contract and undertakes, to this effect, to
provide sufficient cover, in advance and available, for this account.
14.2 Borrower is expressly prohibited from off-setting or allowing an off-set to
be made between any sum payable by it under the Contract and any claim it might
otherwise have vis-a-vis CREDIT LYONNAIS.
Borrower is likewise prohibited from making a payment by subjecting it to any
condition or reservation to assert any demurrer or counterclaim whatsoever
foreign to the Contract.
14.3 All payments shall be made on a Business Day. In the case where the
repayability date of any sum whatsoever due by virtue of the Contract should not
fall on a Business Day, the corresponding payment shall be carried over to the
following Business Day. Consideration shall be made for adjustments in the
calculations of interest and fees.
XV - ABSENCE OF WAIVER
No delay nor omission on the part of CREDIT LYONNAIS in the exercise of any one
of its rights pursuant to the terms of the Contract shall affect said right or
be deemed as implying, on its part, a waiver to avail itself of this right. The
rights and recourses stipulated in these presents are cumulative and
non-exclusionary of any other right or recourse CREDIT LYONNAIS might otherwise
have.
<PAGE> 18
//revenue stamp -
FRENCH
REPUBLIC
17 F //
-18-
XVI - APPLICABLE LAW - DOMICILE - CORRESPONDENCE
16.1 All correspondence relating to this agreement shall be sent:
- by the Borrower: at its corporate headquarters, 133 avenue
des Champs Elysees, Paris 8eme.
- by CREDIT LYONNAIS, at its Corporate Marketing Management
Office - PARIS WEST, 55 avenue des Champs Elysees - Paris
8eme.
16.2 Borrower states that the Notifications of Drawdown signed and transmitted
via telecopier, including those sent by encoded telex, shall be just as binding
on it as an original signature, the Borrower releasing CREDIT LYONNAIS from all
liability which might result from the consequences of erroneous, abusive or
fraudulent use of these transmission media by Borrower.
16.3 The present Contract is subject to French law.
In the event of disputes, the Commercial Court of Paris shall have exclusive
jurisdiction.
Executed in Paris, 4/30/97
In two copies
//signature// //signature//
CREDIT LYONNAIS THE BORROWER
<PAGE> 19
[Revenue stamp,
17 francs]
ANNEX 1
NOTICE OF DRAWDOWN IN FRENCH FRANCS
TO: CREDIT LYONNAIS/UB Commitments CHAMPS ELYSEES
11, rue d'Argenson
75008 PARIS
To the attention of Ms. SICOT/Fax No. 01.49.24.54.99
DATE:
COMPANY:
RE.: Credit Line Agreement for -------- French francs dated --/--/--
This Drawdown Notice is being sent to you in accordance with the provisions of
Article III of the abovecaptioned Agreement.
You are hereby notified that, in accordance with the provisions of Article III
of the abovecaptioned Agreement, we wish to draw down the amount listed below as
follows:
AMOUNT DRAWN DOWN: ------------------- French francs
<PAGE> 20
-20-
DATE OF THE DRAWDOWN: --/--/--
DURATION OF THE DRAWDOWN:
Please credit the amount drawn down to account No. ---------- at your Bank.
We hereby repeat the representations made in Article IX of the abovecaptioned
Agreement and we confirm that none of the conditions for early repayment have
occurred.
Signed
[signature]
<PAGE> 1
Exhibit b(2)
OPENING OF A CREDIT FACILITY
Between the undersigned:
BANQUE PARIBAS, a Corporation with Board of Directors and Supervisory Council,
with capital of 5,651,454,100 French francs, whose registered address is in
PARIS at 3, rue d'Antin, RCS PARIS B 662 047 885,
represented by Mr. Gerard Chatelain and Mr. Francois Hervey, acting,
respectively, as Director and as Director of Corporate Customers of the Neuilly
Business Center,
Hereinafter referred to as "the Bank ";
of the first part
AND
The Corporation with Board of Directors and Supervisory Council PUBLICIS, with
capital of 202,453,525 French francs, whose registered address is in PARIS 75008
at 133, avenue des Champs-Elysees, RCS PARIS B 542 080 601,
<PAGE> 2
-2-
represented by Mr. Jean Paul Morin, General Secretary of the PUBLICIS Group, by
virtue of authority conferred upon him by a decision of the Board of Directors
assembled on April 7, 1997, a certified copy of which is annexed hereto,
Hereinafter referred to as "the Borrower,"
of the second part
IT HAS BEEN AGREED AND COVENANTED AS FOLLOWS:
ARTICLE 1: TERMS FOR OPENING THE FACILITY
Amount of credit: 200,000,000 French francs (Two hundred million French francs)
Object of the facility: Opening of this credit facility is intended for
financing of the Borrower's general needs.
Period of the credit: This Agreement comes into force as of the date of
execution of this instrument.
<PAGE> 3
-3-
The credit facility opened herein shall be extended for a duration of 364 days.
ARTICLE 2: DELAYING CONDITIONS
The credit facility opened herein shall only be placed at the Borrower's
disposal after the Borrower has tendered to the Bank the following documents and
papers:
- by-laws
- "k-bis" statement dated within the past three months
- signer's authority
in a form declared satisfactory by the Bank.
Should all of the above-stated conditions not be satisfied by June 10, 1997 at
the latest, the Agreement herein shall be legally void.
ARTICLE 3: TERMS FOR USAGE
The credit facility opened herein is usable by means of discounting of
promissory notes signed by the Borrower to the order of the Bank, with a term of
1, 2, 3, 4, 5, or 6 months.
<PAGE> 4
-4-
The said discounted amounts shall be credited to the Borrower's current account
opened on the books of the Bank [under number ...] ...A 560547 V.
These drawdowns, a sample of which is attached to this document, shall be in
units of a minimum amount of 10,000,000 francs.
They must be remitted to the bank no later than one day before the discount
date.
These notes shall bear the words "free of fees" and made for value in
consideration of this credit facility. Their execution and renewal shall not
give rise to novation. They shall be domiciled at the Bank and renewable within
the limits authorized herein. They may not be demanded by the Borrower prior to
their due date.
Should the expiration of the term hereof occur, the Bank is authorized to
transform the notes into sight drafts.
The Borrower gives notice that the person authorized to sign the notes is
Mr. Jean-Paul Morin
and undertakes to inform the Bank of any change which occurs in the names of the
<PAGE> 5
-5-
authorized signatories before any renewal of the said notes.
ARTICLE 4: REDUCTION OF THE AUTHORIZATION
The facility opened herein shall terminate at the close of 364 days from the
date of signing of this document, and all usage thereunder must be completely
paid out as of that date.
ARTICLE 5: INTEREST
Interest shall be calculated at the TIOP(1) (or PIBOR) in use, augmented by 0.10
point, with calculation to be performed in the exact number of days the credit
is available, based on a year of 360 days.
This interest shall be charged at the due date of each promissory note, unless
such notes are for a term greater than three months, in which case, interest
shall be charged at the end of each quarter of the civil calendar within the
term, and charged for the last time on the
- ----------
(1) TIOP (Interbank rate offered at Paris) or PIBOR (Paris Interbank Offered
Rate)
TIOP or PIBOR is the average interbank rate offered in Paris at 11 a.m. (Paris
time) by a selected group of banks called the reference banks on the business
day preceding the drawing date (or on the day of the advance or the first day of
interest calculation) for deposits in French francs (or in ECUS) and for a term
equal to that of the drawdown (or of the advance or the period of interest
calculation) in question.
It is broadcast daily on the TELERATE screen (presently on page 20041) on the
business day preceding the date of the drawdown (or of the advance or the period
of interest calculation) under the auspices of the French Association of Banks
for periods of 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, and 12 months and is available
at the Bank. The TIOP (or PIBOR) in francs for periods of one month and three
months is published daily with the official rate of the Society of French
Securities Exchanges (under the title "PIBOR").
<PAGE> 6
-6-
due date of the note by debiting the current account of the Borrower.
MARKET DISTURBANCES
The spread on the Paris market on extremes of the rates bid and asked at 11 a.m.
for the French franc for the TIOP rate determination periods by the reference
banks (as they are displayed on the TELERATE screen) is generally 1/8% [0.125%]
per year.
A market disturbance shall be deemed to have occurred once the spread between
highest and lowest offered rates over the period of the drawdown in question
shall be greater than _% [0.5%] per year at 11 a.m. on the date of setting of
the reference rate (TIOP).
In case of market disturbance, the Bank shall advise the Borrower immediately by
all means. The Bank and the Borrower shall then negotiate to arrive at different
manner of setting a reference rate in light of the new situation.
In the absence of agreement between the Borrower and the Bank, the reference
rate then applicable to the drawdown shall be equal to the arithmetic mean of
the four highest rates used in setting the TIOP for the period in question of
the business day prior to the day the funds were made available (or the first
day of the period for calculating interest).
<PAGE> 7
-7-
Non-Publication of the TIOP
If the TIOP, in the form calculated and published by the French Association of
Banks, should cease for any reason to be published (for example, because of
operating conditions in the interbank market or lack of response from several
reference banks not allowing its determination in the manner prescribed under
the set rules), the Bank shall advise the Borrower immediately by all means, and
the following provisions shall apply:
- in case an index substituted for the TIOP shall be published under
auspices of the French Association of Banks (or of any other organization,
insofar as the Bank shall be placed in the sampling of reference institutions),
that index shall be immediately applicable to further drawdowns (or to the
drawdown in question);
- otherwise, the Bank and the Borrower shall negotiate in order to
arrive at a new reference rate;
- failing agreement, the reference index shall be equal to the
arithmetic mean (rounded off, if necessary, to the next highest one-sixteenth of
a percent (1/16%)) of the rates offered, which shall have been communicated to
the Bank by the following four banks: Caisse Nationale du Credit Agricole,
Banque Nationale de Paris, Credit Lyonnais, and Societe Generale. In case of
non-response from one or more of these four institutions ([illegible] TIOP
reference banks) for transactions denominated in francs [and in] an
<PAGE> 8
-8-
amount equal to the amount of the drawdown in question for the same duration, as
of the day the funds were made available (or the first day of the period for
calculating interest).
ARTICLE 6: COMMISSION
From the date of execution of this document, a commission for non-use shall be
due, calculated upon the portion of this facility authorized but not used at the
rate of 0.0625 per year.
This commission shall be payable at the end of each quarter by debiting the
current account of the Borrower based on sums not utilized during the period in
question, and calculated upon the exact number of days as a proportion of a year
of 360 days.
It shall be definitively earned by the Bank even in case of premature
renunciation of this facility.
ARTICLE 7: EFFECTIVE OVERALL RATE
Pursuant to Article I. 313-1 of the Consumers' Code (formerly Law No. 66-1010 of
December 28, 1966) and to Decree No. 85.944 of September 4, 1985, it is stated
as an indication that in case of a complete drawdown of the amount authorized in
this credit
<PAGE> 9
-9-
facility at the rate of one promissory note every three months, and given the
three-month TIOP rate in effect on February 27, 1997 set at 3.3437% per year,
the effective overall interest rate on the credit herein is 3.49% per year as of
this date, with the rate for the period in question being 0.8729%.
ARTICLE 8: PREMATURE RENUNCIATION
The Borrower shall have the power to decline to draw funds on any note for all
or part of the credit herein, on condition that it notify the Bank by registered
letter, return receipt requested, 30 days prior to the effective date of such
renunciation. The renunciation shall be irrevocable, and shall not be less than
50,000,000 francs, and, beyond that sum, shall be in full multiples of
10,000,000 francs. If renunciation is total, the Borrower shall thenceforth not
make a claim for any further utilization hereunder.
Partial renunciation shall reduce the authorized credit by the amount declined.
The total amount of commissions provided for in this Agreement and payable on
the due date shall remain earned by the Bank.
No penalty shall attach by reason of a renunciation.
<PAGE> 10
-10-
Sums used which exceed the reduced authorized amount must be repaid on their due
date.
ARTICLE 9: TAXES, CHARGES, AND COSTS
Any payment of principal, interest, commissions, or ancillary charges in favor
of the Bank shall be made free of all taxes and official charges of any kind,
present or future, collected or withheld in France, which might affect such
sums, whatever their mode of payment.
In particular, the Borrower shall reimburse to the Bank:
1) All present and future taxes, charges, and official fees attaching to these
transactions, except for corporate income tax,
2) All costs and duties of any kind to which this Agreement might give rise; in
particular those relating to its registration and execution,
3) All registration charges and other costs and professional fees of any kind
which may be payable in case the Bank should be obliged to contemplate or resort
to judicial means to obtain payment of the amounts or sums which may be due, as
well as any premiums, deposit fees, and travel or other expenses.
<PAGE> 11
-11-
ARTICLE 10: CHANGED CIRCUMSTANCES
If the costs of using the credit facility are increased for the Bank in
consequence of a new legislative or regulatory scheme, or of a new directive or
mandate from a competent Authority, or of a change in any law, regulation, or
directive (such as, for example, mandatory reserves or deposits, penalties for
surpassing statutory credit exposure limits, coefficients of retained earnings
or fixed assets, or liquidity, or any other thing, or any tax, charge, duty, or
other levy except for general company income tax), the Bank shall notify the
Borrower thereof and state its intention to raise the rate of interest on the
credit facility it has granted by the percentage necessary to maintain its
profit margin.
In case the Borrower and the Bank do not reach agreement on the new terms to be
applied to the transaction in the sixty days following such notice as to the
occurrence of changed circumstances, all the Borrower's drawdowns shall become
due and owing, and the furnishing of this facility shall be fully rescinded.
ARTICLE 11: DELAYED INTEREST
In case of default by the Borrower, the amounts which become due and owing to
the Bank
<PAGE> 12
-12-
shall yield delayed interest at WAR [TMP](2) increased by two points until
complete reimbursement.
ARTICLE 12: DECLARATIONS OF THE BORROWER
The Borrower declares, and its declarations are deemed to be repeated during
each use of this facility, unless the Borrower expressly notifies the Bank to
the contrary:
- - that the present document is in conformity with French law and that it does
not contravene the articles of incorporation or by-laws of the Borrower in any
respect.
- - that the signatory of this Agreement is duly authorized to sign the present
document and can validly bind the corporation.
- - that all financial statements it has provided to the Bank are correct, and
that they were prepared in accordance with accounting principles generally
applied in France, and that they provide an accurate image of the profit and
loss for each fiscal year.
- - that it is not a party to, or threatened with, any lawsuit which might be
susceptible of
- ----------
(2) WAR [TMP] is the weighted average daily interest rate [taux moyen
pondere] of the interbank market against pensions, set each day by the Banque de
France. It is published daily, in particular in the Official Rates of the
Society of French Securities Exchanges, and is available at the Bank.
<PAGE> 13
-13-
preventing it from meeting its obligations hereunder, and that it is not the
subject of any proceedings.
- - that since the closing date of its most recent fiscal year, no event has
occurred which could prevent it from fulfilling the obligations imposed by this
Agreement.
- - that none of the provisions of the Article entitled "Accelerated Demand" are
applicable to it.
- - that its obligations under this Credit Agreement are equal in priority with
those of the same kind into which it has entered with other credit institutions.
- - that it is not the subject of proceedings whose final outcome would be the
payment of certain creditors, that it has not entered into a composition with
creditors, nor is it in a state of suspension of payments, and that it is not
the object of any proceeding for creditors of any kind whatsoever.
- - that it is not in arrears in payment of its taxes, duties, or other official
charges.
<PAGE> 14
-14-
ARTICLE 13: UNDERTAKINGS OF THE BORROWER
So long as the Borrower shall be debtor hereunder, it undertakes:
- - not to create, or allow to remain in being, real securities guaranteeing any
of its present or future obligations of payment as a borrower under a facility
of the same kind without making the Bank a beneficiary of a security which it
deems to be equivalent thereto.
- - to deliver to the Bank all documents which the Bank shall deem useful to it at
any time, and to give to the Bank minutes of its ordinary and extraordinary
shareholders meetings as soon as they are prepared, and, no more than six months
after the end of any fiscal year, conformed certified copies of its annual
balance sheets, accounts, and profit and loss statements, and all documents
required by law to be appended thereto, accompanied by the auditors' reports.
- - to notify the Bank as soon as possible of any event which might constitute a
case of accelerated demand.
- - to provide written notice to the Bank of any important transformation
affecting its juridical form, nature, or capacity (in particular, changes of
name, change of registered address, voluntary winding-up, judicial
reorganization or liquidation, or dissolution).
<PAGE> 15
-15-
ARTICLE 14: ACCELERATED DEMAND
Independently of [ ... ] causes for accelerated demand, the opening of this
facility shall be fully rescinded immediately, with the Borrower unable to claim
any further utilization, with those already made becoming immediately due and
owing, in the following cases:
- -default in making timely payment of any sum due hereunder.
- - failure to perform any of the obligations arising hereunder, in particular
failure in respect of any undertaking provided for in this Agreement.
- - falsity of any statement made by the Borrower, or provision of inadequate
information.
- - dissolution, voluntary winding-up, judicial reorganization or liquidation, or
ceasing to do business.
- - default in timely payment of any sum due from the Borrower to anyone,
particularly inclusive of official contributions, taxes, and allocations. The
same will apply in case of accelerated demand under any credit facility accorded
to the Borrower under another contract, whether equal priority be granted by the
Bank or a third party, unless the
<PAGE> 16
-16-
Borrower has not disputed the validity of said debt in good faith, and such
dispute is before a court of competent jurisdiction, in which case the payment
of such debt shall not constitute a case for accelerated demand to the extent
that the dispute is not settled.
- - merger (unless the Borrower is the acquiring company), splitting up, or
transformation into another kind of company.
- - judicial or banking interdiction of the Borrower.
The end of the term hereof shall be fully accorded to the Bank 30 days after
notification of default in performance of this Agreement by registered letter
with return receipt requested.
ARTICLE 15: MISCELLANEOUS CLAUSES
It is formally stated that the Bank may at any time avail itself of the causes
for demand provided herein without the non-exercise of its rights implying
renunciation of any of those rights.
Delays in payment shall never be interpreted as equivalent to the Bank's consent
to allow such delays.
<PAGE> 17
-17-
Assessment of delayed interest shall not be interpreted as the Bank's agreement
to any kind of moratorium.
The Borrower shall not assign rights or delegate obligations arising from this
Agreement without prior written consent of the Bank.
The Bank reserves the right to transfer all or part of the commitments arising
hereunder, on condition that it inform the Borrower thereof in such form as the
laws or regulations may require.
Pursuant to the provisions of Article 36 of Law No. 88-1201 of December 23, 1988
relating to organizations for collective investment in real estate, and on
creation of mutual funds of securities, as modified by Law No. 93-1444 of
December 31, 1993, the Bank may assign the collection of debts engendered by
this Agreement.
Any modification of this contract shall be made by written agreement.
ARTICLE 16: APPLICABLE LAW
This Agreement is subject to French law for its validity, its interpretation,
and its performance.
<PAGE> 18
-18-
ARTICLE 17: JURISDICTION
The Commercial Court of Paris shall have sole jurisdiction to adjudge any
dispute relating to this Agreement.
ARTICLE 18: CHOICE OF DOMICILE
The parties elect as domicile for the performance of this Agreement and its
consequences the addresses given at the beginning of this document.
Signed at Neuilly-sur-Seine, May 2, 1997
in as many originals as there are parties
[handwritten] Read and approved
/s/ /s/
the Borrower(3) the Bank
PUBLICIS SA
- ----------
(3) Signature preceded by the handwritten notation "Read and Approved"
and accompanied by the Borrower's seal.
<PAGE> 19
-19-
SAMPLE PROMISSORY NOTE
Against this BOR notation
PROMISSORY NOTE if required
stated to be exempt from fees
we will pay the amount indicated
below to
[place] [date]
Amount for verification Date of making Due date BOR only
Amount FF
Maker's reference
Maker's account information
Address
instit. code teller code Account no. R.I.B. key Tax stamp and
signature
Dated Name
and address
of
signer
Good for guarantee at Do not write below this line.
<PAGE> 1
Exhibit b(3)
AGREEMENT
Between the undersigned:
1. BANQUE NATIONALE DE PARIS (hereinafter referred to as the BANK), joint stock
company with capital of FF 5,185,874,825, having its headquarters at 16,
boulevard des Italiens, Paris 9eme, and entered in the Corporate Register under
no. B 662 042 499, represented by Mr. Yves Lebidois, acting as Department
Director, and Mrs. Dominique Potier-Bassoulet, acting as Under-Director,
and
2. PUBLICIS company (hereinafter referred to as the BORROWER), joint stock with
capital of FF 201,528,125, having its headquarters at 133, avenue des Champs
Elysees, Paris 8eme, and entered in the Corporate Register under no. B 542 080
604, represented by Mr. Jean-Paul Morin, acting as Secretary General,
which have stated and agreed to the following:
ARTICLE 1 - CREDIT LINE - AMOUNT - DURATION
<PAGE> 2
-2-
To provide partial financing for BORROWER's operating requirements, the BANK is
willing to grant to Publicis SA a credit line to be utilized in French francs,
pounds sterling, German marks, United States dollars, Swiss francs, and ECU's,
in the maximum amount of the exchange value in French francs of FF 200,000,000
(two hundred million French francs), hereinafter referred to as the Total
Authorized Amount.
The credit line is granted for a period of 364 days beginning with the date on
which this Agreement is signed.
ARTICLE 2 - DETAILS OF UTILIZATION
The funds shall be provided on BORROWER's current accounts at BNP Champs
Elysees, upon request by BORROWER by means of a drawing notice in accordance
with the sample contained in Annex 1, subject to the proviso that it is for a
minimum unit amount equivalent to the exchange value of FF 10 million.
Said drawing notice shall reach the BANK at the latest at 10:00 a.m. two working
days before the funds are provided.
<PAGE> 3
-3-
BORROWER undertakes to comply with the principle that the total utilizations of
the line shall at no time exceed the Total Authorized Amount of the credit line.
In case of renewal in a currency other than that chosen for the preceding
period, BORROWER shall reimburse the drawing in the preceding currency.
Operations resulting from the functioning of this Agreement shall be recorded in
the special accounts comprising simple accounting tables, which shall not result
in the legal effects related to current accounts.
ARTICLE 3 - UNAVAILABILITY OF THE CURRENCY
If the BANK realizes, either at the time of any utilization or at the time of a
new interest period, that one or several currencies are unavailable on the Paris
interbank market, it shall so advise BORROWER as soon as possible. BORROWER and
the BANK shall consult in order to reach an agreement on the replacement
currency or a possible return to the French franc.
If an agreement is not reached within ten days, the current drawing shall be
automatically considered to be payable, and BORROWER shall reimburse it,
including principal,
<PAGE> 4
-4-
interest, expenses, and any incidentals or costs incurred by the BANK due to the
unavailability of the currency used.
The amount in French francs that is to be reimbursed shall be determined as a
function of the most recent exchange rate for the currency in which the drawing
was then denominated.
ARTICLE 4 - INTEREST
For drawings in French francs, the applicable rate shall be the TIOP for the
selected period displayed by the AFB at noon on the day before the date for
provision of the funds, to which 0.125% is added. The interest shall be
calculated according to the product method on the basis of one calendar year
according to the exact number of days.
For drawings in other currencies, the applicable rate shall be the rate two days
before the date for provision of the funds, based on the LIBOR rate for the
selected period published at 11:00 a.m. (London time) on the market for the
currency concerned, to which 0.125% is added. The interest shall be payable in
the currency of the drawing and calculated on the exact number of days for the
period of utilization with a divisor of 365 for the pound sterling and 360 for
the other currencies.
<PAGE> 5
-5-
The interest period shall be 1, 2, 3, or 6 months, as chosen by BORROWER. The
interest shall be paid at the end of said period.
ARTICLE 5 - MARKET DISRUPTION
If the market is disrupted (a gap greater than 0.5% between the offered rate and
the requested rate, non-publication or unavailability of the LIBOR/PIBOR), BANK
and BORROWER shall negotiate as quickly as possible in order to reach an
agreement on a solution appropriate for the new situation.
ARTICLE 6 - ANNUALIZED PERCENTAGE RATE
In accordance with Article 1 313-2 of the Consumer Code, it is hereby specified
for information only that, based on the credit rate indexed on the TIOP and the
expenses related to that credit, the annualized percentage rate, assuming total
utilization and based on an actuarial rate for the period of .....%, the .....
would be .....% per year.
<PAGE> 6
-6-
ARTICLE 7 - COMMITMENT FEE
The operation shall result in a commitment fee being charged in French francs at
a rate of 0.0625% per year on the Total Authorized Amount. That fee, which shall
be due from the date of signature until this Agreement expires, shall be payable
quarterly in advance. It shall be calculated on the basis of the real number of
days that have elapsed and a year containing 360 days. The commission shall
remain completely and definitively acquired by the BANK.
ARTICLE 8 - EARLY REIMBURSEMENT / RELINQUISHMENT
BORROWER may relinquish the unused line of credit, either in whole or in part.
The early relinquishment or reimbursement shall take effect one month after
notification thereof by certified mail.
ARTICLE 9 - EARLY PAYABILITY
In any of the following cases, the amounts referred to above shall be payable
and no further utilization may be claimed:
<PAGE> 7
-7-
- Liquidation or court-ordered recovery, or cessation of operation by
BORROWER
- Failure by BORROWER to fulfill any of the commitments it has entered into
in this Agreement, particularly under Article 9 ("Commitments by Borrower")
- Non-payment when due of a sum that has become payable pursuant to this
Agreement
- Merger, demerger, dissolution, or a change in the activity of BORROWER
If any of the above cases occurs, BANK may demand payment of all amounts due to
it eight days after notification by sending a certified letter to BORROWER.
ARTICLE 10 - COMMITMENTS OF BORROWER
BORROWER undertakes to do the following:
- Immediately inform the BANK of any events that could significantly reduce
its assets or significantly increase the volume of its obligations
<PAGE> 8
-8-
- Immediately inform the BANK of any events or circumstances that are liable
to comprise or become one of the cases specified in Article 8 ("Early
Payability").
ARTICLE 11 - NEW CIRCUMSTANCES
The conditions for reimbursement of the BANKS for this credit line have been
established in accordance with statutory requirements as of the date this
Agreement was signed. If a measure is imposed on the BANK or if a court ruling
results in an additional charge that would reduce the compensation due to it,
BORROWER and the BANK shall consult as soon as possible in order to reach an
agreement on a solution that will enable any difficulties encountered to be
resolved.
ARTICLE 12 - APPLICABLE LAW - SETTLEMENT OF DISPUTES
This Agreement shall be subject to French law; interpretation or performance of
the Agreement shall fall exclusively within the jurisdiction of the courts of
Paris.
<PAGE> 9
-9-
ARTICLE 13 - DECLARATION
BORROWER declares that it is a duly constituted company that is fully entitled
to enter into this Agreement and to perform the activities corresponding to its
corporate purpose.
ARTICLE 14 - SELECTION OF ADDRESS
The following addresses have been selected for performance of this Agreement and
the consequences thereof:
- For the BANQUE NATIONALE DE PARIS, its Champs Elysees branch located at
37, avenue des Champs Elysees, 75008 Paris
- For PUBLICIS SA, its headquarters at the address indicated above
ARTICLE 15 - TAXES AND EXPENSES
<PAGE> 10
-10-
All present and future taxes and duties of any kind on the interest and
principal of the amounts that may be payable by BORROWER shall be paid by it,
including those that may be legally owed by the BANK.
BORROWER shall pay all expenses, charges, and fees applicable to the provision
of securities and their renewal and, in general, any of them that may relate to
this Agreement or that may be the result or consequence thereof, including any
advances for the expenses of preserving the securities that have been provided.
Signed in Paris on May 2, 1997, in two copies
/s/ Signature of Publicis /s/ Signature of the BANK
<PAGE> 11
Annex 1
DRAWNDOWN NOTICE FORM
TO: BANQUE NATIONALE DE PARIS
(Department)
(Address)
To the attention of M......
Telex ....
Fax ....
RE: Credit Line Agreement for 364 days in the amount of 200,000,000 French
francs dated ..............
Gentlemen:
In accordance with Article 2 -- METHOD OF UTILIZATION of the abovecaptioned
Agreement, please be advised that we wish to draw down the amount listed below
as follows:
- - Date: ...
<PAGE> 12
-2-
- - Currency: ...
- - Amount: ...
- - Duration: ....
- - Interest period selected: ...
- - Account which should be credited (and other required instructions)
We confirm that the representations made in Article 9 -- BORROWER'S COMMITMENTS
are still valid and correct and that no change has occurred which could have a
materially adverse effect on the financial position of the BORROWER, nor has any
change taken place which could result in the filing required under Article 356-1
of the Law of July 24, 1996 on commercial companies.
Very truly yours.
AUTHORIZED REPRESENTATIVE OF THE BORROWER
[initials]
<PAGE> 1
Exhibit b(4)
CREDIT AGREEMENT
BETWEEN THE UNDERSIGNED:
The company PUBLICIS SA, a joint stock corporation having a board of directors
and of supervision, and a share capital of FF 201,528,125, entered in the
Commercial and Company Register of PARIS under No. 542 080 601 and whose head
office is in PARIS, 133 Champs Elysees, represented by Mr. Jean-Paul MORIN in
his capacity as secretary general [company secretary] acting by virtue of the
powers conferred on him on April 7, 1997 (a certified copy of which is attached
to the present agreement)
(hereinafter referred to as the "Borrower")
OF THE ONE PART
BANQUE FRANCAISE DU COMMERCE EXTERIEUR, a company having a share capital of FF
2.1 billion and its head office in Paris 75009, 21 Boulevard Haussmann,
represented by Mr. Claude KLEIN, Manager of the Communications and Culture
Section, and Mr. Vincent
1
<PAGE> 2
LAURAS, duly authorized representative, acting by virtue of the powers conferred
on him by the resolution of January 10, 1997 and following the deliberations of
the Board of Directors of February 26, 1996
(hereinafter referred to as "BFCE")
OF THE OTHER
THE FOLLOWING IS CONCLUDED AND AGREED:
ARTICLE 1 - EXTENSION OF CREDIT:
BFCE, upon application from the Borrower, has agreed to place at his disposal,
under the following conditions, a loan (hereinafter referred to as the "Loan")
for a maximum amount of FF 100,000,000 (one hundred million French francs) or
its countervalue in foreign currency.
ARTICLE 2 - TERM OF THE CREDIT:
The Loan is granted for a term of 364 days from the date of execution of the
present agreement.
2
<PAGE> 3
ARTICLE 3 - APPLICATIONS OF FUNDS
The Loan constituting the subject of the present agreement may be used in
tranche drawdown amounts in French Francs or in foreign currency within the
limit of the amount available.
Each tranche shall be subject to prior notice to BFCE,
2 working days before drawdown date if in French Francs
3 working days before drawdown date if in foreign currency.
Such prior notice shall include:
- - intended drawdown date
- - desired term for tranche
- - currency (French Francs or foreign currency) selected
- - amount of tranche.
Each tranche shall be for an amount between FF 10,000,000 and FF 100,000,000 or
its countervalue in foreign currency, and for a duration of 1, 2, 3 or 6 months.
The first and last day of any tranche must be working days for the French
[currency] market for tranches in French Francs and for both the French market
and that of the selected currency in the
3
<PAGE> 4
event of a foreign currency tranche.
No tranche may have a maturity date beyond the final maturity date of the Loan.
Drawdowns shall be repaid at their respective maturities in the same currency
(French Francs or foreign currency) in which they were [originally] denominated.
Any foreign currency amount not repaid at its normal or early maturity shall be
converted to French Francs at the exchange rate for the relevant currency on the
date of conversion.
Conditions precedent for each utilization:
The Borrower may not request utilization in any of the following cases:
- - occurrence of any event likely to result in an early maturity of the
Loan;
- - occurrence of any material event having an unfavorable determining
effect on the Borrower
- - if any of the statements made by the Borrower in these presents should
prove inaccurate.
ARTICLE 4 - REPAYMENT - AMOUNT AVAILABLE:
4
<PAGE> 5
The present credit shall be repaid in its entirety at the time of its maturity
at latest 364 days after execution of the present agreement.
ARTICLE 5: INTEREST:
The drawdowns made by the Borrower in utilization of the present Loan commitment
shall bear interest at the Borrower's choice in accordance with one of the
following options:
French Franc Tranches:
Interest shall be calculated prorata temporis on the basis of PIBOR (Paris
InterBank Offered Rate) (French acronym: TIOP) reserved for the term of the
tranche such as published on the working day prior to the drawdown at 11:00 a.m.
and increased by 0.1% per annum. Interest shall be payable on the last day of
the term of the tranche for terms of less than 90 days, at the end of each civil
[calendar] quarter and on the last date of the term of the tranche for those
with maturities over 90 days.
Foreign currency tranches
Foreign currency tranches shall bear interest prorata temporis on the basis of
LIBOR (London InterBank Offered Rate) reserved for the term of the tranche and
in the selected currency 2
5
<PAGE> 6
working days before the date of the drawdown increased by a margin of 0.10% per
annum.
BFCE shall define the rate thus applicable and immediately inform the Borrower
thereof. Once accepted, such rate shall be final and mandatory for the latter.
Interest shall be payable in the currency of the tranche in question at its
maturity except for tranches having a term of over 90 days in which case it
shall be paid at the end of each civil [calendar] quarter and on the last date
of the term of the tranche in question.
Market dysfunctions - unavailability of foreign currency
If, by reason of a dysfunction of the international interbank market before the
date of availability or rollover of a tranche BFCE should not have been able to
determine an interest rate or to obtain on the said market deposits in the
relevant currency for the period of the term, BFCE shall immediately advise the
Borrower of such occurrence.
The parties shall then engage in negotiation in order to achieve agreement on a
procedure to overcome the difficulties encountered. Such negotiation shall take
place at the latest on the 30th day following the date in question.
No drawdowns in the relevant currency may be made during the term of the
negotiation, nor
6
<PAGE> 7
thereafter if the negotiation should not succeed. In that event, the Borrower
shall compensate BFCE, on the basis of its vouchers and documentation, for any
costs or losses it should have suffered as a result.
Joint provisions for drawdowns in French Francs and foreign currency-Regulations
- - Global Effective Rate
- - For any tranche term, interest shall be calculated on the basis of the
exact number of days elapsed and of a 360 day year (365 days in the case
of Pound Sterling tranches).
- - Each tranche rollover shall be considered to be a new tranche and the
declarations made by the Borrower in these presents shall be considered to
have been reiterated upon the occasion of each new drawdown or rollover.
- - The conditions for BFCE's remuneration are set as a function of the
regulations in effect on the date of execution of these presents.
In the event that these regulations should undergo any change having a direct or
indirect unfavorable incidence on BFCE's remuneration, the latter shall
immediately advise the Borrower of such event. BFCE and the Borrower shall then
engage in negotiation with a view to concluding, within thirty days following
the advice sent by BFCE, an arrangement regarding an approach to the new
situation.
Notwithstanding any provisions to the contrary in the agreement, no new funds
shall be available
7
<PAGE> 8
from BFCE during the term of the negotiation, nor thereafter if the negotiation
should not succeed.
In the latter case the Borrower shall repay all tranches outstanding at the time
and pay at the same time, on the basis of documentation, the sum necessary in
order fully to compensate the reduction in net remuneration suffered by BFCE.
- - Any payment in favor of BFCE shall be made net of all taxes, duties or
fees. In the event that any legal or regulatory instruments shall oblige
the Borrower to deduct taxes, duties or any fees from the sums due BFCE,
the Borrower shall increase the amounts due to BFCE so that the latter
shall receive in toto and on the correct date the sum it would have
received in the absence of such withholding.
- - Taking into account the characteristics of the methodology used for the
calculation of interest in the present Loan, it is not possible to
determine the Effective Global Rate at this time.
However, as an example, in order to conform with the provisions of Law
No. 66.1010 of December 28, 1966, and with decree No. 85944 of
September 4, 1985, it is hereby indicated that taking into account a
commitment fee calculated as described hereinafter on the amount of FF
100,000,000:
- for a fixed rate drawdown of FF 100,000,000 for the period from
02/19/97 to
8
<PAGE> 9
03/19/97 the rate for the Borrower would increase to 3.4125% per annum,
resulting in an Effective Global Rate for the present Loan, all interest,
fees and commissions included to 3.59% per annum.
- for a fixed rate drawdown in USD for the countervalue of FF 100,000,000
for the period from 02/19/97 to 03/19/97 the rate for the Borrower would
increase to 5.475% per annum, resulting in an Effective Global Rate for
the present Loan, all interest, fees and commissions included to 5.78% per
annum.
ARTICLE 6 - COMMITMENT FEE - FLAT FEE
For the entire duration of the present agreement, as of the date of its
execution, BFCE shall receive a commitment fee of 0.0625% per annum, calculated
on the basis of a 360 day year, i.e. FF 62,500.
For its closing fees in the present agreement the Bank shall receive, upon
execution, a flat fee of FF 10,000.
ARTICLE 7 - LATE PAYMENT INTEREST - CAPITALIZATION
Any sums not paid at their normal or early maturity shall accrue interest by law
at the average weighted money market rate on a day to day basis increased by
1.5% per annum starting from the
9
<PAGE> 10
said due date. The same shall apply to all expenses and disbursement advanced by
BFCE on the occasion of the present transaction for any reason or purpose
whatsoever.
Interest shall be converted to principal if due and outstanding for an entire
year in accordance with article 1154 of the Civil Code.
ARTICLE 8 - COMMUNICATIONS FROM THE BORROWER
For as long as the Borrower shall be a debtor of BFCE or may be so by virtue of
the present agreement, he shall:
- - send BFCE, each year, a certified copy of his latest financial statements
(balance sheet and profit and loss statements) finally approved and
certified as well as the minutes of his Ordinary and Extraordinary General
Meetings of Shareholders as well as of all auditor's reports;
- - inform BFCE within a period of fifteen days of any fact that may seriously
affect the amount or value of its assets or significantly increase the
value of its liabilities;
- - inform BFCE within a period of fifteen days of any changes of more than
10% in the distribution of its stock.
10
<PAGE> 11
ARTICLE 9 - COVENANTS
The Borrower hereby declares:
- - that it is a company duly incorporated;
- - that as of the date of execution of these presents there is no event of
acceleration or threat thereof in the sense of the present agreement;
- - that there is not now nor has there ever been an event of suspension of
payments, of reorganization or liquidation;
- - that there is no litigation or claim pending against it or, to its
knowledge, any threat of litigation or claim that could result in a
substantial deterioration of its financial situation;
- - that it is not currently late in the payment of any sum due for direct
or indirect taxes, equalization taxes or any other sum due to social
services organizations for any reason whatsoever;
ARTICLE 10 - ACCELERATION
In case of the occurrence of any of the following events:
- - the Borrower does not make a payment due under the present agreement on
the due date;
- - interest and commissions on the present Loan become subject to taxes or
duties of any kind to which they are not currently subject, unless the
Borrower should settle such new
11
<PAGE> 12
fiscal charge so that BFCE is not exposed to any detriment in this
respect;
- - the Borrower does not fulfil any of his other obligations or does not
respect any of the other provisions of the present agreement and such
default is not cured within ten days after remittance by BFCE of a
notification by certified mail with return receipt to the Customer;
- - the Borrower has made an incomplete or inaccurate statement;
- - any other borrowing or loan granted to the Borrower by BFCE or any of
its other creditors becomes immediately due and payable;
- - all or part of the Borrower's real estate property becomes the subject
of an attachment or of the registration of a judicial lien;
- - the Borrower becomes the subject of a judgment decreeing a general
assignment of its business or pronouncing its liquidation;
- - total cessation of business; dissolution; merger; divestment; partial
capital injection by the Borrower;
- - arrival in the capital of PUBLICIS SA of a shareholder other than its
current shareholders or those of its affiliate companies, obtaining a
substantial minority position such as to block decisions;
BFCE may, by certified mail, demand, if it so wishes, the early repayment of the
Loan which will then become immediately due and payable by law in principal and
interest without any further formality or court judgment.
12
<PAGE> 13
ARTICLE 11 - APPLICABLE LAW AND JURISDICTION
All litigation resulting from these presents shall be brought before the Paris
Courts. For its execution and interpretation, the present agreement is subject
to French law.
Made in Paris, on May 2, 1997
in two authentic copies
(signed) (signed)
The Borrower BFCE
Banque Francaise du Commerce Exterieur
<PAGE> 1
Exhibit b(5)
CONTRACT FOR THE OPENING
OF A SHORT-TERM LINE OF CREDIT
Between the undersigned:
1: UNION DE CREDIT POUR LE DEVELOPPEMENT REGIONAL "UNICREDIT", a banking
corporation with capital of F 1,797,691,750 and with its registered office
at 128-130 Boulevard Raspail, Paris 6, Entered in the Paris Register of
Commerce and Companies under No. 712,057,322 B.
Represented by
acting on the authority of the powers of attorney conferred upon
him on ....... by .......
Hereinafter referred to as "the Lender"
(unless otherwise designated), party of the first part
and
2: PUBLICIS, a corporation with capital of FRF 201,528,125.00 and with its
registered office at 133 Champs-Elysees, Paris 8, Entered in the Paris
Register of Commerce and Companies under No. B 542,080,601
<PAGE> 2
-2-
Represented by Jean Paul Morin
acting on the authority of the powers of attorney conferred upon
him on April 7 by the Board of Directors, appended hereto,
Hereinafter referred to as "the Borrower"
(unless otherwise designated), party of the second part
THE FOLLOWING HAS BEEN AGREED:
Subject to the clauses and conditions hereinafter, the Lender grants to the
Borrower, which accepts, the opening of a line of credit hereinafter referred to
as "the Line" in a maximum amount of 200,000,000.00 francs (two hundred million
French francs). The line may be increased to FRF 500,000,000.00 (five hundred
million French francs) subject to the conditions set forth in Article II.5 of
the Special Conditions.
DEFINITIONS
For the purposes of the agreement:
Notice of Drawdown: refers to an irrevocable request for a Drawdown
made by the Borrower to the Lender in accordance
with the model in Annex 1
Reference Banks: Caisse Nationale de Credit Agricole -
Banque Nationale de Paris
<PAGE> 3
-3-
Agreement: refers to this contract and its annexes
Due Date: refers in theory to the last day of a Drawdown
Period. However, in the event the Due Date of any
amount due under the Agreement does not fall on a
Business Day, it shall be carried forward to the
following Business Day.
If as a result thereof the Due Date falls in the following
calendar month, the Due Date will be the Business Day
preceding the theoretical Due Date.
Last Repayment Date: refers to the last Business Day before the 3rd
anniversary of the date of signing the Agreement.
Business Day: refers to any full day on which the interbank market is
open for business and on which the banks are open all
day in Paris.
Line: refers to the credit that the Lender agrees to
make available to the Borrower in accordance with
the terms of the Agreement up to the amount of FRF
200,000,000.00; the Line may be increased by FRF
300,000,000.00 to a maximum of FRF 500,000,000.00
as of the last Business day before the 1st
anniversary of signing the Agreement, subject to
the conditions set forth in Article II.5 of the
Agreement.
<PAGE> 4
-4-
Available Amount: refers at a given date to the amount of the Line on that
date, less the accumulated principal amount of the Drawdowns
outstanding and not repaid and of the Drawdowns requested
and not paid out.
Drawdown Period: refers in the case of any Drawdown to the period of less
than 1 month or of 1, 3 or 6 months indicated in the Notice
of Drawdown.
T.I.O.P.: Paris Interbank Offering Rate in francs resulting from the
arithmetic mean of the rates offered on franc deposits for
each maturity of 1 to 12 months to 1st class French
signatories by credit institutions approved by the A.F.B.
after eliminating the four highest and lowest figures. It is
expressed as an annual rate and published at 11:30 AM by
Telerate or Reuters under the aegis of the A.F.B.
Drawdown: refers to any principal amount made available to the
Borrower under the Line for a Drawdown Period.
T.M.P.: The weighted Average Rate refers to the average rate
recorded for overnight transactions between Banks on the
French interbank market weighted by the volume handled. This
rate is published by the Bank of France the day after the
Business Day in question.
<PAGE> 5
-5-
CHAPTER I
GENERAL CONDITIONS
ARTICLE I.1 IMPLEMENTATION
The transactions resulting from operation of the Line are excluded from any
current account that the Borrower has or may have in the future with the Lender.
The special account opened by the Lender for the purpose of recording the
transactions carried out under the Line shall not in any circumstances have the
legal effects appertaining to a current account.
The proof of drawing on the Line and of repayment thereof shall be set forth in
the Lender's records, which shall be deemed authentic by both parties.
ARTICLE I.2 - REPAYMENT
The borrower shall pay all costs as well as those pertaining to this instrument
or which are a consequence thereof, including all advances for the costs of
preserving same.
The Borrower agrees to repay the Line in terms of principal, interest, costs,
fees and incidentals in accordance with the procedures defined in the special
conditions.
On the due date of an amount that has become due and payable, the Borrower
authorizes the Lender to withdraw from the account or accounts then available
and open on the Lender's books such funds as are necessary to settle said
amount.
<PAGE> 6
-6-
Any payment made by the Borrower and received by the Lender must be allocated in
the following order of priority:
(i) to payment of the fees due and payable hereunder,
(ii) to payment of any interest due and payable hereunder,
(iii) to payment of any principal due and payable hereunder,
(iv) to payment of all other amounts due and payable hereunder.
ARTICLE I.3 - COMMITMENTS OF THE BORROWER
Throughout the term of the Agreement, the Borrower agrees:
i. to provide the Lender with:
a) each year, at the latest six months after the date of the settlement
of accounts, all corporate and similar accounting documents relating
to the situation of the company (balance sheets, statements of
income, annexes, auditors' report certifying the financial
statements) and each year, at the latest 6 months from the date of
the settlement of accounts, the documents referred to in 1.3.i.a
draw up on a consolidated basis,
ii. to notify the Lender immediately:
a) of any change in the legal status or situation of the company,
<PAGE> 7
-7-
b) of any change in the person of its legal representative,
c) of any merger, spinoff, absorption, partial contribution of assets,
dissolution or discontinuance of operations,
d) of any event that is likely to significantly and adversely affect
the value of its net worth or appreciably increase the amount of its
commitments,
e) of any event likely to entail the premature repayability of the
Line.
iv. to observe, within the framework of its activities, all statutory and
regulatory provisions in force.
v. Throughout the term of the Agreement, the Borrower may not, without the
prior consent of the Lender:
- pledge its assets as collateral, to the benefit of other creditors,
without first offering the Lender, as a guarantee of the Line, the
same security with a stipulation of equality of ranking, it being
understood that the Borrower may, however, freely consent, with
respect to any assets it may acquire subsequent to signing the
Agreement, to any surety securing the loan it contracts to finance
the cost of acquiring such asset,
<PAGE> 8
-8-
- dispose of its assets except for assets connected with its current
operations, up to a total of 100,000,000.00 francs per fiscal year.
ARTICLE I.4 - OCCURRENCE OF NEW CIRCUMSTANCES
I.4.1. The conditions for repayment of the Line to the Lender have been set on
the basis of the regulations applicable as of the date the Agreement is
signed.
If as a result of new legislative or regulatory provisions or a new
interpretation by an authority with jurisdiction the Lender becomes
subject to any tax, monetary, financial or banking measure entailing an
increase in the cost of its participation in the Line which has the
effect of reducing its share of the proceeds, the following provisions
shall apply:
- the Lender shall notify the Borrower in writing, and at the
initiative of the Lender they shall meet as expeditiously as
possible and negotiate for a period of not more than 30 calendar
days as of the date of such notice, with a view to reaching a
solution that will make it possible to deal with the difficulties
that have arisen, in the spirit of cooperation that existed at the
signing of the Agreement.
At the end of such period of conferral, the following provisions shall
apply:
The Borrower shall have the choice, within not more than seven calendar
days following the last day of said 30-day period:
<PAGE> 9
-9-
- either of asking the Lender to continue the Line, while undertaking
to take responsibility in its entirety, as of the date the Lender
incurs it, for the additional cost the Lender would have to pay,
- or to terminate its commitment by making an early repayment in full
of all Drawdowns in principal, interest and fees, plus, as the case
may be, all costs and charges incurred by the Lender as a result of
such early repayment on the basis of substantiating documents
furnished by the Lender.
I.4.2. In the event of a change in the conditions or data referred to above or
in their interpretation by any authority with jurisdiction, or for any
other reason, which results, in particular:
a) in all or part of the provisions of the Agreement becoming illegal;
b) in it becoming impossible for either of the parties to fulfill any
of the obligations as established in the Agreement
c) in the participation of the parties in the Agreement becoming
illegal
the following provisions shall apply:
<PAGE> 10
-10-
1. the interested party shall inform the other party in writing as
expeditiously as possible. The parties to the Agreement shall meet
with a view to reaching an amicable solution that will make it
possible for the Agreement to continue.
3. If no solution can be found within 10 (ten) days following receipt
by the interested party of the abovementioned notice, the Borrower
must permanently waive any further Drawdown and immediately repay
all amounts due under the Drawdown(s) outstanding in principal,
interest, costs and incidentals, as well as any additional costs
that, through the repayment Date, the Lender might have to pay as a
result of the new circumstances.
ARTICLE I.5 - EARLY REPAYABILITY
In the event of an amicable or court-ordered liquidation or sale of the company
within the framework of class proceedings by the Borrower, all amounts due in
principal, interest, fees, costs and incidentals shall immediately and
automatically become payable and no request may be made to the Lender for any
further drawdown.
Moreover, the Lender may not be asked for any additional drawdown in the event
of receivership.
The right to draw down funds may be cancelled and repayment of the Line may be
demanded by the Lender eight calendar days after notice is served on the
Borrower by
<PAGE> 11
-11-
registered letter with return receipt requested, without any other
judicial formality being necessary, in the following cases:
i. in the event of an inaccurate declaration by the Borrower.
ii. in the case of failure to perform or of violation of any of the
commitments undertaken by the Borrower under the Agreement.
iii. in the event of nonpayment on the normal or early due date of any amount
payable to any bank or financial institution by the Borrower, such as in
the case of it being downgraded by the Bank of France.
iv. in the event other support granted to the Borrower by the Lender or any
other Lender becomes repayable in advance.
v. in the event of a partial contribution of assets, merger, spinoff,
dissolution or discontinuance of the Borrower's operations.
vi. in the event of a significant change in the distribution of the
Borrower's capital and/or voting rights compared with the situation
prevailing as of the date hereof.
vii. in the event the Borrower's stockholders' equity falls to less
than half the share capital.
<PAGE> 12
-12-
viii.in the event of seriously reprehensible behavior on the part of the
Borrower, such as, if its situation were to be irremediably compromised
within the meaning of Article 60 paragraph 2 of the Law of January 24,
1984.
ix. in the event of an occurrence that would have a severely unfavorable
effect on the Borrower's activities, net worth or financial situation.
ARTICLE I.6 - PENALTY INTEREST - INDEMNIFICATION
Any amount that is unpaid on its normal or early due date shall automatically
accrue interest at the Weighted Average Rate ("TMP"), plus one percent per year
(one hundred basis points), from the said due date until full repayment. The
same shall apply for all costs and disbursements advanced by the Lender for any
reason whatsoever. This stipulation shall not affect repayability and
consequently shall not constitute an agreement as to the settlement period.
Interest shall be capitalized if it is due for a full year, pursuant to Article
1154 of the Civil Code. As is customary, such interest shall be in addition to
any tax that may be payable thereon in the future.
If the Lender has to take action in or out of court, the Borrower must pay it an
indemnification covering all the costs it incurs in this connection, on the
basis of a substantiating document that will be submitted to it by the Lender.
ARTICLE I.7 - NON WAIVER
<PAGE> 13
-13-
Failure by the Lender to exercise any right stemming from this Agreement, or
lateness in doing so, shall not constitute a waiver of the right in question.
Similarly, the partial exercise of such right shall not be an impediment to the
subsequent exercise of rights that have not yet been fully exercised.
The rights referred to in this paragraph are cumulative with all rights arising
under the law.
ARTICLE I.8 - REPRESENTATIONS
I.8.1 - The borrower has forwarded to the Lender prior to signing these
presents:
- a certified true copy of its Bylaws
- a K-Bis extract from the Register of Commerce and Companies less
than three months old
- substantiation of the powers of attorney as a signatory.
I.8.2 - The Borrower represents:
- that it has taken all steps necessary to authorize the signature and
execution of this contract,
- that its balance sheets and financial statements as of December 31,
1995 are true and complete; that they were drawn up in accordance
with the
<PAGE> 14
-14-
accounting principles in force in France; that they were certified
by its Auditors, as the case may be, as presenting a true picture of
its financial position at that date as well as the results of its
operations for the fiscal year in question; that there has been no
change since January 1, 1996 that would adversely affect its
financial position for the current year or its future prospects.
- that there is no litigation under way, nor does the threat of any
litigation exist, that is likely to significantly or adversely
affect its position.
- that no event currently in existence constitutes a case of early
repayability.
- that it has not been the subject of any proceedings for amicable
settlement within the meaning of the Law of March 1, 1984.
ARTICLE I.9 - PLACE OF PAYMENT
All payments to be made by the Borrower shall be made at the registered office
of Unicredit.
CHAPTER II
SPECIAL CONDITIONS
ARTICLE II.1 - AMOUNT
<PAGE> 15
-15-
The Line granted by the Lender to the Borrower is for a maximum of
200,000,000.00 francs (Two hundred million French francs).
The Line may be increased by FRF 300,000,000.00 to a maximum of 500,000,000.00
(Five hundred million French francs), subject to the conditions set forth in
Article II.5 below.
ARTICLE II.2 - PURPOSE OF THE LINE OF CREDIT
The Line shall be used, as stated by the Borrower, for its general requirements.
ARTICLE II.3 - TERM
The Line is concluded for a period of one year as of the signing of this
Agreement, and may be extended for periods of one year beginning on the last
Business Day following the 1st anniversary of the signing of the Agreement.
In any event, the Line must be repaid in its entirety as to principal, interest,
fees, costs and incidentals by the Last Repayment Date, i.e. the last business
day before the 3rd anniversary of the date of signing the Agreement.
ARTICLE II.4 - ANNUAL REVIEW OF THE FINANCIAL TERMS OF THE AUTHORIZED
LINE OF FRF 200,000,000.00
15 calendar days before the end of each annual period, the first period
beginning on the last Business Day following the 1st anniversary of the signing
of the Agreement, the
<PAGE> 16
-16-
Lender shall send to the Borrower by registered letter with return receipt
requested a proposal containing the financial terms for using the Line during
the coming year.
The Borrower shall notify the Lender of its agreement or refusal by no later
than 10 AM on the business day before the expiration of the period of 15
calendar days following the date of the acknowledgement of receipt of the
Lender's proposal.
In the event the Borrower accepts the terms proposed by the Lender, the letter
shall constitute a rider to the Agreement or to the preceding proposal.
In the event the Borrower or the Lender are unable to reach an agreement on the
new terms proposed by the Lender, the Borrower shall waive requesting any
further Drawdown and the Line shall automatically be cancelled pursuant to
Article II - 9 of the Agreement.
The Borrower agrees to repay all amounts due in principal, interest, fees, costs
and incidentals under the Line.
ARTICLE II.5 - CONDITIONS FOR INCREASING THE LINE
The Line may be increased by FRF 300,000,000.00 to a maximum of FRF
500,000,000.00 (five hundred million French francs), subject to the Borrower
having made a request therefor in writing to the Lender 15 calendar days before
the last Business Day following the first anniversary of the signing of the
Agreement and after acceptance by the Lender.
<PAGE> 17
-17-
After acceptance by the Lender, the Drawdowns made on the increased portion of
the Line, i.e. FRF 300,000,000.00, shall accrue interest as follows:
- For Drawdown Periods of less than 1 month and a minimum of 10 days:
- TMP plus a margin of 1.10% per annum, for a total, on the
basis of the TMP as of 1/17/97, nominal annual rate of
3.4125%.
- For Drawdown Periods of more than one month:
- TIOP for the Drawdown Period published on the business day
preceding the Drawdown, plus a margin of 0.10% per annum, for
a total, on the basis of the 3-month TIOP as of 1/17/97,
nominal annual rate of 3.4125%.
- Payment of interest
The interest computed on the basis of the exact number of days according
to the method of 360 days at the rate defined above on the amount of the
Drawdown, shall be payable by the Borrower on the Due Date of the
Drawdown.
- Payment of commitment fee
<PAGE> 18
-18-
In the event of the application of this Article, the commitment fee as
defined in Article II.7.2 shall be computed on the new authorized amount
of the Line, whether used or not.
ARTICLE II.6 - USE OF THE LINE
Subject to performance by the Borrower of the obligations arising from the
Agreement, the Line may be used by means of one or more Drawdowns, up to the
limit of the Available Amount. The Notice of Drawdown, in accordance with the
model attached hereto in Annex 1, shall be sent to the Lender and received by it
no later than two Business Days before each Drawdown.
The Notice of Drawdown shall, in any event, indicate the amount of the Drawdown,
which shall be equal to at least 25,000,000.00 francs, and beyond this amount,
to a whole multiple of 25,000,000.00 francs.
It shall also indicate the Drawdown Period, which, at the discretion of the
Borrower, shall be equal to a number of days of less than 1 month or of 1, 3 or
6 months.
The Notice of Drawdown shall be irrevocable.
The Borrower agrees to repay the amount in principal and interest of any
Drawdown at its Due Date. No Drawdown may have a Due Date subsequent to the Last
Repayment Date.
The Line shall be implemented by debiting special account No. 250 214 10 700.
<PAGE> 19
-19-
ARTICLE II.7 - FINANCIAL CONDITIONS
Subject to the application of Article II.4 of the Agreement, the financial
conditions are established as follows:
II.7.1 - Interest
II.7.1.1 - Rate
Drawdowns made under the Line shall accrue interest at the rate
determined as follows:
- for Drawdown Periods of less than one month and a minimum
of 10 days: on the amount of the Line up to FRF 200,000,000.00:
- TMP plus a margin of 0.0625% per annum, for a total, on the
basis of the TMP at 1/17/97, nominal annual rate of 3.3750%.
- for Drawdown Periods of more than one month:
on the amount of the Line up to FRF 200,000,000.00:
- TIOP for the Drawdown Period published on the business day
before the Drawdown, plus a margin of 0.0625% per annum, for a
total, on the basis of the 3-month TIOP at 1/17/97, nominal
annual rate of 3.3750%.
<PAGE> 20
-20-
II.7.1.2 - Payment of interest
The interest computed on the basis of the exact number of days according
to the 360-day method at the rate defined above on the amount of the
Drawdown shall be payable by the Borrower on the Due Date of the Drawdown.
II.7.1.3 - Non publication of the TIOP
If the TIOP as computed and disseminated by the AFB were not to be
published for any reason, the Lender shall immediately notify the Borrower
by all available means and the following provisions shall apply:
a) if an index replacing the TIOP is published under the aegis of the AFB,
it shall apply immediately to any new Drawdowns; this index will be
increased by the margin indicated in Article II.5 and/or II.7.1.
b) otherwise, the Lender and the Borrower shall negotiate a new reference
rate. In the absence of an agreement, the Borrower may not proceed with
any new Drawdown and the Drawdowns outstanding shall be repaid on their
Due Date.
II.7.1.4 - Market disturbance
On the Paris market, the spread as posted on TELERATE screens between the
buying and selling rate of the French franc for all periods is generally
1/8%.
<PAGE> 21
-21-
Disturbance of the market is deemed to exist when the spread for the
period of the requested Drawdown as posted by the Lender and by the
Reference Banks is more than 1/2% at 10 AM on the day the rate is set.
In the event there is a disturbance of the market, the Lender shall use
all available means to notify the Borrower without delay. The Lender and
the Borrower shall then negotiate a different method of setting a rate
that is appropriate given the new situation.
In the absence of an agreement between the Borrower and the Lender, the
rate that will then be applicable to the requested Drawdown shall be equal
to the average of the highest two rates of the eight rates used to set the
TIOP for the Drawdown Period in question, on the day before the day the
funds are made available, plus the margin indicated in Article II.5 and/or
II.7.1.
ARTICLE II.7.2 - COMMITMENT FEE
Throughout the term of the Agreement, the Borrower shall pay to the Lender a
commitment fee of 0.0625% per annum, computed on the amount of the Line, whether
it is used or not, on the basis of the exact number of days on a 360-day year.
This fee shall be payable quarterly in advance, as of the date of signing the
Agreement. The collected fee shall remain the property of the Lender, even if
there is a voluntary early reduction in the Line under the conditions set forth
in Article II.8.
<PAGE> 22
-22-
In the event Article II.5 applies, the commitment fee shall be computed on the
new authorized amount of the Line, whether it is used or not.
ARTICLE II.8 - VOLUNTARY EARLY REDUCTION OF THE LINE
The Borrower shall be empowered to permanently waive in advance all or part of
the Available Amount.
Such request, which shall be sent to the Lender by Registered Letter with Return
Receipt Requested, shall not take effect until expiration of a period of five
Business Days as of the receipt of the request by the Lender.
In this situation, the commitment fee shall cease to be payable by the Borrower
on the amount it has waived. However, the amount of the commitment fee already
paid by the Borrower for the current quarter, at the date the waiver takes
effect, shall remain the property of the Lender.
ARTICLE II.9 - CANCELLATION OF THE AGREEMENT
This Agreement may be cancelled by either party subject to a notice of 30
calendar days sent by registered letter with return receipt requested.
Cancellation of this Agreement by the Borrower shall not take effect until after
total and final repayment of the Drawdowns outstanding in principal, interest,
fees, costs and incidentals.
<PAGE> 23
-23-
No new Drawdown may be requested by the Borrower during the 30-day notice
period.
ARTICLE II.10 - EARLY REPAYMENT
Subject to the express prior agreement of the Lender, the Borrower may repay one
or more Drawdowns prematurely. Any early repayment must be the subject of a
written request to the Lender at least 5 business days before the date of early
repayment.
If the Drawdown Period pertaining to the Drawdown that is repaid early is equal
to or more than one month, the Borrower shall pay the Lender compensation equal
to the amount resulting from the difference between the rate applicable to the
Drawdown that is repaid early and the reference rate in force on that date on
the amount of the Drawdown in question for the remaining term of said Drawdown,
plus the margin.
Reference rate is understood to mean the TIOP with a duration equivalent to the
remaining term of the Drawdown in question, rounded out, if necessary, to the
next higher number of months as published by Telerate on the business day before
the early repayment.
ARTICLE II.11 - EFFECTIVE TOTAL RATE
In accordance with Article L 313-1 of Law No. 93-949 of July 26, 1993, the
effective total rate of the credit, computed according to the proportional
method, starting with;
<PAGE> 24
-24-
on FRF 200,000,000.00
a quarterly actuarial rate of 0.86093%, amounts to 3.44371% per annum.
In computing the above rate, which is given by way of example, account was taken
of:
- the nominal rate of the credit on the basis of the 3-month TIOP
index at 1/17/97, amounting to 3.3125% plus 0.0625%
- the costs devolving on the Borrower in the total amount of 544.00
francs
- the commitment fee of 0.0625%.
- the use of the entire Line during the total term of the credit.
on FRF 300,000,000.00
a quarterly actuarial rate of 0.87305%, amounts to 3.49219% per annum.
In computing the above rate, which is given by way of example, account was taken
of:
- the nominal rate of the credit on the basis of the 3-month TIOP
index at 1/17/97, amounting to 3.3125% plus 0.10%
- the expenses devolving on the Borrower in the total amount of
544.00 francs
- the commitment fee of 0.0625%
- the use of the entire Line for a period of 2 years.
<PAGE> 25
-25-
CHAPTER III
MISCELLANEOUS PROVISIONS
ARTICLE II.1 - ELECTION OF DOMICILE - JURISDICTION
For the performance of these presents and their sequels, domicile is elected:
- for UNICREDIT at its registered office at 128-130 Bld Raspail,
75006 Paris
- for the Borrower, at its address first hereinabove indicated
The jurisdiction of the Courts of Paris is expressly recognized for all
instances and proceedings.
ARTICLE III.2 - APPLICABLE LAW
The Agreement is subject to French Law.
The Borrower requires registration of this instrument, execution of this
formality being left to the good offices of the Lender.
DONE in Paris on May 2, 1997 in 2 copies.
SIGNATURES:
BORROWER (1) UNICREDIT
<PAGE> 26
-26-
Read and approved; valid for the
sum of two hundred million francs
(200,000,000 F) in principal,
plus interest fees, costs
and incidentals
(signature)
(1) Before the signature, write in handwriting: "Read and approved;
valid for the sum of ......................... (in words and figures),
in principal, plus interest, costs and incidentals" and affix the
corporate seal.
<PAGE> 27
-27-
ANNEX I
DRAWDOWN NOTICE FORM
MUST BE RECEIVED BY UNICREDIT TWO (2)
BUSINESS DAYS PRIOR TO THE DRAWDOWN DATE
BORROWER'S
LETTERHEAD
TO THE ATTENTION OF: UNICREDIT
Ms. LOLLI TEL.: 01 43 23 25 62
FAX: 01 43 23 59 96
Ms TERRASSON TEL.: 01 43 23 25 17
FAX: 01 43 23 59 96
DATE:
RE.: - LINE OF CREDIT AGREEMENT DATED ..............
- DRAWDOWN NOTICE
This Drawdown Notice is being sent to you in accordance with Article II.6
of the Agreement.
Please be advised that we wish to draw down the amount listed below, as
follows:
- Amount of the Drawdown in French francs: (French Francs)
from .................... to ....................
<PAGE> 28
-28-
Please credit the amount of this drawdown to Account No.
................. at your bank.
We confirm that as of the abovementioned date the commitments undertaken
under the Agreement are being fulfilled and that no event which could
result in a request for early repayment of the loan is pending.
The terms defined in the Agreement have the same meaning in this Drawdown
Notice.
SIGNATURE
(NAME AND CAPACITY
OF THE AUTHORIZED SIGNATORY)
<PAGE> 29
UNICREDIT ANNEX II
PUBLICIS SA
OFFER
Gentlemen:
In accordance with Article II.4 of the Agreement dated , we offer you the
following financial terms which, if accepted by you, will apply for the period
from until .
- Drawdown margin:
Please express your acceptance or refusal by returning this Offer to us, duly
filled in and signed by an authorized person, within 10 hours after the
expiration of the deadline of 15 calendar days, counting from the date of the
notice of receipt of this Offer.
If you accept the foregoing terms, please note that this Offer will serve as a
Rider to the Agreement to or to the previous Offer.
<PAGE> 30
-30-
Very truly yours
- -----------------------------
ACCEPTED REFUSED
- -----------------------------
Date:
.............................
Signature
- -----------------------------
<PAGE> 1
Exhibit b(6)
THE UNDERSIGNED:
- Banque OBC - Odier Bungener Courvoisier, a corporation with a
capital of 211,277,160.00 francs and registered office at 57 Avenue
d'Iena, Paris 16th, represented by Mr. Bernard PEIGNOUX, Manager, and
Ms. Liliane de VANSSAY, Joint manager,
hereinafter referred to as the Bank, on the one hand, and
- PUBLICIS, a corporation with a Board of Directors and a Supervisory
Committee, capital of 202,453,525.00 francs and registered office at 133 Avenue
des Champs Elysees, Paris 8th, entered in the Paris RCS under No. B 542 080 601,
represented by Jean-Paul MORIN, Corporate Secretary,
hereinafter referred to as the Customer, on the other,
HAVE AGREED AS FOLLOWS:
ARTICLE I -- LINE OF CREDIT
At the request of the Customer, the Bank grants the Customer, who accepts, a
Line of Credit in the amount of 100,000,000.00 francs (ONE HUNDRED MILLION
FRANCS),
<PAGE> 2
which will be used as partial financing for investment carried out
under a program of growth through acquisitions.
This Line of Credit shall be used by means of drawdowns charged to a special
account opened at the Bank in the name of the Customer. It is expressly
understood that said special Customer account shall be kept separate from the
other checking account maintained by the Customer at the Bank. The
abovementioned special account represents merely an accounting tool and will not
produce the legal effects normally attached to checking accounts.
ARTICLE 2 -- DURATION AND REPAYMENT
This Credit Line is granted for 1 year (ONE YEAR), counting from the signing of
this agreement.
This credit line will be repaid at the end of the period.
ARTICLE 3 -- EARLY CANCELLATION
<PAGE> 3
The Customer may cancel without penalty the entire Line of Credit or a portion
thereof, the minimum amount being 20,000,000.00 francs (TWENTY MILLION FRANCS),
unless the available balance is less.
Any such cancellation will be final and the Customer shall have no right to any
further drawdown.
ARTICLE 4 -- INTEREST -- OVERALL EFFECTIVE RATE
The amounts actually owed by the Customer to the Bank will accrue interest at a
rate determined by adding 10 basis points to the Weighted Average Rate (at
present 3.1875% per annum), for a total of 3.2875%. This rate will fluctuate in
accordance with the Weighted Average Rate.
Interest will be deducted at the end of each calendar quarter.
If the composition and/or definition of the Weighted Average Rate referred to
herein should change, or if said rate should disappear and be replaced with
another one which is similar in nature or is equivalent to it and if there
should be any change in the organization that publishes it or in the fashion in
which it is published, particularly in the event of a
<PAGE> 4
switch to a single European currency, the rate resulting from the abovementioned
change or replacement shall be applied automatically.
In addition to the interest discussed above, the Customer shall owe the Bank a
commitment fee payable quarterly in advance, computed at a rate of 6.25 basis
points per annum on the authorized credit amount.
If the Customer cancels all or part of the line of credit, the Bank shall retain
the commitment fees it has received.
The Bank shall deduct the amounts owed by the Customer under this Agreement from
a checking account in which the Customer will maintain sufficient funds to meet
these obligations, as required.
All amounts unpaid on the due date will accrue interest at the rate set forth
above, plus 200 basis points. If interest is owed for a full year, it will also
accrue interest at the same rate.
The overall effective rate of this Agreement pursuant to the provisions of
Articles L 313-1 and following of the Consumer Code (Law 93-949 of July 26,
1993) cannot be determined due to the financial terms of the Agreement.
<PAGE> 5
However, in order to comply with the abovementioned statute and taking into
account the stipulated amount and deadline, the total of interest, costs and
fees owed to the Bank is equivalent to a rate of 3.35% per annum.
Therefore, the overall effective rate of this Agreement pursuant to the Law of
July 26, 1993, determined in accordance with the provisions of said law, is
estimated at 3.3923% per annum.
It does not take into account the following:
- Various indemnities, late interest or other interest agreed to hereunder and
charged in accordance with the Agreement if the Customer fails to perform its
obligations, which charges become due and payable only in the event of default
by the Customer.
- OCCURRENCE OF NEW DEVELOPMENTS
This Credit Agreement is concluded on the basis of the legislation currently in
force and especially the provisions governing the determination of conservative
ratios and the required reserve ratios.
<PAGE> 6
If a new law or regulation is enacted or if the current regulatory and tax
provisions are amended in a fashion that alters the financial terms of this
transaction in a manner that is detrimental to the Bank, the Bank shall inform
the Customer accordingly and will propose an increase in the interest rate of
the credit, in order to reestablish the financial terms of the original
contractual relationship.
If the Bank and the Customer fail to reach an agreement within 60 days from the
date of the notice of the new credit terms, the parties shall meet and attempt
to find a solution to their differences.
ARTICLE 5 -- COSTS PAYABLE BY THE CUSTOMER
The Customer shall bear, and agrees to pay, the following costs:
- - All costs, charges and fees, even if not taxable, stemming from this
instrument and its extensions, including those of any legal action which the
Bank may have to undertake.
- - All taxes, present and future, which may be payable as a result of this
instrument and its extensions.
- - In general, all amounts which the Bank pay has to pay as a result of
this credit.
<PAGE> 7
ARTICLE 6 -- REQUEST FOR EARLY REPAYMENT
Should the Bank deem it appropriate, all the amounts owed by the Customer to the
Bank as a result of this Credit Agreement shall become automatically payable,
without any need for judicial formalities, ten days after the date of the notice
given by simple registered letter, return receipt requested, sent either by the
Clerk of the Court or by the Bank, at the Bank's sole discretion, in any of the
following cases:
a) if the Customer is in receivership or liquidation;
b) if the Customer has failed to pay the interest and/or fees related
to this credit, irrespective of any partial payment made after notice
of default has been given;
c) dissolution or amicable liquidation of the Customer;
d) failure to perform any of the obligations set forth in this
Agreement;
e) utilization of the credit for a purpose that is not consistent with
the Customer's corporate purpose;
<PAGE> 8
f) inaccuracy of the representations made in this Agreement;
g) closure or significant downsizing of the Customer's operations,
whether or not this is the result of a transfer of business resulting
from a merger or divestiture;
h) exclusion of the Customer's signature by the Bank of France;
i) appointment of a receiver or if the Customer is the beneficiary of a
composition with creditors.
The Bank shall have the right to resort at any time to the collection clauses
listed above, but the failure to exercise these rights shall not entail the
waiver of any such rights.
ARTICLE 7 -- MISCELLANEOUS PROVISIONS
The Commercial Court of Paris shall have sole jurisdiction with regard to any
dispute regarding this Agreement or its extensions, irrespective of which party
is the defendant.
For the execution of this Agreement and its extensions, the parties elect their
domiciles at their respective registered offices, as set forth in this
Agreement.
<PAGE> 9
Done in Paris on May 2, 1997.
Mandatory handwritten statement: The signatory must enter the following
handwritten statement before signing:
"READ AND APPROVED, GOOD FOR BORROWINGS UP TO 100,000,000.00 FRANCS (ONE HUNDRED
MILLION FRANCS) IN ACCORDANCE WITH THE TERMS LISTED ABOVE."
[Handwritten: Read and approved, good for borrowings up to
100,000,000.00 francs (ONE HUNDRED MILLION FRANCS) in accordance with
the terms listed above.]
[signature]
<PAGE> 1
EXHIBIT b(7)
Letterhead of CIC -- PARIS
Large Corporate Customers Department
UB Head Office Branch -- Sector G - DF/JB/OP
Telephone: 45.96.90.16
PUBLICIS
Mr. Jean-Paul MORIN
133, Champs Elysees
75008 PARIS
April 9, 1997
Dear Sir:
We confirm that our institution makes available to PUBLICIS a credit line with
the following conditions:
- - Amount: 100,000,000 francs (one hundred million francs).
- - Duration: 364 days, i.e. from April 10, 1997 until April 9, 1998.
- - Method of utilization: The credit will be used up to the amount and for the
duration set forth above by means of renewable advances with a duration
ranging between 10 days and 3 months. It must be repaid by April 9, 1998.
<PAGE> 2
Each request for an advance must specify the date when the funds must be
available; the amount of the advance, which must be a multiple of 5,000,000
francs; and the duration of the advance.
The request must be sent by fax to CIC, UB Head Office Branch, 57 rue de la
Victoire, 75009 PARIS, to the attention of Ms. CLOUARD (Fax No.:
01.45.96.90.59), not later than 10 AM on the business day prior to the date
when the funds must be available, which must also be a business day.
- - Non-utilization fee: A non-utilization fee of 0.0625% per annum will
be charged on the unused portion of the credit.
This fee will be payable quarterly, the first one being due on July 10, 1997
and the last one on April 9, 1998.
- - Interest: interest on the amounts utilized will be computed as
follows:
For drawdowns lasting one, two and three months on the basis of the Franc
PIBOR in force during the utilization period, plus a margin of 0.10% per
annum.
<PAGE> 3
For drawdowns lasting less than one month, more than one month but less than
two months or more than two months not less than three months, on the basis
of the asked rate of C.I.C. Paris plus a margin of 0.10% per annum.
All due dates which do not fall on a business day will be moved to the next
business day.
In all cases, interest will be payable at the end of each period and will be
computed on the actual number of days, based on a year of 360 days.
Interest and fees will be collected by means of charges to account
No. UB 13.085-58 opened by PUBLICIS S.A. at our Bank.
Should you wish to have available a new line of credit upon expiration of this
one, please submit your request to us this December or at the beginning of March
1998. We shall do our best to let you have our reply as soon as possible.
If you accept the terms of this letter, please return a copy to us with your
approval.
We wish to express our satisfaction for having had an opportunity to contribute
to your Group's future development.
<PAGE> 4
Very truly yours,
[signature]
[signature] [signature]
Olivier PERNOD Denis FOURNIER
<PAGE> 1
EXHIBIT C(1)
MASTER ALLIANCE AGREEMENT
between
PUBLICIS COMMUNICATION
and
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
Dated as of January 1, 1989
<PAGE> 2
TABLE OF CONTENTS
MASTER ALLIANCE AGREEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. ALLIANCE RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . .
1.1 Operating Principles . . . . . . . . . . . . . . . . . . . . .
1.2 Preferred Partners . . . . . . . . . . . . . . . . . . . . . .
1.3 International Committee . . . . . . . . . . . . . . . . . . .
1.4 Dispute Resolution Committee . . . . . . . . . . . . . . . . .
2. FORMATION OF ALLIANCE . . . . . . . . . . . . . . . . . . . . . . . .
2.1 Transfer of Business from Publicis . . . . . . . . . . . . . .
2.2 Issuance of Communication Shares . . . . . . . . . . . . . . .
2.3 Communication Shareholders Agreement . . . . . . . . . . . . .
2.4 Issuance of FCB Stock . . . . . . . . . . . . . . . . . . . .
2.5 FCB Stockholders Agreement . . . . . . . . . . . . . . . . . .
2.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . .
2.7 Third Party Consents . . . . . . . . . . . . . . . . . . . . .
3. FORMATION OF PUBLICIS FCB B.V.;
CONSEIL SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Intermarco . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Subscription to PBV Capital . . . . . . . . . . . . . . . . .
3.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . .
3.4 Conseil Shares . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Control of Conseil . . . . . . . . . . . . . . . . . . . . . .
3.6 Ownership of FCB International . . . . . . . . . . . . . . . .
3.7 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . .
3.8 PBV Shareholders Agreement . . . . . . . . . . . . . . . . . .
3.9 Publicis Undertaking . . . . . . . . . . . . . . . . . . . . .
4. CONDUCT OF OPERATIONS PRIOR TO CLOSING . . . . . . . . . . . . . . . .
4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . .
4.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. WARRANTIES OF FCB . . . . . . . . . . . . . . . . . . . . . . . . . .
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . .
5.2 Capitalization of FCB . . . . . . . . . . . . . . . . . . . .
5.3 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.4 Authority of FCB and FCB International . . . . . . . . . . . .
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . .
5.6 Operation in Ordinary Course . . . . . . . . . . . . . . . . .
5.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . .
5.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .
5.9 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . .
5.10 Contracts of FCB Subsidiaries . . . . . . . . . . . . . . . .
5.11 Conflicts of Interest . . . . . . . . . . . . . . . . . . . .
6. WARRANTIES OF COMMUNICATION . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . .
6.2 Capitalization of Publicis and the
Parents . . . . . . . . . . . . . . . . . . . . . . . . . .
6.3 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4 Authority of the Parents . . . . . . . . . . . . . . . . . . .
6.5 Financial Statements . . . . . . . . . . . . . . . . . . . . .
6.6 Operation in Ordinary Course . . . . . . . . . . . . . . . . .
6.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . .
6.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .
6.9 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . .
6.10 Contracts of Communication Subsidiaries . . . . . . . . . . .
6.11 Conflicts of Interest . . . . . . . . . . . . . . . . . . . .
7. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1 Other Agreements and Actions . . . . . . . . . . . . . . . . .
7.2 Representations and Covenants . . . . . . . . . . . . . . . .
7.3 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4 Satisfaction of Counsel . . . . . . . . . . . . . . . . . . .
7.5 Government Action . . . . . . . . . . . . . . . . . . . . . .
7.6 No Restraint or Litigation . . . . . . . . . . . . . . . . . .
8. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2 At the Closing . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Additional Conseil Shares . . . . . . . . . . . . . . . . . .
9. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.1 Public Announcements . . . . . . . . . . . . . . . . . . . . .
9.2 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . .
9.3 Government Reviews; Enforceability . . . . . . . . . . . . . .
9.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . .
9.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .
9.6 Modifications . . . . . . . . . . . . . . . . . . . . . . . .
9.7 Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . .
9.8 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.11 Definitions . . . . . . . . . . . . . . . . . . . . . . . . .
9.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . .
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
-3-
<PAGE> 4
LIST OF APPENDICES
1. Communication Shareholders Agreement
2. Intentionally Left Blank
3. FCB Stockholders Agreement
4. PBV Articles of Association
5. PBV Shareholders Agreement
6. Publicis Undertaking
7. Multiparty Arbitration Agreement
LIST OF SCHEDULES
Schedule 1 FCB Subsidiaries - Sections 5.1, 5.3
Schedule 2 Government Consents - Section 5.4(c)
Schedule 3 Litigation - Section 5.8
Schedule 4 Contracts - Section 5.10
Schedule 5 Conflicts of Interest - Section 5.11
Schedule 6 Communication Subsidiaries - Sections 6.1, 6.3
Schedule 7 Government Consents - Section 6.4(c)
Schedule 8 Litigation - Section 6.8
Schedule 9 Contracts - Section 6.10
Schedule 10 Conflicts of Interest - Section 6.11
Schedule 11 Opinions - Section 7.3
Schedule 12 Opinions - Section 7.3
-4-
<PAGE> 5
MASTER ALLIANCE AGREEMENT
This Master Alliance Agreement dated as of January 1, 1989
(the "Master Alliance Agreement") is entered into between Publicis
Communication ("Communication"), a societe anonyme having its principal office
at 133, avenue des Champs-Elysees, 75008 Paris and a wholly owned subsidiary of
Publicis S.A. ("Publicis"), a societe anonyme, on its own behalf and on behalf
of its subsidiaries Intermarco Algemene Publiceits Unie B.V., a Dutch B.V.
("Intermarco"), and Publicis Conseil, a societe anonyme ("Conseil"), and Foote,
Cone & Belding Communications, Inc. ("FCB"), a Delaware corporation having its
principal office at 101 E. Erie St., Chicago, Illinois 60611, on its own
behalf and on behalf of its subsidiary FCB International, Inc. ("FCB
International"), a Delaware corporation. Wherever actions under this agreement
are required to be performed by a subsidiary of FCB or Communication (including
their respective subsidiaries described in Schedules 1 and 6 hereto), the
respective parent corporation will cause such actions to be taken and cause
such subsidiaries to be bound by the covenants of this agreement as fully as
though they were signatories hereto and hereby guarantees ("se porte fort")
performance of their respective subsidiaries. The term "Parties" shall be
deemed to refer to Communication and FCB.
WHEREAS, THE Parties have determined (i) to effect a worldwide
alliance as further described herein, (ii) to provide for reciprocal
investments in each of their respective domestic corporations, and (iii) to
create a joint venture
-5-
<PAGE> 6
company, Publicis FCB B.V. ("PBV") to do business in Europe (as defined in
Section 1.02 of the PBV Shareholders Agreement, attached as Appendix 6, the
"Venture Territory") in the field of advertising and related businesses (as
defined in Section 1.01 of the PBV Shareholders Agreement, the "Venture Scope")
(the foregoing relationships being called the "Master Alliance");
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth and other good and valuable consideration, the parties
hereto agree as follows:
1. ALLIANCE RELATIONSHIPS
1.1 Operating Principles. The Parties agree that they will
abide by the following principles in all matters relating to their Master
Alliance:
(a) The Parties will be closely associated with each
respective Party having a primary sphere of influence and a responsibility for
leadership in geographic regions, as follows:
FCB -- North America, including the United States (except for
Publicis New York) and Canada, Latin America, Asia/Pacific and
South Africa.
It is recognized that FCB, in its operational responsibility over the
Asia/Pacific region, may establish a partnership with
-6-
<PAGE> 7
an Asian group. Any such action would follow full consultation with
Communication and, following FCB's best efforts to do so, might include
Communication participation in the venture.
Communication -- Europe, the Middle East and Africa (except
South Africa).
(b) Operational responsibility for the agency network in
Europe, including the Middle East and Africa shall be with Communication.
Operational responsibility for the agency network in North America, Latin
America and Asia/Pacific shall be with FCB.
(c) Consistency and quality of multi-national client handling
is the responsibility of the operational management located closest to the
headquarters of the parent company of that client.
(d) The regional operational management will be responsible
for agency operations, and for setting and controlling performance and results.
(e) Matters affecting multi-national client relationships
which transcend the respective spheres of influence will be coordinated by an
International Committee (as provided for in Section 1.3).
(f) Consistency of philosophy and uniformity of action to
these principles are the shared responsibility of the Parties.
-7-
<PAGE> 8
1.2 Preferred Partners. Each of the Parties agrees to
provide any advertising-related services which are within the Venture Scope in
the Venture Territory only through PBV, except as set forth in Section 1.01 of
the PBV Shareholders Agreement. In addition to the formation and operation of
PBV as contemplated by this Agreement and in view of the worldwide scope of
significant multi-national clients of each Party and their respective
investments in one another, the Parties agree on the following additional
cooperation:
(a) Each Party shall be free to make business combinations in
its own sphere of influence so long as such business combinations do not
compete with, or otherwise have a material adverse effect on, the conduct of
business by the other Party in its own sphere of influence; such Party must
inform the other Party of its intentions prior to effecting such combinations.
(b) On mutually acceptable terms to be defined, FCB, through
the FCB/Leber Katz office or other offices, will cooperate in the development
of the office of Communication in New York. Communication will be able to make
ensions of that office or small alliances in the United States, which do not
compete with, or have a major operating impact on, an existing FCB operation.
(c) Except as described in Section 1.2(b), Communication will
secure approval from FCB before establishing any
-8-
<PAGE> 9
operating entity or alliance within North America, Latin America, Asia/Pacific
and South Africa.
(d) Communication will use its best efforts to direct
Communication controlled multi-national clients of Communication to FCB local
affiliates in North America. Latin America or Asia/Pacific, and FCB will use
its best efforts to service those clients. If the Parties are unable to agree
on the servicing of those clients within a reasonable time, Communication may
make other arrangements to service those clients.
FCB will consider name recognition for Communication in
offices where a significant portion of the revenues are from
Communication-controlled multi-national clients.
1.3 International Committee. FCB and Communication shall
create a committee (the "International Committee") which shall consist of five
(5) to seven (7) members. Initial composition of the International Committee
shall include the chief executive officers of FCB and Communication,
respectively, and not less than one representative from Europe, North America
and the Latin America - Asia/pacific regions.
After consultation with Communication, FCB will appoint the
chairman of the Committee (initially Maurice Levy), and in addition to its
respective chief executive officer, FCB shall have the power to appoint and
remove the representative
-9-
<PAGE> 10
from North America and Latin America-Asia/Pacific. In addition to its
respective chief executive officer, Communication shall have the power to
appoint and remove the representative from Europe, provided so long as Craig
Wiggins is Chief Executive Officer of PBV prior to July 1, 1990, he shall be
the representative from Europe.
The function of the International Committee will be to
coordinate all Parties in the development of multi-national client
relationships, including determination of general policies as appropriate for
servicing multi-national client accounts, establishing priorities for
multi-national clients and prospects and resolving client conflict "right of
way" matters.
All matters involving multi-national clients which transcend
regional spheres of influence shall be submitted to the International Committee
for resolution in accordance with procedures and policies to be established by
the Committee. If, however, the chief executive officer of FCB or
Communication does not agree with the Committee decision on any client matter
judged by either of them to be of fundamental importance or of great
sensitivity, the Committee decision shall not be implemented and the chief
executive officers shall attempt to negotiate a resolution with respect to any
such matter. If the chief executive officers shall fail to reach a resolution,
the status quo shall prevail and no change in client assignments shall be
undertaken.
-10-
<PAGE> 11
1.4 Dispute Resolution Committee. From time to time, as
necessary to resolve disputes in accordance with Section 9.2, the chief
executive officers of FCB and Communication shall create a committee (the
"Dispute Resolution Committee") which shall consist of an equal number of
members to be appointed by each chief executive officer. Any member of the
Dispute Resolution Committee may be removed or replaced by the chief executive
officer (or successor) by whom such member was appointed.
All disputes regarding the application of this Master Alliance
Agreement and the Related Agreements (as defined in Section 6.4(b)) shall be
submitted to the Dispute Resolution Committee for resolution in accordance with
procedures and policies to be established by the Committee and with the
provisions of Section 9.2.
2. FORMATION OF ALLIANCE
2.1 Transfer of Business from Publicis. Publicis has
previously transferred to Communication all of its shareholdings in Conseil and
Intermarco and has caused to be transferred to Intermarco all shareholdings of
the subsidiaries of Farner Holding A.G., a Swiss corporation ("Farner").
Communication and Publicis have also caused the Consolidated Net Tangible
Assets (as defined in a separate memorandum executed by the chief financial
officers of the Parties) of Communication at December 31, 1988 to be
approximately .77 times the Consolidated Net Tangible Assets of FCB at such
date, based
-11-
<PAGE> 12
upon an exchange ratio of 6 to 1 French francs per U.S. dollar.
2.2 Issuance of Communication Shares. On the Closing Date
(as defined in Section 8.1), FCB will subscribe to common shares of
Communication as provided in Section 2.4 so that the share capital of
Communication shall be owned after the Closing 74% by Publicis and 26% by FCB,
consisting of a single class of shares with 74% of the Total Voting Power held
by Publicis and 26% of the Total Voting Power held by FCB, such shares having
the characteristics described in the "statuts" of Communication. The
Communication common shares, when issued as contemplated herein, shall be fully
paid and non-assessable. FCB and Communication will each use its best efforts
to secure any necessary approvals of the French government in connection with
FCB's acquisition of such shares.
2.3 Communication Shareholders Agreement. On the Closing
Date, FCB, Communication and Publicis shall enter into the Publicis
Communication Shareholders Agreement in the form set forth in Appendix 1
hereto.
2.4 Issuance of FCB Stock. (a) On the Closing Date,
Communication will acquire by subscription for 322,000,000 French francs
2,110,000 shares of Common Stock, 33-1/3 cents par value per share, of FCB (the
"Common Stock"), representing approximately 19.9% of the Total Voting Power of
FCB and will, in consideration therefor, issue a demand note
-12-
<PAGE> 13
payable only by offset with an amount not more than that which FCB will be
required to pay in its subscription to increase of capital of Communication
described in 2.4(b). Transfer of title of the FCB shares so acquired by
Communication will be deferred until such offset occurs. If such offset does
not take place on the Closing Date, the subscription will be cancelled.
(b) FCB shall pay for its subscription provided for in
Section 2.2 by (i) offset with the amount owed by Communication to FCB pursuant
to Section 2.4(a) and (ii) payment to Communication in cash of 28,000,000 FF.
(c) The FCB Common Stock, when issued as contemplated herein,
shall be fully paid and non-assessable.
2.5 FCB Stockholders Agreement. On the Closing Date, FCB and
Communication shall enter into the FCB Stockholders Agreement in the form set
forth in Appendix 3 hereto.
2.6 Directors. (a) Communication shall be entitled to have
a representative serve as a Director of FCB and FCB shall be entitled to have a
representative serve as a Director of Communication. Each Party shall use its
best efforts to cause the other Party's representative to be elected by its
stockholders as a Director. If for any reason either Party shall be unable to
cause the other's representative to be so elected, the first Party shall
procure
-13-
<PAGE> 14
the resignation of its representative on the Board of Directors of the other.
(b) Each Party undertakes to consider fully the addition to
its Board of Directors of additional representatives of the other. Such
consideration shall take into account the proportion of ownership the other
Party holds in it and the significance of the alliance with the other to the
first Party's overall business operations.
(c) The director elected as provided in paragraph (a) shall
also be selected to serve as a voting or nonvoting member of one or more board
committees. In selecting appropriate committee memberships, each Party will
take into account the proportion of ownership which the other holds in it and
the significance of the alliance with the other to the first Party's overall
business operations. Initially, Maurice Levy shall be appointed to serve on
FCB's Management Council and on the International Committee and shall serve as
chairman of the latter. Jean-Paul Morin shall also initially serve as an
invited nonvoting member of FCB's Audit and Finance Committees whenever
appropriate agenda items are to be considered.
2.7 Third Party Consents. Each Party will use its best
efforts prior to the Closing to obtain all consents of third parties required
on its behalf to carry out the transactions contemplated hereby and shall
promptly notify the other Party if such consents cannot be obtained.
-14-
<PAGE> 15
3. FORMATION OF PUBLICIS FCB B.V.; CONSEIL SHARES
3.1 Intermarco. Communication will cause Intermarco to adopt
amendments to its articles of association whereby its name is changed to
Publicis FCB B.V. ("PBV") and its articles of association are otherwise amended
to read in substance as set forth in Appendix 4 hereto, which shall be
consistent with the PBV Shareholders Agreement.
3.2 Subscription to PBV Capital. (a) At the Closing FCB
International will (i) pay in cash to PBV an amount of approximately
FF (ii) execute a subscription for further amounts of cash (approximately
FF) necessary in connection with the purchase by PBV of a 20% interest in
Conseil as provided in Section 3.4, and (iii) cause to be transferred to PBV
all its business in the Venture Scope within the Venture Territory, except the
Mazda, Cora, Auraco and Modico accounts in Belgium and the Mazda and other
existing accounts of FCB's Rotterdam agency (van Lieshout), by causing FCB
International to transfer to PBV all the shares held by it in the FCB
Subsidiaries set forth on Schedule 1 hereto. At the Closing, PBV will issue to
FCB International 49% of the share capital and Total Voting Power of PBV in
accordance with this Article and thereafter Communication will own 51% of the
share capital and Total Voting Power of PBV.
(b) The Parties have determined the consideration to be paid
by FCB International in exchange for its 49%
-15-
<PAGE> 16
interest as set forth in a separate memorandum executed by their respective
chief financial officers.
3.3 Indemnity. FCB and Communication shall each indemnify
and hold PBV harmless from and against any liability or obligation, known or
unknown, absolute or contingent, or any loss, (i) arising from the conduct of
their respective businesses (including the business of their Subsidiaries)
prior to December 31, 1988 to the extent such liabilities or obligations were
not reflected on the balance sheets of their respective subsidiaries used for
purposes of determining the values contributed by both parties to PBV, whether
or not such liabilities were required to be reflected as of December 31, 1988
in accordance with applicable generally accepted accounting principles, (ii)
arising from the inclusion of assets on the balance sheet at values higher than
permitted under applicable generally accepted accounting principles, or (iii)
to the extent the respective consolidated allowances for bad debts at December
31, 1988 of either Party's Subsidiaries which become part of PBV are
insufficient to reflect actual collections by December 31, 1989 (taking into
account reasonable allowance at such date for amounts being actively pursued
for collection). All claims with regard to indemnities hereunder shall be
filed in writing with the Parties not later than December 31, 1989, except that
claims for taxes shall be made within 30 days of the expiration of applicable
statutes of limitation. Any payment by a Party in respect of such indemnity
shall be net of any offsetting tax benefits and any insurance recoveries
utilized by PBV with
-16-
<PAGE> 17
respect to such liability. A Party shall be obliged to make a payment under
this Section 3.3 only after and to the extent that the aggregate net amounts
due by such Party exceed $500,000 for all such claims. A Party's
indemnification obligation shall be satisfied by the contribution of cash to
PBV.
3.4 Conseil Shares.
(a) Communication agrees that on or before February 28, 1989
PBV will acquire by subscription 20% of the share capital and Total Voting
Power of Conseil (as measured after such acquisition) and on or before March
31, 1990 shall acquire by subscription an additional 10% of the share capital
(as measured after such acquisition) of Conseil. Such acquisition shall be
made by increase of capital of Conseil. PBV's cost of acquisition of the 30%
interest shall be determined as provided in a separate memorandum executed by
the respective chief financial officers of the Parties.
(b) FCB International shall provide 49% of the costs of the
Conseil shares and Communication shall provide 51%, in both cases by loan or
contribution to equity of PBV as the Parties may agree.
3.5 Control of Conseil. Until December 31, 2008 and so long
as FCB shall own at least 10% of the share capital and Total Voting Power of
Communication, Communication agrees that it will not, without the consent of
FCB, dispose of
-17-
<PAGE> 18
shares of Conseil (or cause its shareholdings to be diluted by issuance of
shares to others) such that it does not retain, directly or indirectly, control
of at least 51% of the Total Voting Power of Conseil.
3.6 Ownership of FCB International. FCB agrees that as long
as FCB International holds shares of capital stock of PBV, FCB or another
wholly-owned subsidiary of FCB will own at least 90% of the capital stock of
FCB International.
3.7 Guarantees. PCB or Publicis may have entered into
certain media or other guarantees with regard to the business to be operated by
PBV. To the extent feasible, the Parties will use their best efforts to
release such guarantees on or prior to the Closing. Neither FCB nor
Communication shall be required to provide PBV with media or other guarantees
in the future without their express consent.
3.8 PBV Shareholders Agreement. On the Closing Date, FCB
International and Communication will enter into the PBV Shareholders Agreement
attached hereto as Appendix 5.
3.9 Publicis Undertaking. On the Closing Date, Publicis will
enter into the Publicis Undertaking attached hereto as Appendix 6.
4. CONDUCT OF OPERATIONS PRIOR TO CLOSING
-18-
<PAGE> 19
4.1 Ordinary Course. Prior to the Closing, each Party will
conduct its operations in the ordinary course of business, use reasonable
efforts to preserve intact its present business organizations, preserve its
relationships with clients, and maintain its international network intact,
provided neither Party shall acquire any additional businesses or dispose of
any existing businesses in the Venture Scope within the Venture Territory
without the consent of the other.
4.2 Access. The Parties will afford to each other, their
accountants and attorneys, full and complete access at reasonable times and
upon reasonable notice to their books, records, files and documents and those
of their Subsidiaries, provided each Party and its accountants and attorneys
shall hold in confidence any information received from the other; and shall
instruct its respective officers, employees and representatives having access
to such information of such obligation of confidentiality; provided, however,
that the foregoing restriction shall not prevent the use or disclosure of
information by a Party which is in the public domain, by publication or
otherwise, through no fault of such Party's officers, employees or
representatives.
5. WARRANTIES OF FCB
FCB hereby represents and warrants to Communication and its
Subsidiaries as follows:
-19-
<PAGE> 20
5.1 Organization. Each of FCB, FCB International and each
subsidiary of FCB International set forth on Schedule 1 hereto (including FCB
International, the "FCB Subsidiaries") is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and is qualified to transact business as a foreign corporation in
any other jurisdiction where the failure to so qualify might have a material
adverse effect on the conduct of its operations or expose it to material
liabilities. Each of FCB and the FCB Subsidiaries has full power and authority
to own or lease and operate its properties and to carry on its business as now
conducted. True and complete copies of the articles of incorporation and
by-laws of FCB and FCB International, including all amendments thereto, have
heretofore or will be delivered to Publicis. No portion of FCB's European
operations which fall within the Venture Scope or Venture Territory are
conducted otherwise than through the FCB Subsidiaries (except as provided in
Section 3.2(a)).
5.2 Capitalization of FCB. On December 31, 1988 the
authorized capital stock of FCB consisted solely of (a) 100,000 shares of
Preferred Stock, $1.00 par value per share, none of which is issued and
outstanding, of which 30,000 shares are reserved for issuance pursuant to the
shareholders' rights plan (the "Rights Plan") a copy of which has been
delivered to Communication and (b) 15,000,000 shares of Common Stock, 33-
1/3 (cent) par value, of which 8,541,007 shares have been issued and are
outstanding as of December 31, 1988 and 80.364 of which were held by FCB as
treasury shares at such date and
-20-
<PAGE> 21
353,827 of which are reserved for issuance pursuant to outstanding employee
stock option plans. All of the issued and outstanding shares of capital stock
of FCB are validly issued, fully paid and non-assessable, none have been issued
in violation of any preemptive or subscription rights of others and none is
subject to any restrictions with respect to transferability other than those
imposed by federal securities laws. Except pursuant to employee stock option
plans, no options, warrants or other rights to acquire, as a result of
purchase, subscription, conversion, exchange or otherwise, or agreements or
commitments to issue or sell, shares of capital stock of FCB, are outstanding
as of the date hereof except for approximately 145,000 shares which are
expected to be issued under agreements in connection with FCB acquisitions
prior to December 31, 1988. Except as contemplated herein, there are no
agreements or commitments pursuant to which FCB is or may become obligated to
purchase, retire or redeem any shares of its capital stock. Since December 31,
1988, FCB has not issued any shares of capital stock except pursuant to the
above employee stock options in an amount not greater than 10,000 shares.
5.3 Shares. (a) FCB has, and will have at the Closing Date,
with respect to FCB International, and FCB International (or another FCB
Subsidiary) has, and will have at the Closing Date, with respect to the other
Subsidiaries good and marketable title to the respective number of shares (the
"FCB Subsidiary Shares") set forth on Schedule 1 hereto, free and clear of all
liens, security interests, claims
-21-
<PAGE> 22
encumbrances and restrictions of any kind whatsoever, and there are no other
outstanding shares of such FCB Subsidiaries except as indicated on Schedule 1.
Such ownership constitutes 100% of the outstanding capital stock of each
contributed FCB Subsidiary except as indicated on Schedule 1. The delivery as
of the Closing Date of the certificates representing the FCB Subsidiary Shares
indicated as owned by FCB International to PBV in exchange for PBV shares to be
issued as provided in Article 3 will transfer and convey to PBV good and
marketable title to such FCB Subsidiary Shares, free clear of all liens,
security interests, claims, encumbrances and restrictions of any kind
whatsoever. No option, right of first refusal or other right of any kind to
purchase, or right to convert into or other right to acquire any such shares or
any other shares of FCB Subsidiaries not directly owned by FCB International
exists in favor of any other person except as noted on Schedule 1.
(b) At the Closing, the FCB Common Stock to be issued to
Communication hereunder will be duly authorized pursuant to resolution of the
Board of Directors of FCB and when issued and delivered to Communication in
accordance with the terms hereof will constitute validly issued, fully paid and
non-assessable shares of FCB Common Stock.
5.4 Authority of FCB and FCB International. (a) FCB and FCB
International have, and will have at the Closing Date, full power and authority
to enter into this Master Alliance Agreement and the other agreements contained
in the Ap-
-22-
<PAGE> 23
pendices hereto to which one or both of them is a party; to issue, sell,
assign, transfer and deliver the FCB Common Stock in the case of FCB and the
FCB Subsidiary Shares in the case of FCB International as contemplated pursuant
to this Master Alliance Agreement and to do and perform all acts and things
required to be done by them under the Master Alliance Agreement and the other
agreements contained in the Appendices hereto to which one or more of them is a
party by the transactions contemplated hereby or thereby.
(b) The execution, delivery and performance of this Master
Alliance Agreement and the other agreements contained in the Appendices hereto
to which one or both of them is a party (the "Related Agreements") by FCB and
FCB International, have been duly authorized by each of them who are parties
thereto and this Master Alliance Agreement is, and each of the Related
Agreements, when executed and delivered by parties thereto as contemplated
hereby, will be their respective legal, valid and binding agreements
enforceable in accordance with their respective terms, except to the extent
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights.
(c) Neither the execution and delivery of this Master
Alliance Agreement by FCB or of any of the Related Agreements by such of them
who are parties thereto, nor the consummation of the transactions contemplated
herein or therein, nor compliance with or fulfillment of the terms, con-
-23-
<PAGE> 24
ditions and provisions herein or therein, will (i) result in the breach of any
of the terms and provisions of, constitute a default under, or result in the
creation or imposition of any encumbrance or adverse interest upon, any of the
FCB Common Stock or the FCB Subsidiary Shares, the articles of incorporation or
by-laws or FCB or FCB International, any instrument, agreement, mortgage,
judgment, order, award, decree or other restriction to which FCB or FCB
International is a party or either of their properties is subject or by which
either of them is bound or any statute or regulatory provision affecting either
of them, (ii) require the approval, consent or authorization of, or the making
of any declaration, filing or registration with, any third person, except as
set forth on Schedule 2 hereto, or (iii) cause Communication or any other
person to become an "Acquiring Person," (so long as Communication and its
affiliates and associates do not acquire beneficial ownership of 25% or more of
FCB's Common Stock) cause the "Stock Acquisition Date" to occur, cause the
issuance of "Rights" or entitle holders of Rights to be able to exercise such
Rights, all as contemplated in the Rights Plan.
5.5 Financial Statements. (a) (i) The consolidated balance
sheets of FCB as of December 31, 1986 and December 31, 1987, and the related
consolidated statements of income, stockholders' equity and changes in
financial position for the twelve months then ended, respectively, together
with the notes to such financial statements, incorporated by reference in the
Annual Report of FCB on Form 10-K for the
-24-
<PAGE> 25
year ended December 31, 1987, and (ii) the consolidated balance sheet of FCB as
of June 30, 1988, and the related consolidated statements of income,
stockholder's equity and changes in financial position for the period then
ended, together with the notes thereto contained in the Quarterly Report on
Form 10-Q for the period then ended, have each been prepared in conformity with
United States generally accepted accounting principles consistently applied and
fairly present the consolidated financial position of FCB as of such dates and
the results of its consolidated operations and changes in its financial
position for the periods indicated.
(b) The balance sheets of the FCB Subsidiaries as of June 30,
1988 and the statements of income of the FCB Subsidiaries for 1987 and the
first six months of 1988, previously furnished to Communication, are the
statements upon the basis of which the consolidated financial statements of FCB
have been prepared, and have been prepared in accordance with generally
accepted United States accounting principles consistently applied in all
material respects.
5.6 Operation in Ordinary Course. Since June 30, 1988, each
of FCB, FCB International and the FCB Subsidiaries has operated its business
and assets solely in the ordinary course (except as contemplated by this Master
Alliance Agreement) and there has been no material adverse change in the
assets, liabilities, business or prospects of, or in the condition (financial
or otherwise) of, FCB International or the FCB Subsidiaries, not disclosed to
Publicis, and, to the
-25-
<PAGE> 26
best of the knowledge of FCB, no fact or condition exists or is contemplated or
threatened which might cause such a change in the future.
5.7 No Undisclosed Liabilities. Neither FCB nor the FCB
Subsidiaries are subject to any material liability which is not shown or which
is materially in excess of amounts shown or reserved for in the latest balance
sheets referred to in Section 5.5 or otherwise disclosed in this Master
Alliance Agreement or in the Schedules hereto, other than liabilities of the
same nature as those set forth in such balance sheets and reasonably incurred
in the ordinary course of its business after the date of such balance sheets.
5.8 Litigation. Except as set forth in Schedule 3, there are
no lawsuits, proceedings, claims or governmental investigations pending or, to
the best of the knowledge of FCB, threatened by or against FCB or any of its
Subsidiaries or their properties or business, which might reasonably be
expected to result in liability to FCB or any of the FCB Subsidiaries in excess
of $500,000, and there is no lawsuit, proceeding, claim or governmental
investigation pending or, to the best of the knowledge of FCB threatened, which
questions the legality, validity or propriety of the transactions contemplated
by this Master Alliance Agreement.
5.9 Tax Liabilities. FCB and each of the FCB Subsidiaries
has filed all tax returns which are required to be filed up to and including
the date hereof and has paid all
-26-
<PAGE> 27
taxed (including any interest and penalties thereon) and all installments of
estimated taxes which have become due pursuant to such returns, or pursuant to
any assessment which has become payable. Each such return and the returns to
be filed by such parties with respect to any period after the date hereof
through the Closing Date will be true and correct, and the amounts of all
installments of estimated taxes have been or will be properly computed.
5.10 Contracts of FCB Subsidiaries. Except as set forth in
Schedule 4 or any other Schedule or Exhibit hereto, none of the FCB
Subsidiaries is a party to (i) any contract for the purchase or sale of
property or for the furnishing or receipt of services (excluding agreements or
commitments in the ordinary course of business to purchase media on behalf of
clients) which involves over $1,000,000, (ii) any contract with any
stockholder, officer, director or employee, past or present, who will be
employed by PBV, the non-cancellable terms of which calls for aggregate
payments in excess of $1,000,000 or (iii) any other contract, whether or not
made in the ordinary course of business, which is material to the business or
assets of such Subsidiaries taken as a whole and will become an obligation of
PBV. No FCB Subsidiary is in default under the terms of any such contract, nor
is it in default in the payment of any principal or interest on any
indebtedness for borrowed money.
5.11 Conflicts of Interest. Except as may be set forth in
Schedule 5, (i) as of the date hereof there are no
-27-
<PAGE> 28
material situations involving the personal interests of any officer or director
of any FCB Subsidiary, or any member of their family, which may be generally
characterized as a "conflict of interest," including, but not limited to, the
leasing of property to or from any FCB Subsidiary or direct or indirect
interests of such officers or directors in the business of competitors,
suppliers or customers of any FCB Subsidiary and (ii) as of the date hereof
there are, and for the past three years there have been, no situations
involving illegal payments or payments of doubtful legality to government
officials or others which may be generally characterized as "sensitive
payments."
6. WARRANTIES OF COMMUNICATION
Communication hereby represents and warrants to FCB and its
Subsidiaries as follows:
6.1 Organization. Each of Publicis, Communication, Conseil
and Intermarco and each subsidiary thereof set forth on Schedule 6 hereto (the
"Communication Subsidiaries") is a limited liability entity similar to a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and Communication, Conseil and
Intermarco (the "Parents") are each qualified to transact business as a foreign
corporation in any other jurisdiction where the failure to so qualify might
have a material adverse effect on the conduct of its operations or expose it to
material liabilities. Each of the Parents and
-28-
<PAGE> 29
the Communication Subsidiaries has full power and authority to own or lease and
operate its properties and to carry on its business as now conducted (or, in
the case of Communication, as presently contemplated to be conducted). True
and complete copies of the articles of association of Communication, Intermarco
and Conseil, including all amendments thereto, have heretofore been or will be
delivered to FCB. Publicis has validly and effectively caused to be
transferred to (i) Intermarco the entire ownership of the subsidiaries of
Farner and (ii) Communication the entire ownership of Conseil and Intermarco so
that the entire advertising business previously conducted by Publicis and its
various subsidiaries is owned and will be henceforth conducted by Communication
and the Communication Subsidiaries. No portion of the operations of Publicis
and its subsidiaries which falls within the Venture Scope or Venture Territory
is conducted otherwise than through Intermarco and its Subsidiaries designated
on Schedule 6 hereto.
6.2 Capitalization of the Parents. On the date hereof, the
authorized capital stock of the Parents consists solely of the following:
Conseil: 150,000 shares, par value 100 FF, all of which are outstanding;
Intermarco: 2,500 shares, par value 250 guilders, 1510 of which were
outstanding;
-29-
<PAGE> 30
Communication: 1,000,000 shares, par value 100 FF, 1,000,000 of which are
outstanding;
All of the issued and outstanding shares of capital stock of the Parents and
the Communication Subsidiaries are validly issued, fully paid and
non-assessable, have not and will not have been issued in violation of any
preemptive or subscription rights of others and are subject to no restrictions
with respect to transferability. No options, warrants or other rights to
acquire, as a result of purchase, subscription, conversion, exchange or
otherwise, or agreements or commitments to issue or sell, shares of the capital
stock of the Parents or the Communication Subsidiaries, are outstanding as of
the date hereof. There are no agreements or commitments pursuant to which the
Parents or the Communication Subsidiaries are or may become obligated to
purchase, retire or redeem any shares of their capital stock.
6.3 Shares. (a) Communication has with respect to Conseil
and Intermarco, and the respective Parent has with respect to the other
Communication Subsidiaries (and in each case will have at the Closing Date)
good and marketable title to the respective number of shares (the
"Communication Subsidiary Shares") set forth on Schedule 6 hereto, free and
clear of all liens, security interests, claims, encumbrances and restrictions
of any kind whatsoever. Such ownership constitutes 100% of the outstanding
capital stock of each contributed Communication Subsidiary except as indicated
on Schedule 6.
-30-
<PAGE> 31
(b) At the Closing, the common shares to be issued to FCB by
Communication hereunder will be duly authorized pursuant to action of the
extraordinary general meeting of shareholders and when issued and delivered to
FCB in accordance with the terms hereof will constitute validly issued, fully
paid and non-assessable Common Shares.
(c) At the Closing and upon the subsequent transfer of
additional shares pursuant to Section 8.3, the common shares of Conseil issued
to PBV by Conseil will constitute validly issued, fully paid and non-assessable
shares of Conseil, representing 20% (and 30% after the 1990 transfer) of the
Total Voting Power and share capital of Conseil after completion of the
respective issuances.
6.4 Authority of the Parents. (a) The Parents have, and
will have at the Closing Date, full power and authority to enter into this
Master Alliance Agreement and the other agreements contained in the Appendices
hereto to which any of them is a party; to cause Communication to issue, sell,
assign, transfer and deliver to FCB its common shares and to PBV the Conseil
Shares as contemplated pursuant to this Master Alliance Agreement and to do and
perform all acts and things required to be done by them under this Master
Alliance Agreement and the other agreements contained in the Appendices hereto
to which one or more of them are a party and by the transactions contemplated
hereby or thereby and Publicis will
-31-
<PAGE> 32
have full power and authority to enter into, and perform its obligations under,
the Publicis Undertaking.
(b) The execution, delivery and performance of the Publicis
Undertaking by Publicis and of this Master Alliance Agreement and the other
agreements contained in the Appendices hereto to which one or more of the
Parents is a party (the "Related Agreements") by any of them have been duly
authorized by any of them who are parties thereto and the Publicis Undertaking
and this Master Alliance Agreement are, and each of the Related Agreements,
when executed and delivered by parties thereto as contemplated hereby, will be,
the respective legal, valid and binding agreements of Publicis or the Parents
which executed such agreements as the case may be enforceable in accordance
with their respective terms, except to the extent limited by bankruptcy,
insolvency or other similar laws of general application relating to or
affecting the enforcement of creditors' rights.
(c) Neither the execution and delivery of the Publicis
Undertaking by Publicis or of this Master Agreement by Communication or of any
of the Related Agreements by such of them who are parties thereto, nor the
consummation of the transactions contemplated herein or therein, nor compliance
with or fulfillment of the terms, conditions and provisions herein or therein,
will (i) result in the breach of any of the terms and provisions of, constitute
a default under, or result in the creation or imposition of any encumbrance or
adverse interest upon, any of the Communication Subsidiary Shares, the
-32-
<PAGE> 33
articles of association of Publicis or the Parents, any instrument, agreement,
mortgage, judgment, order, award, decree or other restriction to which Publicis
or any Parent is a party or any of their properties is subject or by which any
of them is bound or any statute or regulatory provision affecting any of them,
or (ii) require the approval, consent or authorization of, or the making of any
declaration, filing or registration with, any third person, except as set forth
on Schedule 7 hereto.
6.5 Financial Statements. The separate consolidated balance
sheets of each of Conseil, Intermarco and Farner as of December 31, 1987 and
June 30, 1988 and the related consolidated statements of income, stockholders'
equity and changes in financial position for the periods then ended,
respectively, together with the notes to such financial statements, copies of
which have been previously furnished to FCB, have each been prepared in
conformity with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of the respective entity
as of its date and the result of its consolidated operations and changes in its
financial position for the periods indicated.
6.6 Operation in Ordinary Course. Since June 30, 1988, each
of the Parents and the Communication Subsidiaries has operated its business and
assets solely in the ordinary course (except as contemplated by this Master
Alliance Agreement) and there has been no material adverse change in the
-33-
<PAGE> 34
assets, liabilities, business or prospect of, or in the condition (financial or
otherwise) of, the Parents or the Communication Subsidiaries, not disclosed to
FCB, and, to the best of the knowledge of Communication, no fact or condition
exists or is contemplated or threatened which might cause such a change in the
future.
6.7 No Undisclosed Liabilities. None of the Parents or the
Communication Subsidiaries is subject to any material liability which is not
shown or which is materially in excess of amounts shown or reserved for in the
latest balance sheets referred to in Section 6.5 or otherwise disclosed in this
Master Alliance Agreement or in the Schedules hereto, other than liabilities of
the same nature as those set forth in such balance sheets and reasonably
incurred in the ordinary course of its business after the date of such balance
sheets.
6.8 Litigation. Except as set forth in Schedule 8, there are
no lawsuits, proceedings, claims or governmental investigations pending or, to
the best of the knowledge of Communication, threatened by or against Publicis,
Communication or any of the Communication Subsidiaries or their properties or
business, which might reasonably be expected to result in liability to the
Parents or any of the Communication Subsidiaries in excess of $500,000, and
there is no lawsuit, proceeding, claim or governmental investigation pending
or, to the best of the knowledge of Communication threatened, which
-34-
<PAGE> 35
questions the legality, validity or propriety of the transactions contemplated
by this Master Alliance Agreement.
6.9 Tax Liabilities. The Parents and each of the
Communication Subsidiaries have each filed all tax returns which are required
to be filed up to and including the date hereof and have each paid all taxes
(including any interest and penalties thereon) and all installments of
estimated taxes which have become due pursuant to such returns, or pursuant to
any assessment which has become payable. Each such return and the returns to
be filed by such parties with respect to any period after the date hereof
through the Closing Date will be true and correct, and the amounts of all
installments of estimated taxes have been or will be properly computed.
6.10 Contracts of Communication Subsidiaries. Except as set
forth in Schedule 9 of any other Schedule or Exhibit hereto, neither
Communication nor any of the Communication Subsidiaries is a party to (i) any
contract for the purchase or sale of property or for the furnishing or receipt
of services (excluding agreements or commitments in the ordinary course of
business to purchase media on behalf of clients) which involves over
$1,000,000, (ii) any contract with any stockholder, officer, director or
employee, past or present, who will be employed by PBV, the non-cancellable
term of which calls for aggregate payments in excess of $1,000,000, or (iii)
any other contract, whether or not made in the ordinary course of business,
which is material to the businesses or assets of Communication Subsidiaries
taken as a
-35-
<PAGE> 36
whole and will become an obligation of PBV. Neither Communication nor any
Communication Subsidiary is in default under the terms of any such contract,
nor is it in default in the payment of any principal or interest on any
indebtedness for borrowed money.
6.11 Conflicts of Interest. Except as may be set forth in
Schedule 10, (i) as of the date hereof there are no material situations
involving the personal interests of any officer or director of Communication or
any Communication Subsidiary, or any member of his family, which may be
generally characterized as a "conflict of interest," including, but not limited
to, the leasing of property to or from Communication or any Communication
Subsidiary or direct or indirect interests of such officers or directors in the
business of competitors, suppliers or customers of Communication or any
Communication Subsidiary and (ii) as of the date hereof there are, and for the
past three years there have been, no situations involving illegal payments or
payments of doubtful legality to government officials or others which may be
generally characterized as "sensitive payments."
7. CLOSING CONDITIONS
The respective obligations of each Party to consummate the
transactions contemplated by this Master Alliance Agreement shall be subject to
the following conditions (to be satisfied as contemplated in Section 8):
-36-
<PAGE> 37
7.1 Other Agreements and Actions. The other Party thereto
(and its Subsidiaries) shall have executed and delivered on the Closing Date
the agreements referred to herein in the form attached hereto as Appendices
with such changes therein as the Parties executing the same may agree.
7.2 Representations and Covenants. The representations and
warranties of the other Party (and its Subsidiaries) shall be true in all
material respects as of and at the Closing Date as though made at the Closing
Date with the same effect as though made at such date as evidenced by a
certificate to that effect by such other Party delivered at the Closing and
such other Party (and its Subsidiaries) shall have performed in all material
respects all obligations required by this Master Alliance Agreement to be
performed on or prior to the Closing Date.
7.3 Opinions. (a) FCB shall have received favorable
opinions dated as of the Closing Date from Bredin, Prat & Saint-Esteben and
Nauta Van Haersolte, as to the matters set forth in Schedule 11 hereto.
(b) Publicis shall have received a favorable opinion dated as
of the Closing Date from Sidley & Austin as to the matters set forth in
Schedule 12 hereto.
7.4 Satisfaction of Counsel. The delivery of such other
documents, certificates and consents as shall be reasonably requested by
counsel.
-37-
<PAGE> 38
7.5 Government Action. (a) On or prior to the Closing Date,
each Party shall have obtained all necessary consents and approvals of any
Governmental Authority having jurisdiction over such Party or the transactions
contemplated herein which must approve the effectiveness and consummation of
the transactions contemplated by this Master Alliance Agreement and the
Appendices hereto.
(b) The Master Alliance and appropriate related agreements
shall have been properly notified to the European Economic Community.
(c) The waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations promulgated thereunder
shall have expired or have been granted early termination on or prior to the
Closing Date.
7.6 No Restraint or Litigation. On or prior to the Closing
Date, no action, suit, investigation or proceeding shall be pending by any
Governmental Authority having jurisdiction over a Party to enjoin, restrain,
prohibit or otherwise challenge the legality or validity of this Master
Alliance Agreement or any of the agreements included in the Appendices hereto
or the transactions contemplated hereby and thereby and no order shall have
been issued and remain pending by any court or Governmental Authority having
jurisdiction over a Party which enjoins, restrains or prohibits
-38-
<PAGE> 39
consummation of the transaction contemplated hereby and thereby.
8. CLOSING
8.1 General. Subject to the terms and conditions hereof, the
closing (the "Closing") of the transactions contemplated hereby shall commence
on January 24, 1989 (the "Closing Date") in the offices of Communication, in
Paris, France, or at such other time and place as the Parties may agree. In
view of various administrative formalities which must be completed, the Parties
recognize that not all steps constituting the Closing may occur in the same
place or at the same time. Section 8.2 describes the order and approximate
time and place at which the Parties anticipate the major steps will be
completed. Notwithstanding the foregoing, the Parties agree that (i) all steps
shall be deemed to occur simultaneously and (ii) all the transfers contemplated
hereunder will be deemed to be effective as of January 1, 1989.
8.2 The Closing Steps:
(a) On January 24, 1989:
(i) FCS shall (x) subscribe for common shares of
Communications as provided in Section 2.2 and make payment therefor as provided
in Section 2.4 in exchange for issuance
-39-
<PAGE> 40
of such shares and (y) issue and deliver to Communication a certificate for
2,110,000 shares of FCB Common Stock;
(ii) Communication shall (x) subscribe for FCB Common
Stock and make payment therefor as provided in Section 2.4 and (y) issue the
common shares of Communication pursuant to Section 2.2 to FCS to be evidenced
by an appropriate officer's certificate evidencing the FCB is the registered
holder of such shares; and
(iii) The appropriate parties shall execute and
deliver the FCB Stockholders Agreement, the Publicis Undertaking, the Publicis
Communication Shareholders Agreement, the Registration Rights Agreement and the
Multi-Party Arbitration Agreement.
(b) At a date on or before February 28, 1989.
(i) FCB International, Communication and PBV will
execute and deliver the PBV Shareholders Agreement;
(ii) Intermarco shall commence the actions to change
its name to PBV and otherwise amend its articles of association (subject to
approval of appropriate Dutch authorities) and appoint a new Board of
Management as required by the PBV Agreement;
(iii) FCB International shall cause to be assigned
and transferred to PBV all the FCB Subsidiary Shares
-40-
<PAGE> 41
referred to in Section 3.2 hereof and make the additional cash payment required
by Section 3.2; and
(iv) PBV shall issue to FCB International 49% of the
share capital and Total Voting Power of PBV in accordance with Article 3.
(c) At a date on or before February 28, 1989.
(i) Conseil shall issue its common shares to PBV
and PBV shall make payment therefor as provided in Section 3.4; and
(ii) FCB shall pay to PBV any unpaid balance of its
subscription to 49% of the shares of PBV as contemplated by Section 3.2.
8.3 Additional Conseil Shares: On or before March 31, 1990,
Conseil shall issue to PBV an additional 10% of the share capital of Conseil
and FCB International and Communication shall provide PBV any funds required
therefor as provided in Section 3.4.
9. GENERAL
9.1 Public Announcements. The parties will use their best
efforts to coordinate publicity initiatives regarding the subject matter of
this Master Alliance Agreement.
-41-
<PAGE> 42
9.2 Dispute Resolution. (a) This Master Alliance Agreement
shall be governed as provided in Section 9.4.
(b) All disputes arising under this Master Alliance Agreement
and the Related Agreements shall be referred in the first instance by written
notice given in accordance with Section 9.9 to the Dispute Resolution
Committee, and if not received by such Committee within thirty calendar days
after the giving of notice, may be referred by either Party by written notice
to the Chief Executive Officers or Chief Operating Officers of FCB and
Communication.
(c) Disputes which are not resolved within thirty calendar
days after the giving of notice to the Chief Executive or Chief Operating
Officers referred to in clause (b) hereof shall be settled in accordance with
the Multi-Party Arbitration Agreement attached as Appendix 7 hereto, provided,
nothing in this Section 9.2 shall prevent any party to the arbitration from
seeking provisional or injunctive relief in any court having jurisdiction over
the parties pending resolution of such dispute by the processes contemplated
herein.
9.3 Government Reviews; Enforceability. The Parties and
their respective Subsidiaries will cooperate in the event of any review by a
Governmental Authority of the transactions contemplated hereby or by any of the
other agreements attached as Appendices hereto, including furnishing
information sought by the reviewing authority. This Master
-42-
<PAGE> 43
Alliance Agreement and the agreements contained in the Appendices may be
discussed with, shown to, and filed with any Governmental Authority or official
as determined to be appropriate by a Party. If, as a result of such
presentation or otherwise, any provision of any such agreement is or becomes or
is deemed invalid, illegal or unenforceable under the applicable laws or
regulations of any jurisdiction, or is stricken or materially amended by the
action of any Governmental Authority or any change or modification of any such
provision is required or recommended by any Governmental Authority or any other
appropriate authority, the Parties shall negotiate in good faith with respect
to either an alternative or modified provision or the striking of such
provision from such agreement. After 60 calendar days from the commencement of
such negotiations, any Party may submit the subject of such disagreement to
arbitration in accordance with the Multi-Party Arbitration Agreement for
reformation or termination of all or portions of this Agreement and the Related
Agreements, all as deemed appropriate by the arbitrators.
9.4 Governing Law. This Agreement shall be governed by the
laws of France applicable to agreements executed and delivered and to be
performed in France, except that the agreements attached hereto as appendices
may be governed by other law if so stated.
9.5 Assignment. Neither of the Parties hereto shall, without
the written consent of the other Party, assign
-43-
<PAGE> 44
or transfer this Master Alliance Agreement or any rights or obligations
hereunder.
9.6 Modifications. Neither this Master Alliance Agreement
nor any agreement contained in the Appendices shall be modified, altered,
changed or amended in any respect unless in writing by a duly authorized
representative of each of the parties to such agreement.
9.7 Non-Waiver. Failure by any Party to enforce any
provision of this Master Alliance Agreement or of any agreement contained in
the Appendices shall not constitute a waiver or affect its right to require the
performance thereof by the parties thereto or their Subsidiaries or affect the
validity of any other provision thereof.
9.8 Titles. Section titles used in this Master Alliance
Agreement and in the agreements are used for convenience only and shall in no
event be used for interpretation purposes.
9.9 Notices. Any notices, requests or demands to or upon the
respective Parties hereto shall be in writing (including telex and telecopy
communication followed by registered mail with return receipt requested) and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or when telexed (answer-back received) or
telecopied (with receipt acknowledged), addressed to the Party for whom
intended as
-44-
<PAGE> 45
provided below (or as hereafter specified by such Party by notice hereunder):
If to Communication to:
133, avenue des Champs-Elysees
Paris 75008
France
Attn: President Directeur General
If to FCB to:
101 East Erie Street
Chicago, Illinois 60611
U.S.A.
Attn: Chief Executive Officer
9.10 Expenses. Except as the Parties may otherwise agree,
all fees, commissions and expenses incurred by FCB or Communication in
connection with the negotiation of this Master Alliance Agreement and the
agreements contained in the Appendices shall be borne by the Party incurring
such expenses.
9.11 Definitions. The following terms used herein shall mean
as follows:
"Governmental Authority": - appropriate entities of the
European Economic Community and any nation or government, any state or other
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government having jurisdiction over a Party.
-45-
<PAGE> 46
"Subsidiary" - a corporation or other legal entity shall be
deemed a Subsidiary of a company if the company owns or controls, directly or
indirectly, not less than 50% of the Total Voting Power entitled to be cast in
the election of directors of such corporation or other legal entity, but only
as long as such ownership or control continues.
"Total Voting Power": - "Total Voting Power" meaning the total
number of votes which may be cast in the election of directors at any meeting
of stockholders if all securities entitled to vote in the election of directors
of a company, other than votes that may be cast only upon the happening of a
contingency, were present and voted at such meeting.
"Venture Scope": - see section 1.01 of PBV Shareholders
Agreement.
"Venture Territory": - see section 1.02 of PBV Shareholders
Agreement.
9.12 Entire Agreement. This Master Alliance Agreement and
the other agreements referred to herein or in the Appendices set forth the
entire agreement and understanding between the Parties as to the subject matter
hereof and thereof and merge all prior discussions and writings between or
among them, and neither of the Parties shall be bound with respect to such
subject matter except as provided herein or therein.
-46-
<PAGE> 47
9.13 Counterparts. This Master Alliance Agreement may be
executed in two full sets, each of which may be executed in one or more
counterparts, each of which shall be considered an original instrument, but all
of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the Parties
and delivered to the other Party hereto.
IN WITNESS WHEREOF, the Parties have caused this agreement to
be executed and delivered on their behalf on January 23, 1989 to be effective
as of the date first above written. This agreement is executed in two full
sets, one for each Party.
PUBLICIS COMMUNICATION
By
----------------------------------------
President-Directeur General
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
By
----------------------------------------
Chairman, Chief Executive Officer
-47-
<PAGE> 1
EXHIBIT C(2)
FCB STOCKHOLDERS AGREEMENT
Dated as of January 1, 1989
between
Publicis Communication
and
Foote, Cone & Belding Communications, Inc.
<PAGE> 2
FCB STOCKHOLDERS AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I COVENANTS OF PC . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.1 Limitation on Ownership of Voting Stock . . . . . . . . . . . . . . . . .
1.2 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.3 Voting Trust, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.4 Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . .
1.5 Acts in Concert with Others . . . . . . . . . . . . . . . . . . . . . . .
1.6 Restrictions on Transfer of FCB Voting
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.7 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . .
2.
ARTICLE II PC'S RIGHT TO PURCHASE ADDITIONAL FCB
SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.1 Right to Purchase Additional Shares . . . . . . . . . . . . . . . . . . .
2.2 Notice of Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3 Purchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.4 Available Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.5 Purchase by FCB of Its Common Stock . . . . . . . . . . . . . . . . . . .
ARTICLE III FCB'S RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . .
3.
3.1 Transfer Sale or Public Offering . . . . . . . . . . . . . . . . . . . . .
3.2 Tender Offer Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.3 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.4 Repurchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Delivery of FCB's PC Voting Stock . . . . . . . . . . . . . . . . . . . .
ARTICLE IV OPTION OF FCB TO REPURCHASE PC'S
FCB VOTING STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
4.1 Right of Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . .
4.2 Notice of Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.3 Repurchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.5 Delivery of FCB's PC Voting Stock . . . . . . . . . . . . . . . . . . . .
ARTICLE V OPTION OF PSA TO REPURCHASE FCB'S
PC COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
5.1 Right to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . .
5.2 Notice of Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.3 Repurchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.4 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5 Delivery of PC's FCB Voting Stock . . . . . . . . . . . . . . . . . . . .
5.6 Transfer of PSA's Rights . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . .
6.
6.1 Election of Director . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.2 Equity Method Accounting . . . . . . . . . . . . . . . . . . . . . . . . .
6.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4 Notice by FCB of Acquisitions . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.
7.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.2 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . .
7.3 Governing Law; Dispute Resolution . . . . . . . . . . . . . . . . . . . .
7.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . .
7.5 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . .
7.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.7 Government Reviews; Enforceability . . . . . . . . . . . . . . . . . . . .
7.8 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.9 Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.10 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.12 PC Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBITS
A Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
-3-
<PAGE> 4
FCB STOCKHOLDERS AGREEMENT
THIS FCB STOCKHOLDERS AGREEMENT (this "Agreement") is made and
entered into as of this 1st day of January, 1989, by and between Foote, Cone &
Belding Communications, Inc., a Delaware corporation ("FCB"), and Publicis
Communication, a societe anonyme ("PC").
WHEREAS, FCB and PC have executed and delivered that certain
Master Alliance Agreement, dated as of January 1, 1989 (the "Master Alliance
Agreement"), the representations and warranties of each party in Sections 5 and
6 to each other being incorporated herein by reference as fully as though set
forth herein;
WHEREAS, pursuant to the Master Alliance Agreement, FCB has
issued to PC 2,110,000 shares of FCB's Common Stock, par value 33-1/3 cents per
share (the "FCB Common Stock"); and PC has issued to FCB 350,000 common shares
of PC's capital stock (the "PC Common Shares");
WHEREAS, the execution and delivery of this Agreement by PC
and FCB is a condition to the obligations of the parties to the Master Alliance
Agreement to consummate the transactions contemplated thereby; and
-4-
<PAGE> 5
WHEREAS, each of FCB and PC have determined that it is in
their best interests and the best interest of their respective shareholders to
enter into this Agreement in order, among other things, to permit the
consummation of the transactions contemplated by the Master Alliance Agreement
and to regulate certain aspects of the relationship of the parties being
created by such Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and undertakings herein set forth and other good in valuable
considerations, the parties hereto agree as follows:
1.
ARTICLE I
Covenants of PC
Until the termination of this Agreement in accordance with
Section 7.2 hereof or of the particular covenant or provision, as the case may
be, or the occurrence of a Change of Control of FCB, and subject to the
provisions of this Agreement:
Section 1.1 Limitation of Ownership of Voting Stock. PC
agrees not to and agrees to cause its Affiliates (excluding any member of PC's
Board of Directors designated by FCB) (the "PC Affiliates") not to acquire
record or beneficial ownership of any FCB Voting Stock (except, in any case, by
way of stock splits of FCB or stock dividends or distributions by FCB to PC)
without the prior written consent of FCB, if the
-5-
<PAGE> 6
effect of such acquisition would be to increase the Voting Power of all FCB
Voting Stock then owned by PC and the PC Affiliates to more than 20.5% of the
Total Voting Power of FCB at such time; provided that:
(i) PC may acquire FCB Voting Stock if it is publicly
disclosed or FCB notifies PC in writing that another person or group
(other than the Foote, Cone & Belding Communications, Inc. Stock
Purchase and Stock Ownership Trust or similar employee stock ownership
plan established by FCB (the "Trust")) has acquired any FCB Voting
Stock which results in such person or group owning or having the right
to acquire FCB Voting Stock with aggregate Voting Power having a
percentage of the Total Voting Power of FCB then in effect which is
more than that percentage of the Total Voting Power of FCB then in
effect then owned by PC and the PC Affiliates less 5 percent of the
Total voting Power of FCB then in effect; provided PC may only acquire
up to that amount of FCB Voting Stock which when added to the FCB
Voting Stock then owned by PC and PC Affiliates does not exceed the
percentage interest in Total Voting Power of FCB acquired by such
other person or group plus 5 percentage points of the Total Voting
Power of FCB then in effect;
(ii) PC may acquire FCB Voting Stock without regard to the
limitations in this Section 1.1 if a tender offer or exchange offer is
made, as evidenced by the filing with the Securities and Exchange
Commission (the "SEC")
-6-
<PAGE> 7
of a Schedule 14D-1 (or any successor schedule or form promulgated or
adopted for such purpose by the SEC) by a person or group (not
including PC or any PC Affiliate) to purchase or exchange for cash or
other consideration any FCB Voting Stock which, if successful, would
result in such person or group making the offer owning or having the
right to acquire shares of FCB Voting Stock with aggregate Voting
Power of at least 30% of the Total Voting Power of FCB then in effect;
(iii) In the event FCB at any time Controls more than 26.5%
of the Total Voting Power of PC, PC may (during the period in which
FCB Controls such excess voting power) acquire FCB Voting Stock which
when added to the FCB Voting Stock then owned by PC and the PC
Affiliates has aggregate Voting Power of more than 20.5% (or a greater
percentage if permitted hereunder) of the Total Voting Power of FCB
then in effect but only up to that percentage of FCB Voting Stock at
which the proportion of FCB Voting Stock owned of record or
beneficially by PC and the PC Affiliates compared to the proportion of
PC Voting Stock owned of record or beneficially by FCB and its
Affiliates (excluding any member of FCB's Board of Directors
designated by PC) does not exceed 1:1.3;
(iv) In the event and during any period when the person
designated by Publicis to serve on the Board of Directors of FCB in
accordance with Section 6.1 hereof is not elected to serve (or such
person's successor is not
-7-
<PAGE> 8
so elected in accordance with Section 6.1) so long as the person
designated by FCB has been duly elected to service on the Board of
Directors of PC, PC may (during the period when no such person serves
as a director of FCB) acquire FCB Voting Stock which when added to the
FCB Voting Stock then owned by PC and the PC Affiliates has aggregate
Voting Power in excess of 20.5% of the Total Voting Power of FCB then
in effect (or any greater percentage permitted hereunder) and shall
not be required to dispose of any such shares in the event its
designee is subsequently elected;
(v) Notwithstanding the foregoing but subject to Section
4.1(b), neither PC nor any of its Affiliates shall be obligated to
dispose of any shares of FCB Voting Stock to the extent that their
aggregate percentage ownership is increased as a result of a
recapitalization of FCB or a repurchase of securities by FCB or any
other action taken by FCB to reduce the Total Voting Power of FCB then
in effect.
Section 1.2 Voting. PC shall take such action as may be
required so that all shares of FCB Voting Stock owned by PC are voted for the
nominees to the Board of Directors of FCB recommended by FCB's Board of
Directors to FCB's stockholders consistent with Section 6.1 hereof. Further,
PC shall take such action as may be required so that all shares of FCB Voting
Stock owned by PC are voted with management on all other matters to be voted on
by holders of FCB Voting
-8-
<PAGE> 9
Stock; provided, that FCB Voting Stock owned by PC may be voted as PC
determines in its sole discretion on any Significant Event presented to the
holders of Voting Stock for a vote. PC, as the holder of shares of FCB Voting
Stock, shall be present, in person or by proxy, at all meetings of stockholders
of FCB so that all shares of FCB Voting Stock owned by PC may be counted for
the purpose of determining the presence of a quorum at such meetings.
Section 1.3 Voting Trust, etc. PC shall not deposit any
shares of FCB Voting Stock in a voting trust or, except as otherwise provided
herein, subject any shares of FCB Voting Stock to any arrangement or agreement
with respect to the voting of such FCB Voting Stock.
Section 1.4 Solicitation of Proxies. Without FCB's prior
written consent, PC shall not solicit proxies with respect to any FCB Voting
Stock, nor shall it become a "participant" in any "election contest", as such
terms are used in Rule 14a-11 of Regulation 14A (or any successor rule or
regulation) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), relating to the election of directors of FCB; provided,
however, that PC shall not be deemed to be a "participant" by reason of the
membership of its designee on the FCB's Board of Directors pursuant to Section
6.1; and, provided, further, however, that the prohibition contained in this
Section 1.4 shall not apply in the event such designee is not included in the
management
-9-
<PAGE> 10
slate for election to the Board of Directors in accordance with Section 6.1.
Section 1.5 Acts in Concert with Others. Except as
contemplated herein with regard to permissible sales of, or the use of a broker
to facilitate permissible acquisitions of, FCB Voting Stock, PC shall not join
a partnership, limited partnership, syndicate or other group, or otherwise act
in concert with any third person, for the purpose of acquiring, holding, or
disposing of FCB Voting Stock.
Section 1.6 Restrictions on Transfer of FCB Voting Stock. PC
shall not, directly or indirectly, sell, transfer, assign, pledge, encumber, or
otherwise suffer any lien or security interest to attach to any of its FCB
Voting Stock except (i) to FCB or any person or group approved of in advance
and in writing by FCB in its sole discretion; or (ii) to a Controlled
Corporation of PC, so long as prior to such transfer such Controlled
Corporation executes and delivers to FCB a written instrument, in form and
substance reasonably acceptable to FCB (x) evidencing its agreement to hold
such FCB Voting Stock subject to all the provisions and restrictions of this
Agreement as if it were a party hereto, including this Section 1.6, and the
rights of FCB with respect to such FCB Voting Stock, and to transfer such FCB
Voting Stock to PC or other Controlled Corporation of PC if it ceases to be a
Controlled Corporation of PC, and (y) setting forth its address for purposes of
receiving notices in connection with this Agreement; or (iii) subject to FCB's
right of first
-10-
<PAGE> 11
refusal as set forth in Article III hereof, pursuant to a bona fide public
offering (which shall be structured to distribute such FCB Voting Stock through
an underwriter or otherwise in such a manner as should not result in a sale or
sales of beneficial ownership of FCB Voting Stock with aggregate Voting Power
of 5% or more of the Total Voting Power of FCB then in effect to a single
person or group) registered under the Securities Act of 1933, as amended (the
"Securities Act"), of FCB Voting Stock; or (iv) subject to FCB's Right of first
refusal as set forth in Article III hereof, in transactions involving receipt
by PC of cash payment for its FCB Voting Stock not otherwise described herein
so long as such transactions do not, directly or indirectly, in a manner PC
knows or should know, result in any single person or group owning or having the
right to acquire FCB Voting Stock with aggregate Voting Power of 5% or more of
the Total Voting Power of FCB then in effect; or (v) in response to (1) an
offer to purchase or exchange for cash or other consideration any FCB Voting
Stock (a) which is made by or on behalf of FCB or its Affiliates, or (b) which
is made by another person or group and is not opposed by the Board of Directors
of FCB within the time such Board is required, pursuant to the regulations then
in effect under the Exchange Act or any successor federal statute, to advise
FCB's stockholders of such Board's position on such offer, or (2) subject to
FCB's right of first refusal as set forth in Article III, any other offer made
by a person or group (not including PC or any PC Affiliate) to purchase or
exchange for cash or other consideration any FCB Voting Stock which, if
successful, would result in such person or group
-11-
<PAGE> 12
owning or having the right to acquire FCB Voting Stock with aggregate Voting
Power of more than 30% of the Total Voting Power of FCB then in effect; or (vi)
pursuant to a bona fide pledge to a bank or other institutional lender (the
"Pledgee") so long as, prior to such pledge, the Pledgee executes and delivers
to FCB a written instrument, in form and substance reasonably acceptable to FCB
evidencing its agreement (x) to provide FCB a right of first refusal in
connection with any sale or transfer of such FCB Voting Stock by the Pledgee on
the same terms as provided herein, (y) to exercise all voting rights with
respect to such FCB Voting Stock in a manner consistent with FCB's rights under
this Agreement and (z) otherwise to exercise any rights it may have with
respect to such FCB Voting Stock in a manner consistent with FCB's rights under
the Agreement.
Section 1.7 Confidential Information. Notwithstanding any
Change of Control of FCB, FCB will from time to time pursuant to and in
connection with this Agreement or the Master Alliance Agreement and related
agreements, disclose to PC and its representatives, including PC's designee to
the Board of Directors of FCB, certain business information which FCB deems to
be confidential (for example, financial information or business plans). PC
shall not disclose such information to third parties until the earliest of (i)
the date upon which such information becomes public knowledge through no fault
of PC, (ii) the date upon which FCB discloses such fault of PC, (ii) the date
upon which FCB discloses such information to a third party on an unrestricted
-12-
<PAGE> 13
basis, or (iii) the fifth anniversary of the date of disclosure to PC.
2.
ARTICLE II
PC's Right to Purchase Additional FCB Shares
Section 2.1 Right to Purchase Additional Shares. (a)
Subject to the provisions of this Agreement and so long as no Change of Control
of FCB shall have occurred, in the event that PC (and the PC Affiliates) shall
at any time after January 24, 1989 have beneficial ownership of less that
19.9% of the Total Voting Power of FCB then in effect and desires to acquire
additional FCB Voting Stock up to such 19.9% and all or a part of such FCB
Voting Stock is not likely to be available for purchase in the market over a
period of 60 days for less than 115% of the Market Price (as defined in Section
7.1(j)) thereof determined as of the date of its notice to FCB under the
section (a "Section 2.1 Notice"), PC may elect to purchase directly from FCB,
and FCB shall sell to PC, such amount of FCB Common Stock for a cash payment
equal to the Market Price thereof; provided, that in the event FCB shall be
required to obtain shareholder approval for such sale in accordance with its
New York Stock Exchange listing agreement otherwise by law, FCB shall not be
obligated to issue such shares prior to obtaining such approval, which it shall
use its best efforts to secure. If FCB shall seek and fail to obtain such
shareholder approval, FCB shall offer to sell to PSA (so long as no Change of
Control of PC shall have occurred) sufficient shares of PC Voting Stock so that
the ratio of Total Voting Power of PC then owned by FCB to the
-13-
<PAGE> 14
Total Voting Power of FCB then owned by PC does not exceed 1.3 to 1. Such PC
Voting Stock shall be offered at the Market Price thereof as valued on the date
of the FCB meeting of stockholders at which shareholder approval is sought but
not obtained. PC may conclusively establish that it is not likely to be able
to acquire such FCB Voting Stock in the market on the conditions mentioned
above by providing FCB with a letter to such effect from a nationally
recognized investment bank firm.
Section 2.2 Notice of Purchase. In order to exercise its
rights to purchase FCB Common Stock pursuant to Section 2.1 hereof, PC shall
deliver to FCB the Section 2.1 Notice, setting forth the FCB Voting Stock owned
by PC and the PC Affiliates on the date of the Section 2.1 Notice, the number
of shares of FCB Common Stock it wishes to purchase, the basis under Section
2.1 entitling it to acquire such Common Stock and the date on which PC wishes
to purchase such Common Stock, which date shall not be less than 30 days
following PC's delivery of such notice or as soon thereafter as may be
permitted under applicable laws (the "Purchase Date").
Section 2.3 Purchase of Stock. Unless the parties agree
otherwise, any purchase of FCB Common Stock pursuant to the Article II shall
take place at the corporate offices of FCB on the Purchase Date.
-14-
<PAGE> 15
Section 2.4 Available Shares. FCB shall at all times keep
available as authorized but unissued or as treasury shares a sufficient number
of shares of Common Stock to satisfy its obligations under this Article II.
Section 2.5 Purchase by FCB of Its Common Stock. In order to
enable PC to maintain its proportionate interest in FCB despite the exercise of
employee stock options, so long as there is no stock option plan of PC in
existence, FCB will purchase within a reasonable period of the end of each
quarter sufficient amounts of its Common Stock so that its total outstanding
Common Stock is not increased by the exercise of employee stock options.
3.
ARTICLE III
FCB'S Right of First Refusal
Section 3.1 Transfer Sale or Public Offering. So long as no
Change of Control of FCB shall have occurred, prior to making any public
offering or sale or transfer of FCB Voting Stock pursuant to Sections 1.6(iii)
or (iv), PC shall give FCB the opportunity to purchase such FCB Voting Stock in
the following manner:
(i) PC shall give notice ( the "Transfer Notice" or
"Section 3.1 Notice") to FCB in writing of such intention specifying
the approximate number of the proposed purchasers or transferees, the
amount of FCB Voting Stock proposed to be sold or transferred, the
proposed cash price per share therefor (the "Transfer Price") in the
-15-
<PAGE> 16
case of a proposed sale under Section 1.6(iv) or the proposed
underwriters in the case of a proposed public offering, and the other
material terms upon which any such disposition is proposed to be made
(to the extent known).
(ii) FCB shall have the right, exercisable by written
notice given by FCB to PC within thirty calendar days after receipt of
such Transfer Notice, to purchase all but not part of the FCB Voting
Stock specified in such Transfer Notice for a price per share equal,
in the case of a proposed sale under Section 1.6(iv), to the Transfer
Price or, in the case of a proposed public offering, to the Market
Price on the date of the Section 3.1 Notice, payable (in FCB's
discretion) in cash and/or FCB's PC Common Shares in accordance with
the Section 3.5 valued at the Market Price thereof.
(iii) If FCB exercises its right of first refusal
hereunder, the closing of the purchase of the FCB Voting Stock with
respect to which such right has been exercised shall take place within
sixty calendar days after FCB gives the Section 3.1 Notice; provided,
if at any time prior to such closing, an offer to purchase or exchange
FCB Common Stock described in Section 1.6(v) is made by any person, PC
may revoke its Transfer Notice and sell or exchange its FCB Voting
Stock in responses to such offer, subject to FCB's right of first
refusal set forth in Section 3.2 and, if the offer is made by FCB, to
FCB's right
-16-
<PAGE> 17
to pay its purchase price in FCB's PC Common Shares in accordance with
Section 3.5 valued at the Market Price thereof.
(iv) If FCB does not exercise its right of first refusal
hereunder with respect to any Transfer Notice within the time
specified hereunder for such exercise, PC shall be free, only during
the period of ninety calendar days following the expiration of such
time of exercise, to sell the FCB Voting Stock specified in such
Transfer Notice (x) in the case of a proposed transfer under Section
1.6(iv) on terms no less favorable to PC than the terms specified in
such Transfer Notice and (y) in the case of a proposed public
offering, in accordance with Section 1.6(iii).
Section 3.2 Tender Offer Sale. So long as no Change of
Control of FCB shall have occurred, prior to making any sale or exchange of FCB
Voting Stock pursuant to Section 1.6(v)(2) in response to a tender or exchange
offer, PC shall give FCB the opportunity to purchase such FCB Voting Stock in
the following manner:
(i) PC shall give notice (the "Tender Notice" or "Section
3.2 Notice") to FCB in writing of such intention no later than ten
calendar days prior to the latest time by which FCB Voting Stock must
be tendered in order to be accepted pursuant to such offer or to
qualify for any proration applicable to such offer (the "Tender
Date"),
-17-
<PAGE> 18
specifying the amount of FCB Voting Stock proposed to be tendered.
For purposes hereof, a tender offer to purchase or exchange FCB Voting
Stock shall be deemed to be an offer at the price specified therein,
without regard to any provisions thereof with respect to proration or
condition as to the offeror's obligation to purchase (assuming the
performance of such conditions is not impossible when the offer is
made, without giving effect to FCB's right of first refusal).
(ii) If the Tender Notice is given, FCB shall have the
right, exercisable by giving notice to PC (the "Tender Repurchase
Notice") at least two business days prior to the Tender Date, to
purchase all but not part of the FCB Voting Stock specified in the
Tender Notice for a price consisting (in FCB's discretion) of cash
and/or FCB's PC Common Shares in accordance with Section 3.5 valued at
the Market Price thereof. If FCB exercises such right by giving such
notice, the closing of the purchase of such FCB Voting Stock shall
take place not later than one business day prior to the Tender Date;
provided, however, that (x) PC shall be authorized to withdraw its
Tender Notice if, prior to closing hereunder, another offer described
in Section 1.6(v) is made and (y) if the purchase price specified in
the tender or exchange offer includes any property other than cash,
the value of any property included in the purchase price shall be
jointly determined by a nationally recognized investment banking firm
selected by each party
-18-
<PAGE> 19
or, in the event such firms are unable to agree, a third nationally
recognized investment banking firm to be selected by such two firms.
For this purpose:
(x) In each instance in which such tender offer
is made, the parties shall use their best efforts to cause any
determination of the value of any securities included in the purchase
price to be made within three business days after the date of delivery
of the related Tender Notice even if FCB shall not have then informed
PC of its decision to exercise its right to purchase its right to
purchase the applicable FCB Voting Stock. If the firms selected by PC
and FCB are unable to agree upon the value of any such securities
within such three-day period, the firms shall promptly select a third
firm whose determination shall be made promptly and shall be
conclusive.
(y) The parties shall use their best efforts to
cause any determination of the value of property other than securities
to be made within four business days after the date of delivery of the
Tender Notice. If the firms selected by PC and FCB are unable to
agree upon a value within such four-day period, the firms shall
promptly select a third firm whose determination shall be made
promptly and shall be conclusive.
The purchase price to be paid by FCB or its designee pursuant
to this Section 3.2 shall be (x) if such tender
-19-
<PAGE> 20
or exchange offer is consummated, the purchase price that PC would
have received if it has tendered the FCB Voting Stock purchased by FCB
and all such Voting Stock had been purchased in such tender or
exchange offer, including any increases in the price paid by the
tender offeror after exercise by FCB of its right of first refusal
hereunder, or (y) if such tender or exchange offer is not consummated,
the highest price offered pursuant thereto, in each case with
property, if any, to be valued as aforesaid. Each party shall bear
the cost of its own investment bank firm and the parties shall share
the cost of any third firm selected hereunder.
(iii) If PCB does not exercise such right by giving such
notice, then PC shall be free to accept the tender or exchange offer
with respect to which the Tender Notice was given.
Section 3.3 Assignment of Rights. In the event that FCB
elect to exercise a right of first refusal under this Article III, FCB may
specify prior to closing such purchase another person as its designee to
purchase the FCB Voting Stock to which such right relates. If FCB shall
designate another person as the purchases pursuant to this Article III, the
giving of notice of acceptance of the right of first refusal by FCB shall
constitute a legally binding obligation of FCB to complete such purchase if
such person shall fail to do so.
-20-
<PAGE> 21
Section 3.4 Repurchase of Stock. Unless the Parties agree
otherwise, any repurchase of FCB Voting Stock pursuant to this Article III
shall take place at the corporate offices of FCB.
Section 3.5 Delivery of FCB's PC Voting Stock. FCB may elect
to deliver its PC Voting Stock in connection with payment of the purchase price
of FCB Voting Stock pursuant to this Article III and PC shall cause a person
which it designates to purchase for cash from FCB as much PC Voting Stock (to
the extent of FCB's holding of PC Voting Stock) as equals the Market Price of
the FCB Voting Stock to be purchased by FCB and FCB shall use such cash in the
payment to PC of the purchase price for such FCB Voting Stock. Such PC Common
Shares shall be valued at the Market Price thereof on the date the Section 3.1
or 3.2 Notice is given hereunder as determined hereunder.
4.
ARTICLE IV
Option of FCB to Repurchase PC's FCB Voting Stock
Section 4.1 Right to Repurchase Shares. (a) In the event of
a Change of Control of PC or the existence of an FCB Event, FCB shall have the
right to repurchase from PC or any PC Controlled Corporation then owning such
shares all but not part of the FCB Voting Stock then owned by PC or such
Controlled Corporation for a payment equal to the Market Price thereof
consisting (in FCB's discretion) of cash and/or FCB's PC Common Shares in
accordance with Section 4.5. PC hereby agrees to inform FCB immediately
following the commencement of
-21-
<PAGE> 22
any Change of Control of PC or any FCB Event. FCB's rights hereunder shall
expire unless FCB gives notice of exercise within twelve months after receipt
by FCB of such notice from PC.
(b) Should the FCB Voting Stock owned by PC and the PC
Affiliates exceed the percentage limitations set forth in this Agreement in
violation of the terms of this Agreement, or should the aggregate number of
outstanding shares of FCB Voting Stock be reduced for any reason whatsoever,
and such reduction results in PC and the PC Affiliates owning a greater
percentage of the Total Voting Power of FCB then in effect than in permitted by
the terms of this Agreement (without regard to Section 21.1(v)), in addition to
any other remedies or rights hereunder, FCB shall have the right to repurchase
from PC a sufficient number of shares of FCB Voting Stock for a payment equal
to the Market Price thereof consisting (in FCB's discretion) of cash and/or
FCB's PC Common Shares in accordance with Section 4.5 (so long as no Change of
Control of PC shall have occurred) to meet the foregoing percentage limitation.
PC shall notify FCB promptly after it becomes aware of any fact in light of
which FCB shall be entitled to effect such repurchase.
Section 4.2 Notice of Repurchase. In order to exercise its
right to repurchase shares of FCB Voting Stock pursuant to Section 4.1 hereof,
FCB shall deliver to PC a notice (the "Section 4.1 Notice") setting forth the
basis under Section 4.1 entitling it to repurchase such FCB Voting
-22-
<PAGE> 23
Stock and the date on which FCB wishes to purchase such FCB Voting Stock, which
date shall not be less than 60 days following FCB's delivery of such notice or
as soon thereafter as may be permitted under applicable laws (the "Repurchase
Date").
Section 4.3 Repurchase of Stock. Unless the parties agree
otherwise, any repurchase of FCB Voting Stock pursuant to this Article IV shall
take place at the corporate offices of FCB on the Repurchase Date.
Section 4.4 Assignment of Rights. In the event that FCB
elects to exercise its right to repurchase under this Article IV, FCB may
specify in the Section 4.1 Notice another person as its designee to purchase
the FCB Voting Stock to which such Notice relates, provided that if such person
shall fail to do so, FCB shall be obligated to purchase such FCB Voting Stock
on the day following the Repurchase Date.
Section 4.5 Delivery of FCB's PC Voting Stock. Whenever FCB
shall elect to deliver its PC Voting Stock in connection with payment of the
purchase price of FCB Voting Stock pursuant to this Article, PSA (or any person
which it designates who is reasonably acceptable to FCB) shall purchase for
cash from FCB as much PC Voting Stock (to the extent of FCB's holdings of PC
Voting Stock) as equals the Market Price
-23-
<PAGE> 24
of the FCB Voting Stock to be purchased by FCB and FCB shall use such cash in
the payment to PC of the purchase price for such FCB Voting Stock. Such PC
Voting Stock shall be valued at the Market Price thereof on the date the
Section 4.1 Notice is given hereunder as determined hereunder. FCB's rights to
deliver PC Voting Stock to PSA pursuant to this Section 4.5 shall terminate if
FCB shall not exercise its right to repurchase FCB Voting Stock within sixty
days after receipt by FCB form PC of notice of a Change of Control of PC;
provided, PSA may at any time prior thereto assign its obligations under this
Section 4.5 to any other person who shall be reasonably satisfactory to FCB in
which event PSA shall have no further obligation under this section.
5.
ARTICLE V
Option of PSA to Repurchase FCB's PC Common Shares
Section 5.1 Right to Repurchase Shares. (a) In the event of
a Change of Control of FCB or the existence of a PC Event, so long as no Change
of Control of PC shall have occurred, PSA shall have the right to repurchase
from FCB or any FCB Controlled Corporation then owning such shares all but no
part of the shares of capital stock of PC then owned by FCB or such Controlled
Corporation for a payment equal to the Market Price thereof consisting (in
PSA's discretion) of cash and/or PC's FCB Voting Stock in accordance with
Section 5.5. FCB hereby agrees to inform PSA and PC immediately following the
commencement of any Change of Control of FCB or any PC Event. PSA's rights
hereunder shall expire twelve months after the receipt by PSA of such notice
from FCB.
-24-
<PAGE> 25
(b) Should the PC Voting Stock owned by FCB and the FCB
Affiliates exceed the percentage limitations set forth in the Publicis
Communication Shareholders Agreement, dated as of the date hereof, among FCB,
PC and Publicis (the "PC Shareholders Agreement"), in violation of the terms of
such Agreement, or should the aggregate number of outstanding shares of PC
Voting Stock be reduced for any reason whatsoever, and such reduction results
in FCB and the FCB Affiliates owning a greater percentage of the Total Voting
Power of PC then in effect than is permitted by the terms of the PC
Shareholders Agreement (without regard to Section 1.1(v) of the PC Shareholders
Agreement) in addition to any other remedies or rights thereunder, so long as
no Change of Control of PC shall have occurred, PSA shall have the right to
repurchase form FCB a sufficient number of shares of PC Voting Stock for a
payment equal to the Market Price thereof consisting (in PSA's discretion) of
cash and/or PC's FCB Voting Stock (in accordance with Section 5.5) to meet the
foregoing percentage limitation. FCB shall notify PSA and PC promptly after it
becomes aware of any facts in light of which PSA shall be entitled to effect
such repurchase.
Section 5.2 Notice of Repurchase. In order to exercise its
right to repurchase shares of PC Voting Stock pursuant to Section 5.1 hereof,
PSA shall deliver to FCB a notice (the "Section 5.1 Notice") setting forth the
basis under Section 5.1 entitling it to repurchase such PC Voting Stock and the
date on which PSA wishes to purchase such PC
-25-
<PAGE> 26
Voting Stock, which date shall not be less than 60 days following PSA's
delivery of such notice or as soon thereafter as may be permitted under
applicable laws (the "Repurchase Date").
Section 5.3 Repurchase of Stock. Unless the parties agree
otherwise, any repurchase of securities pursuant to this Article V shall take
place at the corporate offices of FCB on the Repurchase Date.
Section 5.4 Assignment of Rights. In the event that PSA
elects to exercise its right to repurchase under this Article V, PSA may
specify in the Section 5.1 Notice another person as its designee to purchase
the PC Voting Stock to which such notice relates, provided that if such person
shall fail to do so, PSA shall be obligated to purchase such PC Voting Stock on
the day following the Repurchase Date.
Section 5.5 Delivery of PC's FCB Voting Stock. Whenever PSA
shall elect (with PC's consent) that the purchase price of PC Common Shares
pursuant to this Article shall be payable in whole or in part by delivery of
PC's FCB Voting Stock to FCB, the transaction may be structured as a purchase
by PSA for cash of PC Common Shares in which case FCB shall accept a put from
PC of so much of PC's FCB Voting Stock as equals the cash acquired by FCB as
proceeds of the purchase by PSA and FCB shall pay PC such acquired cash in
exchange for the FCB Voting Stock to be received upon the exercise of such put.
In such case, such FCB Voting Stock shall be valued at
-26-
<PAGE> 27
the Market Price thereof on the date of Section 5.1 Notice is given hereunder
as determined hereunder.
Section 5.6 Transfer of PSA's Rights. Notwithstanding the
foregoing, the option granted PSA hereunder shall apply only so long as PSA
Controls a majority of the Voting Stock of PC. In the event PSA does not
Control a majority of the Voting Stock of PC, PC shall have the right to
designate the party, if any, which shall be entitled to exercise such rights,
which party shall be reasonably acceptable to FCB. FCB and PC shall cooperate
to establish appropriate new arrangements in this regard.
6.
ARTICLE VI
Additional Agreements
Section 6.1 Election of Director. (a) At the first meeting
of the Board of Directors of FCB occurring following the closing of the
transactions contemplated by the Master Alliance Agreement, FCB shall cause
Maurice Levy to be elected to FCB's Board of Directors who shall serve until
his successor is duly elected and qualified. Commencing on the date hereof and
thereafter during the term of this Agreement so long as PC shall beneficially
own at least 10% of the outstanding Voting Stock of FCB and FCB's designee
shall be elected to serve on PC's Board of Directors in compliance with Section
6.1 of the PC Shareholders Agreement. FCB's management shall recommend to the
Nominating Committee of the Board of Directors of FCB to be included in the
slate of nominees recommended by FCB's Board of Directors to
-27-
<PAGE> 28
stockholders for election as directors at each annual meeting of stockholders
of FCB, commencing with the annual meeting of stockholders next following the
date hereof, one person designated by PC and, assuming such person is included
by such committee in such recommended slate, shall use its best efforts to
cause the shares for which FCB's management or Board of Directors holds proxies
or is otherwise entitled to vote to be voted in favor of the election of such
designee. In the event that any such designee shall cease to serve as a
director for any reason between any annual meetings of FCB's stockholders, so
long as this section shall be applicable, FCB's management shall recommend to
the Nominating Committee to recommend to the Board of Directors that such
vacancy be filled with a person designated by PC. If PC's designee is unable
to attend any meeting of the Board, he shall be entitled to send a non-voting
observer in his place. Moreover, if PC's designee is not elected to FCB's
Board of Directors, PC shall be entitled to have a non- voting observer who
shall be a senior officer of PC present at all meetings of the Board.
(b) The director elected as provided in paragraph (a)
shall also be selected to serve as a voting or nonvoting member of one or more
board committees. In selecting appropriate committee memberships, FCB will
take into account the proportion of ownership which PC holds in it and the
significance of the alliance with PC to FCB's overall business operations.
Initially, Maurice Levy shall be appointed to service on FCB's Management
Council and on the International
-28-
<PAGE> 29
Committee and shall serve as chairman of the latter. Jean-Paul Morin shall
also initially serve as an invited nonvoting member of FCB's Audit and Finance
Committees whenever appropriate agenda items are to be considered.
Section 6.2 Equity Method Accounting. FCB shall furnish to
PC at FCB's expense all information requested by PC that is required by French
generally accepted accounting principles to enable PC to account for its
investment in FCB pursuant to French equity accounting principles, or otherwise
to comply with any reporting requirements under applicable French securities
and tax laws and regulations. FCB shall provide at the expense of PC such
additional information regarding FCB, to the extent reasonably available, to,
and otherwise cooperate with, PC so as to enable PC or Publicis to prepare its
financial statements and meet management reporting requirements. In cas
information is not available, FCB will use its best efforts to produce such
information as soon as feasible.
Section 6.3 Securities Laws. PC hereby represents and
warrants to FCB that it is not acquiring any of its PC Common Stock on the date
hereof and neither PC nor PSA will be acquiring from FCB any other shares of
the capital stock of FCB pursuant to this Agreement with a view to the public
distribution thereof. Further, PC acknowledges that none of such shares and
none of such other shares when issued to PC will be registered under the
Securities Act or under any state securities or "blue sky" laws and agrees not
transfer any such
-29-
<PAGE> 30
shares unless they are registered under such Act and laws or unless an
exemption from such registration is available, as evidence by an opinion of
United States counsel to PC addressed to FCB reasonably acceptable to FCB and
its United States counsel. FCB agrees to comply with the provisions regarding
registration rights attached in the Registration Agreement attached as Exhibit
A hereto. PC agrees that until any shares of capital stock issued to it or PSA
by FCB are so registered, the certificates representing such shares shall bear
a legend to the effect that such shares are "restricted securities" for
securities laws purposes and are subject to this Agreement.
6.4 Notice by FCB of Acquisitions. FCB shall use its best
efforts to give PC prompt notice of the receipt by FCB of (i) any written
notice from any person or group couched in such terms as to put FCB reasonably
on notice of the likelihood that such person or group has acquired or is
proposing to acquire any shares of FCB Voting Stock which results in, or, if
successful, would result in, such person or group owning or having the right to
acquire more than 5% of the shares of FCB Voting Stock then outstanding, (ii)
any notice under the Hart-Scott- Rodino Antitrust Improvements Act of 1976 and
(iii) any Statement on Schedule 13D or 14D-1 under the Exchange Act.
7.
ARTICLE VII
Miscellaneous
-30-
<PAGE> 31
Section 7.1 Certain Definitions. As used in this Agreement:
(a) The term "Affiliate" means, with respect to any
person, any other person which directly or indirectly Controls, is Controlled
by or is under common Control with such person.
(b) "Bleustein-Blanchet Family" means any of Marcel
Bleustein-Blanchet, Sophie Vaillant or their descendants or any combination of
them.
(bb) The term "business day" shall mean a day which is not
a legal holiday for banks in Chicago, Illinois.
(c) A "Change of Control" with respect to FCB shall be
deemed to have occurred (i) if any person or group (other than (A) the Trust,
(B) any officer or director of FCB who had been such an officer or director for
at least one year prior thereto, (C) any person whose shares of Voting Stock
are treated as "beneficially owned", as defined in Rule 13d-3, of the Exchange
Act, as in effect on the date hereof, by such an officer or director of FCB,
(D) PC, Publicis or any Affiliate of PC or Publicis or (E) a person or group
approved by PC and FCB which approval may be conditioned upon no further
increase of shareholding or other designated conduct by such person or group)
Controls more than 33-1/3% of the Total Voting Power of FCB then in effect or
(ii) if during any period of two consecutive years, individuals who at the
beginning of any
-31-
<PAGE> 32
such period constitute the directors of FCB cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination for
election by FCB's stockholders, of each director of FCB first elected during
such period was approved by a vote of at least two-thirds of the directors of
FCB then still in office who were directors of FCB at the beginning of any such
period, (iii) if FCB shall be merged into or consolidated with another
corporation and FCB shall not be the surviving corporation or FCB shall sell
all or substantially all its assets to another person.
(d) A "Change of Control" with respect to PC shall be
deemed to have occurred as follows:
(1) Family Control. A "Change of Control" with respect
to PC shall not be deemed to have occurred so long as a majority of
the Voting Stock of PC is Controlled by members of the Bleustein-
Blanchet Family either directly or by Control of a majority of the
Voting Stock of PSA so long as PSA shall Control a majority of the
Voting Stock of PC.
(2) No Family Control. At any time a majority of the
Voting Stock of PC is not Controlled by the Bleustein-Blanchet Family
as provided above, a "Change of Control" shall be deemed to have
occurred if either of the following occurs:
-32-
<PAGE> 33
(A) PC Level. During any period in which PC is
listed on the Cote Officielle, Second Marche or Marche
hors-cote or PSA Controls less than 40% of the Total Voting
Power of PC (i) for any period of two consecutive years,
individuals who at the beginning of any such period constitute
the members of the conseil d'administration, i.e., the
administrateurs, of PC or of the conseil de surveillance if
such form shall be adopted) cease for any reason to constitute
at least a majority thereof, unless the election, or the
nomination for election by PC's stockholders, of each
administrateur of PC first elected during such period was
approved (by written consent or vote) by at least two-thirds
of the administrateurs of PC then still in office who were
administrators of PC at the beginning of any such period;
provided on Change of Control shall be deem to have occurred
pursuant to this clause (i) if it is established to the
satisfaction of the arbitrators in proceedings pursuant of the
Multi-Party Arbitration Agreement that the Bleustein- Blanchet
Family continues as a matter of fact to possess the power to
control (despite its failure to own directly or indirectly a
majority of the Total Voting Power of PC) the election of a
majority of the administrateurs, or (ii) any other person or
group Controls more than 33-1/3% of the Total Voting Power of
PC then in effect without the consent of FCB and PC (which
-33-
<PAGE> 34
consent may be conditioned upon no further increases of
shareholding or other designated conduct by such person or
group); or
(B) PSA Level. During any period in which PSA
Controls at least 40% of the Total Voting Power of PC (i) for
any period of two consecutive years, individuals who at the
beginning of any such period constitute the members of the
conseil de surveillance of PSA cease for any reason to
constitute at least a majority thereof, unless the election,
or the nomination for election by PSA's stockholders, of each
such member first elected during such period was approved (by
written consent or vote) by at least two-thirds of such
members then still in office who were members at the beginning
of any such period; provided no Change of Control shall be
deemed to have occurred pursuant to this clause (i) if it is
established to the satisfaction of the arbitrators in
proceedings pursuant to the Multi-Party Arbitration Agreement
that the Bleustein-Blanchet Family continues as a matter of
fact to possess the power to control (despite its failure to
own directly or indirectly a majority of the Total Voting
Power of PSA ) the election of a majority of the members of
the conseil de surveillance, or (ii) any other person or group
Controls more than 33-1/3% of the Total Voting Power of PSA
then in effect without the consent of FCB and PC
-34-
<PAGE> 35
(which consent may be conditioned upon no further increases in
shareholding or other designated conduct by such person or
group) unless members of the Bleustein-Blanchet Family shall
continue to Control at all time thereafter a percentage of the
Total Voting Power of PSA which is at least equal to the sum
of the total Voting Power of PSA held by such other person or
group plus 5% of the Total Voting Power of PSA.
(3) Merger, Sale of Assets: (A) PC Level. If PC shall
be merged into or consolidated with another corporation and PC shall
not be the surviving corporation or PC shall sell all or substantially
all its assets to another person, so long as a majority of the Voting
Stock of the surviving corporation is not Controlled by members of the
Bleustein-Blanchet Family either directly or by Control of a majority
of the Voting Stock of PSA so long as PSA shall Control a majority of
the Voting Stock of the surviving corporation.
(B) PSA Level. During any period in which PSA Controls at
least 40%
(e) An "FCB Event" shall be deemed to occur upon the
existence of any of the following events:
(iv) PC or PSA shall be in default in any material respect
in the performance of any of its obligations
-35-
<PAGE> 36
hereunder or under the Master Alliance Agreement, the PC Shareholders
Agreement, the Publicis Undertaking dated the date hereof, the PSA
Shareholders Agreement, dated as of the date hereof, among PC, FCB
International, Inc, and Publicis FCB B.V. or the Registration Rights
Agreement, dated the date hereof, between PC and FCB (such agreements
to be collectively referred to herein as the "Related Agreements") as
determined by the arbitrator in proceedings pursuant to the Multi-
Party Arbitration Agreement described in Section 7.3;
(v) PC or PSA (so long as PSA shall Control PC) shall
file a voluntary petition in bankruptcy or insolvency, or a petition
for relief or reorganization under any bankruptcy or insolvency law or
declare a moratorium with respect to the payment of its indebtedness;
or an involuntary petition in bankruptcy or insolvency shall be filed
against either of them and shall not have been vacated within sixty
days; or a receiver, intervenor or custodian shall be appointed for
all or a substantial portion of the property of either them; or
(vi) Any of the stock or the advertising business of PC or
PSA (so long as PSA shall Control PC) or any of the stock or the
advertising business of Publicis Conseil shall have been expropriated
or nationalized by any governmental Authority (other than the United
States).
-36-
<PAGE> 37
(h) The term "Governmental Authority" means any nation or
government, any state, province, department or other political subdivision
thereof, and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government have jurisdiction
over a party.
(i) The term "group" shall have the meaning comprehended
by Section 13(d)(3) of the Exchange Act and the rules and regulations
promulgated thereunder.
(j) The term "Market Price" means:
(i) with respect to FCB Voting Stock, upon the issuance
of any Notice hereunder in which the Market Price of FCB Voting Stock
is applicable, (a) with respect to FCB Common Stock, the average of
the closing prices of FCB Common Stock during the 20 trading days
ending with the trading day next preceding the date the Notice is
sent, as reported by the Wall Street Journal for the New York Stock
Exchange, or as reported by the Wall Street Journal for the principal
stock exchange on which such FCB Common Stock is listed (if other than
the New York Stock Exchange) or as reported by the Wall Street Journal
for the NASDAQ National Market System, if such Common Stock is
principally traded thereon; and (b) with respect to any other Voting
Stock of FCB that is not publicly listed or traded, the value of such
Voting Stock on the date of such Notice, as jointly determined by
nationally
-37-
<PAGE> 38
recognized investment banking firms selected by each party or, in the
event such firms are unable to agree, a third nationally recognized
investment banking firm to be selected by such two firms in accordance
with the procedures set forth in clause (ii) hereof;
(ii) with respect to FCB's PC Common Shares upon the
issuance of any Notice hereunder in which the Market Price of PC
Common Shares is applicable, (a) so long as such PC Common Shares are
not publicly listed for trading on the French Stock Exchange. FCB and
PSA shall each designate within 15 calendar days after delivery of
such Notice an investment banker of recognized standing in France to
evaluate FCB's PC Common Shares. PC shall give each investment banker
full access to all information that it may reasonably request
concerning PC and shall provide the same information to the other
investment banker. Within 30 days of their selection, each investment
banker must propose a market value for FCB's PC Common Shares as of
the date of the Notice. If the market value proposed by FCB's
investment banker is lower or not more than 10% more than the market
value proposed by PSA's investment banker, then the Market Price shall
be the average of such prices. If the price proposed by FCB's
investment banker is more than 10% higher than the price proposed by
PSA's investment banker, then the parties shall consult as to a fair
price. If they are unable to agree within 10 days, they shall cause
their investment bankers to select jointly a third investment
-38-
<PAGE> 39
banker who shall have access to all information it shall reasonably
request concerning PC. The third investment banker shall within 30
days of its selection choose the market value which best reflects its
professional opinion of the fair market value of FCB's PC Common
Shares on the date the applicable Notice was first given which shall
be the price proposed by FCB's investment banker or PSA's investment
banker, and such choice shall be final. Each party shall each bear
the costs of its own investment banker and the parties shall share
equally the cost of the third investment banker; or (b) from the time
PC Common Shares are listed on the French Stock Exchange, the price
published in the "Cote Officielle" on the day of any notice hereunder,
or, if no notice is provided, on the relevant day to be considered in
the terms of this Agreement. The "French Stock Exchange" as used
herein means either of the Cote Officielle, second Marche or Marche
hors-cote.
(k) A "PC Event" shall be deemed to occur upon the
existence of any of the following events:
(i) FCB or FCB International shall be in default in any
material respect in the performance of any of its obligations
hereunder or under any of the Related Agreements as determined by the
arbitrators in proceedings pursuant to the Multi-Party Arbitration
Agreement described in Section 7.3;
-39-
<PAGE> 40
(ii) FCB or FCB International shall file a voluntary
petition in bankruptcy or insolvency, or a petition for relief or
reorganization under any bankruptcy or insolvency law or declare a
moratorium with respect to the payment of its indebtedness; or an
involuntary petition in bankruptcy or insolvency shall be filed
against FCB or FCB International and shall not have been vacated
within sixty days; or a receiver, intervenor or custodian shall be
appointed for all or a substantial portion of the property of FCB or
FCB International; or
(iii) Any of the stock or business of FCB shall have been
expropriated or nationalized by any Governmental Authority (other than
France);
(l) The term "person" shall mean any person, individual,
corporation, partnership, trust or other nongovernmental entity or any
Governmental Authority.
(m) The term "Publicis" or "PSA" means Publicis S.A., a
societe anonyme, which at the date hereof controls PC.
(n) The term "Significant Event" mean (i) any proposed
amendment to the Certificate of Incorporation or By-laws of FCB, (ii) any
disposition of FCB (by way of merger, disposition of assets or otherwise),
(iii) any recapitalization, (iv) any liquidation, (v) any vote pursuant to any
provision of law or FCB's Certificate of Incorporation or By-laws requiring or
permitting stockholders to approve any
-40-
<PAGE> 41
business combination proposed by or with another person or its affiliates which
have acquired a certain percentage of FCB's shares or to grant voting rights to
such person or to waive or adopt provisions requiring such a vote, or (vi) any
action which PC, in good faith, believes would be materially adverse to PC
(other than actions which may be taken by FCB as contemplated by this
Agreement).
(o) The term "Total Voting Power" of a person which is a
corporation means the total number of votes which may be cast in the election
of directors of such person at any meeting of stockholders if all securities
entitled to vote in the election of directors were present and voted at such
meeting (other than votes that may be cast only upon the happening of a
contingency).
(p) The term "Voting Power" with respect to any person or
group or with respect to the Voting Stock held by such person or group means
the total number of votes to be cast in the election of directors of any
corporation which such person or group, alone or in possession with any
Affiliate, holds directly or indirectly, the power to vote.
(q) The term "Voting Stock" means the common shares and
any other securities issued by a corporation having the ordinary power to vote
in the election of directors of such corporation (other than securities having
such power only upon the happening of a contingency not then in effect).
-41-
<PAGE> 42
Section 7.2 Termination of Agreement. (a) FCB may terminate
this Agreement, in its sole discretion, if PC at any time owns less than 10% of
the FCB Voting Stock than outstanding, for a period in excess of 12 months;
and PC may terminate this Agreement, in its sole discretion, if FCB at any time
thereafter owns less than 10% of the PC Common Shares then outstanding, for a
period in excess of 12 months.
(b) Notwithstanding anything to the contrary in this
Agreement, this Agreement shall terminate on December 31, 2008, except that
Article I (other than Sections 1.6 and 1.7) and II shall expire on December 31,
1998.
(c) From and after the termination of this Agreement, the
covenants, obligations and agreements of the parties set forth herein shall be
of no further force or effect and the parties shall be under no further
obligation with respect thereto; provided that the representations, warranties
and agreements of PC contained in Section 6.3 and the Registration Rights
Agreement shall survive any termination of this Agreement.
Section 7.3 Governing Laws, Dispute Resolution. (a) This
Agreement shall be governed in all respects by the laws of the State of
Delaware as applied to contracts entered into solely between residents of, and
to be performed entirely within, such state,
-42-
<PAGE> 43
(b) All disputes arising under this Agreement and the
Related Agreements shall be referred in the first instance by written notice in
accordance with Section 7.6 to the Dispute Resolution Committee (described in
Section 1.4 of the Master Alliance Agreement), and if not resolved by such
Committee within thirty calendar days after the giving of notice may be
referred by either party by written notice to the Chief Executive Officers or
Chief Operating Officers of FCB and PC.
(c) Disputes which are not revolved within thirty
calendar days after the giving of notice to the Chief Executive or Chief
Operating Officers referred to in clause (b) hereof shall be settled in
accordance with the Multi-Party Arbitration Agreement attached as Appendix 7 to
the Master Alliance Agreement, provided, nothing in this Section 7.3 shall
prevent any party from seeking provisional or injunctive relief in any court
having jurisdiction over the parties pending resolution of such dispute by the
processes contemplated herein.
Section 7.4 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties thereto and their
respective successors and assigns. This Agreement may not be assigned by a
party hereto, whether by operation of law or otherwise, without the prior
written consent of the other party.
-43-
<PAGE> 44
Section 7.5 Entire Agreement; Amendment. This Agreement, the
Master Alliance Agreement and the other documents delivered pursuant thereto
constitute full and entire understanding and agreement between the parties with
regard to the subject matter hereof and supersede all prior agreements and
understandings among the parties relating to the subject matter hereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
Section 7.6 Notices. Any notice, request or other demand to
or upon the parties hereto shall be in writing (including telex and telecopy
communication followed by registered mail with return receipt requested) and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or when telexed (answer-back received) or
telecopied (with receipt acknowledged) addressed to the party for which
intended as provided below (or as hereafter specified by such party by notice
hereunder):
(a) if to PC or PSA, to it at:
133, avenue des Champs-Elysees
Paris 76008
France
Attn: President Directeur General
(b) if to FCB, to it at:
101 E. Erie Street
Chicago, Illinois 60666
USA
-44-
<PAGE> 45
Attn: Chief Executive Officer
Section 7.7 Government Reviews, Enforceability. The parties
and their respective subsidiaries will cooperate in the event of any
governmental or EEC review of the transactions contemplated hereby, including
furnishing information sought by the reviewing authority. This Agreement may
be discussed with, shown to, and filed with any Governmental Authority or
official as determined to be appropriate by a party. If, as a result of such
representation or otherwise, any provision of this Agreement is or becomes or
is deemed invalid, illegal or unenforceable under the applicable laws or
regulations of any jurisdiction, or is stricken or materially amended by the
action of any competent authority or any change or modification of any such
provision is required or recommended by any such Governmental Authority, the
parties shall negotiate in good faith with respect to either an alternative or
modified provision or the striking of such provision from this Agreement.
After sixty days from the commencement of such negotiations, either party may
submit the subject of such disagreement to arbitration in accordance with the
Multi-Party Arbitration Agreement for reformation or termination of all or
portions of this Agreement and the Related Agreements, all as deemed
appropriate by the arbitrators.
Section 7.8 Injunctive Relief. PC, on the one hand, and FCB
on the other, acknowledge and agree that irreparable damage would occur in the
event that any of the
-45-
<PAGE> 46
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specific
performance of the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they may be entitled at law or equity but subject to the
provisions of Section 7.3 with regard to the Multi-Party Arbitration Agreement.
Section 7.9 Non-Waiver. The failure by any party to enforce
any provision of this Agreement shall not constitute a waiver or affect its
right to require the performance thereof by the other party hereto or affect
the validity of any other provision hereof.
Section 7.10 Titles. Section titles used in the Agreement
are used for convenience of reference only and shall in no event be used for
interpretation purposes.
Section 7.11 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement,
and shall become binding when one or more counterpart have been signed by each
of the parties and delivered to the other party thereto.
-46-
<PAGE> 47
Section 7.12 PC Common Shares. When the term PC Common
Shares is used herein, it shall mean PC Voting Stock.
-47-
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on their behalf on January 23, 1989 to
be effective as of the date first above written.
PUBLICIS COMMUNICATION
By:
Name:
Title:
FOOTE, CONE & BELDING
COMMUNICATIONS, INC.
By: /s/ Norman W. Brown
-----------------------
Name:
Title:
This agreement is executed in 2 full sets, one for each Party.
-48-
<PAGE> 1
EXHIBIT C(3)
Execution Copy
AGREEMENT, dated as of May 19, 1997 (the "Agreement") among
PUBLICIS S.A., a societe anonyme organized and existing under
the laws of France ("Publicis"), PUBLICIS COMMUNICATION, a
societe anonyme organized and existing under the laws of
France ("Communication"), and PUBLICIS-FCB EUROPE B.V., a
company organized under the laws of the Netherlands ("PBV"),
on the one hand, and TRUE NORTH COMMUNICATIONS INC., a
Delaware corporation ("True North"), FCB INTERNATIONAL, INC.,
a Delaware corporation ("FCBI"), and TRUE NORTH HOLDINGS
NETHERLANDS B.V., a company organized under the laws of the
Netherlands ("TNBV"), on the other hand.
INTRODUCTION
Publicis, Communication and PBV, on the one hand, and True North, FCBI
and TNBV, on the other hand, desire to create two separate worldwide agency
networks, one owned and controlled by Communication and one owned and
controlled by True North.
Publicis and True North desire to set forth the parties' agreement
concerning ownership of Communication and certain other agreements between
them.
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement and other good and
valuable consideration, the parties agree as follows:
ARTICLE I
EQUITY AND GOVERNANCE OF COMMUNICATION
1.1. Put and Call of Communication Stock. At the times and under the
circumstances described below, True North shall have the right, in its sole
discretion and on one occasion, to require Publicis to purchase from True North
(the "Remainder Put"), and Publicis shall have the right, in its sole
discretion and on one occasion, to require True North to sell to Publicis (the
"Remainder Call") the number of shares of Communication Stock (as defined
below) which is equal to the percentage of the issued and outstanding shares of
Communication Stock owned by True North, less the Expiration Put Percentage (as
defined below). The applicable percentage of issued and outstanding shares of
Communication Stock subject to the Remainder Put and the Remainder Call is
referred to herein as the "Remainder Percentage" and in no event shall exceed
6.5%. The shares subject to the Remainder Call or the Remainder Put shall be
subject to appropriate adjustments for stock dividends, splits, combinations,
exchanges, or similar events, occurring subsequent to such date of exercise and
prior to the consummation of such Remainder Put or Call. True North may
exercise the Remainder Put only if (i) Communication Stock has not been listed
on a major European stock exchange on or prior to December 31, 1998 and (ii)
True
<PAGE> 2
North has previously exercised the Expiration Put (as defined below) and (iii)
True North has given its notice of exercise on or prior to March 31, 2000.
Publicis may exercise the Remainder Call only if (i) Communication Stock has
not been listed on a major European stock exchange and (ii) either (A) True
North has exercised its Expiration Put or (B) Publicis has given its notice of
exercise on or after April 1, 2000 and on or prior to June 30, 2000. The
purchase price shall be a price per share equal to the Put/Call Price, as
determined pursuant to the terms of Section 1.1.1, and upon exercise of the
Remainder Put, True North shall be bound to sell such shares to Publicis and
convey ownership of such shares to Publicis and Publicis shall be bound to
purchase such shares from True North and tender the purchase price therefor, in
accordance with Section 1.1.2, and upon exercise of the Remainder Call,
Publicis shall be bound to purchase such shares from True North and tender the
purchase price therefor and True North shall be bound to sell such shares to
Publicis and convey ownership of such shares to Publicis pursuant to Section
1.1.2.
1.1.1. The Put/Call Price per share of Communication Stock shall be
equal to (X) the sum of (1) the average of (A) 60% of the average of the annual
revenue of Communication and its subsidiaries, on a consolidated basis, for
each of the two full calendar years ended immediately preceding the date of
exercise of the Remainder Put or the Remainder Call, as the case may be, and
(B) 11 times the average of the net income of Communication and its
subsidiaries, on a consolidated basis (after taxes and before amortization of
goodwill), for each of such two full calendar years (and if such average net
income is negative, then such average net income shall be deemed to be zero)
and (2) the amount of net tangible assets (net equity less intangible assets)
of Communication as of the last day of the calendar year immediately preceding
the date of exercise (less the amount of any dividends paid by Communication,
and plus the amount of any capital contributions made to Communication, in each
case after such last day of the calendar year immediately preceding the date of
exercise and prior to the date of the consummation of such Remainder Put or
Remainder Call), divided by (Y) the total number of shares of Communication
Stock issued and outstanding on the date of exercise, subject to appropriate
adjustments for stock dividends, splits, combinations, exchanges, or similar
events, occurring subsequent to such date of exercise and prior to the
consummation of such Remainder Put or Call. Subject to the last sentence of
this Section 1.1.1, the calculations required to be made pursuant to this
Section 1.1.1 shall be made by reference to the annual audited consolidated
financial results of Communication determined in accordance with French
generally accepted accounting principles, consistently applied. The annual
audited consolidated financial results of Communication shall, for purposes of
the calculations required to be made pursuant to this Section 1.1.1, be
adjusted:
(i) on a pro forma basis with respect to revenue and net
income and any effect on net tangible assets or shares outstanding, to
exclude from such calculations the revenue and net income generated
and any effect on net tangible assets or shares outstanding during the
second year of the two full calendar years ended immediately preceding
the date of such exercise by any agencies acquired during such year by
Communication from Publicis or a third party; provided that the
inclusion of any pro forma revenue shall give effect to minority
interests as set forth in clause (iii) of this Section 1.1.1 and
provided further that the pro forma calculations required by this
clause (i) shall give effect to Publicis' cost of financing any of the
acquired agencies transferred to Communication and shall also give
effect to any capital contributions made to finance such acquisition;
2
<PAGE> 3
(ii) to exclude from net income any extraordinary and
non-recurring losses incurred or extraordinary and non-recurring gains
realized, in each case, only those losses or gains which are
collectively in excess of US $5 million, during the relevant year;
(iii) for any subsidiary or equity investment that is not
directly or indirectly wholly-owned by Communication, to include in
revenue that percentage of such subsidiary's or investee's revenue
which reflects that percentage interest in such subsidiary or equity
investment which is owned by Communication but only if such percentage
interest is equal to or greater than 30%; and
(iv) with respect to any items of revenue or net income
attributable to True North and its subsidiaries which are included in
the annual audited consolidated financial results of Communication to
(x) exclude any such items of revenue and net income from the
calculation of the Put/Call Price and (y) include in the calculation
of the Put/Call Price (after the exclusion called for by clause (x)
of this paragraph (iv)) an amount equal to 10 times the average net
income of True North and its consolidated subsidiaries reflected in
the annual audited consolidated financial results of Communication
for each of the two full calendar years ended immediately preceding
the date of exercise of the Remainder Put or the Remainder Call.
1.1.2. If either (i) True North wishes to exercise the Remainder Put
or (ii) Publicis wishes to exercise the Remainder Call, in either case, such
party shall give the other party written notice of such exercise, which notice
shall contain the number of shares of Communication Stock which is the subject
of such exercise together with the notifying party's estimated calculation of
the Put/Call Price. The purchase and sale of such shares shall be consummated
within 10 Business Days (as defined below) following the receipt of the notice
of exercise or, in the event of exercise between January 1 and February 15 of
any year, within 10 Business Days of February 15 of such year. In exchange for
the payment by Publicis of the aggregate Put/Call Price determined pursuant to
this Section, which shall be payable by wire transfer of immediately available
funds in French Francs to a bank or other financial institution designated by
True North, True North shall convey ownership of the Communication Stock
subject to the Remainder Put or Remainder Call, as applicable, to Publicis,
free of any mortgage, pledge, lien, encumbrance, assessment, charge or adverse
claim affecting title to, or resulting in an encumbrance against, such
Communication Stock, or a security interest of any kind (including any
conditional sale or other title retention agreement), any option or other
agreement to sell and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes of any U.S.
or other jurisdiction) excluding, however, Encumbrances solely in favor of
Publicis or Communication (collectively, "Encumbrances"). For purposes of this
Agreement, "Business Day" shall mean any day that is not a Saturday, Sunday or
a day on which banks in Chicago or Paris are permitted or required to be
closed. After True North has given written notice to Publicis of its exercise
of the Remainder Put, or Publicis has given written notice to True North of its
exercise of the Remainder Call, as the case may be, such notice shall be
irrevocable, and True North shall be bound to sell to Publicis and Publicis
shall be bound to buy from True North that number of shares of Communication
Stock specified in such notice at the Put/Call Price. Notwithstanding the
immediately preceding sentence, in the event that the Remainder Put or
Remainder Call shall have been exercised but the closing of such transaction
shall not have occurred within 180 days of such
3
<PAGE> 4
exercise, the exercising party, if not in breach of the provisions of such
Remainder Put or Remainder Call, may cancel such exercise by written notice to
the other party and upon such cancellation, neither party shall be required to
fulfill its obligation with respect to such Remainder Put or Remainder Call
(but otherwise without prejudicing the rights of any party with respect to a
breach of such provisions by any other party).
1.2. Listing of Communication Stock. Publicis and Communication
agree to use their respective best efforts to cause to be offered to the public
and listed on a major European stock exchange prior to December 31, 1998,
shares of the common stock, par value 100 French Francs, of Communication
(including such other equity or debt securities as Communication may hereafter
issue in respect of or in exchange for shares of such common stock in
connection with any stock dividend or distribution, stock split-up,
recapitalization, recombination, or exchange by Communication generally of
shares of such common stock) (the "Communication Stock"). Publicis and
Communication each agree to seek to cause such listing to occur in 1997. For
the purposes of this Agreement, "major European stock exchange" shall be deemed
to be the Paris Bourse or the London Stock Exchange. The intention of the
parties is to provide True North with a means of selling its stake in
Communication in a public market. A merger of Communication with an entity
which is then publicly listed and which is the surviving corporation in such
merger shall be deemed to be a public listing for all purposes under this
Agreement.
1.3. Sale in Offering. Publicis and Communication shall give True
North at least 30 days prior written notice of their intention to commence the
offering and listing of Communication Stock. Upon True North's written request
to Communication, given within 15 days of the receipt of such notice, to
include in such offering shares of Communication Stock owned by True North,
Publicis and Communication shall cause such shares to be included in such
offering to the extent set forth below. True North's request shall include a
schedule (the "Schedule") which shall set forth the amount of shares of
Communication Stock which True North requests Communication to include in the
offering assuming a range of hypothetical offering prices, which shall include
the prices, based on a reasonable good faith estimate of market values, at
which True North will request Communication to include 25%, 33 1/3% and 50% of
its interests in the offering. As set forth in such Schedule, True North may
request that any amount of its Communication Stock be included in such
offering, provided, that it shall be entitled to have offered in such offering
up to, but no more than, 50% of the Communication Stock owned by True North at
the time True North requests that such shares be included in such offering (or,
if higher, up to, but no more than, 50% of the Communication Stock owned by
True North immediately prior to the consummation of such offering (to the
extent so requested by True North)) in priority over any other shares so
offered, until all of the shares which True North is entitled to have offered
(pursuant to the provisions of this sentence) are sold. Subject to its rights
to withdraw from such offering, as set forth below in this Section, True North
shall use all commercially reasonable efforts to cooperate with Communication
and its agents and advisors in effecting such offering.
1.3.1 If the offering is to be made on a major European stock
exchange and the laws and regulations applicable to an offering thereon require
that, prior to such offering, offering documents which include a minimum
offering price must be lodged with a regulatory entity, not less than 5 days
prior to the lodging of the offering with the Commission des Operations de
Bourse (the "COB") or other regulatory entity, as the case may be,
Communication shall furnish
4
<PAGE> 5
True North with a written copy of the offering documents to be lodged with the
COB or such regulatory entity, as the case may be, which shall include a
minimum offering price per share. If the offering is to be made in a country
which does not have such a regulatory requirement, then Communication agrees to
give True North written notice not less than 5 days prior to the commencement
of the offering, which notice shall contain a minimum offering price per share.
Within 2 Business Days after its receipt of such documents or notice, as the
case may be, True North may give written notification to Communication that it
wishes to withdraw from the offering a portion or all of the shares it
requested to be offered in accordance with the Schedule. If True North fails
to give such notice within such time, it shall be deemed to have irrevocably
committed to the offering all of its shares which it requested be offered in
accordance with the Schedule; provided that the actual price at which shares
are offered in such offering equals or exceeds the minimum offering price
specified in the documents lodged with the COB or such regulatory entity or
such notice, as the case may be. If True North so withdraws any or all of its
shares and Publicis or Communication elects, each acting in its sole
discretion, to offer and list any shares of Communication Stock in such
offering, such offering and listing shall constitute the offering and listing
of Communication Stock for all purposes under this Agreement. For the
avoidance of doubt, the parties agree that if, following True North's election
to withdraw some or all of its shares to be offered, the managing underwriter
of such offering determines, in its sole discretion, that the number of shares
remaining to be so offered shall be less than the number of shares required for
a successful offering, such managing underwriter may terminate such offering
and Publicis and Communication shall be deemed to have used their respective
best efforts to effect such offering and listing of the Communication Stock for
all purposes under this Agreement.
1.3.2. True North shall bear (i) its pro rata share of all
underwriting discounts and commissions, listing or other regulatory fees of an
offering to the extent incurred by Publicis and Communication and (ii) all
costs and expenses incurred directly by True North in connection with such
offering, including, without limitation, the fees and expenses of counsel,
investment advisors or other professionals hired by True North. Except as
specifically provided in clause (i) of the immediately preceding sentence, True
North shall not be responsible for any expenses incurred by Publicis or
Communication in connection with the offering and listing of the Communication
Stock. True North's pro rata share of expenses incurred under clause (i) of
the second preceding sentence shall be the percentage that the aggregate number
of shares of Communication Stock to be sold by True North constitutes of the
aggregate number of shares to be sold in such offering and listing.
1.3.3. In connection with any listing and offering of Communication
Stock pursuant to the terms of this Agreement, each of Publicis and
Communication agrees to indemnify and hold True North and its subsidiaries
harmless, in accordance with customary practice, against any and all losses,
claims, damages or liabilities to which they may become subject under any
statute or common law or otherwise and to reimburse them for any reasonable
legal or other expenses incurred by them in connection with defending any
actions, insofar as any such losses, claims, damages, liabilities or actions
shall arise out of or shall be based upon any untrue statement or alleged
untrue statement of a material fact contained in any offering documents or the
omission or alleged omission to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing indemnification shall not
apply to any losses, claims, damages, liabilities or actions which shall
5
<PAGE> 6
arise from the sale of shares of Communication Stock to any person if such
losses, claims, damages, liabilities or actions which shall arise out of or
shall be based upon any such untrue statement or alleged untrue statement, or
any omission or alleged omission, if such statement or omission shall have been
made in reliance upon or in conformity with information furnished in writing by
True North. In connection with any listing and offering of Communication Stock
pursuant to the terms of this Agreement, True North agrees to indemnify and
hold Publicis and Communication and each of their subsidiaries harmless, in
accordance with customary practice, against any and all losses, claims, damages
or liabilities to which they may become subject under any statute or common law
or otherwise and to reimburse them for any reasonable legal or other expenses
incurred by them in connection with defending any actions, insofar as any such
losses, claims, damages, liabilities or actions shall arise out of or shall be
based upon any untrue statement or alleged untrue statement of a material fact
contained in any offering documents or the omission or alleged omission to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading if such statement or
omission shall have been made in reliance upon and in conformity with the
information furnished in writing by True North to Communication in connection
with the preparation of such registration or offering statement.
1.4. Put of Communication Stock if Not Listed. If Communication
Stock has not been listed on a major European stock exchange on or prior to
December 31, 1998, then on or prior to March 31, 2000, True North shall have
the right, in its sole discretion and on one occasion, to require Publicis to
purchase from True North (the "Expiration Put") up to, but not more than, the
number of shares of Communication Stock which is equal to 20% (subject to
adjustment) of the number of shares of Communication Stock issued and
outstanding as of the date of exercise of such Expiration Put, subject to
appropriate adjustments for stock dividends, splits, combinations, exchanges,
or similar events, occurring subsequent to such date of exercise and prior to
the consummation of such Expiration Put. The purchase price shall be a price
equal to the fair market value, as of the date of the notice of exercise of the
Expiration Put, of the block of Communication Stock sought to be sold by True
North ("Fair Market Value"), as determined by a panel of three investment banks
pursuant to the terms of Section 1.4.1, and upon exercise of the Expiration
Put, True North shall be bound to sell and convey ownership of such shares,
free of any Encumbrances, to Publicis and Publicis shall be bound to purchase
such shares from True North and tender the purchase price therefor in
accordance with Section 1.4.1. The 20% figure in the first sentence of this
Section 1.4 shall be reduced if True North shall fail to exercise any
Percentage Purchase Right or any True North Maintenance Right by multiplying 20
by a fraction, the numerator of which is the percentage of the issued and
outstanding shares of Communication Stock owned by True North after such
failure to exercise and the denominator of which is the percentage of such
shares which would have been owned had there been an exercise. The applicable
percentage of issued and outstanding shares of Communication Stock subject to
the Expiration Put is referred to herein as the "Expiration Put Percentage."
For the avoidance of doubt, the parties agree that the existence of the
Expiration Put shall not relieve Publicis or Communication from their
respective obligations pursuant to Section 1.2 to use their respective best
efforts to offer and list the Communication Stock.
1.4.1. If True North wishes to exercise the Expiration Put, it shall
give written notice to Publicis, subject to Section 1.4, at any time after
December 31, 1998 and on or prior to
6
<PAGE> 7
March 31, 2000, which notice shall include the number of shares of
Communication Stock which it wishes Publicis to purchase and True North's
selection of a globally recognized investment bank. Within 5 days of Publicis'
receipt of such notice, Publicis shall give True North written notice of its
selection of a globally recognized investment bank. If Publicis fails to
select an investment bank within the allotted time, Publicis shall be deemed to
have selected Lazard Freres. The two selected banks shall, within 10 days,
agree upon a third globally recognized investment bank. If the two selected
banks cannot agree on a third globally recognized investment bank, such third
bank shall be selected by lot from among four candidates, two to be nominated
by each of the selected banks. Each of True North and Publicis, respectively,
shall bear the fees and expenses of the investment bank selected by it, and the
fees and expenses of the third investment bank shall be shared equally by True
North and Publicis. The three selected banks shall be directed by each party
hereto to fully cooperate with one another and act in good faith to arrive
jointly at the Fair Market Value within 45 days of the selection of the third
bank. If the three selected banks cannot agree on a single determination of
the Fair Market Value within 45 days, the determination of Fair Market Value
shall be made by the Arbitral Tribunal (as defined below) in accordance with
Section 3.4.1 through 3.4.10 hereof. The Arbitral Tribunal shall be given
Terms of Reference (as defined below) which shall mandate a decision within 180
days from the date of the Notice of Arbitration. The purchase and sale of such
shares shall be consummated within 5 Business Days following the determination
of Fair Market Value. In exchange for the payment by Publicis of the Fair
Market Value determined pursuant to this Section 1.4.1, which shall be payable
by Publicis by wire transfer of immediately available funds in French Francs to
a bank or other financial institution designated by True North, True North
shall convey ownership of the Communication Stock subject to such Expiration
Put to Publicis, free of any Encumbrances. After True North has given written
notice to Publicis of its exercise of the Expiration Put, such notice shall be
irrevocable, and True North shall be bound to sell to Publicis and Publicis
shall be bound to buy from True North that number of shares of Communication
Stock specified in such notice at the price determined pursuant to this Section
1.4.1. Notwithstanding the immediately preceding sentence, in the event that
the Expiration Put shall have been exercised but the closing of such
transaction shall not have occurred within 260 days of such exercise, the
exercising party, if not in breach of the provisions of such Expiration Put,
may cancel such exercise by written notice to the other party and upon such
cancellation neither party shall be required to fulfill its obligation with
respect to such Expiration Put (but otherwise without prejudicing the rights of
any party hereto with respect to a breach of such provisions by any other
party).
1.5. Maintenance of Percentage Ownership. If, at any time, or from
time to time, (i) True North shall own securities having 20% or more of the
total voting rights of all issued and outstanding equity of Communication
(after giving pro forma effect to any Expiration Put, True North Maintenance
Right, Remainder Put, Remainder Call or any prior exercise of the Percentage
Purchase Right (as defined below) in each case if then exercised but not yet
consummated), (ii) Communication issues or plans to issue a number of shares of
Communication Stock or other equity securities (whether a new issuance of
securities, securities issued upon the exercise of an option, warrant or
conversion or an exchange right or other similar dilutive event (other than a
repurchase by Communication or purchase by Publicis of Communication Stock from
True North or its subsidiaries)) which would result, upon the consummation of
the transaction giving rise to such issuance, in True North's owning securities
having less than 20% of the total voting rights of each class of issued and
outstanding equity securities of Communication (based on the number of
7
<PAGE> 8
outstanding shares) all as determined in accordance with clause (i) above, and
(iii) the Communication Stock is not listed on a major European stock exchange
on the date of the consummation of such issuance (upon the occurrence of (i),
(ii) and (iii), the date of the consummation of such issuance being a "Dilution
Date"), True North shall have the right, in its sole discretion, to purchase
from Publicis and/or Communication (who shall determine in their sole
discretion which of whom shall sell such shares), and Publicis and/or
Communication, as the case may be, shall be obligated to sell to True North, a
number of shares of Communication Stock or other equity securities, as
applicable, of Communication (the "Percentage Purchase Right") such that,
following the consummation of such purchase and the consummation of the
transaction giving rise to the occurrence of such Dilution Date, True North
shall own securities representing 20% of the total voting rights of each class
of issued and outstanding equity securities of Communication, all as determined
in accordance with clause (i) above. If either Publicis or Communication is
prohibited under applicable law to sell its shares to True North pursuant to
the preceding sentence, then the party not so prohibited shall sell such shares
to True North pursuant to the preceding sentence. The price per share of
Communication Stock or other equity securities to be purchased by True North
pursuant to the Percentage Purchase Right shall be the fair value of the per
share consideration received by Communication in connection with the
transaction giving rise to the occurrence of such Dilution Date (the
"Transaction Valuation"). Notwithstanding the foregoing, to the extent that
Communication issues options, warrants or purchase or subscription rights or
any other non-voting security which converts into or can be exchanged for
shares of Communication Stock or other voting security of Communication, the
parties agree that a Dilution Date shall not have occurred with respect to such
securities, until such time as the voting securities underlying such options,
warrants, rights or other securities are issued. In respect of an event which
both gives rise to a Dilution Date and constitutes a Publicis Acquisition, True
North must elect between exercising a Percentage Purchase Right under Section
1.5 and exercising a True North Maintenance Right under Section 1.12. If
either of such rights is exercised and consummated, True North's rights to (a)
request the listing of Communication Stock pursuant to Section 1.6 and (b)
exercise the Dilution Put pursuant to Section 1.6.1 shall be extinguished in
respect of such event.
1.5.1. If Communication intends to issue additional shares of
Communication Stock or other securities in an amount which would give rise to
the occurrence of a Dilution Date, it shall give True North written notice not
less than 10 Business Days in advance of the consummation of such event, which
notice shall include the number of shares of Communication Stock or other
securities which would be subject to the Percentage Purchase Right, the
Transaction Valuation of such shares and sufficient information regarding such
issuance transaction in order to reasonably substantiate the Transaction
Valuation. So long as the Transaction Valuation has been approved by a
majority of the three Outside Directors (as defined below) and by the Board of
Directors of Communication, such Transaction Valuation shall be conclusive and
binding upon the parties. Upon receipt of such notice, True North shall have 5
Business Days to give written notice to Communication that it wishes to
exercise its Percentage Purchase Right with respect to such transaction. After
True North has given written notice to Publicis of its exercise of the
Percentage Purchase Right, such notice shall be irrevocable, and True North
shall be bound to buy from Publicis and/or Communication and Publicis and/or
Communication shall be bound to sell to True North that number of shares of
Communication Stock specified in Communication's notice at the Transaction
Valuation. The purchase and sale of shares pursuant to the Percentage Purchase
8
<PAGE> 9
Right shall be consummated simultaneously with the issuance transaction giving
rise to such right, payment to be made by True North by certified check payable
to Publicis and/or Communication, as the case may be.
1.6. Listing of Communication Stock if Ownership Diluted. Upon (i)
True North having received written notice of the anticipated occurrence of a
Dilution Date in accordance with Section 1.5.1, (ii) the occurrence of any
Dilution Date and (iii) True North's failure to elect to exercise its
Percentage Purchase Right with respect to such Dilution Date within the time
period specified in Section 1.5.1, and upon the written request of True North
given to Communication within 5 Business Days following the Dilution Date,
Publicis and Communication agree to use their respective best efforts to cause
to be offered to the public and listed (within 120 days following the Dilution
Date) on a major European stock exchange the Communication Stock. True North
may request in such notice that any amount of its Communication Stock be
included in such offering and listing, but shall be entitled only to have
offered in the offering up to, but no more than, 50% of the Communication Stock
owned by True North in the aggregate at the time True North requests for its
shares or, if higher, up to, but not more than, 50% of the Communication Stock
owned by True North immediately prior to the consummation of such offering (to
the extent so requested by True North). True North's request shall include a
schedule which shall set forth the amount of shares of Communication Stock
which True North requests Communication to include in the offering assuming a
range of hypothetical offering prices. Subject to its rights to withdraw from
such offering, as set forth in this Section, True North shall use all
commercially reasonable efforts to cooperate with Communication and its agents
and advisors in effecting such offering. The obligations of the parties with
respect to the offering and listing shall be treated as set forth in Section
1.3.1. The obligations of the parties with respect to indemnification and
expenses of the offering and listing shall be treated as set forth in Sections
1.3.2 and 1.3.3., respectively.
1.6.1. Put of Communication Stock if Ownership Diluted and
Communication Stock Not Listed. If True North makes a written request pursuant
to Section 1.6 and the listing of the Communication Stock has not occurred
within the 120 day period specified in Section 1.6, True North shall have the
right, in its sole discretion and on one occasion per Dilution Date occurrence,
which right shall be exercisable by written notice to Publicis for 30 days
immediately following the expiration of such 120 day period, to require
Publicis to purchase from True North (the "Dilution Put") all, but not less
than all, of the shares of Communication Stock owned by True North on the date
of such notice (the "Dilution Notice Date"), at the Dilution Price, calculated
pursuant to the terms of Section 1.6.2, subject to appropriate adjustments for
stock dividends, splits, combinations, exchanges, or similar events, occurring
subsequent to such date but prior to the consummation of such Dilution Put, and
upon exercise of the Dilution Put, Publicis shall be bound to purchase such
shares from True North and tender the purchase price therefor, and True North
shall be bound to tender such shares and convey ownership of such shares to
Publicis, free of all Encumbrances, all in accordance with Section 1.6.3. For
the avoidance of doubt, the parties agree that neither the existence of the
Percentage Purchase Right nor the Dilution Put shall relieve Publicis or
Communication from their respective obligations pursuant to Section 1.6 to use
their respective best efforts to offer and list the Communication Stock.
9
<PAGE> 10
1.6.2. The Dilution Price shall be equal to (X) the number of shares
of Communication Stock owned by True North on the Dilution Notice Date
multiplied by (Y) the sum of (1)(A) 75% of the fair market value as of the
Dilution Notice Date of the block of Communication Stock owned by True North on
the Dilution Notice Date, as determined pursuant to the procedures set forth in
Section 1.4.1, divided by (B) the number of shares of Communication Stock owned
by True North on the Dilution Notice Date, and (2) 25% of the Put/Call Price of
Communication Stock, as determined pursuant to Section 1.1.1 as appropriately
modified to replace all references to the Remainder Put with the Dilution Put.
1.6.3. Subject to the conditions set forth in Section 1.6.1, if True
North wishes to exercise the Dilution Put, it shall give Publicis written
notice of such exercise within 30 days of the expiration of the 120 day period
referred to in Section 1.6, together with True North's estimated calculation of
Put/Call Price (if then available) and True North's selection of a
globally-recognized investment bank. The purchase and sale of such shares
shall be consummated within 20 Business Days following the determination of the
Dilution Price. In exchange for the payment by Publicis of the aggregate
Dilution Price determined pursuant to Section 1.6.2, which shall be payable by
Publicis by wire transfer of immediately available funds in French Francs to a
bank or other financial institution designated by True North, True North shall
convey ownership of all of the Communication Stock owned by True North on the
Dilution Notice Date to Publicis, free of all Encumbrances. After True North
has given written notice to Publicis of its exercise of the Dilution Put, such
notice shall be irrevocable, and True North shall be bound to sell to Publicis
and Publicis shall be bound to buy from True North that number of shares of
Communication Stock owned by True North on the Dilution Notice Date.
1.6.4. Subsequent Dilutive Events. True North's rights under
Sections 1.5 through 1.6.1 of this Agreement shall apply with respect to each
successive subsequent Dilution Date.
1.7. Transactions on Arm's Length Basis. So long as True North owns
at least 10% of the issued and outstanding shares of Communication Stock, any
significant transactions effected by Communication shall be effected on an
arm's length basis; provided, that this Section shall not apply to the merger
or other combination of PBV and Communication or acquisition of PBV by
Communication.
1.8. Communication Directors. As soon as practicable, but no later
than 60 days after the consummation of the transactions contemplated by this
Agreement and in all events prior to the consummation or corporate approval of
any transaction to transfer to Communication agencies owned by Publicis, and so
long thereafter as True North owns at least 10% of the issued and outstanding
shares of Communication Stock, Communication shall elect to its Board of
Directors three members who have no prior significant relationship with
Publicis, True North or the directors or senior officers of either (the
"Outside Directors"). Publicis and Communication shall consult with True North
prior to the appointment of the three Outside Directors. A majority of the
three Outside Directors and the Board of Directors of Communication must
approve any transaction (other than those specifically contemplated by this
Agreement or the Memorandum of Agreement) of Communication, including
transactions with Publicis or any affiliates of Publicis, that a majority of
the three Outside Directors deem to be significant.
10
<PAGE> 11
1.9 True North Director.
(a) If at any time or from time to time True North owns at
least 18% of the issued and outstanding shares of Communication Stock, True
North shall have the right to nominate and have elected one member of the Board
of Directors of Communication.
(b) If, as a result of the occurrence of a Dilution Date or
Publicis Acquisition, True North shall own less than 18% of the issued and
outstanding shares of Communication Stock and True North shall have given (and
not withdrawn) notice to Communication of its exercise of the Percentage
Purchase Right or the True North Maintenance Right, as the case may be, True
North shall retain its right to its directorship through the time of closing of
such Percentage Purchase Right or the True North Maintenance Right, as the case
may be.
(c) Following the offering and listing of Communication Stock,
Publicis's and Communication's obligation pursuant to subsection (a) of this
Section 1.9 shall be fulfilled by Publicis and Communication by (i) the
inclusion of the nominee proposed by True North in the slate of nominees
recommended by the Communication Board of Directors to stockholders for
election as directors at the next annual meeting of stockholders of
Communication if True North owns at least 18% of the issued and outstanding
shares of Communication Stock at the time of slating of such nominees, (ii)
Communication using reasonable efforts to cause the shares for which
Communication's management or Board of Directors holds proxies or is otherwise
entitled to vote to be voted in favor of such nominee and (iii) Publicis
voting, or causing the vote of, shares of Communication Stock owned by it or
any of its affiliates in favor of such nominee. Following the offering and
listing of Communication Stock, if, as a result of the issuance of shares of
Communication Stock or similar dilutive event affecting the Communication
Stock, True North shall own less the 18% of the issued and outstanding shares
of Communication Stock at the time of slating of the nominees recommended by
the Communication Board of Directors to its stockholders for election of
directors at any annual meeting of stockholders of Communication, Communication
shall give True North written notice of the slating of directors and that True
North owns less than 18% of the issued and outstanding shares of Communication
and if, within 5 Business Days of receipt of such notice, True North gives
Communication written notice stating that True North intends to purchase
additional shares of Communication Stock such that True North will own at least
18% of the issued and outstanding shares of Communication Stock within six
months of the date of such notice from True North to Communication,
Communication shall continue to fulfill its obligations under clauses (i), (ii)
and (iii) of the preceding sentence for such six month period; provided,
however, that if True North does not effect such purchases within such six
month period, True North, upon Communication's request, shall cause its
designee on the Communication Board of Directors to immediately resign.
Following such resignation, all of Communication's obligations with respect to
this Section 1.9 shall terminate. If at any time True North shall own less
than 18% of the issued and outstanding shares of Communication Stock for any
reason other than the issuance of shares of Communication Stock or similar
dilutive event affecting the Communication Stock, True North, at the request of
Communication, shall cause its designee on the Communication Board of Directors
to immediately resign. Following such resignation, all of Communication's
obligations with respect to this Section 1.9 shall terminate. True North
acknowledges that the Communication Board of Directors may form a committee,
which does not include the True North designee, to consider issues involving a
direct conflict
11
<PAGE> 12
between True North and Communication, provided that the formation of any such
committee shall be approved by a majority of the non-management directors of
Communication (excluding the True North designee). It is further understood
and agreed that True North's designee shall not be an officer or director or
employee of True North or any of its affiliates.
1.10. Financial Reports and Appraisals.
(a) So long as True North owns at least 10% of the issued and
outstanding shares of Communication Stock, Communication shall (i) provide all
financial and other information reasonably requested by True North for purposes
of True North's compliance with U.S. income tax laws and other U.S. regulatory
requirements, (ii) cause its independent auditors to complete their annual
audit and provide the results to True North before February 15 of each year,
and shall provide True North with unaudited quarterly consolidated financial
results before April 30, July 30, and October 30 of each year.
(b) The parties acknowledge that in connection with the
transactions contemplated in this Agreement, True North desires to obtain such
independent appraisals as are necessary to support the necessary or desirable
accounting for financial tax reporting purposes. Each of Publicis,
Communication and PBV agrees to use all commercially reasonable efforts to
provide the assistance necessary to enable True North to obtain such
appraisals.
1.11. Transfer of Publicis Agency Network; True North Consent. Prior
to the earlier of (i) the offering and listing of Communication Stock on a
major European stock exchange or (ii) December 31, 1998, Publicis,
Communication and PBV agree to combine or merge Communication and PBV and to
transfer for consideration the Publicis global agency network owned by Publicis
so that such global network is owned by Communication. True North authorizes
and consents to any and all transactions designed to combine or merge
Communication with PBV and any and all transactions designed to transfer the
Publicis global agency network owned by Publicis so that such global network is
owned by Communication. Following such transactions, Communication and its
subsidiaries will be the holding company of the worldwide agency network for
Publicis. It is understood and agreed that all such material transactions
between Communication and Publicis will be effected on an arm's length basis.
1.12. True North Maintenance Right. In the event that, prior to the
completion of an initial public offering of the Communication Stock,
Communication acquires any entity or interest from Publicis in a transaction
involving the issuance of Communication Stock or other equity of Communication
(a "Publicis Acquisition"), True North shall have the right, in its sole
discretion, to purchase from Publicis and/or Communication (who shall determine
in their sole discretion which of whom shall sell such shares), and Publicis
and/or Communication, as the case may be, shall be obligated to sell to True
North, a number of shares of Communication Stock or other securities (the "True
North Maintenance Right") such that, following the consummation of such
purchase and the consummation of such acquisition by Communication, True North
shall own the same percentage of shares of Communication Stock owned by True
North immediately prior to the Publicis Acquisition and to the extent of
issuance of any other class of equity securities, True North shall own the same
percentage of such other class as it owned of Communication Stock immediately
prior to the Publicis Acquisition (after giving effect to the consummation of
any
12
<PAGE> 13
Liquidity Right (as defined below) if such right was exercised and not
withdrawn, but not yet consummated). For purposes of this Agreement the term
"Liquidity Right" shall mean the Percentage Purchase Right, the listing of
Communication Stock pursuant to Section 1.4 or 1.6, the Dilution Put, the
Remainder Put, the Remainder Call and the Expiration Put. If either Publicis
or Communication is prohibited under applicable law to sell its shares to True
North pursuant to the preceding sentence, then the party not so prohibited
shall sell such shares of Communication Stock or other securities to True North
pursuant to the preceding sentence. The price per share of Communication Stock
to be purchased by True North pursuant to the True North Maintenance Right
shall be the per share value of the consideration received by Communication in
connection with such Publicis Acquisition. In respect of an event which both
gives rise to a Dilution Date and constitutes a Publicis Acquisition, True
North must elect between exercising a Percentage Purchase Right under Section
1.5 and exercising a True North Maintenance Right under Section 1.12. If
either of such rights is exercised and consummated, True North's rights to (a)
request the listing of Communication Stock pursuant to Section 1.6 and (b)
exercise the Dilution Put pursuant to Section 1.6.1 shall be extinguished in
respect of such event.
1.12.1. If Communication intends to consummate a Publicis
Acquisition, it shall give True North written notice not less than 10 Business
Days in advance of the consummation of such event, which notice shall include
the number of shares of Communication Stock or other securities subject to the
True North Maintenance Right, the price per share and sufficient information
regarding such issuance transaction in order to reasonably substantiate the
price per share. So long as the price per share has been approved by a
majority the three Outside Directors and by the Board of Directors of
Communication, such price per share shall be conclusive and binding on the
parties. Upon receipt of such notice, True North shall have 5 Business Days to
give written notice to Communication that it wishes to exercise its True North
Maintenance Right with respect to such transaction. After True North has given
written notice to Publicis of its exercise of the True North Maintenance Right,
such notice shall be irrevocable, and True North shall be bound to buy from
Publicis and/or Communication and Publicis and/or Communication shall be bound
to sell to True North that number of shares of Communication Stock specified in
Communication's notice at such aggregate price. The purchase and sale of
shares pursuant to the True North Maintenance Right shall be consummated
simultaneously with the issuance transaction giving rise to such right, payment
to be made by True North by certified check payable to Publicis and/or
Communication, as the case may be.
1.13. Communication May Act for Publicis; Guarantee. The parties
agree that Publicis shall have the right, acting in its sole discretion, to
assign to Communication Publicis's rights and/or obligations to purchase shares
of Communication Stock from True North, pay the purchase price therefor and
fulfill any or all of the obligations of Publicis in connection therewith in
the event of the exercise of any Remainder Put, Remainder Call, Expiration Put,
Dilution Put or rights pursuant to Section 1.16; provided, that in the event of
any such assignment, Publicis shall remain liable for the performance of any
and all obligations owing to True North in any such event. Publicis hereby
guarantees the performance of all obligations of Communication under this
Agreement.
1.14. True North Equity Rights. For purposes of Article I,
references to shares of Communication Stock owned by True North shall be deemed
to refer to shares of Communication
13
<PAGE> 14
Stock owned by True North and its subsidiaries, in the aggregate. In the event
that True North shall acquire, upon exercise of a Percentage Purchase Right or
a True North Maintenance Right, any shares of a class of equity securities
other than Communication Stock, such shares shall be includible in any other
Liquidity Right (other than the obligation of Communication to list equity
securities pursuant to sections 1.4 or 1.6).
1.15. Currency. All references to French Francs shall be deemed to
refer to French Francs or any successor currency.
1.16. Publicis Maintenance of Majority Control of Communication.
(a) In the event that, following an acquisition by Communication of a
privately held advertising company, an exercise by True North of its Percentage
Purchase Right or its True North Maintenance Right, together with the issuance
of Communication Stock or other securities giving rise thereto, would result in
Publicis owning securities having less than 51% of the total voting rights of
each class of issued and outstanding equity securities of Communication (based
on the number of outstanding shares), Communication shall issue non-voting
securities to True North in lieu of voting securities to the extent required to
maintain such 51% control by Publicis. Such non-voting securities shall be
identical in all respects (other than voting rights) to the Communication Stock
or other securities otherwise issuable pursuant to the Percentage Purchase
Right or True North Maintenance Right, as applicable, and shall be issued upon
the same price and other terms. For purposes of the percentage threshold
requirements of Sections 1.9 and 1.10, such non-voting securities shall be
treated as if they had the same voting rights as the voting securities
otherwise issuable.
(b) If (i) notwithstanding True North's exercise of its commercially
reasonable efforts to maintain equity accounting treatment for its investment
in Communication, it is unable to do so under United States generally accepted
accounting principles due solely to its receipt of non-voting securities in
lieu of voting securities pursuant to Section 1.16(a), and (ii) the
Communication Stock has not been listed on a major European stock exchange,
then True North shall promptly notify Publicis in writing of its inability to
maintain equity accounting treatment, and Publicis shall purchase from True
North, and True North shall sell to Publicis, all such non-voting securities at
the same price originally paid for them by True North. The purchase and sale
of such shares shall be consummated within 20 Business Days following the date
of True North's notice. In exchange for the payment by Publicis of the
aggregate price for such non-voting securities, which shall be payable by
Publicis by wire transfer of immediately available funds in French Francs to a
bank or other financial institution designated by True North, True North shall
convey ownership of all of such non-voting securities to Publicis, free of all
Encumbrances.
(c) True North may elect in addition, in its notice given pursuant to
Section 1.16(b), to require Publicis to purchase from True North (the
"Accounting Put") all, but not less than all, of the shares of Communication
Stock owned by True North on the date of such notice (the "Accounting Notice
Date"), at the Accounting Price, as defined below, subject to appropriate
adjustments for stock dividends, splits, combinations, exchanges, or similar
events, occurring subsequent to such date but prior to the consummation of such
Accounting Put, and upon exercise of the Accounting Put, Publicis shall be
bound to purchase such shares from True North and
14
<PAGE> 15
tender the purchase price therefor, and True North shall be bound to tender
such shares and convey ownership of such shares to Publicis, free of all
Encumbrances, all in accordance with this paragraph (c). True North shall
specify in such notice its selection of a globally-recognized investment bank.
The Accounting Price will be determined as follows: The percentage of voting
shares of Communication owned by True North at the time of the Accounting
Notice Date multiplied by the fair market value of the combined enterprise of
Communication and the acquired or merged entity. The fair market value of the
combined enterprise will be established pursuant to the procedures set forth in
Section 1.4.1. The purchase and sale of such shares shall be consummated
within 20 Business Days following the determination of the Accounting Price.
In exchange for the payment by Publicis of the aggregate Accounting Price,
which shall be payable by Publicis by wire transfer of immediately available
funds in French Francs to a bank or other financial institution designated by
True North, True North shall convey ownership of all of the Communication Stock
owned by True North on the Accounting Notice Date to Publicis, free of all
Encumbrances.
ARTICLE II
OTHER AGREEMENTS
2.1. Covenants and Consents of True North with Respect to South
Africa, Thailand, Argentina and India.
2.1.1. True North, on its own behalf and to the extent of its
ownership interest in any direct or indirect subsidiaries and investees, hereby
(i) waives any and all pre-emptive or similar rights it has or may have with
respect to the shares of the Partnership agency in South Africa and (ii)
consents to the sale by Lindsay Smithers/FCB or any of its affiliates to
Publicis or any of its affiliates of 100% of the Partnership agency in South
Africa, as agreed by the parties.
2.1.2. At the Closing, True North agrees that it shall pay Publicis,
by certified check payable to Publicis, US $310,000. Such payment represents
True North's allocated portion of the purchase price to be paid by Publicis for
the Prakit-Publicis agency in Thailand. If Publicis has not acquired the
Prakit-Publicis agency as contemplated by the Thailand Agreement (as defined
below) prior to June 30, 1998, then Publicis shall pay True North, by certified
check payable to True North, US$310,000 within 30 days following such date;
provided, however, that Publicis shall not be required to pay such US $310,000
if the failure to acquire the Prakit-Publicis agency results directly or
indirectly from the breach by True North or any of its affiliates of the
obligations set forth in the Agreement (Thailand) among the parties hereto
dated as of the date hereof (the "Thailand Agreement").
2.1.3. True North agrees to service the Nestle, L'Oreal and other
Publicis client accounts in Argentina through Pragma/FCB pursuant to the terms
of Section 2.6 of this Agreement until such time as Publicis shall have
established stand-alone operations in Argentina. At such time as Publicis
notifies True North that it has established stand-alone operations in
Argentina, True North shall, pursuant to Section 2.7 of this Agreement,
transfer the Nestle, L'Oreal and other Publicis client accounts, if any, to
Publicis' stand-alone agency.
15
<PAGE> 16
2.1.4. True North agrees that until the consummation of the
transactions contemplated by the Thailand Agreement and the Agreement (India)
among the parties hereto dated as of the date hereof (the "India Agreement"),
True North will service the Nestle, L'Oreal and other Publicis client accounts,
if any, in Thailand and India through Prakit/FCB and FCB/Ulka, respectively,
pursuant to the terms of Section 2.6 of this Agreement. If, for any reason,
the transactions contemplated by either the Thailand Agreement and the India
Agreement are not consummated, True North agrees to continue to service the
Nestle, L'Oreal and other Publicis client accounts, if any, in Thailand and
India pursuant to Section 2.6. Pursuant to Section 2.7 of this Agreement, True
North agrees to transfer the Nestle, L'Oreal and other Publicis client accounts
to Publicis stand-alone agency.
2.2. Publicis Director.
(a) If at any time or from time to time Communication owns at least
18% of the issued and outstanding shares of the Common Stock, par value $.33 1/3
per share (the "True North Stock"), Communication shall have the right to
nominate and have elected one member of the Board of Directors of True North.
(b) True North's obligation pursuant to the preceding sentence has
been fulfilled by True North by the nomination of Communication's designee for
election to the True North Board of Directors at the 1997 Annual Meeting
(unless such designee is then serving on such Board of Directors) and its
commitment to use its reasonable best efforts to cause the shares for which
True North's management or Board of Directors holds proxies or is otherwise
entitled to vote to be voted in favor of such nominee and thereafter by (i) the
inclusion of the nominee proposed by Communication in the slate of nominees
recommended by the True North Board of Directors to stockholders for election
as directors at the next annual meeting of stockholders of True North if
Communication owns at least 18% of the issued and outstanding shares of True
North stock at the time of slating of such nominees, and (ii) True North's
using reasonable best efforts to cause the shares for which True North's
management or Board of Directors holds proxies or is otherwise entitled to vote
to be voted in favor of such nominee. If, as a result of the issuance of
shares of True North Stock or similar dilutive event affecting the True North
Stock, Communication shall own less than 18% of the issued and outstanding
shares of True North Stock at the time of slating of the nominees recommended
by the True North Board of Directors to its stockholders for election of
directors at any annual meeting of stockholders of True North, True North shall
give Communication written notice of the slating of directors and that
Communication owns less than 18% of the issued and outstanding shares of True
North and if, within 5 business days of receipt of such notice, Communication
gives written notice to True North stating that Communication intends to
purchase additional shares of True North Stock such that Communication will own
at least 18% of the issued and outstanding shares of True North Stock within
six months of the date of such notice from Communication to True North, True
North shall continue to fulfill its obligations under clauses (i) and (ii) of
the preceding sentence for such six month period; provided, however, that if
Communication does not effect such purchases within such six month period,
Communication, at the request of True North, shall cause its designee on the
True North Board of Directors to immediately resign. Following such
resignation, all of True North's obligations with respect to this Section 2.2
shall terminate. If at any time Communication shall own less than 18% of the
issued and outstanding shares of True North Stock for any reason other
16
<PAGE> 17
than the issuance of shares of True North Stock or similar dilutive event
affecting the True North Stock, Communication shall cause its designee on the
True North Board of Directors to immediately resign. Following such
resignation, all of True North's obligations with respect to this Section 2.2
shall terminate. Communication acknowledges that the True North Board of
Directors may form a committee, which does not include the Communication
designee, to consider issues involving a direct conflict between Communication
and True North, provided that the formation of any such committee shall be
approved by a majority of the non-management directors of True North (excluding
the Communication designee). It is further understood and agreed that
Communication's designee shall not be an officer or director or employee of
either Publicis or Communication or any of their affiliates.
2.3. Financial Reports. So long as Publicis and/or Communication
owns at least 10% of the issued and outstanding shares of True North Stock,
True North shall provide all financial and other information reasonably
requested by Publicis and/or Communication for purposes of their compliance
with French and European income tax laws and other French and European
regulatory requirements, shall cause its independent auditors to complete their
annual audit and provide the results to Publicis and Communication before
February 15 of each year, and shall provide Publicis and Communication with
unaudited quarterly consolidated financial results before April 30, July 30,
and October 30 of each year.
2.4. Use of Names.
2.4.1. As between True North, FCBI and TNBV, on the one hand, and
Publicis, Communication and PBV on the other hand, True North and FCBI shall
own all right, title and interest in and to any trademark, service mark or
trade name (collectively "Trademarks") which comprises or incorporates any of
the following: Foote, Cone & Belding, FCB, True North, TN, Impact, Mind &
Mood or Ulka (collectively, the "True North Trademarks").
2.4.2. As between True North, FCBI and TNBV, on the one hand, and
Publicis, Communication and PBV on the other hand, Publicis, Communication and
PBV shall own all right, title and interest in and to any Trademark which
comprises or incorporates any of the following: Publicis, FCA/BMZ or Optimedia
(collectively, the "Publicis Trademarks").
2.4.3. Except as provided for herein, each of True North, FCBI and
TNBV agrees that it will not, and will not permit its subsidiaries to, use,
adopt, apply to register or register any Trademark which comprises or contains
a Publicis Trademark. Except as provided for herein, each of Publicis,
Communication and PBV agrees that it will not, and will not permit its
subsidiaries to, use, adopt, apply to register or register any Trademark which
comprises or contains a True North Trademark. The parties hereby agree that
neither will, nor permit any of their respective subsidiaries to, challenge the
use of the other party's Trademarks anywhere in the world.
2.4.4. As soon as reasonably practicable, but in no event later than
30 days after the consummation of the transactions contemplated by this
Agreement, each party, and each of its respective subsidiaries, shall cease to
use any Trademark owned by the other.
17
<PAGE> 18
2.4.5. If True North, FCBI or TNBV, or any of their respective
subsidiaries, has obtained a Trademark registration in any country for any
Publicis Trademark or has applied to register a Publicis Trademark in any
country, each of True North, FCBI and TNBV agrees to assign, or cause its
subsidiaries to assign, such Trademark registrations or applications and all
its rights herein to Communication, except for Trademarks comprised of both a
Publicis Trademark and a non-Publicis Trademark, which (rather than being
assigned to Communication) shall be affirmatively abandoned or amended so as to
effectively eliminate all use or reference to the Publicis Trademark. If
Publicis, Communication or PBV or any of their respective subsidiaries has
obtained a Trademark registration in any country for any True North Trademark
or has applied to register a True North Trademark in any country, each of
Publicis, Communication and PBV agrees to assign, or cause its subsidiaries to
assign, such Trademark registrations or applications and all its rights therein
to True North, except for Trademarks comprised of both a True North Trademark
and a non-True North Trademark, which (rather than being assigned to True
North) shall be affirmatively abandoned or amended so as to effectively
eliminate all use or reference to the True North Trademark.
2.4.6. None of True North, FCBI or TNBV, nor any of their respective
subsidiaries, has granted nor is obligated to grant a license, assignment or
other right in respect of any Publicis Trademark nor has it sold or otherwise
encumbered any Publicis Trademark. None of Publicis, Communication nor PBV,
nor any of their respective subsidiaries, has granted nor is obligated to grant
a license, assignment or other right in respect of any True North Trademark nor
has it sold or otherwise encumbered any True North Trademark.
2.4.7. Each party agrees to work diligently to identify all
Trademarks or registrations or applications therefor worldwide which are
subject to this Agreement and to take those steps that may be necessary to
effectuate the purposes of this Agreement when and as any such Trademark or
registration or application therefor becomes known to it. Each party shall
advise the other when and as it learns of any information concerning any such
Trademarks or registrations or applications therefor. The parties further
agree that they will cooperate with each other in all reasonable respects
regarding this Agreement and each will promptly execute any document reasonably
necessary to facilitate the protection by the other party of its Trademarks
anywhere in the world. The parties further agree that they will cause any
entity owned or controlled by either of them to cooperate in effectuating the
terms of this Agreement and to execute any document necessary to facilitate the
terms of this Agreement.
2.5. Coordination Fees. Each of True North, FCBI and TNBV, on the
one hand, and Publicis, Communication and PBV, on the other hand, shall pay to
the other coordination fees of 1% of capitalized billings for "qualified
international accounts" (as hereinafter defined), computed as being 6.67% of
revenue from such qualified international accounts. Such fees shall be payable
hereunder retroactively from January 1, 1996. Each of True North, FCBI and
TNBV, on the one hand, and Publicis, Communication and PBV, on the other hand,
agree to pay all such fees due in respect of billings during calendar year 1996
on or prior to June 30, 1997, such payment to be made by certified check. All
fees due in respect of each succeeding calendar year, including 1997, shall be
due and payable on June 30 of the year immediately following such year, such
payment to be made by appropriate means. Each of True North, FCBI and TNBV, on
the one hand, and Publicis, Communication and PBV, on the other hand, agree to
provide the other party with such
18
<PAGE> 19
information requested by such party as is reasonably required in order to
substantiate such fee requests. "Qualified international accounts" are clients
which are (i) aligned on a worldwide basis with either Publicis or True North,
(ii) served by a worldwide coordination team working with an agency consisting
of agency employees located in proximity to the client's headquarters and
delivering services through local agencies and (iii) coordinated on and
administered by such team through a global network of local agencies. Specific
clients which will be "qualified international accounts" for 1996 and
subsequent years, if any, will be jointly agreed upon by the CEO of
Communication and the CEO of FCB
2.6. Collaboration in Certain Countries. For a period of one year
from the date of this Agreement, each of Publicis, Communication and PBV, on
the one hand, and True North, FCBI and TNBV, on the other hand, shall, upon
request, service clients of the other in countries where the other has not
established operations. This covenant shall be renewable for additional one
year terms by either party upon the delivery of written notice to the other
prior to the 60th day prior to the expiration of such period. Each of the
foregoing arrangements shall be terminable on a country-by-country basis by
either party upon 6 weeks prior written notice.
2.7. Transfer of Certain Clients, Employees. Subject to the parties
understanding that the concurrence of a client to a transfer of its account
from one agency to another is the way the advertising business works (and it is
the parties' assumption that neither party will attempt to obstruct such
concurrence), each client of Publicis, Communication and PBV, on the one hand,
and True North, FCBI and TNBV, on the other hand, whose account was managed by
the other party because such client was located within the other party's
"sphere of influence" (within the meaning of such term under the Master
Alliance Agreement referred to below), shall be transferred to the party having
the worldwide agreement with such client. Such transfer shall be effected as
soon as possible after the party having such worldwide agreement has available
to it, in its sole judgment, agencies capable of serving such transferred
client. Employees of the transferring party responsible primarily for the
servicing of such transferred client shall be given the opportunity to leave
the employ of the transferring party and become employed by the agency to whom
the client is to be transferred.
2.8. Termination of Adversarial Proceedings; Releases. Each of
Publicis, Communication and PBV, and their respective subsidiaries, on the one
hand and True North, FCBI and TNBV, and their respective subsidiaries, on the
other hand, shall immediately and irrevocably terminate with prejudice any and
all adversarial proceedings now pending between them, of every nature and in
every forum, including all litigation or arbitration which arises out of events
occurring prior to the date of this Agreement.
2.8.1. Non-Assignment of Claims. Each of True North, FCBI and TNBV
represents and warrants, on behalf of themselves and their respective
subsidiaries, to Publicis, Communication and PBV that it has not assigned and
will not assign any claim it may have against the Publicis Released Parties, as
defined in paragraph 2.8.2 herein, to any other person or entity. Each of
Publicis, Communication and PBV, on behalf of themselves and their respective
subsidiaries, represent and warrant to True North, FCBI and TNBV that they have
not assigned and will not assign any claim they may have against the True North
Released Parties, as defined in paragraph 2.8.3 herein, to any other person or
entity.
19
<PAGE> 20
2.8.2. True North Release of Publicis. Each of True North, FCBI and
TNBV, on behalf of themselves, their respective subsidiaries, and each of their
respective officers, directors, employees and affiliates, hereby releases,
remises and forever discharges Publicis, Communication, PBV, their respective
subsidiaries and each of their respective present and former officers,
directors, employees, shareholders, principals, affiliates, subsidiaries,
consultants and agents (collectively, the "Publicis Released Parties") from all
actions, causes of action, suits, debts, dues, sums of money, claims for unpaid
remuneration, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, obligations, claims and demands whatsoever
("True North Claims"), in contract or tort, in law or equity, whether known or
unknown, including without limitation, all True North Claims arising under or
related in any way to the Master Alliance Agreement and the other agreements
and undertakings contemplated thereby, which True North or True North's
successors and assigns ever had, now have or hereafter can, shall or may have
against the Publicis Released Parties for, upon, or by reason of any matter,
cause or thing whatsoever from the beginning of the world to the date hereof,
but excluding any True North Claims relating to or arising under this Agreement
and the other Operative Agreements (as hereinafter defined).
2.8.3. Publicis Release of True North. Each of Publicis,
Communication and PBV, on behalf of themselves, their respective subsidiaries,
and each of their respective officers, directors, employees and affiliates,
hereby releases, remises and forever discharges True North, FCBI, TNBV, their
respective subsidiaries and each of their respective present and former
officers, directors, employees, shareholders, principals, affiliates,
subsidiaries, consultants and agents (collectively, the "True North Released
Parties") from all actions, causes of action, suits, debts, dues, sums of
money, claims for unpaid remuneration, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, obligations,
claims and demands whatsoever ("Publicis Claims"), in contract or tort, in law
or equity, whether known or unknown, including without limitation, all Publicis
Claims arising under or related in any way to the Master Alliance Agreement and
the other agreements and undertakings contemplated thereby, which Publicis or
Publicis's successors and assigns ever had, now have or hereafter can, shall or
may have against the True North Released Parties for, upon, or by reason of any
matter, cause or thing whatsoever from the beginning of the world to the date
hereof, but excluding any Publicis Claims relating to or arising under this
Agreement and the other Operative Agreements.
2.9. Publicis Consent to Certain Transactions. Subject to the
provisions of Section 2.4, each of Publicis, Communication and PBV authorizes
and consents to any and all transactions by True North and its subsidiaries in
Europe designed to establish an independent True North network in Europe;
provided that such authorization and consent shall not extend to the
solicitation by any of True North, FCBI, TNBV or any of their respective
subsidiaries of employees or clients of any of Publicis, Communication or PBV
or their respective subsidiaries.
2.10. Status of Alliance Agreements. The parties hereto hereby
confirm the status of the following agreements previously entered into between
and among the parties hereto:
20
<PAGE> 21
a. The Master Alliance Agreement dated as of January 1, 1989
between Communication and True North (then known as Foote, Cone
& Belding Communications, Inc.) has been terminated in its
entirety and has no current or further force or effect.
b. The Publicis Communication Shareholders Agreement dated as
January 1, 1989 among Communication, Publicis and True North
(then known as Foote, Cone & Belding Communications, Inc.) has
been terminated in its entirety and has no current or further
force or effect.
c. The FCB Stockholders Agreement dated as of January 1, 1989
between Communication and True North (then known as Foote, Cone
& Belding Communications, Inc.) has been terminated in its
entirety and has no current or further force or effect.
d. The PBV Stockholders Agreement dated as of January 1, 1989 among
Communication, FCBI and PBV has been terminated in its entirety
and has no current or further force or effect.
e. The Publicis Undertaking made and entered into as of January 1,
1989 by Publicis has been terminated in its entirety and has no
current or further force or effect.
f. The Multiparty Arbitration Agreement dated as of January 1, 1989
among Communication, Publicis, FCBI, True North and PBV has been
terminated in its entirety and has no current or further force
or effect.
g. The Registration Rights Agreement dated as of January 1, 1989
(the "Registration Rights Agreement") between Communication and
True North (then known as Foote, Cone & Belding Communications,
Inc.) is, as of the date hereof, in full force and effect and is
hereby agreed by the parties to be in all respects reaffirmed,
remade and ratified; provided, that the arbitration provisions
contained in Sections 8(b) and (c) thereof are agreed by the
parties to be replaced with the arbitration provisions contained
in Sections 3.4.2 through 3.4.10 hereof.
In respect of each of the agreements referred to in this Section, each of the
parties hereto agrees to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws and
regulations to confirm the terminations provided for under clauses a through f,
and the reaffirmation provided for under clause g, of this Section.
2.11. Right of Communication to Buy True North Stock. True North
agrees that it shall not on or before March 31, 2000 (i) amend the Rights
Agreement, dated as November 16, 1988, between True North (then known as Foote,
Cone & Belding Communications, Inc.) and Harris Trust and Savings Bank, to
establish an ownership threshold below 22% as it relates to Communication, (ii)
adopt a new rights agreement (or other device similar to a rights agreement)
with an ownership threshold below 22% as it relates to Communication; or (iii)
amend its bylaws, certificate of incorporation or fail to take an action under
Section 203 of the Delaware General
21
<PAGE> 22
Corporation law (or the analogous statute in another jurisdiction applicable to
True North) which would limit Communication's ability to beneficially own up to
22% of the outstanding shares of True North Stock.
2.12. Payment of Fees. Upon the consummation of the transactions
contemplated by this Agreement and as a condition to the transfers contemplated
by the Share Repurchase and Share Exchange Agreement (as hereinafter defined),
True North agrees that it shall pay Publicis, by certified check payable to
Publicis, US$2,300,000 in respect of coordination and development fees due for
the years 1992, 1993, 1994 and 1995.
2.13. Payment of Dividends. At the Closing, True North agrees that
it shall pay Publicis, by certified check payable to Publicis, FFr 8,500,000
(less an agreed amount to provide for True North's anticipated tax burden, if
any) in respect of dividends of Gnomi FCB Athens for the years 1992, 1993, 1994
and 1995.
2.14. Closing of All Transactions. The Closing (as defined below)
shall take place on Tuesday, June 10, 1997 (the "Closing Date") at 10:00 a.m.
U.S. Eastern Daylight Time at the offices of Howard, Darby & Levin, 1330 Avenue
of the Americas, New York, NY USA. All of the actions to be taken and
documents to be executed and delivered at the closing shall be deemed to be
taken, executed and delivered simultaneously, and no such action, execution or
delivery shall be effective until all actions to be taken and execution and
deliveries to be effected at the closing are complete.
At the Closing:
(1) the transactions contemplated by the Share Purchase
and Share Exchange Agreement shall be consummated;
(2) the transactions contemplated by the Germany
Agreement shall be consummated;
(3) the parties shall execute and deliver the definitive
agreement contemplated by the Australian Agreement;
and
(4) True North shall pay to Publicis:
(i) U.S.$310,000 pursuant to Section 2.1.2.
(ii) U.S.$2,300,000 pursuant to Section 2.12.
(iii) FFr 8,500,000 (less an agreed amount to
provide for True North's anticipated tax burden, if any) pursuant to
Section 2.13.
2.15. Effective Date of Transactions. The parties agree that the
effective date of the transactions contemplated by the Share Repurchase and
Share Exchange Agreement shall be January 1, 1997. Notwithstanding the
foregoing, the parties acknowledge that True North reserves the right to treat
the closing date of such transactions as the effective date for US
22
<PAGE> 23
financial and tax reporting purposes.
ARTICLE III
MISCELLANEOUS
3.1. Entire Agreement. This Agreement, the Memorandum of Agreement
dated February 19, 1997 (the "Memorandum of Agreement") among Publicis,
Communication, PBV, True North, Foote, Cone & Belding Communications Inc.,
FCBI, the Registration Rights Agreement, the Share Repurchase and Share
Exchange Agreement, dated as of the date hereof (the "Share Repurchase and
Share Exchange Agreement"), the India Agreement, the Thailand Agreement, the
Germany Agreement, the Pooling Agreement and the Australian Agreement
(collectively, the "Operative Agreements") constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and supersede all prior agreements and understandings among the
parties relating to the subject matter hereof. With the exception of the
Memorandum of Agreement and the Registration Rights Agreement, no Operative
Agreement will be of any force or effect until all Operative Agreements have
been executed and delivered by each party thereto. To the extent that there is
any conflict between the provisions of the Memorandum of Agreement and the
provisions of this Agreement or the other Operative Agreement, dated as of the
date hereof, the provisions of this Agreement or the other Operative Agreement,
dated as of the date hereof shall govern.
3.2. Notices. Any notice, request or other demand to or upon the
parties hereto shall be in writing (including telex and telecopy communication
followed by registered mail with return receipt requested) and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or when telexed (answer-back received) or
telecopied (with receipt acknowledged) addressed to the party for which
intended as provided below (or as hereafter specified by such party by notice
hereunder):
If to Communication, Publicis or PBV, to it at:
133 avenue des Champs-Elysees
75380 Paris Cedex 08
France
Attention: President-Directeur General
Telecopy: 33-1-44-43-75-50
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
United States of America
Attention: Thomas J. Kuhn, Esq.
Telecopy: 212-841-1010
23
<PAGE> 24
If to True North, FCBI or TNBV, to it at:
101 East Erie Street
Chicago, Illinois 60611
United States of America
Attention: Chief Executive Officer
Telecopy: 1-312-425-5010
with a copy to:
General Counsel
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
United States of America
Telecopy: 1-312-425-6354
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Unites States of America
Attention: Thomas A. Cole
Telecopy: 1-312-853-7036
3.3. Survival. All representations and warranties, agreements and
covenants contained herein or in any document delivered pursuant hereto or in
connection herewith (unless otherwise expressly provided herein or therein)
shall survive the date of this Agreement and shall remain in full force and
effect.
3.4.1. Governing Laws; Arbitration. Sections 2.2, 2.3 and 2.11 of
this Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, United States of America. All other terms and
conditions of this Agreement and the Operative Agreements (except as
specifically otherwise provided in these Agreements), including, without
limitation, the validity, interpretation, performance or termination of such
agreements, shall be governed by and construed in accordance with the laws of
France applicable to agreements executed and delivered and to be performed in
France, without regard to conflicts of laws principles.
3.4.2. All disputes, differences, controversies or claims arising out
of, related to or in connection with this Agreement or the Operative Agreements
(other than the Pooling Agreement) or the transactions contemplated hereby and
thereby shall be submitted to and resolved by arbitration in London, England
conducted in accordance with UNCITRAL Arbitration Rules as then in force (the
"Rules"). The London Court of International Arbitration shall be the
administrative and appointing authority (the "Appointing Authority"). Each of
the parties hereto hereby submits to such jurisdiction, forum and rules and
irrevocably waives any and all objections
24
<PAGE> 25
to such jurisdiction, forum and rules.
3.4.3. Any such arbitration shall be initiated upon notice (the
"Notice of Arbitration") by any party (the "Initiating Party") to any other
party. Unless the Arbitral Tribunal (as defined in Section 3.4.5) directs
otherwise, all communications between the parties and the Arbitral Tribunal
(except at hearings and meetings) shall be made through the Appointing
Authority. When passed on by the Appointing Authority to any party, such
notices or communications shall be sent to the address of that party specified
in Section 3.2.
3.4.4. The Notice of Arbitration shall be signed by the chief
executive officer of the Initiating Party. A copy of the Notice of Arbitration
shall simultaneously be communicated by the Initiating Party to each and every
other party regardless of whether or not they are sought as respondents in the
said Notice of Arbitration.
3.4.5. An arbitral tribunal (the "Arbitral Tribunal") shall be created
which shall consist of three arbitrators all to be appointed by the Appointing
Authority pursuant to the procedure contemplated in Article 6(3) of the Rules,
except that the list procedure shall only be applied in respect of the
presiding arbitrator and that Article 7 of the Rules shall not apply. All such
arbitrators shall be capable of participating in the proceedings in both French
and English. The presiding arbitrator of the Arbitral Tribunal shall be a
lawyer and shall not be a citizen or resident of France or the United States of
America. Contrary to the first phrase of Article 14 of the Rules, if any
arbitrator is replaced, including the presiding arbitrator, any hearings held
previously shall only be repeated if and to the extent deemed necessary by the
Arbitral Tribunal.
3.4.6. Subject to the Rules and the provisions hereof, the Arbitral
Tribunal shall conduct the arbitration in such manner as it considers
appropriate. The shall be no discovery or interrogatory proceedings unless and
to the extent deemed by the Arbitral Tribunal to be necessary for fairly
disposing of the matter or matters before it. All oral hearings shall be taped
recorded and copies made available to all parties. Each party can speak in
English or French and file any document in its own language with a translation
into the other language.
3.4.7. Any party hereto shall have the right within thirty days from
the Notice of Arbitration (or from joinder of a new party to the arbitration)
to be joined as a party in any arbitration initiated hereunder between other
parties hereto, regardless of whether or not they are parties to the same
Operating Agreement. Any party named as a Respondent in the Notice of
Arbitration shall have the right within thirty days from such Notice of
Arbitration to join as a party in the arbitration one or more other parties
hereto. Any party jointed in arbitration, pursuant to this Section, shall have
the right within thirty days from such joinder to join in its turn any other
party hereto not yet a party to the arbitration. All joinders pursuant to this
Section shall be effected by notice communicated to all parties hereto and to
the Appointing Authority.
3.4.8. After submission of the statements of defense, or at any later
stage, if the Arbitral Tribunal so decides, the Arbitral Tribunal shall draw up
in the presence of the parties to the arbitration and in the light of their
submissions a document (the "Terms of Reference") which shall include the
following particulars:
25
<PAGE> 26
- the names and addresses of the arbitrators;
- the full names and description of the parties to the arbitration;
- the addresses of the parties to the arbitration to which notifications
or communications arising in the course of the arbitration may validly be made;
- a summary of the respective claims of the parties to the arbitration
and the issues on which the Arbitral Tribunal must decide; and
- any particular rules of the conduct of arbitration on which the parties
to the arbitration may agree or on which the Arbitral Tribunal may decide
without prejudice to the power of the Arbitral Tribunal to make further
procedural rulings as circumstances may require.
The Terms of Reference shall be signed by a duly authorized representative
of each party to the arbitration who shall include the attorneys for any such
party and by the arbitrators. Should any party to the arbitration refuse to
take part in the drawing up of the Terms of Reference or refuse to sign the
same, the Terms of Reference shall be communicated to the Appointing Authority,
who shall send a copy thereof to each party to the arbitration. The Arbitral
Tribunal, if it is satisfied prima facie that the Arbitration Agreement is
binding on the defaulting party and that this party has been informed of the
arbitral proceedings initiated shall set a fixed limit for the signature of the
Terms of Reference by the defaulting party and on expiring of that time limit
the arbitration shall proceed and the award to be rendered shall be binding on
the defaulting party.
The Terms of Reference, when signed, shall be sent by the Arbitral
Tribunal to all the Parties hereto who are not yet party to the arbitration and
any such party wishing to be joined in the arbitration may do so on notice
given within thirty days of such party's receipt of those Terms of Reference to
all other parties to the arbitration and the Arbitral Tribunal; the decision of
the Arbitral Tribunal on any matters therein included shall be binding on all
the Parties who received copies thereof whether or not they have joined the
arbitration proceedings.
3.4.9. In the event a matter is submitted to arbitration involving a
provision of an Operative Agreement which is invalid, illegal or unenforceable
and for which the parties to such agreement have failed to reach a negotiated
solution, the Arbitral Tribunal shall have the power to replace or remove such
provision as it deems necessary to most closely achieve the original intent
expressed by the replaced or removed provision.
3.4.10. Nothing herein shall limit the right of a party to seek
provisional or injunctive relief pending resolution of a dispute pursuant to
this Agreement. The arbitrators shall be entitled to consider the adequacy of
performance by the Parties under all the Agreements in considering any relief
requested hereunder and to award such relief including release of a party from
its obligations under any or all of the Agreements or requiring a party to
perform such obligations under any or all of the Agreements as they determine.
3.5. Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement and the Operative Agreements shall
be enforced to the fullest permissible extent under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement or the Operative
Agreements shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only
26
<PAGE> 27
with respect to the operation of such provision in the particular jurisdiction
in which such adjudication is made.
3.6. Expenses. Except as the parties may otherwise agree, all fees,
commissions and expenses incurred by True North, Publicis, or Communication in
connection with the negotiation of this Agreement shall be borne by the party
incurring such expenses. All fees, expenses, and costs incurred by True North,
Publicis or Communication in connection with the adversarial proceedings
referred to in Section 2.8 above shall be borne by the party incurring such
fees, expenses or costs.
3.7. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties thereto and their respective
successors and assigns. This Agreement may not be assigned by a party hereto,
whether by operation of law or otherwise, without the prior written consent of
the other party. Any purported assignment in violation of this provision shall
be void and of no force or effect.
3.8. Descriptive Headings. Section headings used in the Agreement
are used for convenience of reference only and shall in no event be used for
interpretation purposes.
3.9. Amendment; Waivers. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
3.10. Severability. It is the desire and intent of the parties that
this Agreement and the Operative Agreements shall be enforced to the fullest
extent permissible under the governing laws. Accordingly, if any provision of
this Agreement or the Operative Agreements shall be adjudicated to be invalid
or unenforceable, under French or Delaware law, as applicable, then such
provision shall be interpreted under Dutch law, and insofar as it is invalid or
unenforceable under Dutch law, such provision shall be interpreted under the
laws of France (in the case of Sections 2.2, 2.3 and 2.11) and as under the
laws of Delaware in the case of all other provisions.
3.11. Counterparts. This Agreement may be executed in one or more
counter-parts, each of which shall be considered an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterpart have been signed by each of the parties
and delivered to each of the other parties thereto.
3.12. Organization and Authority of Publicis, Communication and PBV.
Each of Publicis, Communication and PBV represents and warrants to True North
and FCBI as follows: Each of Publicis and Communication is a limited liability
entity similar to a corporation duly organized, validly existing and in good
standing under the laws of France. PBV is a Besloten Vennootschap duly
organized, validly existing and in good standing under the laws of the
Netherlands. Each of Publicis, Communication and PBV has full power and
authority to execute and deliver this Agreement and each other Operative
Agreement to which it is a party and to perform its obligations hereunder and
thereunder. All corporate action on the part of each of Publicis,
Communication and PBV and its officers, directors and shareholders necessary
for the authorization, execution, delivery and performance of all of the
obligations of each of Publicis,
27
<PAGE> 28
Communication and PBV under this Agreement and each other Operative Agreement
to which it is party has been taken prior to closing except for certain
corporate actions which will be taken prior to the Closing, which actions are
not required for this Agreement to be enforceable. Each of this Agreement and
each other Operative Agreement, when executed and delivered, shall constitute
the valid and legally binding obligation of each of Publicis, Communication and
PBV (assuming that they are parties thereto) enforceable in accordance with its
terms.
3.13. Organization and Authority of True North and FCBI. Each of
True North and FCBI represents and warrants to Publicis, Communication and PBV
as follows: Each of True North and FCBI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to execute and deliver this
Agreement and each other Operative Agreement and to perform its obligations
hereunder and thereunder. All corporate action on the part of each of True
North and FCBI and its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance of all of the obligations of
each of True North and FCBI under this Agreement has been taken prior to
closing except for certain corporate actions which will be taken prior to the
Closing, which actions are not required for this Agreement to be enforceable.
Each of this Agreement and each other Operative Agreement, when executed and
delivered, shall constitute the valid and legally binding obligation of each of
True North and FCBI (assuming that they are parties thereto) enforceable in
accordance with its terms.
3.14. Minor Disputes. Any dispute arising under this Agreement and
the Operative Agreements which involves a claim for the payment of money is an
amount not in excess of US $500,000 shall be referred in the first instance by
written notice to a committee consisting of an equal number of members to be
appointed by the Chief Executive Officer of each of True North and
Communication. If such dispute is not resolved by such committee within thirty
days, the dispute may be referred by either party to the Chief Executive
Officers or Chief Operating Officers of True North and Communication. Disputes
which are not resolved within thirty days after giving notice to the Chief
Executive or Chief Operating Officers shall be settled in accordance with
Section 3.4.1 through 3.4.10 hereof.
28
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective duly authorized officers,
effective as of the date first written above.
PUBLICIS S.A. TRUE NORTH COMMUNICATIONS INC.
By: /s/ Maurice Levy By: /s/ Stephen T. Vehslage
------------------ -------------------------
Name: Maurice Levy Name: Stephen T. Vehslage
Title: President of Directoire Title: Director, Chairman of Special
Committee
PUBLICIS COMMUNICATION FCB INTERNATIONAL, INC.
By: /s/ Maurice Levy By: /s/ Theodore J. Theophilos
------------------ ----------------------------
Name: Maurice Levy Name: Theodore J. Theophilos
Title: Director General Title: Executive Vice President
PUBLICIS-FCB EUROPE B.V. TRUE NORTH HOLDINGS NETHERLANDS B.V.
By: /s/ Maurice Levy By: /s/ Theodore J. Theophilos
------------------ ----------------------------
Name: Maurice Levy Name: Theodore J. Theophilos
Title: President Director Title: Executive Vice President
29
<PAGE> 1
EXHIBIT C(4)
Execution Copy
19 May 1997
POOLING AGREEMENT
Agreement dated as of May 19, 1997 (this "Agreement") by and
among Publicis S.A., a societe anonyme organized and existing under the laws of
France ("Publicis"), Publicis Communication, a societe anonyme organized and
existing under the laws of France ("Communication") and True North
Communications Inc., a Delaware corporation ("True North").
In consideration of the representations, warranties, covenants
and agreements set forth in this Agreement and other good and valuable
consideration, and independently and unconditionally with respect to any and
all other agreements between the parties, the parties agree as follows:
ARTICLE I
AGREEMENTS
1.1. Obligation of Publicis and Communication to Deliver
Pooling Letter. So long as Communication or any of its affiliates owns at
least 10% of the issued and outstanding shares of True North Stock (as
hereinafter defined), within 30 days after receiving a written request from
True North delivered before the third anniversary of this Agreement, Publicis
and Communication shall (a) furnish True North, and shall cause any designee of
Communication serving on the Board of Directors of True North to furnish True
North, with a "pooling letter", in substantially the form attached hereto as
Exhibit A, or upon the request of True North, in such other form as is
conventional for a transaction accounted for as a pooling of interests under
generally accepted accounting principles applied in the United States, and, (b)
if reasonably requested, take such other action in support of the transaction
(other than a commitment to vote for such transaction) as would be customary
with respect to an acquisition or other similar business transaction in which
True North may participate; provided that Publicis and Communication may
withdraw such pooling letter if any of the following conditions is not met
within 90 days after Publicis and Communication shall have furnished such
pooling letter.
(i) True North has obtained a fairness opinion
from a nationally recognized investment bank with regard to the
contemplated transaction;
(ii) A majority of the non-management directors of
True North has voted to approve the terms and conditions of the
contemplated transaction; and
<PAGE> 2
(iii) True North has obtained pooling letters (or
similar action) by all other non-de minimis affiliates of True North.
1.1.1. Not later than 90 days after Publicis and
Communication shall have furnished the pooling letter, True North shall call a
meeting of the shareholders of True North, to be held within a further 60 days,
to vote on the contemplated transaction. If a majority vote of the outstanding
shares of True North in favor of the contemplated transaction is not obtained
at such meeting (or at an adjournment thereof within such 60 day period),
Publicis and Communication may withdraw their pooling letter.
1.1.2. The obligation of Publicis and Communication to
furnish a pooling letter pursuant to this Section 1.1 shall expire at the end
of the earlier of (a) True North's successful completion of a significant
transaction involving the pooling method of accounting or (b) three years after
the date of this Agreement.
1.2. Obligations of True North to Deliver Pooling Letter.
So long as True North and its subsidiaries own in the aggregate at least 10% of
the issued and outstanding shares of Communication Stock, within 30 days after
receiving a written request from Communication delivered before the third
anniversary of this Agreement, True North shall (a) furnish Communication, and
shall cause any designee of True North serving on the Board of Directors of
Communication to furnish Communication, with a pooling letter, in a form as is
conventional for a transaction accounted for as a pooling of interests under
generally accepted accounting principles applied in France, and, (b) if
reasonably requested, take such other action in support of the transaction
(other than a commitment to vote for such transaction) as would be customary
with respect to an acquisition or other similar business transaction in which
Communication may participate; provided that True North may withdraw such
pooling letter if any of the following conditions is not met within 90 days
after True North shall have furnished such pooling letter.
(i) Communication has obtained a fairness opinion
from a nationally recognized investment bank with regard to the
contemplated transaction;
(ii) A majority of the outside Directors of
Communication has voted to approve the terms and conditions of the
contemplated transaction; and
(iii) Communication has obtained pooling letters
(or similar action) by all other non-de minimis affiliates of
Communication.
1.2.1. Not later than 90 days after True North shall have
furnished the pooling letter, Communication shall call a meeting of the
shareholders of Communication, to be held within a further 60 days, to vote on
the contemplated transaction. If a majority vote of the outstanding shares of
Communication in favor of the contemplated transaction is not obtained at such
meeting, True North may withdraw its pooling letter.
2
<PAGE> 3
1.2.2. The obligation of True North to furnish a pooling
letter pursuant to this Section 1.2 shall expire at the end of the earlier of
(a) Communication's successful completion of a significant transaction
involving the pooling method of accounting or (b) three years after the date of
this Agreement.
ARTICLE II
MISCELLANEOUS
2.1. Entire Agreement. This Agreement constitutes the
full and entire understanding and agreement among the parties with regard to
the subject matter hereof and supersedes all prior agreements and
understandings among the parties relating to the subject matter hereof. This
Agreement shall be of no force or effect until the Agreement dated as of the
date hereof by and among the parties hereto, Publicis-FCB Europe B.V. ("PBV"),
FCB International Inc. ("FCBI") and True North Holdings Netherlands B.V.
("TNBV") (the "Main Agreement") has been executed and delivered by each party
thereto.
2.2. Notices. Any notice, request or other demand to or
upon the parties hereto shall be in writing (including telex and telecopy
communication followed by registered mail with return receipt requested) and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or when telexed (answer-back received) or
telecopied (with receipt acknowledged) addressed to the party for which
intended as provided below (or as hereinafter specified by such party by notice
hereunder):
3
<PAGE> 4
If to Communication or Publicis, to it at:
133 avenue des Champs-Elysees
75380 Paris Cedex 08
France
Attention: President-Directeur General
Telecopy: 33-1-44-43-75-50
with a copy to:
Thomas Kuhn, Esq.
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
United States of America
Telecopy: 1-212-841-1010
If to True North, to it at:
101 East Erie Street
Chicago, Illinois 60611
United States of America
Attention: Chief Executive Officer
Telecopy: 1-312-425-5010
with a copy to:
General Counsel
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
United States of America
Telecopy: 1-312-425-6354
4
<PAGE> 5
2.3. Survival. Sections 2.4.1, 2.4.2, 2.4.3, and 2.5 and
agreements and covenants contained in any document delivered pursuant hereto or
in connection herewith (unless otherwise expressly provided herein or therein)
shall survive the termination of this Agreement and shall remain in full force
and effect.
2.4.1. Governing Laws. The provisions of this Agreement,
including, without limitation, the validity, interpretation, performance or
termination of them, shall be governed by and construed in accordance with (a)
to the extent relating to a request under Section 1.1, the laws of the State of
Delaware, United States of America, excluding its choice of law rules and (b)
to the extent relating to a request under Section 1.2, the laws of France
applicable to agreements executed and delivered and to be performed in France,
without regard to conflicts of laws principles.
2.4.2. Any claim arising out of a request under Section 1.1
of this Agreement shall be brought only in a court of the State of Delaware or
in a United States District Court located within the State of Delaware. This
provision shall be enforceable by any party even if another party has related
disputes with persons who are not parties to this Agreement. Each of the
parties hereto irrevocably consents and submits to the jurisdiction of such
courts in any action within the scope of this provision. Each of the parties
to this Agreement agrees to the sufficiency of service of process if made by
hand delivery pursuant to Section 2.2 of this Agreement. Each of the parties
to this Agreement hereby irrevocably waives any objections to jurisdiction or
venue in such courts, including but not limited to objections based on the
common law doctrine or forum non coveniens or its statutory counterparts.
Without limiting the rights of True North to pursue any other legal and
equitable remedies available to it for any breach by Publicis and Communication
of this Agreement arising out of a request under Section 1.1, Publicis and
Communication acknowledge that such a breach would cause a loss to True North
which could not be reasonably or adequately compensated in damages in an action
at law, that remedies other than injunctive relief could not fully compensate
True North for a breach of said covenants and that, accordingly, True North
shall be entitled to injunctive relief to prevent any breach or continuing
breaches of this Agreement arising out of a request under Section 1.1. It is
the intention of the parties hereto that if any term, restriction, covenant or
promise is found to be unenforceable and for that reason is unenforceable, then
such term, restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such court.
2.4.3. Any claim arising out of a request under Section 1.2
shall be brought only in a court of France located in Paris, France. This
provision shall be enforceable by any party even if another party has related
disputes with persons who are not parties to this Agreement. Each of the
parties hereto irrevocably consents and submits to the jurisdiction of such
courts in any action within the scope of this provision. Each of the parties
to this Agreement agrees to the sufficiency of service of process if made by
hand delivery pursuant to Section 2.2 of this Agreement. Each of the parties
to this Agreement hereby irrevocably waives any objections to jurisdiction or
venue in such courts, including but not limited to objections based on the
common law doctrine of forum
5
<PAGE> 6
non conveniens or its statutory counterparts. Without limited the rights of
Communication to pursue any other legal and equitable remedies available to it
for any breach by True North of this Agreement arising out of a request under
Section 1.2, True North acknowledges that such a breach would cause a loss to
Communication which could not be reasonably or adequately compensated in
damages in an action at law, that remedies other than injunctive relief could
not fully compensate Communication for a breach of said covenants and that,
accordingly, Communication shall be entitled to injunctive relief to prevent
any breach or continuing breaches of this Agreement arising out of a request
under Section 1.2. It is the intention of the parties hereto that if any term,
restriction, covenant or promise is found to be unenforceable and for that
reason is unenforceable, then such term, restriction, covenant or promise shall
be deemed modified to the extent necessary to make it enforceable by such
court.
2.5. Enforceability; Severability. It is the desire and
intent of the parties that the provisions of this Agreement shall be enforced
to the fullest extent permissible under the governing laws. Accordingly, if
any provision of this Agreement is or becomes invalid or unenforceable, is held
by any competent court or arbitral tribunal to be invalid or unenforceable, or
is challenged by either party hereto as being invalid or unenforceable under
French or Delaware law, respectively, then such provision shall be interpreted
under laws of the State of Delaware or France, respectively, and insofar as it
is invalid or unenforceable under Delaware or French law, respectively, be
given no effect and shall be deemed not be included in this Agreement, but
without invalidating any of the remaining provisions of this Agreement, which
other provisions shall remain in full force and effect. The parties shall then
negotiate in good faith and shall be bound to replace without delay the invalid
or unenforceable provision by a valid provision the effect of which is as close
as possible to the intended effect of the invalid or unenforceable provision.
2.6. Expenses. Except as the parties may otherwise agree,
all fees, commissions and expenses incurred by True North, Publicis, or
Communication in connection with the negotiation, execution, delivery or
performance of this Agreement shall be borne by the party incurring such
expenses.
2.7. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties thereto and their
respective successors and assigns. This Agreement may not be assigned by a
party hereto, whether by operation of law or otherwise, without the prior
written consent of the other party. Any purported assignment in violation of
this provision shall be void and of no force or effect.
2.8. Descriptive Headings. Section headings used in the
Agreement are used for convenience of reference only and shall in no event be
used for interpretation purposes.
2.9. Amendment; Waivers. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument
6
<PAGE> 7
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
2.10. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and shall
become binding when one or more counterpart shall have been signed by each of
the parties and delivered to each of the other parties thereto.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective duly authorized
officers, effective as of the date first written above.
PUBLICIS S.A. TRUE NORTH COMMUNICATIONS, INC.
By: /s/ Maurice Levy By: /s/ Stephen T. Vehslage
-------------------------------- ---------------------------------
Name: Maurice Levy Name: Stephen T. Vehslage
Title: President of Directoire Title: Director, Chairman of Special
Committee
PUBLICIS COMMUNICATION
By: /s/ Maurice Levy
--------------------------------
Name: Maurice Levy
Title: Director General
8
<PAGE> 1
Exhibit g(1)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of
our report dated March 13, 1997 on the consolidated financial statements of
Publicis SA included as an Exhibit to the Schedule 14D-1 and Amendment N(o) 10
to Schedule 13D, dated December 16, 1997 of Publicis SA and Publicis
Communication.
<TABLE>
<S> <C>
MAZARS & GUERARD MAZARS & GUERARD LLP
Paris New York
</TABLE>
December 16, 1997
<PAGE> 2
PUBLICIS S.A.
INDEPENDENT AUDITORS' REPORT
The Boards of Directors and Shareholders
Publicis
We have audited the accompanying consolidated balance sheet of Publicis as
of December 31, 1996 and 1995, and the related consolidated statements of
income, shareholder's equity and cash flows, for each of the three years in the
period ended December 31, 1996, which have been prepared on the basis of
accounting principles generally accepted in France. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in France and in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amount and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the management as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Publicis at 31 December, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with accounting principles generally accepted
in France.
Application of accounting principles generally accepted in the United
States would have affected shareholder's equity as of December 31, 1996, 1995
and 1994 and net income for each of the three years in the three-year period
ended December 31, 1996 to the extent summarised in note 9 to the consolidated
financial statements.
<TABLE>
<S> <C>
MAZARS & GUERARD MAZARS & GUERARD LLP
Paris New York
</TABLE>
Paris, March 13, 1997
2
<PAGE> 3
PUBLICIS S.A.
CONSOLIDATED BALANCE SHEETS
(IN FRF THOUSAND)
<TABLE>
<CAPTION>
ASSETS 12/31/94 12/31/95 12/31/96
--------- --------- ---------
<S> <C> <C> <C>
FIXED ASSETS................................................ 1,558,405 1,634,341 1,785,704
Gross intangible assets..................................... 733,826 891,874 938,534
Depreciation on intangible assets........................... (72,418) (87,621) (171,861)
Gross tangible assets....................................... 1,300,567 1,335,128 1,393,685
Accumulated depreciation on gross tangible assets........... (803,642) (854,929) (935,450)
INTANGIBLE AND TANGIBLE FIXED ASSETS, NET................... 1,158,333 1,284,452 1,224,908
Non consolidated investments................................ 35,150 34,885 184,507
Subsidiaries and affiliates accounted for by the equity
method.................................................... 302,296 278,736 329,899
Loans and advances to subsidiaries and affiliates........... 35,643 10,482 17,712
Other long-term investments (gross)......................... 50,152 49,420 47,380
Loss provisions relating to long-term investments........... (23,169) (23,634) (18,702)
LONG-TERM INVESTMENTS, NET.................................. 400,072 349,889 560,796
CURRENT ASSETS.............................................. 5,420,349 5,607,947 5,753,259
Inventories and work in progress............................ 232,900 257,396 251,971
Advances to suppliers....................................... 65,573 56,226 65,486
Trade accounts receivable................................... 2,815,142 2,751,508 3,034,935
Other debtors............................................... 1,272,479 1,374,929 1,068,481
Cash and cash equivalents................................... 1,034,255 1,167,888 1,332,386
PREPAID EXPENSES............................................ 91,618 78,766 72,485
TOTAL ASSETS................................................ 7,070,372 7,321,054 7,611,448
LIABILITIES
CONSOLIDATED SHAREHOLDERS' EQUITY........................... 1,939,958 2,180,288 2,397,066
Retained earnings........................................... 1,212,137 1,269,245 1,373,405
Group net income............................................ 120,456 152,726 185,331
SHAREHOLDERS' EQUITY........................................ 1,332,593 1,421,971 1,558,736
Minority interest in retained earnings...................... 506,235 602,654 685,073
Minority interest in consolidated income.................... 101,130 155,663 153,257
MINORITY INTERESTS.......................................... 607,365 758,317 838,330
LOSS AND CONTINGENCY PROVISIONS............................. 374,423 395,108 363,334
CURRENT LIABILITIES......................................... 4,661,647 4,654,365 4,753,894
Financial debts (other than bank borrowings)................ 215,919 130,471 68,699
Bank borrowings and overdrafts.............................. 543,790 592,617 625,789
Advances on orders.......................................... 160,512 176,419 198,620
Trade accounts payable...................................... 2,163,139 2,083,696 2,243,818
Other creditors............................................. 1,578,287 1,671,162 1,616,968
PREPAID INCOME.............................................. 94,344 91,293 97,154
TOTAL LIABILITIES........................................... 7,070,372 7,321,054 7,611,448
</TABLE>
3
<PAGE> 4
PUBLICIS S.A.
CONSOLIDATED INCOME STATEMENTS
(IN FRF THOUSAND)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996 % 96/95
----------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Sales..................................... 20,002,154 20,542,689 21,964,216 7%
Cost of sales............................. (16,563,440) (16,893,334) (18,218,142)
REVENUES.................................. 3,438,714 3,649,355 3,746,074 3%
Payroll expenses.......................... (1,850,426) (1,992,398) (2,033,681)
Administrative expenses................... (1,006,654) (1,073,203) (1,096,932)
Total expenses............................ (2,857,080) (3,065,601) (3,130,613) 2%
Other operating income.................... 76,389 77,003 62,492
Earnings before depreciation, interest and
taxes (loss)............................ 658,023 660,757 677,953
Depreciation and amortization............. (192,629) (192,440) (188,273)
Provisions for bad debts.................. (32,281) (22,888) (31,007)
Other reserves............................ (27,490) (30,868) (33,711)
Financial result, net..................... 21,918 39,315 36,091
CURRENT INCOME............................ 427,541 453,876 461,053 2%
Exceptional income (loss)................. (17,484) (5,912) (604)
Employee profit-sharing................... (8,026) (11,108) (13,288)
Corporate and income tax.................. (157,259) (174,682) (175,018)
Income from companies accounted for by the
equity method........................... 56,814 46,215 58,144
Exceptional provision..................... (80,000) -- --
TOTAL NET INCOME FROM ORDINARY
OPERATIONS.............................. 221,586 308,389 330,287 7%
GROUP NET INCOME FOR ORDINARY OPERATIONS
(EXCLUDING MINORITY INTERESTS).......... 120,456 152,726 177,565 16%
NET EXTRAORDINARY PROFIT.................. 8,301
TOTAL NET INCOME.......................... 221,586 308,389 338,588 10%
GROUP NET INCOME (EXCLUDING MINORITY
INTERESTS).............................. 120,456 152,726 185,331 21%
</TABLE>
4
<PAGE> 5
PUBLICIS S.A.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(IN FRF THOUSAND)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
USES OF FUNDS
Dividends distributed......................................... 81,162 93,415 96,370
Investments in consolidated subsidiaries and affiliates....... 195,560 126,608 49,924
Investments in affiliates accounted for by the equity
method...................................................... 24,858 0 13,203
Non-consolidated investments (Publicis Monde network)......... 0 0 151,603
Other long-term investments................................... 149,194 153,297 124,978
Loans and advances to subsidiaries and affiliates............. 0 5,500 5,000
Working capital............................................... 61,917 88,115 (66,357)
TOTAL USES OF FUNDS (1)....................................... 512,691 466,935 374,721
SOURCES OF FUNDS
Net income.................................................... 221,586 308,389 338,588
Depreciation and amortization................................. 192,629 192,440 188,273
Non-recurring provision....................................... 80,000 0 0
SOURCES OF FUNDS FROM OPERATIONS.............................. 494,215 500,829 526,861
Profit (loss) of companies accounted for by the equity
method...................................................... (56,813) (46,215) (58,144)
Dividends received from companies accounted for by the equity
method...................................................... 14,984 57,787 23,468
Capital increases............................................. 1,436 35,891 16,779
Repayment of loans to subsidiaries and affiliates............. 22,908 0 0
Translation adjustments and other gains (losses).............. (14,159) 3,448 (2,917)
TOTAL SOURCES OF FUNDS (2).................................... 462,571 551,740 506,047
NET SOURCES OF FUNDS (2) -- (1)............................... (50,120) 84,805 131,326
</TABLE>
5
<PAGE> 6
PUBLICIS S.A.
CHANGE IN CONSOLIDATED WORKING
CAPITAL REQUIREMENT AND CASH FLOW
(IN FRF THOUSAND)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
CHANGE IN WORKING CAPITAL
USES OF FUNDS (3)
Decrease in loss and contingency provisions................... 0 0 29,755
Increase in inventories and work in progress.................. 65,830 24,496 0
Decrease in loans and other long-term debts................... 0 85,448 61,772
Increase in accounts receivable and other current assets*..... 390,266 18,013 0
456,096 127,957 91,527
SOURCES OF FUNDS (4)
Increase in loss and contingency provisions................... 28,613 20,114 0
Decrease in inventories and work in progress.................. 0 0 5,425
Increase in loans and other long-term debts................... 61,278 0 0
Decrease in accounts receivable and other current assets*..... 0 0 49,930
Increase in accounts payable and other debts*................. 304,288 19,728 102,529
394,179 39,842 157,884
CHANGE IN NET WORKING CAPITAL REQUIREMENT (3) - (4)........... 61,917 88,115 (66,357)
CHANGE IN CASH POSITION
Cash and cash equivalents..................................... (85,430) 133,633 164,498
Less:
Banks (liabilities)........................................... (35,310) 48,828 33,172
NET CHANGE IN CASH POSITION................................... (50,120) 84,805 131,326
</TABLE>
- ---------------
* The sharp rise in accounts receivable and other current assets, and in
accounts payable and other debts in 1994 stemmed primarily from the first-time
consolidation of the FCA group.
6
<PAGE> 7
PUBLICIS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT EVENTS
1.1. GLOBALIZATION OF THE GROUP
The outstanding event of 1996 was the implementation by Publicis S.A. of
its strategy to build a worldwide network.
This began in Latin America with the acquisition of a 51% interest in
Publicis Romero (Mexico) and a 60% interest in Publicis Norton in Brazil.
The Group then strengthened its presence in North America with the
acquisition of a 70% interest in the BCP Group, Canada's no. 7 advertising
agency.
This strategy to build a worldwide network spread to Asia with the
acquisition, at the end of the year, of 60% of Publicis Eureka in Singapore and
of a 30% shareholding in Basic Advertising and Asia Link in the Philippines.
These companies have not been consolidated by Publicis at December 31,
1996. For the record, their 1996 billings totaled FRF 1.7 billion, representing
8% of Publicis Group consolidated billings.
1.2. MAIN ACQUISITIONS AND INCREASES IN EQUITY INVESTMENTS
MAIN ACQUISITIONS
Main acquisitions in 1996 were: in Sweden, 76% of GRO&S, which changed its
name to Publicis GRO&S; in the Netherlands, 52% of BMB by Overad; and various
small acquisitions and start-ups in Eastern Europe.
DISPOSAL
Publicis FCB Communication Germany sold its 50% interest in the MC&D
Messeagentur agency (which specializes in trade fairs and exhibitions) to the
Siemens Group. The disposal of this agency, which had billings of FRF 313
million in 1995, had no material impact on the Group's consolidated financial
statements.
1.3. MAJOR NEW ACCOUNTS WON
-- Worldwide: Bally, Inmarsat, Tambrands;
-- European: Guinness, Hewlett Packard, Stafford Miller.
2. METHODS AND PRINCIPLES OF CONSOLIDATION
2.1. RULES
The consolidated financial statements of the Publicis Group were
established as at December 31, 1996 in accordance with current laws and
regulations in France (the January 3, 1985 Act and the enabling decree of
February 17, 1986), with the rules laid down by the Conseil National de la
Comptabilite (French accounting standards board), and with generally accepted
international accounting policies.
2.2. CONSOLIDATION CRITERIA
All companies controlled by Publicis are fully-consolidated. The concept of
control is defined, in the first place, in terms of ownership percentage and
attendant voting rights. It applies to all companies in which Publicis owns more
than 50%.
7
<PAGE> 8
Media space sales companies in which it owns a 49% interest are
fully-consolidated when Publicis exercises a contractual controlling and
commercial management role.
Companies over which Publicis exercises a permanent and significant
influence, as evidenced by a percentage holding of at least 20%, are accounted
for by the equity method.
Equity investments and subsidiaries that are not significant in relation to
the consolidated financial statements are not consolidated.
2.3. FOREIGN COMPANIES
The financial statements of foreign companies are translated at the
year-end closing rate. The Group's interest in translation gains or losses on
the share capital and reserves of foreign subsidiaries is recorded under "Group
interest in consolidated reserves", non-Group interests being recorded in
"Minority interests".
The choice of this method is justified by the fact that the majority of
Publicis units are located in low-inflation countries in Europe, and by its
relatively small fixed assets.
The main exchange rates used are as follows:
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 % CHANGE 95/96
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Deutschmark (DEM)...................... 3.45 3.42 3.37 -1.5%
Belgian Franc (BEF).................... 0.168 0.166 0.164 -1.2%
Peseta (ESP)........................... 0.0406 0.0404 0.0400 -1.0%
US Dollar (USD)........................ 5.35 4.90 5.24 6.9%
Sterling (GBP)......................... 8.35 7.60 8.90 17.1%
Lira (ITL) (000)....................... 3.29 3.09 3.43 11.0%
Dutch Florin (NLG)..................... 3.08 3.05 3.00 -1.6%
Escudo (PTE)........................... 0.0336 0.0328 0.0335 2.1%
Swiss Franc (CHF)...................... 4.08 4.26 3.88 -8.9%
</TABLE>
2.4. CLOSING DATE
The consolidated financial statements, parent company financial statements
and those of nearly all consolidated companies are closed at December 31.
The fiscal year of Regie 1 ends on September 30 and the company is
fully-consolidated on the basis of its statutory financial statements.
Giraudy, which closes its financial statements at the same date, is
accounted for under the equity method and the share of profit or loss included
in the consolidated financial statements is based on the figures at September
30.
2.5. INTRA-GROUP ELIMINATIONS
Reciprocal assets and liabilities and intra-group transactions between
fully-consolidated companies are eliminated.
Significant intra-group profits and losses, provisions and dividends are
eliminated where necessary.
3. ACCOUNTING POLICIES, RULES AND METHODS
3.1. METHODS OF VALUATION AND PRESENTATION
Methods of valuation and presentation of the consolidated financial
statements and those of consolidated companies in 1996 are unchanged from those
applied in the previous year, with the exception of retirement allowances, the
annual change in which is recorded in the income statement (see 3.11 Retirement
allowances and similar payments).
8
<PAGE> 9
3.2. RESEARCH COSTS
The advertising industry is now highly technical. Each campaign is subject
to studies and research, and pre- and post-testing.
Research programs also investigate consumer behavior in various areas.
Media buying is another area in which extensive research and modeling is
conducted in order to optimize the use and choice of media, and the selection of
target publics. Publicis and Optimedia draw on high-performance computerized
mathematical models such as Optimix for these purposes.
Publicis operates a media research center called the Credome, and the
Institute of Context Analysis, an advertising research center. Both centers
market highly-sophisticated products.
A new research product called Tweens was launched in 1996, and results look
highly promising.
A large number of employees, generally with a scientific background, are
contributing to progress in these fields, foreshadowing trends in consumer
behavior and our advertisers' future needs.
Many of the expenses incurred in the design and development of these models
and studies concern long-lived products and could therefore justifiably be
amortized over a period of time.
However, Publicis has adopted a conservative accounting policy, and these
costs are therefore expensed as incurred. Consequently, these sizable programs
are not recorded under assets in the balance sheet.
3.3. INTANGIBLE ASSETS
These comprise goodwill arising on acquisition, local goodwill, leasehold
rights, and software.
ACQUISITION GOODWILL
Goodwill arising on first time consolidation consists of the difference
between the acquisition cost of shares in consolidated companies and the Group's
share in their net assets restated in accordance with Publicis' policies and
accounting principles at the time of entry into the Group.
These differences are allocated between goodwill arising on valuation or on
acquisition, according to whether they are, respectively, identifiable or
non-identifiable intangible assets.
Goodwill arising on valuation is determined on the basis of verifiable,
objective criteria, e.g. market share, trade-marks, trade names, client lists,
brands, revenues and earnings, and are therefore identifiable.
These assets are not amortized systematically but are subjected to annual
review of their market value on the basis of the parameters used at the time of
their acquisition. A loss provision or depreciation is recorded if their market
value is found to be persistently (more than three years) less than their
acquisition cost.
All acquisition goodwill at the date of this report has been assigned to
identifiable intangible assets.
As a result, the consolidated financial statements of Publicis do not
record any differences arising on acquisition. Any future acquisition goodwill,
i.e. unidentifiable intangible assets, would systematically be amortized over a
maximum of 40 years.
Relatively small acquisition goodwill arising on first time consolidation
(generally less than FRF 1 million) is amortized in full in the year of
recognition.
LEASEHOLD RIGHTS AND LOCAL GOODWILL
These are carried in the balance sheet at their historical acquisition
cost, which consists of their cost at the time of their entry into the Group's
assets.
These items are not amortized, but they are written down when their useful
value is lower than their acquisition cost.
9
<PAGE> 10
SOFTWARE
This comprises:
-- software for internal use, which is valued at purchase cost;
-- software for commercial use, which is mainly utilized by our
computer services subsidiary and is valued at production cost.
These are amortized over a period not exceeding three years.
3.4. TANGIBLE ASSETS
Tangible assets are valued at cost. This is made up of either their
original cost (purchase price plus incidental expenses, e.g. transportation,
installation and assembly costs, etc.), or their contributed value (generally
their net book value). A limited number of assets have been revalued in
accordance with French legislation, but the amounts concerned are insignificant.
They are amortized according to the method best-suited to record their
economic depreciation, the most commonly-used amortization periods being
(straight line method):
<TABLE>
<S> <C>
Buildings................................................ 20 years
Fixtures and fittings, and general installations......... 10 years
Billboards............................................... 4-7 years
Office furniture, and equipment.......................... 5-10 years
Vehicles................................................. 4 years
Computer hardware........................................ 2-4 years
</TABLE>
3.5. FIXED ASSETS PRODUCED BY THE COMPANY
The Group creates products for its clients which can be used over several
years. To be prudent, however, these items are not recorded as fixed assets.
For similar reasons, no value is placed in the consolidated balance sheet
on brands, business goodwill and other intangible assets produced by the Group.
3.6. CAPITAL LEASES
Assets acquired under finance leases or long-term rental are not
capitalized. Corresponding rent is recorded under operating expenses in the year
in which it is paid. Rentals remaining to be paid and other liabilities relating
to these contracts are shown as contingent liabilities.
Capitalization of these assets would not have significant impact on the
consolidated balance sheet.
3.7. NON-CONSOLIDATED INVESTMENTS
These refer to companies not included in the scope of consolidation (see
2.2 Consolidation criteria). Where appropriate, a loss provision is recorded if
their useful value is less than their book value. Useful value is determined on
the basis of criteria such as revalued net assets, capitalized earnings, stock
market price, the outlook for the sector and the likely impact on the
performance of the company, and the strategic value of the shareholding to the
Group.
Any provisions thus made are recorded under "Provisions for long-term
investments".
3.8. LOANS AND ADVANCES TO SUBSIDIARIES AND AFFILIATES
This item comprises financial claims held by the Group on companies
accounted for by the equity method and nonconsolidated companies.
10
<PAGE> 11
A loss provision is booked where the financial position of the subsidiaries
concerned gives rise to a risk of non-collection. This provision is included
under "Provisions for long-term investments".
3.9. INVENTORIES AND WORK IN PROGRESS
This item includes:
-- advertising-related work in progress. This consists of technical
creative and production work (graphic design, TV and radio production,
publishing, etc.) which is billable, but not yet billed, to the client. A
write-down charge is taken on these items where their value on completion
will be less than their cost of production.
Unbillable work and costs incurred in acquiring new clients are not
recorded in the balance sheet.
-- inventories of merchandise relating to the Group's retailing
business (Drugstores) are valued at weighted average costs and are written
down when their sale value is less than their cost to the Group.
3.10. DERIVATIVE PRODUCTS
The Group makes no use of financial derivative instruments, having little
exposure to foreign exchange and interest rate risk. Cash surpluses are invested
in liquid, immediately realizable, non-speculative instruments.
3.11. RETIREMENT ALLOWANCES AND SIMILAR PAYMENTS
FRENCH COMPANIES
The advertising industry collective bargaining agreement to which Publicis
is affiliated provides for payment of a retirement allowance to all employees
equivalent to 1/4 of one month's remuneration at the last salary level for each
year of services within the Group. For executive-grade staff, this entitlement
is increased to 1/3 of the monthly salary beyond the tenth year of employment.
After 20 years' seniority, employees further qualify for a "loyalty bonus" of
between 5 and 20%.
In view of labor market trends in general, and in the advertising industry
in particular, it has been considered necessary to bring Publicis' criteria for
calculating retirement allowances and related entitlements up to date. It has
therefore been decided to bring the age from which retirement allowances and
related entitlements start to be calculated forward, from 55 to 50 years of age.
The methods of calculation remain unchanged: retirement allowances,
including social security contributions, are recognized in loss and contingency
provisions. Their annual change is recorded in the income statement.
For the first year of application of this new rule, a decision was taken,
exceptionally, to draw on available reserves the sum representing the impact of
this change of method on the previously-established provision. The annual
allocation is recognized in the income statement under payroll expenses.
Consequently, no further contingent liability exists in this regard.
FOREIGN COMPANIES
Provision for retirement allowances is made in accordance with local
regulations and legislation.
The main countries concerned are Germany and Italy, where the following
accounting policies are applied:
-- vested rights of all employees are revalued on the basis of
mortality tables, pursuant to German law and agreements with the labor
unions;
-- in Italy, an equalization fund is set up consisting of capitalized
and revalued vested rights.
11
<PAGE> 12
3.12. SALES
COMMUNICATIONS SECTOR
Billings in this sector mainly consist of sales of advertising produced and
of advertising space.
MEDIA BUYING IN FRANCE
The Sapin Law, which came into force on March 31, 1993, modified the ground
rules of our business, obliging media buyers to act under an agency contract.
Consequently, media space buying operations conducted by agents (whether
advertising agencies or centralized buying units) on behalf of clients are no
longer recorded in the sales and purchases ledger accounts. Debts and
receivables in respect of these operations are recorded under "Other debtors"
and "Other creditors" in the balance sheet.
In order to compare our billings with the figures for previous years, and
with those of our international competitors in our business, the media billings
handled by French centralized media buying units acting under an agency contract
are recorded under consolidated billings. French media buying accounts for less
than 10% of our consolidated billings.
MEDIAS AND MEDIA SPACE SALES
Billings here consist of sales of advertising space in media for which we
act as space vendors or which are owned by us (newspapers and magazines, radio,
cinemas, billboards).
DIVERSIFIED BUSINESSES
These billings are generated by our retailing, EDP, real estate and
administrative services businesses.
3.13. REVENUES
These represent the difference between billings and the cost of external
production and media purchases. It is the concept commonly used in the
advertising sector to measure real activity levels. It is the only truly
significant measure of an advertising firm's volume of activity, expressing the
true value added by the agencies.
3.14. EXPOSURE TO FOREIGN EXCHANGE RISK
The Group has little exposure to foreign exchange risks, since it generates
40% of its billings in France and 53% in the rest of Europe, where the European
Monetary System regulates currency fluctuations. However, the Group is exposed
to fluctuations in the pound sterling, which has still not joined the EMS.
Changes in the dollar exchange rate have no significant impact on the
Group's financial statements, only 7% of consolidated billings being generated
in dollars.
With respect to the results of companies accounted for under the equity
method, and because of the consolidation of True North, a 10% variation in the
dollar exchange rate would have an approximately FRF 3.7 million impact on total
consolidated earnings.
The impact of exchange rate variations on the consolidated financial
statements (use of year-end closing rates) is discussed where appropriate.
Most commercial transactions are conducted in local currency. Worldwide
accounts are not managed centrally from either a financial or an administrative
standpoint. These accounts are managed in accordance with outline agreements
which are transposed to all countries in which our clients operate.
Moreover, intra-group cross-border transactions are too small to incur any
significant currency risk and are therefore not hedged.
12
<PAGE> 13
3.15. EXPOSURE TO INTEREST RATE RISK
The group has little exposure to interest rate risk thanks to its strong
cash position. Consequently, the Group does not utilize financial instruments to
hedge its interest rate risk.
3.16. CORPORATE AND INCOME TAX
All income is taxed in accordance with local tax legislation.
All tax immediately due or due at some future date is booked on an accrual
basis.
Tax loss carryforwards and deferred depreciation are not recorded under
assets in the consolidated balance sheet, and they are not restated in the
income statement. This conservative position has been adopted by the Publicis
Group and applies equally to the recognition and to the utilization of the said
tax losses.
In certain countries in Europe (the United Kingdom, the Netherlands,
Germany, etc.), we have elected to create consolidated tax groups combining all
of our companies in those countries, allowing profits to be offset against
losses in the different units concerned.
Average income tax rates in the main countries in which we operate were as
follows in 1996:
<TABLE>
<S> <C> <C> <C>
France..................... 36.66% Italy(2)................... 53%
Germany(1)................. 44% and 50% Netherlands................ 35%
Belgium.................... 41% Portugal................... 41%
Spain(2)................... 35% Switzerland................ 30%
United Kingdom............. 33% United States.............. 34%
</TABLE>
- ---------------
(1) 44% on distributed income, and 50% on undistributed income.
(2) The Group does not pay income tax in Spain and Italy.
4. NOTES AND COMMENTS RELATING TO THE CONSOLIDATED BALANCE SHEET
4.1. SCOPE OF CONSOLIDATION
The list of consolidated companies at December 31, 1996, with details of
methods of consolidation and ownership percentages, is attached.
As stated in 1.1 Globalization of the Group, acquisitions made by Publicis
in 1996 in Latin America (Romero, Norton), Canada (BCP) and Asia (Eureka and
Basic-Asia Link) are not consolidated at December 31, 1996. The other
consolidation changes that took place in 1996 did not have a material impact on
the financial statements of the Publicis Group at December 31, 1996.
4.2. INTANGIBLE ASSETS
Changes in the year were as follows:
<TABLE>
<CAPTION>
GROSS AMOUNT CHANGES IN GROSS AMOUNT
AT 1996 CURRENCY AT
IN THOUSANDS OF FRF 12/31/1995 ACQUISITIONS DISPOSALS AND OTHER 12/31/1996
------------------------ ------------ ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Differences arising on
valuation............. 742,146 56,162 (20,081) 2,558 780,785
Local goodwill.......... 91,594 5,756 (1,848) (64) 95,438
Software, leasehold
rights, and other..... 58,134 4,177 -- -- 62,311
TOTAL................... 891,874 66,095 (21,929) 2,494 938,534
</TABLE>
13
<PAGE> 14
DIFFERENCES ARISING ON VALUATION
The main goodwill items arising on valuation in 1996 were:
-- FRF 23,715,000 following the acquisition of additional investments
by Publicis-FCB Europe in Northern Europe (Norway, Sweden and Finland);
-- FRF 19,984,000 following the acquisition of additional investments
by Publicis Communication in FCA Amsterdam and FCA/BMZ CID Madrid.
At December 31, 1996, gross valuation differences recognized in the
consolidated balance sheet were as follows:
-- advertising agencies in Europe: FRF 686,622,000;
-- media buying in France, Publicis Centre Media: FRF 52,565,000;
-- Publicis in the United States: FRF 15,090,000;
-- Media & Advertising Space Sales sector: FRF 26,508,000
LOCAL GOODWILL
Le Monde Publicite, in which we hold a 49% interest, owns the commercial
advertising and classified advertising space sales division of the French
newspaper Le Monde. A value of FRF 30 million was placed on this local goodwill
at the time of the share transfer operations in 1985; this amount is not
amortized. Its current value is assessed as exceeding its book value.
The technical support contracts and financial operating terms of this
advertising space sales unit were renewed for a period of ten years in 1995.
The acquisition cost of the local goodwill corresponding to the advertising
space sales contract with the weekly magazine l'Evenement du Jeudi is also
included under this heading for a gross amount of FRF 26 million, with a FRF 8
million amortization charge.
The other advertising space sales contracts held by the Group, including
the one for the newspaper Liberation(also renewed in 1995), and for Pariscope,
are not recognized in the consolidated balance sheet.
The other business franchises included in this item were acquired from
advertising agencies, mainly in France, the recorded amount being FRF
39,022,000.
Business franchises created by the company itself are not recognized in the
balance sheet.
Net amounts for intangible assets are as follows:
<TABLE>
<CAPTION>
GROSS VALUE ACCUMULATED NET VALUE
IN THOUSANDS OF FRF AT 12/31/1996 AMORTIZATION AT 12/31/1996
------------------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
Differences arising on valuation..... 780,785 (121,616) 659,169
Local goodwill....................... 95,438 (10,393) 85,045
Software, leasehold rights and
other.............................. 62,311 (39,852) 22,459
TOTAL................................ 938,534 (171,861) 766,673
</TABLE>
A portion (FRF 40,000,000) of the extraordinary provision made on Italy in
1994 and recorded in loss and contingency provisions, was assigned in 1996 to
amortization of the goodwill recognized on Italy. It is included in the FRF
121,616,000 referred to above.
Further, no capital gain on the disposal of MC&D Messeagentur is recognized
in the consolidated financial statements. This disposal resulted in an increase
of approximately FRF 12 million in amortization of intangible assets relating to
our German operations.
Net intangible assets excluding software and leasehold rights, totaling FRF
744,214,000 are split between the Publicis Group's share (FRF 426,925,000) and
minority interests (FRF 317,289,000).
14
<PAGE> 15
The net amounts shown above do not reflect the economic value of the
Group's intangible assets, since this is substantially greater on the basis of
their fair market value.
4.3. TANGIBLE ASSETS
The following changes occurred in the Group's tangible assets in 1996:
<TABLE>
<CAPTION>
CHANGES IN 1996
GROSS VALUE --------------------------- GROSS VALUE
AT CONSOLIDATION CURRENCY AT
IN THOUSANDS OF FRF 12/31/1995 ACQUISITIONS DISPOSALS CHANGES AND OTHER 12/31/1996
- ----------------------- ----------- ------------ --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Land and buildings..... 163,095 1,723 -- -- 819 165,637
Other.................. 1,172,033 151,357 (93,403) (14,019) 12,080 1,228,048
TOTAL.................. 1,335,128 153,080 (93,403) (14,019) 12,899 1,393,685
</TABLE>
Net value of tangible assets:
<TABLE>
<CAPTION>
GROSS VALUE
AT ACCUMULATED NET VALUE
IN THOUSANDS OF FRF 12/31/1996 DEPRECIATION AT 12/31/1996
--------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Land and buildings..................... 165,637 (46,732) 118,905
Other.................................. 1,228,048 (888,718) 339,330
TOTAL.................................. 1,393,685 (935,450) 458,235
</TABLE>
LAND AND BUILDINGS
The gross value of the Publicis Group's real estate holdings is recorded at
FRF 166 million in the balance sheet, with a net amount of FRF 119 million.
The main asset is the headquarters building at 133, avenue des
Champs-Elysees, a prime Paris location. This 7-floor building contains about
12,000 square meters of office space, occupied by the Drugstore Champs-Elysees
and two movie theaters open to the public.
The Group is also joint-owner of the building that houses the Drugstore
Matignon (floorspace approximately 2,400 square meters) and a movie theater, at
the "Rond-Point des Champs-Elysees".
Our subsidiary Metrobus owns three stories of the building at 15 rue du
Dome, Boulogne, where its headquarters are located.
Outside France, our advertising agencies own premises in downtown districts
in Brussels, Amsterdam and Lisbon with a total floorspace of approximately 6,000
square meters.
OTHER TANGIBLE ASSETS
"Other tangible assets" include substantial computer facilities dedicated
to the creation and production of advertising material, management of media
buying, and administrative operations. Most of the advertising agencies are now
equipped with large installed bases of networked microcomputers.
SGIP, the Group's information technology and electronic communications
subsidiary, is equipped with a client/server system based on a 31 MIPS ES 9000
main-frame, located at its teleport in the Bastille district of Paris. This
system hosts the Group's Internet, videotext and network facilities with a
capacity of 3,000 connections.
Gross tangible assets also comprise FRF 345 million of billboards and
street furniture belonging to the Group's billboard operating companies, chiefly
Publex in the Netherlands and Metrobus, a public transit and airports
advertising space sales unit operating in France, Spain and Portugal.
This equipment is written down over a maximum of seven years.
15
<PAGE> 16
4.4. NON-CONSOLIDATED INVESTMENTS
FRF 151,603,000 of this amount consists of shares in companies acquired by
Publicis at the end of 1996 (see 1.1 Globalization of the Group), which will be
consolidated as from January 1, 1997.
The balance, i.e., FRF 32,904,000, comprises shares of companies over which
Publicis exercises no significant influence or whose unit value is too small to
meet the consolidation criteria.
Provision for the latter is made under the heading "provisions for
long-term investments" for an amount of FRF 13,915,000, or a net amount of FRF
18,989,000, versus a net amount of FRF 15,257,000 at December 31, 1995.
4.5. SUBSIDIARIES AND AFFILIATES ACCOUNTED FOR BY THE EQUITY METHOD
<TABLE>
<CAPTION>
BALANCE SHEET AMOUNT
-------------------------------
IN THOUSANDS OF FRF 1994 1995 1996
- -------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
True North Communications (20%)............................... 124,822 92,895 122,057
Giraudy (29.23%).............................................. 126,399 130,033 149,778
Mediavision (33.30%).......................................... 15,476 16,287 17,294
Other......................................................... 35,599 39,521 40,770
TOTAL......................................................... 302,296 278,736 329,899
</TABLE>
TRUE NORTH, in which Publicis Communications holds a 20% interest, is
listed on the New York Stock Exchange. Our worldwide partner is the n(o) 10
advertising group, with billings of USD 3.3 billion. It has operations in the
United States, Southern and Central America, and in the Asia-Pacific zone. Its
main clients are ATT, SC Johnson, Levi Strauss, Citibank, Mazda, Kraft General
Food and Mattel.
True North's group net income (excluding minority interests) totaled USD
26,630,000 versus USD 19,653,000 in 1995, in which year a one-time charge of USD
13 million was recorded.
The contribution of Publicis Communication and Publicis FCB Europe to the
earnings of True North for 1996 totaled USD 15.7 million.
Consolidated total assets of True North stand at USD 930,000,000, with net
assets of USD 241,000,000.
True North's financial statements are drawn up in accordance with US
accounting standards (GAAP) which are akin to the ones applied by the Publicis
Group. They are audited by Arthur Andersen, which has certified the 1996
financial statements.
The 4,658,000 shares in True North held by Publicis Communication (which is
the main shareholder) are valued at FRF 122,057,000 in the consolidated balance
sheet of the Publicis Group. This figure represents our interest in the restated
net assets of True North. Since the beginning of the relationship, owing to the
very particular nature of the alliance between Publicis and True North, which is
treated as a "pooling of interests", goodwill recognized in True North's balance
sheet has been eliminated for the purpose of computing our interest in the net
assets of True North.
True North had a market capitalization of approximately USD 500 million at
February 28, 1997, on the basis of shares outstanding at December 31, 1996 and
Publicis Communication's interest in True North contains an unrealized gain of
approximately FRF 430 million.
As a consequence of deep strategic divergences between Publicis
Communication and True North, the alliance was terminated since January 1995,
with effect from February 29, 1996.
On February 19, 1997, the two groups announced an agreement to resolve
their differences. Details of this agreement are provided in Section 6.2
Subsequent events.
GIRAUDY is France's number 1 4x3 meters billboard operator and is 29.23%
held by Publicis S.A. The shares are traded on the Paris USM ("marche Hors
Cote"). Consolidated billings total FRF 1.2 billion and consolidated net income
FRF 34,019,000.
16
<PAGE> 17
Consolidated total assets stand at FRF 1.1 billion, with consolidated net
assets of FRF 510,408,000.
Giraudy's shares are valued at FRF 150 million in the consolidated balance,
which is less than their fair market value. Although it operates mainly in
France, Giraudy has in recent years expanded its operations in Europe (mainly in
Spain). MEDIAVISION, a movie theater advertising space sales unit, is one-third
held by Publicis S.A. The company generated a net income of FRF 9,460,000 on
billings of FRF 165 million in 1996.
Mediavision holds interests in Belgium, the USA, the UK, and Spain.
CHANGE IN SUBSIDIARIES AND AFFILIATES ACCOUNTED FOR BY THE EQUITY METHOD
Between December 31, 1995 and December 31, 1996, this item increased by FRF
58 million, less FRF 26 million in dividends paid, representing 1996 earnings of
subsidiaries and affiliates accounted for by the equity method.
This item also increased to FRF 13 million as a result of the acquisition
of an additional stake in Giraudy. It was further increased by FRF 5 million as
a result of the favorable impact of currency changes on True North shares.
4.6. OTHER LONG-TERM INVESTMENTS
This item amounts to FRF 47,380,000 in the 1996 balance sheet, versus FRF
49,420,000 at December 31, 1995. It mainly concerns amounts paid to outside
parties as guarantees and deposits (for the most part real estate rental
guarantees) and loans made by Group companies (construction loans, etc.).
4.7. INVENTORIES AND WORK IN PROGRESS
<TABLE>
<CAPTION>
BALANCE SHEET AMOUNT
--------------------------------
IN THOUSANDS OF FRF 1994 1995 1996
---------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Inventories of merchandise relating to retailing and
catering (Drugstores)............................. 18,654 17,395 14,994
Billboard operating companies' spare parts and
equipment......................................... 16,587 23,439 18,570
Advertising and other work in progress.............. 197,659 216,562 218,407
TOTAL............................................... 232,900 257,396 251,971
</TABLE>
4.8. ADVANCES TO SUPPLIERS
This item increased from FRF 56,226,000 at December 31, 1995 to FRF
65,486,000 at December 31, 1996. It shows down payments and advances paid to
suppliers by the Group:
-- prior to the start of work on orders (advances),
-- upon proof of partial execution of orders (down payments).
4.9. TRADE ACCOUNTS RECEIVABLE
These are recorded in the consolidated balance sheet at FRF 3,034,935,000
at December 31, 1996, versus FRF 2,751,508,000 one year earlier.
This item comprises all receivables pertaining to the operating cycle
together with bills receivable and invoices pending relating to operations for
the year. These receivables are all considered to be current assets.
Accounts receivable relating to media buying in France are recording under
"Other debtors" given the specific nature of this sector.
The average client credit period at December 31, 1996, was 46 days,
unchanged from December 31, 1995.
17
<PAGE> 18
4.10. OTHER DEBTORS
This item amounted to FRF 1,068,481,000 at December 31, 1996, as against
FRF 1,374,929,000 one year earlier. It comprises amounts owed by advertisers to
French media buying units and advertising agencies in respect of advertising
space bought under agency contracts rendered mandatory by the "Sapin Law",
together with tax, social security and other receivables.
4.11. CASH AND CASH EQUIVALENTS
Cash and cash equivalents chiefly comprises bank accounts in credit and
marketable securities. Short-term cash surpluses are invested in liquid
instruments such as mutual funds and investment funds, or similar, and are
realizable at short notice. The Group does not make use of derivative financial
instruments.
Our Group is made up of legally distinct entities subject to a variety of
local legislation and with different shareholders. It is therefore not possible
to practice any netting of debit balances (cash and cash equivalents under
assets) and credit balances (bank overdrafts) either within a single country or
between legally separate units. In certain cases, needless to say, cash balances
are managed on a centralized basis, using surpluses from one subsidiary to
finance the needs of others, charging a market rate of return on such transfers.
The net free cash balance of the Publicis Group at December 31, 1996 (in
FRF) was:
<TABLE>
<S> <C>
Cash and cash equivalents............................. 1,332,386,000
Bank overdrafts....................................... (625,789,000)
NET CASH BALANCE...................................... 706,597,000
</TABLE>
This cash balance may be considered to be representative of the Group's
average free cash position, given the relatively small seasonal variations.
The net cash balance shows an increase of FRF 131,326,000 over the December
31, 1995 figure of FRF 575,271,000. The improvement stems from the
non-reinvested balance of funds provided from operations for the year (see
Statement of sources and uses of funds).
4.12. PREPAID EXPENSES
This item fell from FRF 78,766,000 in 1995 to FRF 72,485,000 at December
31, 1996 and mainly comprises deferred expenses and prepaid expenses.
It also includes translation adjustments on subsidiaries, corresponding to
potential losses on currency translation recognized at year-end on
foreign-currency denominated debts and receivables. Provisions are made for
potential losses and reported under loss and contingency provisions.
18
<PAGE> 19
4.13. SHAREHOLDER'S EQUITY
A) CHANGE
The change in Group net assets and non-Group interests between December 31,
1995 and December 31, 1996, before 1996 income, is analyzed as follows:
<TABLE>
<CAPTION>
GROUP NON-
IN THOUSANDS OF FRF TOTAL SHARE GROUP
-------------------------------------------------------- --------- --------- -------
<S> <C> <C> <C>
Net assets at December 31, 1995......................... 1,871,899 1,269,245 602,654
1995 income............................................. 308,389 152,726 155,663
THEORETICAL NET ASSETS AT DECEMBER 31, 1996............. 2,180,288 1,421,971 758,317
1996 operations with an impact on net assets:
-- Publicis S.A. capital increase (and additional
paid-in capital).................................... 8,979 8,979 0
-- Distribution of parent company dividends........... (32,244) (32,244) 0
-- Dividends paid by subsidiaries to minority
shareholders........................................ (59,915) 0 (59,915)
-- Adjustment to provision for retirement
allowances.......................................... (37,396) (25,443) (11,953)
-- Translation adjustments............................ 5,807 2,207 3,600
-- Consolidation changes and other.................... (7,041) (2,065) (4,976)
NET ASSETS BEFORE 1996 INCOME, AT DECEMBER 31, 1996..... 2,058,478 1,373,405 685,073
</TABLE>
DIVIDENDS PAID
-- by parent company: FRF 4 per share with a par value of FRF 25, paid in
respect of 1995 by Publicis S.A. on the 8,061,125 shares making up the share
capital.
-- by subsidiaries to minority shareholders: this mainly concerns dividends
paid by the subsidiaries of Publicis. FCB Europe to non-Group shareholders (FRF
20 million) and minority shareholders' interests in the dividends paid by
subsidiaries.
ADJUSTMENTS TO PROVISION FOR RETIREMENT ALLOWANCES
As mentioned in 3.11 Accounting policies, rules and methods, the Group
modified the accounting rules relating to the provision for retirement
allowances. The resulting additional provision in respect of prior years was
drawn from reserves. The amount concerned was FRF 37 million, of which FRF 25
million was drawn from the Group's interest in consolidated reserves.
TRANSLATION ADJUSTMENTS
As mentioned in 2.3 Foreign companies, translation adjustments recognized
from one year to the next on the occasion of the translation of the financial
statements of foreign subsidiaries are recorded under net assets, and are split
between "Group interest" and "Minority interests" on the basis of ownership
percentages.
The main translation adjustments recorded in 1996 flow from the rise in the
dollar exchange rate, which increased 7% from FRF 4.90 at December 31, 1995 to
FRF 5.24 at December 31, 1996, and in that of sterling, which increased 17% from
FRF 7.60 at December 31, 1995 to FRF 8.90 at December 31, 1996. These rises
against the franc were partially offset by depreciation of the Dutch florin,
which fell from FRF 3.05 at December 31, 1995 to FRF 3 at December 31, 1996.
CHANGES IN THE SCOPE OF CONSOLIDATION AND OTHER FACTORS
This item chiefly concerns:
-- a fall of FRF 12,087,000 in minority interests (non-Group share)
at Publicis--FCB Europe, as a result of the acquisition of additional
shareholdings, mainly in Norway, and the withdrawal of minority
shareholders from Publicis MC&D Messeagentur following the sale of that
company to Siemens;
19
<PAGE> 20
-- FRF 7,800,000 representing the fraction subscribed by minority
shareholders in the increase in the capital of Le Monde Publicite.
B) ANALYSIS
Group net assets are analyzed as follows (in thousands of FRF):
<TABLE>
<S> <C>
Authorized capital...................................... 202,454
Parent company reserves................................. 934,548
Consolidated reserves................................... 236,403
GROUP NET ASSETS AT DECEMBER 31, 1996................... 1,373,405
</TABLE>
4.14. LOSS AND CONTINGENCY PROVISIONS
These totaled FRF 363,334,000 at December 31, 1996, versus FRF 395,108,000
for the previous year, representing a decrease of FRF 31,774,000. This change
stems primarily from the allocation of a portion -- FRF 40 million -- of the
one-time provision on Italy to amortization of Italian goodwill (see 4.2
Intangible assets).
These provisions are by definition intended to cover the contingencies and
charges that arise in the conduct of our businesses. By nature, these provisions
are hard to quantify with precision. The Publicis Group follows an extremely
conservative policy in setting up these provisions and exercises great caution
in appraising risks.
Generally speaking, annual allocations to provisions for contingencies and
charges are tax-deductible in the countries in which they are set up. However,
some of them inherently do not qualify for tax deductions, and Publicis prefers
not to deduct others from taxable income to be prudent and in order to avoid
disputes with the local tax authorities.
At December 31, 1996, nearly half of all loss and contingency provisions
were not treated as tax deductible and are therefore unencumbered by any
potential tax liability. These provisions may therefore be considered to be
permanent resources.
PROVISIONS FOR RETIREMENT ALLOWANCES
This item is the main component of loss and contingency provisions,
totaling FRF 143,146,000 at December 31, 1996 compared with FRF 99,441,000 one
year earlier (adjusted for consolidated changes, ie excluding MC&D
Messeagentur), representing a net new allocation of FRF 43,705,000.
The policies governing the setting up and utilization of these provisions
are described in section III -- Provisions for retirement allowances or
equivalent.
This balance includes FRF 74,626,000 in provisions set up outside France,
concerning Germany and Italy.
EXTRAORDINARY PROVISION FOR ITALY
Part of this provision (total FRF 59,225,000 at December 31, 1995) was
allocated to amortization of intangible assets (FRF 40,000,000), and part was
reclassified in the provision for general risks (FRF 19,225,000).
PROVISIONS FOR LAWSUITS, GENERAL RISKS AND CUSTOMERS
These totaled FRF 92,780,000, in provisions for general risks, versus FRF
92,441,000 at December 31, 1995.
20
<PAGE> 21
OTHER PROVISIONS
These totaled FRF 127,407,000 in 1996, versus FRF 116,330,000 in 1995, and
they comprise provisions relating to major repairs, computer and removal
expenses, for personnel costs, taxation, financial risks, and miscellaneous
risks.
4.15. FINANCIAL DEBTS (OTHER THAN BANK BORROWINGS)
These totaled FRF 68,699,000 at December 31, 1996, versus FRF 130,471,000
one year earlier.
This item mainly concerns debts payable to former shareholders of
consolidated subsidiaries and balances payable, as well as security deposits
received.
4.16. ADVANCES RECEIVED ON ORDERS
These totaled FRF 198,620,000 in 1996 versus FRF 176,419,000 the previous
year. The item records amounts received from clients, following conclusion of
the sale, in the form of down payments on the stipulated contract price. A
distinction is made between:
-- advances, which are paid prior to the start of work on a contract,
-- down payments, which are paid upon proof of partial execution.
4.17. TRADE ACCOUNTS PAYABLE
This item totaled FRF 2,243,818,000 at December 31, 1996, compared with FRF
2,083,696,000 in 1995.
It comprises all operating debts (including bills payable and invoices
awaited) relating to the acquisition of goods and services, with the exception
of those pertaining to media space buying in France, which is conducted within
the framework of the "Sapin Law" (recorded under "Other creditors").
Average supplier credit in 1996 was 40 days (unchanged from 1995).
4.18. OTHER CREDITORS
These amounted to FRF 1,616,968,000 at December 31, 1996, versus FRF
1,671,162,000 in 1995.
Amounts payable to advertising media in France by media buying units under
agency contracts rendered mandatory under the "Sapin Law" are recorded under
"Other creditors" (see 3.2 Sales).
This item also includes liabilities vis-a-vis personnel, social security
agencies, the State and other outside creditors.
4.19. PREPAID INCOME
These amounts include prepayments and goodwill under liabilities. This item
totaled FRF 97,154,000 at December 31, 1996, against FRF 91,293,000 in 1995.
21
<PAGE> 22
4.20. FINANCIAL RATIOS
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Surplus of equity over fixed assets(FRF)....... 381,552,000 545,948,000 611,363,000
Equity/Fixed assets ratio...................... 1.24 1.33 1.34
Fixed assets/Total assets...................... 22% 22% 23%
Equity/Total assets............................ 27% 30% 31%
Group net assets (FRF):
-- before goodwill write-offs................ 1,332,593,000 1,421,971,000 1,558,736,000
-- after goodwill write-offs................. 1,070,856,000 1,037,128,000 1,185,627,000
Financial debt/Equity ratio.................... nil(1) nil(1) nil(1)
</TABLE>
- ---------------
(1) The Group has a positive net cash balance.
5. NOTES TO THE CONSOLIDATED INCOME STATEMENT
5.1. BREAKDOWN OF BILLINGS AND INCOME
<TABLE>
<CAPTION>
GROUP INCOME FROM ORDINARY GROUP NET
OPERATIONS 1996 INCOME
IN FRF MILLION (EXCL.
--------------------------- MINORITY
EXCL. INCL. SHAREHOLDERS)
INCOME FROM INCOME FROM 1996 IN FRF
COMPANIES COMPANIES MILLION
ACCOUNTED ACCOUNTED -----------
1996 FOR FOR AFTER NET
BILLINGS BY THE BY THE ONE-TIME
BY BUSINESS IN FRF EQUITY EQUITY CAPITAL
SEGMENT BILLION METHOD METHOD GAIN
- ------------------------------------------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Communications.................................. 19.5 88% 114 87% 146 82% 146 79%
Media and media sales division.................. 2.4 11% 30 23% 45 25% 38 21%
Other activities................................ 0.2 1% (13) -10% (13) -7% 1 1%
Intra-Group..................................... (0.2) n.s. -- -- -- -- -- --
TOTAL........................................... 22.0 100% 132 100% 178 100% 185 100%
</TABLE>
<TABLE>
<CAPTION>
GROUP INCOME FROM ORDINARY GROUP NET
OPERATIONS 1996 INCOME
IN FRF MILLION (EXCL.
--------------------------- MINORITY
EXCL. INCL. SHAREHOLDERS)
INCOME FROM INCOME FROM 1996 IN FRF
COMPANIES COMPANIES MILLION
ACCOUNTED ACCOUNTED -----------
1996 FOR FOR AFTER NET
BILLINGS BY THE BY THE ONE-TIME
BY GEOGRAPHIC IN FRF EQUITY EQUITY CAPITAL
REGION BILLION METHOD METHOD GAIN
- ------------------------------------------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
France.......................................... 8.9 40% 70 53% 83 47% 91 49%
Rest of Europe.................................. 11.6 53% 58 44% 60 34% 60 33%
United States................................... 1.6 7% 4 3% 34 19% 34 18%
Intra-Group..................................... (0.2) n.s -- -- -- -- --
TOTAL........................................... 22.0 100% 132 100% 178 100% 185 100%
</TABLE>
22
<PAGE> 23
5.2. BREAKDOWN OF BILLINGS OUTSIDE FRANCE
<TABLE>
<CAPTION>
BILLING
IN FRF % OF TOTAL
BILLION BILLINGS
------ ----------
<S> <C> <C>
Germany.................................................................... 3.9 18%
United Kingdom............................................................. 2.1 10%
United States.............................................................. 1.6 7%
Netherlands................................................................ 1.5 7%
Italy...................................................................... 0.8 4%
Spain...................................................................... 0.6 3%
Portugal................................................................... 0.6 3%
Switzerland................................................................ 0.5 2%
Belgium.................................................................... 0.4 2%
Other...................................................................... 1.1 5%
TOTAL OUTSIDE FRANCE....................................................... 13.2 60%
</TABLE>
5.3. WORK FORCE
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
BY GEOGRAPHIC REGION
France............................................................ 2,825 2,982 2,975
Rest of Europe.................................................... 2,432 2,694 2,785
United States..................................................... 283 290 278
BY BUSINESS SEGMENT
Communications.................................................... 4,155 4,593 4,731
Media and advertising space sales................................. 718 728 766
Diversified business.............................................. 667 645 541
TOTAL............................................................. 5,540 5,966 6,038
</TABLE>
BY FUNCTION
<TABLE>
<S> <C>
Sales................................................................................ 45%
Creative............................................................................. 20%
Administrative/Management............................................................ 20%
Production........................................................................... 10%
Media/Research....................................................................... 5%
TOTAL................................................................................ 100%
</TABLE>
5.4. PAYROLL EXPENSES
These totaled FRF 2,033,681,000 in 1996, versus FRF 1,992,398,000 in 1995
and comprise all staff-related expenses, namely:
-- personnel remuneration (salaries, wages, commissions, bonuses,
incentive plan and paid vacation leave);
-- social security contributions and staff health and related
benefits.
Fiscal charges based on salaries are recorded in "Administrative expenses".
23
<PAGE> 24
5.5. ADMINISTRATIVE EXPENSES
These totaled FRF 1,096,932,000 in 1996, compared with FRF 1,073,203,000
the previous year and comprise, among others:
-- rents, and rental and condominium charges;
-- office supplies, consumables and material consumed in the year;
-- computer costs (external subcontracting and processing);
-- fees, commissions and brokers' fees;
-- research (see 3.2 Research costs);
-- insurance premiums;
-- advertising and public relations expenses to promote companies
(advertising campaigns, catalogs and other printed material,
conferences, seminars, publicity material and bonuses, gifts to
clients);
-- transport, travel and entertainment expenses;
-- postal expenses and bank charges;
-- other sundry administration expenses (royalties, directors' fees,
losses on bad debts, gifts and fringe benefits, etc.);
-- taxation (other than corporate income taxes) and equivalent
payments, mainly comprising payroll taxes and other tax
contributions;
-- other routine operating expenses.
5.6. DEPRECIATION AND AMORTIZATION
This item totaled FRF 188,273,000 in 1996, versus FRF 192,440,000 the
previous year. It comprises allocations to operating depreciation and
amortization.
Extraordinary charges corresponding to definitive write-downs and
exceptional depreciation are recorded under exceptional profits or losses, as
appropriate.
Amortization charges are determined on the basis of amortization schedules
adopted for the different categories of amortizable assets discussed in 3.3
Intangible assets and 3.4 Tangible assets.
The allocation for the year flows from:
-- fixed assets depreciation: FRF 150 million;
-- amortization and write-downs of intangible assets and deferred
expenses: FRF 12 million;
-- amortization of small valuation differences or for occasional
impairment of value relative to fair market value of intangibles
(see section III -- Intangible assets): FRF 26 million.
5.7. OPERATING RESERVES
These totaled FRF 33,711,000, versus FRF 30,869,000 in 1995. This item
comprises allocations to provisions for asset write-downs (excluding customer
accounts, which are recorded under "Provisions for doubtful debts") and
allocations to provisions for operating risks and charges.
5.8. FINANCIAL RESULT, NET
This item corresponds to the net balance of financial expense and revenues,
after eliminating dividends paid by consolidated subsidiaries to their parent
company (FRF 36,091,000 for 1996, versus FRF 39,315,000 in 1995).
24
<PAGE> 25
5.9. EXCEPTIONAL INCOME (LOSS)
The Group registered a net exceptional loss of FRF 604,000 in 1996 versus a
loss of FRF 5,912,000 in 1995. All amounts recorded under this item correspond
to one-time charges or gains determined in accordance with the French chart of
accounts.
The main components of this item are:
-- exceptional charges and gains on business operations (penalties,
fines, gifts, irrecoverable debts, grants and subsidies, etc.),
-- one-time charges and gains on capital operations (asset disposals);
however, the net capital gain realized on the sale of the Drugstore
Saint-Germain leasehold has been presented under a separate
heading, owing to its nature and amount (see paragraph 5.10 below),
-- allocations to and releases of exceptional amortization charges and
provisions (on fixed-assets, tax-regulated provisions and
exceptional write-downs, exceptional items, etc.).
However, this item only records amounts that are exceptional by their
amount or their nature, but it does not include exceptional overhead charges.
Consequently, all exceptional personnel expenses and overheads generated on the
occasion of mergers or geographical transfers of agencies continue to be booked
under overheads.
5.10. NET EXTRAORDINARY PROFIT
As announced last year, we agreed to sell the leasehold of the Drugstore
Saint-Germain to Giorgio Armani. Since all of the suspensive conditions were
lifted in March 1996, the sale became effective at this date. This operation
generated an extraordinary capital gain of approximately FRF 15 million.
Moreover, Medias et Regies Presse was obliged to pay an exceptional FRF 7
million indemnity to a newspaper.
The total net effect of these operations was an aggregate one-time profit
of FRF 8,301,000, in which the Group's interest amounted to FRF 7,766,000.
5.11. EMPLOYEE PROFIT-SHARING
This totaled FRF 13,288,000 in 1996, versus FRF 11,108,000 the previous
year.
This item is peculiar to France and does not include amounts recorded under
the statutory employee profit-sharing plan provided under the French government
ordinance of October 21, 1986 and the enabling decree of July 17, 1987.
All other variable components of remuneration are recorded under "Payroll
expenses".
5.12. CORPORATE AND INCOME TAX
These taxes are booked in accordance with the methods described in 3.16
Corporate and income tax. They totaled FRF 175,018,000 in 1996, compared with
FRF 174,682,000 in 1995.
Our subsidiary Publicis Conseil benefited from tax saving of approximately
FRF 16 million in 1996 resulting from the utilization of FRF 44 million tax loss
carry forwards from FCAB. Ordinary tax loss carry forwards and deferred
depreciation at Publicis Conseil, and still available at December 31, 1996,
totaled FRF 7,510,000 (which may be carried forward indefinitely). At current
tax rates, this represents a potential tax saving of FRF 2,750,000. Long-term
capital losses eligible for carry forward (until 2003 and 2004) amount to FRF
83,855,092.
At December 31, 1996, Publicis S.A. and Publicis Communication held tax
loss carry forwards (until 1999 and beyond) and deferred depreciation of FRF
25,119,000 and FRF 9,690,000 respectively.
25
<PAGE> 26
No tax loss eligible for carryforward is recorded upon consolidation, in
keeping with the prudent policies applied by the Group, even though there is a
high probability of subsequent recovery.
The average corporate tax rate (applied to current income) was 38%.
Tax paid in France totaled FRF 61,370,000 (of which FRF 5.6 million
corresponded to the additional 10% tax levy), and those paid abroad amounted to
FRF 113,648,000.
5.13. INCOME FROM COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
<TABLE>
<CAPTION>
GROUP INTEREST IN INCOME
(LOSS)
-----------------------------
IN THOUSANDS OF FRF 1994 1995 1996
----------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
True North Communications (20%)...................... 39,980 26,741 37,246
Giraudy (29.23%)..................................... 3,618 4,934 9,944
Mediavision (33.30%)................................. 1,901 3,274 2,976
Other................................................ 11,315 11,266 7,978
TOTAL................................................ 56,814 46,215 58,144
</TABLE>
The increase in the income of companies accounted for by the equity method
is the direct outcome of increased income at True North, which took a net
one-time charge of USD 13 million in 1995 (Publicis Communication's 20% interest
representing FRF 13 million).
5.14. TOTAL INCOME, GROUP NET INCOME (EXCLUDING MINORITY SHAREHOLDERS)
Total Publicis Group net income came to FRF 330,287,000 in 1996, the
Group's interest in this amount being FRF 177,565,000, versus FRF 308,389,000
and FRF 152,726,000 respectively at December 31, 1995. After recognition of a
net one-time capital gain of FRF 8,301,000 (Group share FRF 7,766,000) total net
income amounts to FRF 338,588,000, Group net income (excluding minority
shareholders) amounting to FRF 185,331,000.
The high proportion of minority interests stems from:
-- the Publicis Communication Group (FRF 113 million) in which True
North holds a 20.83% interest, and primarily Publicis FCB Europe, in which
True North holds a 49% interest;
-- the remainder stems from the Media and Media Sales division, in
which the Group co-partners the media on whose behalf the advertising space
sales units act. The minority interests stem mainly from Regie 1, Metrobus
and Publex, which are 50%-held, representing FRF 39 million for these three
companies.
5.15. BREAKDOWN OF TOTAL INCOME AND GROUP NET INCOME
BEFORE EXTRAORDINARY ITEMS
<TABLE>
<CAPTION>
1996 (BEFORE NET ONE-TIME CAPITAL
1994 (BEFORE EXTRAORDINARY ITEMS) 1995 GAIN)
---------------------------------- ---------------------------------- ----------------------------------
PUBLICIS PUBLICIS PUBLICIS
GROUP GROUP NET GROUP GROUP NET GROUP GROUP NET
INTEREST IN INCOME INTEREST IN INCOME INTEREST IN INCOME
TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL.
IN MILLIONS OF FRF INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES)
- ------------------- ------ ----------- ----------- ------ ----------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Communications..... 198 106 79 241 155 123 259 184 146
Media and Media
sales division... 75 40 40 94 51 51 87 45 45
Diversified
activities....... (1) (2) (2) (14) (15) (15) (3) (3) (3)
Holding company.... 34 34 34 (3) (3) (3) (10) (10) (10)
Restatements....... (4) 0 0 (9) (4) (3) (3) 0 0
TOTAL.............. 302 178 151 308 184 153 330 216 178
</TABLE>
26
<PAGE> 27
AFTER EXTRAORDINARY ITEMS
<TABLE>
<CAPTION>
1996 (AFTER NET ONE-TIME CAPITAL
1994 (AFTER EXTRAORDINARY ITEMS) 1995 GAIN)
---------------------------------- ---------------------------------- ----------------------------------
PUBLICIS PUBLICIS PUBLICIS
GROUP GROUP NET GROUP GROUP NET GROUP GROUP NET
INTEREST IN INCOME INTEREST IN INCOME INTEREST IN INCOME
TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL.
IN MILLIONS OF FRF INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES)
- ------------------- ------ ----------- ----------- ------ ----------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Communications..... 118 66 49 241 155 123 259 184 146
Media and Media
sales division... 75 40 40 94 51 51 81 38 38
Diversified
activities....... (1) (2) (2) (14) (15) (15) 12 11 11
Holding company.... 34 34 34 (3) (3) (3) (10) (10) (10)
Restatements....... (4) 0 0 (9) (4) (3) (3) 0 0
TOTAL.............. 222 137 121 308 184 153 339 223 185
</TABLE>
5.16. FINANCIAL RATIOS
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Payroll expenses/Revenues........................... 53.8% 54.6% 54.3%
Administrative expenses/Revenues.................... 29.3% 29.4% 29.3%
Consolidated net income (excluding extraordinary
items)............................................ 301,586,000 308,389,000 338,588,000
Allocations to amortization and depreciation........ 192,629,000 192,440,000 188,273,000
CASH FLOW........................................... 494,215,000 500,829,000 526,861,000
Cash flow/Revenues.................................. 14.4% 13.7% 14.1%
EARNINGS BEFORE INTEREST, DEPRECIATION AND INCOME
TAX: income before amortization, provisions,
financial result, taxation and extraordinary items
(EBDIT)........................................... 658,023,000 660,757,000 677,953,000
CURRENT INCOME: income before taxation and
extraordinary items (EBIT)........................ 427,541,000 453,876,000 461,052,000
EBDIT/Revenues...................................... 19.1% 18.1% 18.1%
Income before exceptional items and tax/Revenues.... 12.4% 12.4% 12.3%
</TABLE>
6. OTHER INFORMATION
6.1. SURETIES AND COMMITMENTS
<TABLE>
<CAPTION>
COMMITMENTS GIVEN COMMITMENTS RECEIVED
------------------------- --------------------
IN THOUSANDS OF FRF 1994 1995 1996 1994 1995 1996
- -------------------------------------------------- ------- ------ ------ ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Discounted notes not yet matured.................. 4,867 3,300 3,322 -- -- --
Endorsements and sureties......................... 6,239 6,653 3,914 7,123 325 1,986
Finance lease commitments(1)...................... 89,232 81,538 75,249 -- -- --
Other............................................. 11,497 5,256 2,523 -- -- --
TOTAL............................................. 111,835 96,747 85,008 7,123 325 1,986
</TABLE>
- ---------------
(1) Of which real estate finance leases amounting to FRF 69,496,000 in 1996 (FRF
75,740,000 in 1995). The main real estate leasing contract, signed by
Metrobus, a 50%-owned subsidiary of Publicis, relates to the acquisition
over 15 years of two floors of office premises, with a floorspace of 1,500
square meters, in the building in which its headquarters are located, at 15,
rue du Dome, Boulogne.
6.2. SUBSEQUENT EVENTS
On February 19, 1997, Publicis and True North agreed to resolve the
strategic divergences existing between them. Upon completion of execution of
this agreement, each of the two parties will have its own network, and
cross-shareholdings will be confined to the holding companies, Publicis
Communication and True North.
27
<PAGE> 28
The main points of the agreement are: Publicis will transfer to True North
four former FCB agencies in Paris, London, Lisbon and Athens. In exchange, True
North will sell its 49% shareholdings in Publicis FCB Europe (which will become
Publicis Europe) to Publicis Communication and will increase its shareholding in
Publicis Communication to 26.5%, compared with 20.83% as at present. Publicis
Communication, meanwhile, will maintain its 20% shareholding in True North.
True North will assist Publicis in building up its worldwide network by
selling to it units or majority shareholdings (in South Africa, Australia, New
Zealand, Argentina, Thailand, and India).
6.3. SHARE SUBSCRIPTION OPTION PLAN (STOCK OPTIONS)
The Extraordinary General Meetings of Shareholders of November 27, 1987 and
June 21, 1991 authorized the issue of 616,800 shares in the form of share
subscription options, all of which were allocated in earlier years.
Beneficiaries may exercise their options within a period of 10 years.
During the course of the year, 37,016 options were exercised, increasing
the share capital by FRF 925,400, with additional paid-in capital of FRF
8,053,710.
Options outstanding at December 31, 1996, were as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
SHARES OF FRF 25 PAR VALUE DATE GRANTED OUTSTANDING OPTION PRICE EXPIRATION DATE
- ------------------------------------- ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
First tranche........................ 11/27/87 7,458 115 1997
Second tranche....................... 12/16/88 21,116 194 1998
Third tranche........................ 12/04/89 28,480 322 1999
Fourth tranche....................... 12/17/90 78,960 204 2000
Fifth tranche........................ 01/06/92 334,560 187 2002
Sixth tranche........................ 11/30/92 51,840 174 2002
TOTAL................................ 522,414
</TABLE>
6.4. FIVE-YEAR CONSOLIDATED SUMMARY
<TABLE>
<CAPTION>
IN MILLIONS OF FRF 1992 1993 1994 1995 1996
- ---------------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Billings...................................... 20,002 18,236 20,002 20,543 21,964
Revenues...................................... 3,517 3,140 3,439 3,649 3,746
Total income.................................. 295 260 222 308 339
Group net income (excl. minority interests)... 149 127 120 153 185
Cash flow..................................... 470 435 494 501 527
</TABLE>
6.5. FIVE-YEAR PER SHARE DATA
<TABLE>
<CAPTION>
IN FRF 1992 1993 1994 1995 1996
- -------------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total consolidated net earnings per share(1)............ 19.2 15.7 14.9 18.9 22.9
Adjusted dividend per share(1).......................... 3.33 3.33 3.33 4.00 4.80
Group net equity, including income(1)................... 180 164 165 176 192
Share price at December 31(1)........................... 216 477 367 289 452
</TABLE>
- ---------------
(1) Adjusted for January 1994 two-for-one stock split and one-for-five bonus
share issue in July 1995. However, no account is taken of potential dilution
resulting from stock options.
28
<PAGE> 29
7. CONSOLIDATED COMPANIES
7.1. ADVERTISING AGENCIES
<TABLE>
<CAPTION>
COMPANY NAME
- -----------------------------
<S> <C> <C> <C> <C>
PUBLICIS COMMUNICATION....... 79.17 FINANCE FRANCE PARIS
PUBLICIS CONSEIL............. 99.61 ADVERTISING FRANCE PARIS
FCA/BMZ...................... 100.00 Advertising France Paris
Exclamation.................. 89.97 Advertising France Paris
Loeb et Associes............. 55.00 Advertising France Paris
Mundocom..................... 100.00 Advertising France Paris
Interplans Edition........... 100.00 Advertising France Paris
Procis....................... 89.40 Advertising France Paris
Publicis Direct.............. 77.04 Advertising France Paris
Directis..................... 77.05 Advertising France Paris
ID3d......................... 69.88 Advertising France Paris
Extension.................... 100.00 Advertising France Paris
Publicis Design.............. 100.00 Advertising France Paris
Motivom...................... 74.50 Advertising France Paris
Media System................. 99.67 Advertising France Paris
Guillaume Tell............... 80.00 Advertising France Paris
Verbe........................ 70.00 Advertising France Paris
Publicis Hourra.............. 80.71 Advertising France Lille
Epure........................ 99.67 Advertising France Lille
Publicis Cachemire........... 66.93 Advertising France Lyon, Clermont-Ferrand
Phreas....................... 99.00 Advertising France Lyon
2(e) Communication........... 51.00 Advertising France Lyon
Publicis Mediterranee........ 100.00 Advertising France Marseille
Publicis Soleil.............. 50.25 Advertising France Toulouse, Montpellier
Publicis Grand Angle......... 74.11 Advertising France Brest, Nantes, Rennes
Positif...................... 99.80 Advertising France Brest
Publicis Grand Est/Koufra.... 63.32 Advertising France Nancy, Dijon, Strasbourg
Publicis Qualigraphie........ 93.57 Advertising France Rouen, Caen
Reseau Graphic............... 66.79 Advertising France Rouen
Publicis Atlantique.......... 100.00 Advertising France Bordeaux
Expression................... 51.00 Advertising France Bordeaux
Racines Grand Centre......... 66.00 Advertising France Tours
SKT.......................... 68.78 Advertising France Paris
Exaudi....................... 99.80 Advertising France Paris
Jacques Schu et Associes..... 100.00 Advertising France Paris
Hautefeuille Regions......... 100.00 Advertising France Lyon
Hautefeuille Mediterranee.... 99.85 Advertising France Nice
Hautefeuille Grenoble........ 100.00 Advertising France Grenoble
Hautefeuille Besancon........ 90.00 Advertising France Besancon
O' de Formes................. 76.00 Advertising France Lyon
O' REP FLB................... 65.00 Advertising France Lyon
Publicis Alpes............... 99.85 Advertising France Annecy
PUBLICIS-FCB EUROPE.......... 51.00 FINANCE NETHERLANDS AMSTERDAM, PARIS
Publicis-FCB................. 100.00 Advertising Austria Vienna
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Publicis-FCB................. 100.00 Advertising Belgium Brussels
Cre-Action -- Full Option.... 53.95 Advertising Belgium Brussels
Publicis-FCB Direct.......... 100.00 Advertising Belgium Brussels
FCA! BMZ..................... 100.00 Advertising Belgium Brussels
Publicis Trzisno
Komuniciranje................ 100.00 Advertising Croatia Zagreb
Czech
Publicis-FCB................. 60.00 Advertising Republic Prague
Publicis-FCB................. 100.00 Advertising Denmark Copenhagen
Publicis Torma............... 60.03 Advertising Finland Helsinki
FCB.......................... 100.00 Advertising France Paris
Groupe Kenya................. 53.00 Advertising France Paris
Kenya Institutionnel......... 65.00 Advertising France Paris
Empir........................ 100.00 Advertising France Paris
Empir Media.................. 100.00 Media buying France Paris
Publicis-FCB Communication... 100.00 Finance Germany Dusseldorf
B.M.Z.FCA.................... 64.50 Advertising Germany Dusseldorf
Prorepro..................... 100.00 Advertising Germany Dusseldorf
More Sales................... 100.00 Advertising Germany Dusseldorf
More Media................... 90.00 Media buying Germany Dusseldorf
Publicis..................... 100.00 Advertising Germany Frankfurt
Mundocom..................... 100.00 Advertising Germany Frankfurt
Mundo Sales.................. 100.00 Advertising Germany Frankfurt
FCB Hamburg.................. 98.00 Advertising Germany Hamburg
Optimedia.................... 100.00 Media buying Germany Dusseldorf
FCB Direct Marketing......... 90.00 Advertising Germany Hamburg
Publicis Vital............... 90.00 Advertising Germany Frankfurt
B.R.P........................ 98.00 Advertising Germany Dusseldorf
Publicis MCD................. 74.90 Advertising Germany Erlangen, Munich
Contur....................... 100.00 Advertising Germany Friedrichsdorf
Contur Identity Design....... 100.00 Advertising Germany Friedrichsdorf
Contec....................... 100.00 Advertising Germany Friedrichsdorf
Sisyphos..................... 51.00 Advertising Germany Berlin
Publicis Hellas
Advertising.................. 100.00 Advertising Greece Athens
Publicis-FCB Magyarorszag.... 100.00 Advertising Hungary Budapest
Publicis-FCB................. 100.00 Advertising Italy Milan, Rome
FCA! BMZ..................... 100.00 Advertising Italy Milan
Optimedia Italia............. 100.00 Advertising Italy Milan
Overad....................... 100.00 Finance Netherlands Amsterdam
Publicis-FCB................. 100.00 Advertising Netherlands Amsterdam
Publicis-FCB Eindhoven....... 100.00 Advertising Netherlands Eindhoven
HVR Advertising.............. 100.00 Advertising Netherlands The Hague
Mundocom A.A.C............... 100.00 Advertising Netherlands Amsterdam, Eindhoven
Kern Habbema & Yap........... 53.00 Advertising Netherlands Amsterdam
Bruggenwirth, Mass &
Boswinkel.................... 52.00 Advertising Netherlands Amsterdam
Overad Property.............. 100.00 Finance Netherlands Amsterdam
Publicis-FCB................. 100.00 Advertising Norway Oslo
Publicis-FCB Direct.......... 91.00 Advertising Norway Oslo
Strategic Marketing.......... 100.00 Advertising Norway Oslo
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Basic........................ 100.00 Advertising Norway Oslo
Publicis-FCB Reklamebyra..... 95.00 Advertising Norway Oslo
Park Reklamebyra............. 100.00 Advertising Norway Oslo
Sponsor Marketing............ 65.00 Advertising Norway Oslo
Publicis-FCB Polska.......... 70.00 Advertising Poland Warsaw
FCB Publicidade.............. 83.00 Advertising Portugal Lisbon
Publicis Publicidade......... 90.00 Advertising Portugal Lisbon
BMZ/Park Publicidade......... 56.44 Advertising Portugal Lisbon
Comunicar Publicidade e
Promocao..................... 90.00 Advertising Portugal Lisbon
Optimedia Publicidade........ 93.00 Media buying Portugal Lisbon
Publicis-FCB................. 100.00 Advertising Russia Moscow
Publicis Virgo
Komunikacije................. 60.00 Advertising Slovenia Ljubljana
Publicis-FCB Arge............ 100.00 Advertising Spain Madrid, Barcelona
Optimedia.................... 98.00 Media buying Spain Madrid
Publicis Etoile.............. 100.00 Advertising Sweden Stockholm
Publicis GRO & S............. 76.00 Advertising Sweden Stockholm
Farner Publicis-FCB.......... 90.00 Advertising Switzerland Zurich
Bureau d'Etudes Publicitaires
BEP.......................... 100.00 Advertising Switzerland Lausanne
United
Multi Market Services........ 100.00 Finance Kingdom London
United
Publicis..................... 100.00 Advertising Kingdom London
United
FCB Advertising.............. 100.00 Advertising Kingdom London
United
FCB Impact................... 100.00 Advertising Kingdom London
United
Mundocom..................... 100.00 Advertising Kingdom London
United
Optimedia International...... 100.00 Advertising Kingdom London
FCA EUROPE
FCA/BMZ International........ 100.00 Advertising France Paris
FCA Amsterdam................ 97.00 Advertising Netherlands Amsterdam
FCA Walker................... 77.10 Advertising Netherlands Amsterdam
FCA Werner & Messelink....... 60.00 Advertising Netherlands Amsterdam
United
FCA London................... 100.00 Advertising Kingdom London
FCA/BMZ CID.................. 100.00 Advertising Spain Madrid, Barcelona,
Seville
WAM.......................... 79.76 ADVERTISING FRANCE PARIS
PUBLICIS BLOOM............... 96.15 ADVERTISING USA NEW YORK, DALLAS
PUBLICIS CENTRE MEDIA........ 100.00 MEDIA BUYING FRANCE PARIS
PUBLICIS CONSULTANTS......... 100.00 ADVERTISING FRANCE PARIS
Media-Finance................ 100.00 Advertising France Paris
Idees Dialogue Conseil....... 100.00 Advertising France Paris
Publicis Consultants
Nederland.................... 93.00 Advertising Netherlands Amsterdam
</TABLE>
31
<PAGE> 32
7.2. MEDIA BUYING UNITS
<TABLE>
<CAPTION>
COMPANY NAME
- -------------------------------------
<S> <C> <C> <C> <C>
MEDIA & REGIES EUROPE................ 100.00 FINANCE FRANCE PARIS
Medias et Regies Presse.............. 100.00 Media buying/ France Paris
Services
Le Monde Publicite................... 49.00 Media buying France Paris
Regiscope............................ 49.00 Media buying France Paris
Espaces Liberation................... 49.00 Media buying France Paris
Profil 18/30......................... 50.00 Media buying France Paris
TV Mission........................... 77.80 Advertising France Paris
Regie T.............................. 49.00 Electronic media France Paris
Regie T Mexico....................... 51.00 Electronic media Mexico Mexico
City
Publex............................... 50.00 Billboards Netherlands Amsterdam
V.K.M................................ 50.00 Billboard unit Netherlands Amsterdam
Spectacolor.......................... 80.00 Billboards France Paris
SB System............................ 100.00 Billboards France Paris
REGIE 1.............................. 50.00 RADIO AIRTIME FRANCE PARIS
BUYING
METROBUS............................. 50.00 BILLBOARD UNIT FRANCE PARIS
Sodex................................ 99.54 Billboard unit France Paris
AP Systemes.......................... 99.24 Billboards France Paris
Transcom Publicite................... 99.97 Billboard unit France Paris
France Index......................... 99.97 Billboard unit France Paris
Publisistemas........................ 100.00 Billboards Spain Madrid
Aerosistemas......................... 99.24 Billboards Spain Madrid
AP Portugal.......................... 89.60 Billboards Portugal Lisbon
</TABLE>
7.3. OTHER SECTORS
<TABLE>
<CAPTION>
COMPANY NAME
- -------------------------------------
<S> <C> <C> <C> <C>
Les Drugstores Publicis.............. 100.00 Finance France Paris
Drugstore Champs-Elysees............. 100.00 Retailing France Paris
Drugstore Matignon................... 100.00 Retailing France Paris
SCI de L'Etoile...................... 100.00 Real estate France Paris
S.G.I.P.............................. 66.00 Data processing France Paris
Groupe Publicis Services............. 100.00 Services France Paris
Communication et Publicite........... 50.00 Finance France Paris
Farner Holding....................... 100.00 Finance Switzerland Zurich
</TABLE>
32
<PAGE> 33
8. COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
<TABLE>
<CAPTION>
COMPANY NAME
- -------------------------------------
<S> <C> <C> <C> <C>
True North Communications............ 20.00 Advertising USA Chicago
Gnomi FCB............................ 40.00 Advertising Greece Athens
Giraudy.............................. 29.23 Billboards France Paris
Somupi............................... 34.00 Billboards France Paris
Sopact............................... 49.00 Billboards France Paris
TCS Portugal......................... 35.00 Billboards Portugal Lisbon
Metromatic........................... 50.00 Promotional Spain Madrid
Mediavision.......................... 33.30 Movie theater France Paris
Promometro........................... 33.92 Promotional France Paris
Elysee Marbeuf (Pub Renault)......... 25.00 Retailing France Paris
</TABLE>
9. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING POLICIES GENERALLY
ACCEPTED IN THE UNITED STATES AND FRANCE
The consolidated financial statements of Publicis S.A. have been prepared
in accordance with French accounting principles which differ in certain respects
from generally accepted accounting principles in the United States. The
principal differences between French GAAP and U.S. GAAP as they relate to
Publicis S.A. are discussed in further detail below.
9.1. GOODWILL
Publicis S.A. does not systematically amortize goodwill, but subjects the
asset to annual review of its market value, with a provision for loss being
recorded if the market value is less than the acquisition cost for more than
three years. Further, the utilization of tax loss carryforwards of acquired
companies is accounted for as a reduction of tax expense.
Under U.S. GAAP, the amount of goodwill would be reduced by the amount of
acquired deferred tax assets and would be amortized on a straight-line basis
over the estimated useful life of the asset, which the Company has determined to
be within a range of 10 to 40 years, depending on the type of entity acquired.
9.2. POST-RETIREMENT BENEFITS
As described in further detail in 3.11 Retirement allowances and similar
payments, the Company's French employees are entitled to certain lump-sum
payments upon retirement. Under French GAAP, through December 31, 1995, Publicis
S.A. reported expense based on contributions due, and disclosed the estimated
full obligation in the footnotes to the financial statements. Beginning December
31, 1996, the liability was recorded on the balance sheet, with the accumulated
effect as of January 1, 1996 being recorded as a direct adjustment to
shareholders' equity. Under U.S. GAAP, the full actuarially defined obligation
would be recorded on the balance sheet for all periods presented and the
increases to the reserve would be recorded as a charge in the income statement.
Further, the Company calculates its post-retirement benefit obligation for
French personnel only for employees over 50 years old. U.S. GAAP requires that
the estimation take into consideration all employees, with the estimated
turnover and interest rate being used.
9.3. RESTRUCTURING PROVISION
In 1994, the Company recorded for French accounting purposes a FRF 40 000
000 provision for the restructuring of its Italian operations. This provision
did not meet the requirements as set forth in EITF 94-3 and so would not have
been recorded until 1995 under U.S. GAAP.
33
<PAGE> 34
9.4. NET EXTRAORDINARY PROFIT
In 1996, Publicis S.A. recognized a capital gain on the sale of retail
leasehold and an expense related to a settlement paid to a newspaper. The net
gain arising from these two transactions has been characterized as
"extraordinary" under French accounting principles. As neither transaction meets
the U.S. GAAP criteria of being "unusual and infrequent", both would be
classified elements of "net income from ordinary operations".
The approximate effects of these differences on net income and
shareholders' equity are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF FRF
------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
NET INCOME AS REPORTED IN THE CONSOLIDATED
STATEMENT OF INCOME..................... 185,331 152,726 120,456
Adjustments to conform to U.S. GAAP
Amortization of goodwill................ (239) (6,136) (4,147)
Provision for post-retirement benefit
obligation........................... 1,402 (2,238) (5,228)
Restructuring provision................. 0 (8,080) 16,160
Deferred taxes acquired in business
combinations......................... (14,611) (108) 4,651
Tax on the above adjustments............ (514) 3,784 (3,644)
--------- --------- ---------
NET INCOME AS ADJUSTED FOR U.S. GAAP...... 171,369 139,948 128,248
--------- --------- ---------
EARNINGS PER SHARE AS ADJUSTED FOR U.S.
GAAP.................................... 20.52 16.90 15.38
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------
1996 1995 1994
(IN THOUSANDS) FRF FRF FRF
------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY AS REPORTED IN THE
CONSOLIDATED BALANCE SHEET.............. 1,558,736 1,421,971 1,332,593
Adjustments to conform to U.S. GAAP
Amortization of goodwill................ (36,480) (36,241) (30,105)
Provision for post-retirement benefit
obligation........................... 13,845 (16,859) (14,621)
Restructuring provision................. 8,080 8,080 16,160
Deferred taxes ......................... 17,605 29,774 29,268
Tax on the above adjustments.............. (8,040) 3,219 (513)
--------- --------- ---------
SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S.
GAAP.................................... 1,553,746 1,409,944 1,332,782
======== ======== ========
</TABLE>
9.5. CONSOLIDATION OF SUBSIDIARIES THAT ARE LESS THAN MAJORITY-OWNED
The principles covering the scope of consolidation under French GAAP are
set forth in 2.2 Methods and principles of consolidation criteria. Under this
policy, certain companies in which Publicis S.A. owns 49% or 50% and exercises
control over significant financial operating policies are consolidated.
For U.S. GAAP purposes, only majority-owned companies, based on voting
rights directly or indirectly held, are fully consolidated, and less than
majority-owned companies over which Publicis S.A. exercises significant
influence (generally 20% or more owned), would be included in the consolidated
financial statements using the equity method.
This difference in accounting policy has no effect on either net income or
shareholder's equity. The approximate effects on the consolidated balance sheet
at December 31, 1996, 1995 and 1994 would be to decrease minority interest by
FRF 141 124 000, FRF 123 216 000 and FRF 116 708 000, respectively and to
34
<PAGE> 35
record on one line the investment in companies accounted for using the equity
method of FRF 145 540 000, FRF 133 744 000 and FRF 116 708 000, respectively.
The impact on working capital on all periods is not material. The principal
income statement line items, if such investments were accounted for using the
equity method rather than being consolidated, would be decreased by the
following amounts:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------
1996 1995 1994
(IN THOUSANDS) FRF FRF FRF
--------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Sales.................................. 1,933,403 1,937,557 1,985,027
Cost of sales.......................... (1,422,718) (1,446,466) (1,490,894)
Revenues............................... 510,685 491,091 494,133
Current income......................... 115,354 125,242 134,839
========= ========= =========
</TABLE>
9.6. SUPPLEMENTARY CASH FLOW INFORMATION
Following is summarized cash flow information prepared in accordance with
U.S. GAAP:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF FRF
- ---------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income as adjusted for U.S. GAAP.................... 171,369 139,948 128,248
Depreciation and amortization........................... 184,601 224,522 244,256
Minority interest....................................... 157,538 139,961 123,940
Equity income (loss), net of dividends received......... (58,144) (46,215) (56,813)
Changes in working capital accounts..................... 141,482 (6,269) (125,424)
--------- --------- ---------
596,846 451,947 314,207
Cash flows from investing activities:
Acquisition of subsidiaries............................. (214,730) (126,608) (220,418)
Dividend received....................................... 23,468 57,787 14,984
Purchase of fixed assets................................ (124,978) (153,297) (149,194)
--------- --------- ---------
(316,240) (222,118) (354,628)
Cash flows from financing activities:
Proceeds from loans..................................... (66,772) (90,948) (35,310)
Repayment of loans...................................... 33,172 48,827 84,186
Issuance of common stock................................ 16,779 35,891 1,436
Payment of dividends.................................... (96,370) (93,415) (81,162)
--------- --------- ---------
(113,191) (99,645) (30,850)
Effect of exchange rate changes on cash................... (2,917) 3,448 (14,159)
--------- --------- ---------
Increase (decrease) in cash............................... 164,498 133,633 (85,430)
Cash at beginning of year................................. 1,167,888 1,034,255 1,119,685
--------- --------- ---------
Cash at end of year....................................... 1,332,386 1,167,888 1,034,255
========= ========= =========
</TABLE>
35
<PAGE> 36
PUBLICIS S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
6/30/96 6/30/97
--------- ---------
<S> <C> <C>
FIXED ASSETS.................................................................... 1,656,351 2,006,185
-- Intangible assets.......................................................... 917,824 1,308,097
-- Depreciation and amortization on intangible assets......................... (101,763) (196,995)
-- Tangible assets (gross).................................................... 1,394,899 1,445,011
-- Depreciation and amortization on tangible assets........................... (916,163) (987,656)
NET TANGIBLE AND INTANGIBLE ASSETS.............................................. 1,294,797 1,568,457
-- Investments (non-consolidated companies)................................... 35,436 42,665
-- Investments (equity subsidiaries).......................................... 283,705 18,969
-- Intercos loans............................................................. 20,662 28,864
-- Other financial assets..................................................... 47,282 60,134
-- Provisions on financial assets............................................. (25,531) (12,904)
NET FINANCIAL ASSETS............................................................ 361,554 437,728
CURRENT ASSETS.................................................................. 5,948,602 6,140,041
-- Work in progress........................................................... 390,254 407,486
-- Advance payments made...................................................... 96,425 93,711
-- Accounts receivable (net).................................................. 2,875,603 3,183,320
-- Other debtors.............................................................. 1,543,288 1,326,445
-- Cash....................................................................... 1,043,032 1,129,079
OTHER CURRENT ASSETS............................................................ 123,715 79,829
TOTAL ASSETS.................................................................... 7,728,668 8,226,055
TOTAL EQUITY.................................................................... 2,245,574 2,319,805
-- Equity (before net income), Group share.................................... 1,389,346 1,671,604
-- Net income, Group share.................................................... 78,611 92,935
TOTAL EQUITY GROUP SHARE........................................................ 1,467,957 1,764,539
-- Equity (before net income), non-Group share................................ 702,250 499,511
-- Net income, non-Group share................................................ 75,367 55,755
TOTAL EQUITY NON-GROUP SHARE.................................................... 777,617 555,266
PROVISIONS FOR CONTINGENCIES.................................................... 372,676 395,029
SHORT TERM LIABILITIES.......................................................... 4,889,504 5,320,938
-- Borrowings................................................................. 82,759 74,449
-- Banks...................................................................... 819,553 571,154
-- Advance payments from clients.............................................. 164,674 255,052
-- Account payable............................................................ 2,049,209 2,466,166
Other creditors............................................................... 1,773,309 1,954,117
OTHER ACCRUALS.................................................................. 220,914 190,283
TOTAL LIABILITIES............................................................... 7,728,668 8,226,055
</TABLE>
36
<PAGE> 37
PUBLICIS S.A
CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------
CONSOLIDATED INCOME STATEMENT 6/30/96 6/30/97
- ------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Billings........................................................... 10,681,967 12,380,259
Purchases.......................................................... (8,853,523) (10,350,067)
REVENUES........................................................... 1,828,444 2,030,192
Salaries and Benefits.............................................. (995,586) (1,157,791)
Office and general expenses........................................ (528,429) (597,416)
TOTAL EXPENSES..................................................... (1,524,015) (1,755,207)
OTHER INCOME....................................................... 32,521 29,755
OPERATING PROFIT................................................... 336,950 304,740
Depreciation and amortization...................................... (87,514) (86,669)
Provision doubtful debts........................................... (10,393) (6,312)
Other provisions................................................... (13,867) (8,186)
Financial result, net.............................................. 10,615 25,635
PROFIT BEFORE TAX.................................................. 235,791 229,208
Exceptional income (loss).......................................... (4,570) 1,949
Profit sharing -- statutory........................................ (5,739) (4,398)
Income Tax......................................................... (91,967) (101,991)
Profit (equity subsidiaries)....................................... 15,462 16,699
Exceptional item................................................... 0 7,223
CURRENT NET INCOME................................................. 148,977 148,690
CURRENT GROUP SHARE................................................ 73,611 92,935
Exceptional net capital gain....................................... 5,000 0
NET INCOME......................................................... 153,977 148,690
GROUP SHARE........................................................ 78,611 92,935
</TABLE>
37
<PAGE> 38
PUBLICIS S.A.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet of Publicis S.A. as of June 30,
1997 and the related condensed consolidated statements of income for the
six-month periods ended June 30, 1997 and 1996 have been prepared in accordance
with accounting principles generally accepted in France on a basis consistent
with Publicis S.A.'s audited consolidated financial statements for the year
ended December 31, 1996. For the purposes of these condensed consolidated
interim financial statements certain information and disclosures normally
included in financial statements prepared in accordance with French generally
accepted accounting principles have been condensed or omitted. In the opinion of
management, all adjustments considered necessary, consisting only of normal
recurring accruals, to present fairly the consolidated financial position and
results of operations for such interim periods have been made.
2. ACQUISITIONS
During the first six months of 1997, the Group acquired advertising
agencies for a total amount of approximately FF 287,000,000:
<TABLE>
<CAPTION>
DATE OF
COUNTRY FORMER NAME NEW NAME ACQUISITION % OF CONTROL
--------------- --------------------------- -------------------- ----------- ------------
<S> <C> <C> <C> <C>
WORLDWIDE
Mexico......... Romero y Associados Publicis Romeo January 97 51%
Brazil......... Norton Publicis Norton January 97 60%
Canada......... BCP Publicis BCP January 97 70%
Singapore...... Eureka advertising Publicis Eureka January 97 60%
Philippines.... Basic Advertising Publicis Basic January 97 60%
Australia...... MOJO Partners Publicis MOJO June 97 100%
South Africa... Partnership in advertising Publicis June 97 60%
Johannesburg
EUROPE
UK............. SMI Publicis Technology June 97 100%
UK............. KWS merged with FCA/BMZ June 97 100%
FRANCE
Additional ownership interest in CP 50%
Metrobus 50%
Mediavision 33%
SGIP 34%
</TABLE>
3. EVENTS SUBSEQUENT TO JUNE 30, 1997
Subsequent to June 30, 1997 the Group continued its policy of international
development by acquiring advertising agencies for a total amount of
approximately FF 60,000,000:
<TABLE>
<CAPTION>
DATE OF
COUNTRY FORMER NAME NEW NAME ACQUISITION % OF CONTROL
---------------------------- ----------- ------------------- --------------- ------------
<S> <C> <C> <C> <C>
Israel...................... Ariely Publicis Ariely July 1997 51%
Indonesia................... Inovasi Publicis Inovasi September 1997 51%
Argentina................... Capurro Publicis Capurro October 1997 60%
South Africa................ Blue Print Publicis Cape Town November 1997 60%
</TABLE>
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
38
<PAGE> 39
4. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING POLICIES GENERALLY ACCEPTED IN THE
UNITED STATES AND FRANCE
The unaudited consolidated interim financial statements of Publicis S.A.
have been prepared in accordance with French accounting principles which differ
in certain respects from generally accepted accounting principles in the United
States. The principal differences between French GAAP and U.S. GAAP as they
relate to Publicis S.A. are discussed in further detail in the final Note to the
audited consolidated financial statements for the year ended December 31, 1996.
The approximate effects of these differences on net income and
shareholders' equity are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF
- ------------------------------------------------------------------------- ------ ------
<S> <C> <C>
NET INCOME AS REPORTED IN THE CONSOLIDATED STATEMENT OF INCOME........... 92,935 78,611
Adjustments to conform to U.S. GAAP
Amortization of goodwill............................................... (7,791) (3,084)
Provision for post-retirement benefit obligation....................... (2,228) 701
Deferred taxes acquired in business combinations....................... 2,158 (6,085)
Tax on the above adjustments........................................... 817 (257)
------ ------
NET INCOME AS ADJUSTED FOR U.S. GAAP..................................... 85,891 69,886
====== ======
EARNINGS PER SHARE AS ADJUSTED FOR U.S. GAAP............................. 10.18 8.39
====== ======
</TABLE>
<TABLE>
<CAPTION>
AT JUNE
30, 1997
(IN THOUSANDS) FRF
- ---------------------------------------------------------------------------- ---------
<S> <C>
SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEET.......... 1,764,539
Adjustments to conform to U.S. GAAP
Amortization of goodwill.................................................. (44,271)
Provision for post-retirement benefit obligation.......................... 11,617
Restructuring provision................................................... 8,080
Deferred taxes acquired in business combinations.......................... 20,060
Tax on the above adjustments.............................................. (7,223)
---------
SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S. GAAP.............................. 1,752,802
=========
</TABLE>
The principal income statement line items, if less than majority-held
investments were accounted for using the equity method rather than being
consolidated, would be decreased by the following amounts:
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------
1997 1996
(IN THOUSANDS) FRF FRF
---------------------------------------------------- --------- --------
<S> <C> <C>
Sales............................................... 876,716 1,017,289
Cost of sales....................................... (655,811) (762,279)
Revenues............................................ 220,905 254,410
Current income...................................... 50,261 66,002
======== ========
</TABLE>
39
<PAGE> 40
Following is summarized cash flow information prepared in accordance with
U.S. GAAP:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
-----------------------
1997 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF
---------------------------------------------------- --------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income as adjusted for U.S. GAAP.............. 85,891 69,887
Depreciation and amortization..................... 99,179 91,818
Minority interest................................. 49,905 73,110
Equity income, net of dividends received.......... (16,669) (15,463)
Changes in working capital accounts............... 105,614 (340,978)
-------- --------
323,890 (121,626)
Cash flows from investing activities:
Acquisition of subsidiaries....................... (287,316) (30,981)
Dividend received................................. 24,258 22,981
Purchase of fixed assets.......................... (98,985) (88,716)
-------- --------
(362,043) (96,716)
Cash flows from financing activities:
Proceeds from loans............................... (98,975) (47,712)
Repayment of loans................................ 44,055 226,936
Issuance of common stock.......................... 5,096 8,878
Payment of dividends.............................. (113,118) (85,999)
-------- --------
(162,942) 102,103
Effect of exchange rate changes on cash............. (2,212) (8,617)
-------- --------
Increase (decrease) in cash......................... (203,307) (124,856)
Cash at beginning of year........................... 1,332,386 1,167,888
-------- --------
Cash at end of year................................. 1,129,079 1,043,032
======== ========
</TABLE>
40
<PAGE> 1
EXHIBIT h(1)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PUBLICIS COMMUNICATION, )
)
Plaintiff,)
)
v. ) Civil No. 97 C 8263
)
TRUE NORTH COMMUNICATIONS INC., )
BRUCE MASON, STEPHEN T. VEHSLAGE, )
GREGORY W. BLAINE, LAUREL CUTLER, )
J. BRENDAN RYAN, RICHARD S. )
BRADDOCK, MICHAEL P. MURPHY, and )
RICHARD P. MAYER, )
)
Defendants.)
COMPLAINT
Publicis Communication ("Publicis"), through its undersigned
counsel, for its complaint against defendant True North Communications Inc.
("True North" and the "Company") and defendants Bruce Mason, Gregory W.
Blaine, Richard S. Braddock, Laurel Cutler, Richard P. Mayer, Michael P.
Murphy, J. Brendan Ryan, and Stephen T. Vehslage (together, the "Director
Defendants"), alleges as follows:
Nature of the Action
1. Publicis brings this action to redress a wrongful course of
conduct by True North and its Board of Directors. Publicis is True North's
largest shareholder, holding 18.4% of its common stock. Publicis has a long
history of disagreements with
<PAGE> 2
current True North management. True North now seeks substantially to dilute the
holdings of Publicis and all public shareholders and to vest effective control
of the Company in its management.
2. True North seeks to implement this change of control by means of
a merger with another advertising firm, Bozell, Jacobs, Kenyon & Eckhardt, Inc.
("Bozell"). Under the merger agreement, True North will issue 20 million new
shares of True North common stock, an amount that will dilute the holdings of
True North's current public shareholders - and Publicis - by approximately 50%.
After the merger, management of the surviving True North will own and/or have
the power to direct the votes for a controlling block of the Company's stock,
while Publicis' stake will be reduced to less than 10%.
3. In breach of its fiduciary obligations, the True North Board has
refused to meet with Publicis to consider a superior proposal made by Publicis
that will deliver more value to the Company's shareholders. Instead, True North
management has embarked upon a campaign to lock up its future, improperly
restricting the Board's ability to consider superior offers, and manipulating
the corporate machinery to fix the upcoming special shareholder vote on the
Bozell merger. Defendants have violated the New York Stock Exchange Rules as
well as the federal proxy rules in order to disenfranchise those stockholders
who are likely to vote against the Bozell merger.
4. Upon information and belief, if the Bozell merger is consummated,
the pay-off to members of post-merger True North management and one of True
North's outside directors - who will potentially receive tens of millions of
dollars over the next
-2-
<PAGE> 3
several years - is fantastic. Unfortunately, the shareholders will not reap the
same windfall.
5. Publicis brings this action for preliminary and permanent
injunctive relief, for declaratory relief, and for damages.
Jurisdiction and Venue
6. This Court has jurisdiction over this action pursuant to 28
U.S.C. Section 1332. The amount in dispute exceeds $75,000.
7. Venue is proper under 28 U.S.C. Section 1391.
The Parties
8. Publicis is a wholly owned subsidiary of Publicis, S.A.
Both Publicis and Publicis S.A. are French corporations with their principal
place of business in Paris, France. Publicis is one of Europe's largest
advertising networks, with offices in 35 countries and 71 cities. Publicis
S.A.'s stock is publicly traded on the Paris stock exchange.
9. Defendant True North is a Delaware company with its principal
place of business in Chicago, Illinois. True North is a communications company
and the parent of Foote, Cone & Belding, a national advertising agency network.
Its stock is traded on the New York Stock Exchange.
10. Defendant Bruce Mason is the Chairman of the Board of
Directors and Chief Executive Officer of True North. Defendants Stephen T.
Vehslage, Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer are
directors of True North. Defendants Gregory W. Blaine, Laurel Cutler, and J.
Brendan Ryan are officers and
-3-
<PAGE> 4
directors of True North. Upon information and belief, the Director Defendants
are citizens of Illinois, New York, and Connecticut.
Background
11. In 1989, Publicis and True North formed a separate joint venture
in which the two companies combined certain of their European operations. As
part of the formation of the joint venture, the parties also became significant
shareholders of one another.
12. In the years since the formation of the Publicis/True North
joint venture, the parties have had disagreements concerning the nature and
scope of their joint efforts. Notwithstanding these disagreements, Publicis has
never posed any type of threat to True North's corporate policies or
effectiveness, although, upon information and belief, True North incorrectly and
unreasonably perceived Publicis as a threat. In May 1997, the parties signed a
series of agreements that unwound their European joint venture. After
consummation of the transactions contemplated by the May 1997 agreements,
Publicis remained an 18.5% owner of True North, and True North became a 26.5%
owner of Publicis.
The Bozell Merger
13. On July 31, 1997, True North announced its agreement to merge
with Bozell, an advertising firm with headquarters in New York City (the "Bozell
Merger"). True North did not consult its largest stockholder, Publicis, with
respect to the Bozell Merger. Since the July announcement, the stockholders of
True North have not been provided with detailed information regarding the Bozell
Merger.
-4-
<PAGE> 5
14. The merger agreement with Bozell (the "Merger Agreement")
requires True North to issue 20 million new shares of common stock, nearly
doubling the 25 million currently outstanding. The Merger Agreement also
requires an amendment of True North's charter to increase the total number of
authorized shares of common stock from 50 million to 90 million. Each share of
Bozell common stock will be converted into 0.51 shares of True North common
stock upon completion of the Bozell Merger.
15. Upon information and belief, post-merger management of True
North will effectively control the Company. Through the exercise of options and
distribution of newly issued shares, the post-merger management of True North
will gain voting control of a dominant block of the Company's shares, many times
larger than the block owned by Publicis. Publicis and True North's public
shareholders, on the other hand, will suffer an approximate 50% dilution in
their holdings. In addition, post-merger management will control the newly
constituted and expanded Board of Directors. Publicis may lose its single seat
on the Board.
16. In connection with the Merger Agreement, upon information and
belief, employment agreements were entered into with certain members of senior
management of both companies that provide that, upon consummation of the Merger,
certain of the Defendants will receive exorbitant compensation, potentially in
excess of tens of millions of dollars over the next several years.
17. The Merger Agreement prohibits True North and its officers,
directors, and employees from engaging in discussions or negotiations with other
potential bidders for True North except under very limited circumstances. The
Merger Agreement only permits the True North Board to consider a "Superior
Parent Takeover Proposal",
-5-
<PAGE> 6
which is narrowly defined as a third-party offer for a business combination with
True North in which the sole consideration to be received by True North
shareholders is the stock of a widely-held public company.
The Publicis Proposal
18. On November 10, 1997, Publicis chairman Maurice Levy sent a
letter to the True North Board of Directors stating Publicis' belief that "True
North's transaction with Bozell is contrary to the best interests of True
North's stockholders, of which Publicis is by far the largest with 18.5% of True
North's common stock." As Mr. Levy explained:
The acquisition does not solve True North's fundamental strategic
weakness, which has been its failure to establish a global presence.
Bozell is primarily a U.S.-based business with a weak international
presence, and Publicis believes that its acquisition by True North
will compound, rather than solve, True North's strategic weaknesses.
As global marketers have increasingly demanded worldwide coverage,
True North has continued to focus on its U.S. business and as a
result, we believe that True North now finds itself at a significant
competitive disadvantage. In short, True North's proposed
acquisition of Bozell does nothing to solve these problems, and we
believe (based on the limited information that has been made
available to date) that the price to be paid for Bozell
significantly exceeds the value of Bozell's business."
19. As an alternative to the Bozell transaction, Mr. Levy stated
that Publicis is "prepared to propose a business combination between Publicis
Communication and True North in which each outstanding share of True North would
be valued at US$28":
-6-
<PAGE> 7
Publicis has for some time believed that a combination of Publicis
Communication's businesses with those of True North would create a
powerful global presence with tremendous opportunities for growth. .
. . We at Publicis continue to believe that a merger between
Publicis Communication and True North is in the best interests of
both True North's and Publicis' stockholders and their respective
clients and employees. . . .
20. Mr. Levy concluded with an invitation "to discuss with True
North and its representatives the details of our proposal, including the cash
and stock components of our US$28 valuation":
We would be willing to meet with you and your advisors at your
earliest convenience to discuss our proposal and to answer any
questions you may have. Our preferred course would be to negotiate a
transaction that can be presented to our respective stockholders and
clients as the amicable and joint effort of Publicis, True North and
each of the companies' Boards of Directors and senior management. I
hope that each of you will give our proposal serious consideration,
and I look forward to your reply. We stand ready to meet with the
Board to present our plans.
True North's Attempts to Steal the Special Shareholder Vote
21. True North did not disclose Publicis' letter to the public.
Nor did it respond in any way to Publicis. Instead, True North - recognizing
that Publicis' opposition and counter-offer would seriously threaten its
proposed merger with Bozell - immediately undertook to rig the vote at a special
shareholders' meeting (set for December 22, 1997) at which the Bozell
transaction would be voted upon by True North shareholders.
-7-
<PAGE> 8
22. True North attempted to manipulate the vote by setting a
premature record date, the date used to determine who is entitled to vote at the
special shareholders' meeting. Without revealing to the New York Stock Exchange
(the "Exchange") or to the public the highly material information that it had
received from Publicis, True North set a record date of Tuesday, November 18.
True North sat silently upon this information as well, deliberately choosing not
to announce that it had set a record date for the special shareholders' meeting.
23. After a week had passed with no response, on November 17,
Publicis decided to disclose publicly the text of the letter. The stock market's
reaction was immediate and dramatic. On the day of the announcement, the price
of a share of True North common stock rose more than 12%, from 23 3/8 to 26 1/4.
Approximately one million shares were traded on November 17 and 18, more than
twelve times the average daily volume of the stock. The market's reaction to the
news of Publicis' opposition to the Bozell merger and its counter-proposal
demonstrates the significance of the news to True North shareholders.
24. True North's decision to set an early record date while it sat
silently upon this explosive news, if not remedied, will deprive the holders of
over a million True North shares of the opportunity to participate in a
contested special shareholders' meeting. Because trades of securities take three
business days to settle, every single shareholder who purchased True North
securities after Thursday, November 13 - including persons who purchased at
higher prices that prevailed after the public announcement of Publicis'
opposition and counter-proposal - has been disenfranchised.
-8-
<PAGE> 9
25. True North's decisions to set a premature record date, to remain
silent about Publicis' opposition and counter-proposal, and not to announce its
record date have disenfranchised holders of millions of True North shares who
purchased because of their interest in, or at prices that reflected, Publicis'
counter-proposal. And True North shareholders who sold their shares before the
news about Publicis was released will be permitted to vote, notwithstanding
their lack of interest in the meeting. In short, because True North remained
silent about Publicis' opposition and counter-proposal and furtively set an
early record date, no True North shareholder who purchased knowing of Publicis'
opposition and counter-proposal will be allowed to participate in the special
shareholders' meeting.
26. True North's eight-day notice to the Exchange violated Section
401.02 of the rules set forth in the New York Stock Exchange Listed Company
Manual, which applies to True North. Section 401.02 provides that "[a] minimum
of ten days' notice is required prior to the record date established (or closing
of the transfer books) for determination of shareholders entitled to vote at the
meeting." True North also violated Securities and Exchange Commission ("SEC")
Rule 14a-13 regarding the solicitation of proxies, which requires the mailing of
broker inquiries twenty days in advance of the record date. 17 C.F.R. Section
240.14a-13. In violation of Rule 14a-13, True North did not mail broker
inquiries until the day before and, in some cases, the day after the record date
to maintain the secrecy of its record-date maneuver.
True North's Delayed Response to Publicis
27. After the close of trading on November 17 - and after Publicis
had publicly disclosed the contents of its November 10 letter - True North
(through its
-9-
<PAGE> 10
chairman, Bruce Mason) finally responded to Publicis' November 10 merger
proposal. Mason claimed that the Board of Directors discussed the proposal "at
length" but rejected the offer, even though it refused to meet with or discuss
the proposal with Publicis.
28. Also on November 17, 1997, True North filed a complaint in the
Delaware Court of Chancery against Publicis and its parent company, Publicis
S.A., seeking a preliminary and permanent injunction to provide certain
financial information and documentation to the SEC in connection with True
North's preliminary proxy and registration statements. No hearing or other
proceeding was held in the action and, on November 21, 1997, counsel for True
North informed the Delaware court that Publicis had fully complied with its
requests.
Count I
Breach of Fiduciary Duty
(Interference with Stockholder Franchise)
29. Plaintiff repeats and realleges paragraphs 1 through 28 as
if fully set forth herein.
30. Defendants' actions in setting a premature record date, in
sitting silently while that record date passed without disclosing Publicis'
opposition to the Bozell Merger and its counter-proposal, and in deliberately
choosing not to announce its record date were taken for the primary purpose of
impeding and/or interfering with the effective exercise of the stockholder
franchise in connection with the vote at the special shareholders' meeting.
Defendants sat silently upon the highly material news of Publicis' offer after
surreptitiously setting a record date in violation of the New York Stock
Exchange Rules. Defendants also violated Rule 14a-13 of the federal proxy rules
by failing to send out broker inquiries until approximately the record date.
-10-
<PAGE> 11
31. Defendants took these actions to disenfranchise shareholders who
purchased or would be purchasing True North stock after the disclosure of
Publicis' opposition to the Bozell Merger and $28 per share counter-proposal. As
True North knew, those shareholders who purchased upon the news of Publicis'
opposition and counter-proposal would be likely to vote against the Bozell
Merger.
32. Publicis is being, or will be, irreparably injured by
Defendants' misconduct and has no adequate remedy at law.
Count II
Breach of Fiduciary Duty
(Failure to Maximize Stockholder Value)
33. Plaintiff repeats and realleges paragraphs 1 through 32 as
if fully set forth herein.
34. The Bozell Merger will result in a change of the effective
control of True North. In this context, the Board's fiduciary duty is to seek to
obtain the best available terms for True North's shareholders and not to favor
one potential acquirer over another or one type of financial alternative over
another. In pursuing this objective, True North's Board of Directors have a duty
to inform themselves, prior to making business decisions, of all information
reasonably available to them.
35. The True North Directors have not sought to obtain the best
available terms for the True North shareholders and have not properly informed
themselves. They have breached, and are continuing to breach, their fiduciary
duties.
36. Publicis is being, or will be, irreparably injured by
Defendants' misconduct and has no adequate remedy at law.
-11-
<PAGE> 12
Count III
Breach of Fiduciary Duty
(Breach of Duty of Loyalty)
37. Plaintiff repeats and realleges paragraphs 1 through 36 as
if fully set forth herein.
38. Upon information and belief, some or all of the Director
Defendants will receive exorbitant compensation - potentially tens of millions
of dollars - in the period following the consummation of the Bozell Merger. By
placing their own personal interests and the interests of new True North
management ahead of the shareholders' interests, these defendants have acted in
bad faith and have breached their duty of loyalty.
39. Publicis is being, or will be, irreparably injured by
Director Defendants' misconduct and has no adequate remedy at law.
Count IV
Breach of Fiduciary Duty
(Unreasonable Preemptive Defensive Measures)
40. Plaintiff repeats and realleges paragraphs 1 through 39 as
if fully set forth herein.
41. Upon information and belief, the Defendants sought and agreed to
the Bozell Merger as a defensive measure to dilute the holdings of its largest
shareholder, Publicis, with whom it has had a hostile relationship for years. By
the Bozell Merger, the Defendants sought to entrench senior True North
management. The Bozell Merger is not in the best interests of True North
shareholders and is an unreasonable and disproportionate response to the
perceived threat posed by Publicis.
42. Similarly, Defendants' restriction upon the offers that may be
considered under the Merger Agreement, their manipulation of the record date in
violation
-12-
<PAGE> 13
of the rules of the New York Stock Exchange, and their violation of the federal
proxy rules in failing to send out timely broker inquiries constitute
unreasonable and disproportionate responses by the True North Board of Directors
to Publicis and Publicis' proposal. The impact of these responses upon True
North shareholders is disproportionately large in relation to any "threat"
allegedly posed by Publicis' proposal. The Defendants thereby have breached, and
are threatening to continue to breach, their fiduciary duties.
43. Publicis is being, or will be, irreparably injured by
Defendants' misconduct and has no adequate remedy at law.
WHEREFORE, Publicis seeks judgment:
(a) enjoining the special shareholders' meeting until the True North
Board of Directors has engaged in serious, good faith discussions with
Publicis concerning the Publicis proposal;
(b) enjoining the special shareholders' meeting unless and until a
proper record date, including through compliance with all applicable laws,
rules, and regulations;
(c) rescinding the restrictions in the Merger Agreement purporting
to prohibit True North from engaging in discussions and/or negotiating a
transaction with Publicis;
(d) declaring that the Merger Agreement between True North and
Bozell is void;
(e) awarding Publicis damages in an amount to be determined at
trial, as well as the costs and fees incurred by Publicis in prosecuting
this lawsuit; and
-13-
<PAGE> 14
(f) granting such other and further relief as the Court deems
just and proper.
Dated: November 26, 1997
/s/ C. William Phillips
----------------------------------
One of the Attorneys for Plaintiff
C. William Phillips
HOWARD, DARBY & LEVIN
1330 Avenue of the Americas
New York, New York 10019
(212) 841-1000
Local Counsel:
/s/ Stephen J. Bisgeier
----------------------------------
One of the Attorneys for Plaintiff
Stephen J. Bisgeier (00213756)
MILLER, SHAKMAN, HAMILTON,
KURTZON & SCHLIFKE
208 South LaSalle Street
Chicago, Illinois 60604
(312) 263-3700
-14-
<PAGE> 1
Exhibit (h)(2)
[TRUE NORTH LOGO]
101 EAST ERIE STREET, CHICAGO, ILLINOIS 60611-2897, USA PHONE 312 425 6501
FAX 312 425 6352
December 3, 1997
VIA TELECOPY AND REGISTERED MAIL
Publicis S.A.
Publicis Communication
133 avenue des Champs-Elysees
75380 Paris Cedex 08
France
Attention: President-Directeur General
The London Court of International Arbitration
12 Carthusian Street
London EC1M 6EB
Attention: The Registrar
NOTICE OF ARBITRATION
Gentlemen:
Pursuant to Section 3.4.3 of the Agreement dated May 19, 1997 among
Publicis S.A., Publicis Communication and Publicis-FCB Europe B.V. on the one
hand, and True North Communications Inc. ("True North"), FCB International,
Inc. and True North Holdings Netherlands B.V. on the other hand (hereinafter,
the "Agreement"), True North hereby serves notice of its initiation of an
arbitration to resolve the claims described below against Publicis S.A. and
Publicis Communication (collectively, "Publicis") for their willful and
deliberate breach of the Agreement.
This letter serves as a demand for and notice of arbitration. True
North reserves the right, if it deems it necessary, to submit an additional
statement of claims pursuant to Article 18 of the UNCITRAL Arbitration Rules.
<PAGE> 2
THE PARTIES TO THIS ARBITRATION
The parties to this arbitration, which is to be conducted in accordance
with Section 3.4 of the Agreement (attached hereto as Exhibit A), are True North
(the Claimant) against Publicis S.A. and Publicis Communication (the
Respondents).
True North is a communications company incorporated in Delaware with its
principal place of business at 101 East Erie Street, Chicago, Illinois, 60611.
True North is engaged in all aspects of the advertising and marketing business
in the United States and abroad. Among its other assets, True North is the
holding company of Foote, Cone & Belding, one of the largest advertising
agencies in the world.
Publicis S.A. and Publicis Communication are both French corporations with
their principal place of business at the above address. Publicis S.A. is a
publicly traded company listed on the French stock exchange. Publicis
Communication owns and operates numerous advertising agencies in various
countries.
In 1989, True North and Publicis created a global joint venture called
Publics-FCB. The joint venture owned and operated numerous advertising agencies
located in Europe. In addition, the companies each acquired a significant
portion of the other's stock. True North currently owns 26.5% of Publicis
Communication's common stock, and Publicis Communication owns 18.4% of True
North's common stock.
Almost from the beginning, the parties had great difficulty with the joint
venture. The alliance between True North and Publicis did not work to either
company's satisfaction and relations between them soured over time.
Accordingly, the parties mutually agreed to unwind the joint venture.
In May 1997, the parties executed a series of contracts, including the
Agreement dated May 19,
2
<PAGE> 3
1997, to undo the joint venture and divide ownership of the advertising agencies
operated by the joint venture.
THE PARTIES' AGREEMENT
Given True North's substantial stake in Publicis Communication, the
Agreement contains numerous terms dealing with the ownership and operation of
Publicis Communication. These terms were needed to protect True North's 26.5%
minority ownership of Publicis Communication in light of the potential that
Publicis S.A. would abuse its dominant 73.5% ownership portion.
Accordingly, the Agreement provides in Section 1.7 that "any significant
transactions" effected by Publicis Communication, including those involving
Publicis S.A., be conducted at arm's length. Section 1.7 of the Agreement
provides, in pertinent part, as follows:
Transactions on Arm's Length Basis. So long as True North owns at least
10% of the issued and outstanding shares of Communication Stock, any
significant transactions effected by Communication shall be effected on an
arm's length basis;...
Similarly, to protect True North, the parties agreed in Section 1.8 of the
Agreement that Publicis Communication would elect to its Board of Directors
three independent, outside directors before approving any major transactions.
The parties further agreed that a majority of these three "Outside Directors"
must approve any transaction they deem to be significant. Section 1.8 of the
Agreement provides as follows:
Communication Directors. As soon as practicable, but no later than 60 days
after the consummation of the transactions contemplated by this Agreement
and in all events prior to the consummation or corporate
3
<PAGE> 4
approval of any transaction to transfer to Communication agencies owned by
Publicis, and so long thereafter as True North owns at least 10% of the
issued and outstanding shares of Communication Stock, Communication shall
elect to its Board of Directors three members who have no prior
significant relationship with Publicis, True North or the directors or
senior officers of either (the "Outside Directors"). Publicis and
Communication shall consult with True North prior to the appointment of
the three Outside Directors. A majority of the three Outside Directors and
the Board of Directors of Communication must approve any transaction
(other than those specifically contemplated by this Agreement or the
Memorandum of Agreement) of Communication, including transactions with
Publicis or any affiliates of Publicis, that a majority of the three
Outside Directors deem to be significant.
Despite this clear mandate, Publicis Communication has not elected any
Outside Directors to its Board. And, as described below, Publicis S.A. and
Publicis Communication have breached or now threaten to breach Section 1.7 and
Section 1.8 of the Agreement by purporting to propose a "business combination"
with True North in an effort to thwart True North's acquisition of another
advertising company, Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell").
THE BREACHES OF SECTIONS 1.7 AND 1.8 OF THE AGREEMENT
On or about July 31, 1997, True North announced that it had entered into
an Agreement and Plan of Merger to acquire Bozell (the "Merger Agreement") in a
merger worth an estimated $1.2 billion. On or about August 6, 1997, True North
filed a Form 8-K with the United States Securities and Exchange Commission that
included a copy of the Merger Agreement. The expiration date for the merger is
December 31, 1997.
In accordance with the Merger Agreement, a wholly-owned True North
subsidiary will merge with and into Bozell, with Bozell surviving as a
wholly-owned subsidiary of True North. Each share of Bozell common stock will be
converted into 0.51 of a share of
4
<PAGE> 5
True North common stock. As a consequence, the acquisition of Bozell essentially
will nearly double the size and market capital of True North.
Publicis recently launched a campaign to derail True North's acquisition
of Bozell by inter alia, withholding crucial information in violation of their
contractual obligations, commencing meritless litigation, and purporting to
propose an "offer" to acquire True North in a transaction prohibited by Sections
1.7 and 1.8 of the Agreement.
Despite having been aware of the proposed True North-Bozell merger since
the end of July 1997, Publicis waited until November 10, 1997 and then sent a
letter to True North expressing their objection to the Bozell acquisition, and
purporting to set forth an "offer" regarding a "combination" between Publicis
Communication and True North. (A copy of Publicis's November 10, 1997 letter is
attached hereto as Exhibit B.) Publicis's supposed proposal to acquire True
North is nothing more than a ruse designed to interfere with the proposed Bozell
acquisition and to mislead True North shareholders.
Moreover, Publicis's purported "offer" violates, and is therefore barred
by, the specific contractual provisions in the Agreement drafted by the parties
for the protection of True North:
First, the terms of the November 10, 1997 letter sent on behalf of
Publicis Communication contemplate a "significant transaction" within the
meaning of Section 1.7, yet Publicis S.A. has not conducted its affairs with
Publics Communication on an arm's length basis with respect to the transaction
proposed in the letter. The purported transaction reflected in the November 10,
1997 letter necessarily involves arrangements between Publicis Communication and
Publicis S.A., yet Publicis S.A. has not treated Publicis Communication and its
shareholders -- including True North -- fairly.
5
<PAGE> 6
Second, notwithstanding the express provisions of Section 1.8 of the
Agreement, Publicis Communication has not elected, and Publicis has failed to
cause the election, of any of the three required Outside Directors to the Board
of Publicis Communication. Until such Outside Directors are elected, Publicis
Communication is prohibited under Section 1.8 from undertaking any significant
transactions, including the one purportedly contemplated by Publicis's November
10, 1997 letter.
The failure by Publicis S.A. and Publicis Communication to elect the
Outside Directors breaches Section 1.8 of the Agreement. In addition, unless
Publicis S.A. and Publicis Communication refrain, or are ordered to refrain,
from proceeding with the purported "offer" in the November 10, 1997 letter, they
will further violate Sections 1.7 and 1.8 of the Agreement and cause True North
substantial damages.
OTHER BREACHES OF THE AGREEMENT: SECTION 1.10
Publicis S.A. and Publicis Communication also agreed in the agreement to
provide True North with "all financial and other information" True North needs
to comply with the United States income tax laws, including the information
needed to satisfy the requirements of the U.S. Internal Revenue Service
("I.R.S."). This was necessary because, as a significant shareholder in Publicis
Communication, the earnings of Publicis Communication and its related companies
have a significant effect on True North's income.
Accordingly, Paragraph 1.10 of the Agreement provides:
(a) So long as True North owns at least 10% of the issued and outstanding
shares of Communications Stock, Communication shall (i) provide all
financial and other information reasonably requested by True North for
purposes of True North's compliance with U.S. income tax laws
6
<PAGE> 7
and other U.S. regulatory requirements, (ii) cause its independent
auditors to complete their annual audit and provide the results to True
North before February 15 of each year, and shall provide True North with
unaudited quarterly consolidated financial results before April 30, July
30, and October 30 of each year.
(b) The parties acknowledge that in connection with the transactions
contemplated in this Agreement, True North desires to obtain such
independent appraisals as are necessary to support the necessary or
desirable accounting for financial tax reporting purposes. Each of
Publicis, Communication and PBV agrees to use all commercially reasonably
efforts to provide the assistance necessary to enable True North to obtain
such appraisals.
In accordance with Paragraph 1.10 of the Agreement, True North has made a
series of reasonable requests upon Publicis S.A. and Publicis Communication for
tax information relating to the 1994, 1995 and 1996 tax years. The tax
information is essential for True North to fulfill its U.S. tax filing
obligations and to avoid severe penalties and damages. Publicis, however, has
not complied with True North's requests.
Specifically, True North has requested repeatedly that Publicis provide
financial and tax information about the individual advertising and holding
companies that were operated by the parties' joint venture during 1994, 1995 and
1996, as well as advertising entities owned by Publicis Communication outside of
the joint venture. True North requires this information to properly report and
support (1) its foreign earnings and (2) its foreign tax credits with respect to
its foreign earnings.
Among other information reasonably requested, Publicis must provide True
North with the financial statements, tax returns, tax payment receipts, dividend
payment information, withholding tax receipts and corporate structure change
information for Publicis Communication, each of the joint venture companies and
their related entities, as
7
<PAGE> 8
well as advertising entities owned by Publicis Communications outside the joint
venture during the 1994 through 1996 period. True North will request the same
information for the 1997 tax year.
True North has requested the above information and, to date, Publicis has
failed to provide the necessary or complete information.
The I.R.S. currently is auditing True North's tax returns for the years
1994 through 1996. The I.R.S. has notified True North that if it does not
provide the information and documents in the materials requested from Publicis,
True North will be sanctioned. If Publicis does not fully comply with True
North's requests, True North faces tax penalties, lost foreign tax credits and
interest of approximately $10 million. These damages can be averted if Publicis
promptly complies, or is ordered to comply, with True North's outstanding
requests made pursuant to Section 1.10 of the Agreement.
THE ARBITRATION PROVISION
The Agreement provides for this arbitration in Section 3.4.2.
All disputes, differences, controversies or claims arising out of, related
to or in connection with this Agreement or the Operative Agreements (other
than the Pooling Agreement) or the transactions contemplated hereby and
thereby shall be submitted to and resolved by arbitration in London,
England conducted in accordance with UNCITRAL Arbitration Rules as then in
force (the "Rules"). The London Court of International Arbitration shall
be the administrative and appointing authority (the "Appointing
Authority"). Each of the parties hereto hereby submits to such
jurisdiction, forum and rules and irrevocably waives any and all
objections.
Claims To Be Arbitrated and Relief Sought
Based on the foregoing, True North will arbitrate the following claims
and seeks the following relief from Publicis S.A. and Publicis Communication:
8
<PAGE> 9
1. For their breach of Section 1.7 of the Agreement, an award enjoining
Publicis S.A. and Publicis Communication from proceeding with the purported
"offer" set forth in the November 10, 1997 letter, or any similar transaction,
and an award of monetary damages in an amount to be determined at the
arbitration.
2. For their breach of Section 1.8 of the Agreement, an award enjoining
Publicis S.A. and Publicis Communication from proceeding with the purported
"offer" set forth in the November 10, 1997 letter, or any similar transaction,
an award ordering Publicis Communication to elect three independent outside
directors in accordance with Section 1.8 of the Agreement, and an award of
monetary damages in an amount to be determined at the arbitration.
3. For its breach of Section 1.10 of the Agreement, an award ordering
Publicis Communication to provide True North with all the financial and other
information requested by True North pursuant to Section 1.10 of the Agreement
and an award of monetary damages in an amount to be determined at the
arbitration.
9
<PAGE> 10
In addition to the above relief, True North will seek an award of its
costs and disbursements relating to this arbitration, including attorneys' fees,
and any other relief that is just and proper.
Very truly yours,
Bruce Mason
Chairman and Chief Executive Officer
True North Communications Inc.
cc: Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Thomas J. Kuhn, Esq.
10
<PAGE> 1
Exhibit (h)(3)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PUBLICIS COMMUNICATION, )
)
Plaintiff, )
)
v. ) Civil No. 97 C 8263
)
TRUE NORTH COMMUNICATIONS INC., ) Judge Joan B. Gottschall
BRUCE MASON, STEPHEN T. VEHSLAGE, )
GREGORY W. BLAINE, LAUREL CUTLER, )
J. BRENDAN RYAN, RICHARD S. )
BRADDOCK, MICHAEL P. MURPHY, and )
RICHARD P. MAYER, )
)
Defendants. )
)
) JURY TRIAL DEMANDED
)
TRUE NORTH COMMUNICATIONS INC., a )
Delaware corporation )
)
Counterclaim-Plaintiff, )
)
v. )
)
PUBLICIS COMMUNICATION, a )
French corporation, PUBLICIS S.A., a )
French corporation, and MAURICE LEVY )
a French citizen, )
)
Counterclaim-Defendants.)
ANSWER OF DEFENDANTS TRUE NORTH COMMUNICATIONS INC.,
BRUCE MASON, STEPHEN T. VEHSLAGE, GREGORY W. BLAINE,
LAUREL CUTLER, J. BRENDAN RYAN, RICHARD S. BRADDOCK,
MICHAEL P. MURPHY, AND RICHARD P. MAYER AND
VERIFIED COUNTERCLAIM OF TRUE NORTH COMMUNICATIONS INC.
<PAGE> 2
Defendants True North Communications Inc. ("True North"), Bruce
Mason, Stephen T. Vehslage, Gregory W. Blaine, Laurel Cutler, J. Brendan
Ryan, Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer
(collectively, the "Defendants"), by their undersigned counsel, hereby answer
the complaint of Publicis Communication as follows:
NATURE OF THE ACTION
1. Publicis brings this action to redress a wrongful course of conduct by
True North and its Board of Directors. Publicis is True North's largest
shareholder, holding 18.4% of its common stock. Publicis has a long history of
disagreements with current True North management. True North now seeks
substantially to dilute the holdings of Publicis and all public shareholders and
to vest effective control of the Company and its management.
ANSWER:
Defendants admit that Publicis Communication is True North's largest
shareholder of record and that there has been a long history of disagreements
between True North and Publicis Communication and its parent, Publicis S.A.
Defendants deny that they have engaged in any wrongdoing and further deny each
and every other allegation of paragraph 1.
2. True North seeks to implement this change of control by means of a
merger with another advertising firm, Bozell Jacobs, Kenyon & Eckhardt, Inc.
("Bozell"). Under the merger agreement, True North will issue 20 million new
shares of True North common stock, an amount that will dilute the holdings of
True North's current public shareholders -- and Publicis -- by approximately
50%. After the merger, management of the surviving True North will own and/or
have the power to direct the votes for a controlling block of the Company's
stock, while Publicis' stake will be reduced to less than 10%.
ANSWER:
Defendants admit that True North has entered into a Merger Agreement with
the advertising firm of Bozell, Jacobs, Kenyon & Eckhardt. Inc. ("Bozell"), that
pursuant to the
-2-
<PAGE> 3
Merger Agreement, True North will issue new shares of True North common stock in
exchange for the stock of Bozell, and that following such issuance, Publicis
Communication is expected to hold less than 10% of the outstanding shares of
True North. Publicis Communication has, however, the right to purchase
additional shares of True North. Defendants deny that the Merger Agreement with
Bozell constitutes a change of control and deny that management will have the
power to direct a controlling block of stock, and further deny each and every
other allegation of paragraph 2.
3. In breach of its fiduciary obligations, the True North Board has
refused to meet with Publicis to consider a superior proposal made by Publicis
that will deliver more value to the Company's shareholders. Instead, True North
management has embarked upon a campaign to lock up its future, improperly
restricting the Board's ability to consider superior offers, and manipulating
the corporate machinery to fix the upcoming special shareholder vote on the
Bozell merger. Defendants have violated the New York Stock Exchange Rules as
well as the federal proxy rules in order to disenfranchise those stockholders
who are likely to vote against the Bozell merger.
ANSWER:
Defendants admit that the True North Board has not met with Publicis in
connection with a letter received by True North on November 10, 1997, but
further state that there has been no breach of fiduciary obligations and deny
each and every other allegation of paragraph 3.
4. Upon information and belief, if the Bozell merger is consummated, the
pay-off to members of post-merger True North management and one of True North's
outside directors - who will potentially receive tens of millions of dollars
over the next several years - is fantastic. Unfortunately, the shareholders will
not reap the same windfall.
-3-
<PAGE> 4
ANSWER:
Defendants deny each and every allegation of paragraph 4.
5. Publicis brings this action for preliminary and permanent
injunctive relief, for declaratory relief, and for damages.
ANSWER:
Defendants deny that Publicis has properly brought this action and further
deny that Publicis is entitled to any relief.
JURISDICTION AND VENUE
6. This Court has jurisdiction over this action pursuant to 28
U.S.C. Section 1332. The amount in dispute exceeds $75,000.
ANSWER:
Defendants admit that this court has jurisdiction and that the amount in
dispute exceeds $75,000.
7. Venue is proper under 28 U.S.C. Section 1391.
ANSWER:
Defendants admit the allegations in paragraph 7.
THE PARTIES
8. Publicis is a wholly-owned subsidiary of Publicis, S.A. Both
Publicis and Publicis S.A. are French corporations with their principal place
of business in Paris, France. Publicis is one of Europe's largest advertising
networks, with offices in 35 countries and 71 cities. Publicis S.A.'s stock
is publicly traded on the Paris stock exchange.
-4-
<PAGE> 5
ANSWER:
Defendants deny that Publicis Communication is a wholly-owned subsidiary
of Publicis S.A.; in fact, True North owns 26.5% of the shares of Publicis
Communication. Upon information and belief, defendants admit the remaining
allegations in paragraph 8.
9. Defendant True North is a Delaware company with its principal place
of business in Chicago. True North is a communications company and the parent
of Foote, Cone & Belding, a national advertising agency network. Its stock is
traded on the New York Stock Exchange.
ANSWER:
Defendants admit the allegations in paragraph 9.
10. Defendant Bruce Mason is the Chairman of the Board of Directors
and Chief Executive Officer of True North. Defendants Stephen T. Vehslage,
Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer are directors of
True North. Defendants Gregory W. Blaine, Laurel Cutler, and J. Brendan Ryan
are officers and directors of True North. Upon information and belief, the
Director Defendants are citizens of Illinois, New York, and Connecticut.
ANSWER:
Defendants deny that Laurel Cutler is an officer of True North and state
that the Director Defendants are citizens of Illinois, New York or Connecticut.
Defendants otherwise admit the allegations in paragraph 10.
11. In 1989, Publicis and True North formed a separate joint venture in
which the two companies combined certain of their European operations. As part
of the formation of the joint venture, the parties also became significant
shareholders of one another.
-5-
<PAGE> 6
ANSWER:
Defendants admit the allegations of paragraph 11.
12. In the years since the formation of the Publicis/True North joint
venture, the parties have had disagreements concerning the nature and scope of
their joint efforts. Notwithstanding these disagreements, Publicis has never
posed any type of threat to True North's corporate policies or effectiveness,
although, upon information and belief, True North incorrectly and unreasonably
perceived Publicis as a threat. In May 1997, the parties signed a series of
agreements that unwound their European joint venture. After consummation of the
transactions contemplated by the May 1997 agreements, Publicis remained an 18.5%
owner of True North, and True North became a 26.5% owner of Publicis.
ANSWER:
Defendants admit that, as a result of Publicis Communication's and
Publicis S.A.'s wrongful conduct, the parties had disagreements concerning the
joint venture from its inception until early 1997, and defendants further admit
that in May 1997, the parties signed a series of agreements to end their joint
venture and that, as a result of those agreements, Publicis Communication
remained a stockholder of True North and True North remained a stockholder of
Publicis Communication. Defendants deny each and every other allegation of
paragraph 12.
THE BOZELL MERGER
13. On July 31, 1997, True North announced its agreement to merge with
Bozell, an advertising firm with headquarters in New York City (the "Bozell
Merger"). True North did not consult its largest stockholder, Publicis, with
respect to the Bozell merger. Since the July announcement, the stockholders of
True North have not been provided with detailed information regarding the Bozell
Merger.
-6-
<PAGE> 7
ANSWER:
Defendants admit that True North announced the Merger Agreement with
Bozell on July 31, 1997. Defendants deny each and every other allegation of
paragraph 13.
14. The merger agreement with Bozell (the "Merger Agreement") requires
True North to issue 20 million new shares of common stock, nearly doubling the
25 million currently outstanding. The Merger Agreement also requires an
amendment of True North's charter to increase the total number of authorized
shares of common stock from 50 million to 90 million. Each share of Bozell
common stock will be converted into 0.51 shares of True North common stock upon
completion of the Bozell Merger.
ANSWER:
Defendants admit that the Merger Agreement requires an increase in the
total number of True North authorized shares of common stock and that each share
of Bozell common stock will be converted into 0.51 shares of True North common
stock upon completion of the Merger. Defendants deny each and every other
allegation of paragraph 14.
15. Upon information and belief, post-merger management of True North will
effectively control the Company. Through the exercise of options and
distribution of newly issued shares, the post-merger management of True North
will gain voting control of a dominant block of the Company's shares, many times
larger than the block owned by Publicis. Publicis and True North's public
shareholders, on the other hand, will suffer an approximate 50% dilution in
their holdings. In addition, post-merger management will control the newly
constituted and expanded Board of Directors. Publicis may lose its single seat
on the Board.
ANSWER:
Defendants admit that, as a result of the Bozell Merger, Publicis
Communication's percentage ownership of True North will decrease, but further
state that Publicis Communication has the right to buy additional shares of True
North common stock so as to
-7-
<PAGE> 8
maintain its current ownership percentage. Defendants deny each and every other
allegation of paragraph 15.
16. In connection with the Merger Agreement, upon information and belief,
employment agreements were entered into with certain members of senior
management of both companies that provide that, upon consummation of the Merger,
certain of the Defendants will receive exorbitant compensation, potentially in
excess of tens of millions of dollars over the next several years.
ANSWER:
Defendants deny the allegations of paragraph 16.
17. The Merger Agreement prohibits True North and its officers, directors,
and employees from engaging in discussions or negotiations with other potential
bidders for True North except under very limited circumstances. The Merger
Agreement only permits the True North Board to consider a "Superior Parent
Takeover Proposal", which is narrowly defined as a third-party offer for a
business combination with True North in which the sole consideration to be
received by True North shareholders is the stock of a widely-held public
company.
ANSWER:
Defendants admit that the Merger Agreement, among its numerous terms and
conditions, places certain specified limitations upon True North in engaging in
discussions or negotiations with potential bidders for True North. The Merger
Agreement places similar limitations upon Bozell. Defendants deny each and every
other allegations of paragraph 17.
THE PUBLICIS PROPOSAL
18. On November 10, 1997, Publicis chairman Maurice Levy sent a letter to
the True North Board of Directors stating Publicis' belief that "True North's
transaction with Bozell is contrary to the best interests of True North's
stockholders, of which Publicis is by far the largest with 18.5% of True North's
common stock." As Mr. Levy explained:
-8-
<PAGE> 9
The acquisition does not solve True North's fundamental strategic
weakness, which has been its failure to establish a global presence.
Bozell is primarily a U.S.-based business with a weak international
presence, and Publicis believes that its acquisition by True North
will compound, rather than solve, True North's strategic weaknesses.
As global marketers have increasingly demanded worldwide coverage,
True North has continued to focus on its U.S. business and as a
result, we believe that True North now finds itself at a significant
competitive disadvantage. In short, True North's proposed
acquisition of Bozell does nothing to solve these problems, and we
believe (based on the limited information that has been made
available to date) that the price to be paid for Bozell
significantly exceeds the value of Bozell's business."
ANSWER:
Defendants admit that on November 10, 1997, True North received a letter
from Maurice Levy and admit that the letter contains the quoted language.
Defendants refer to the entirety of Mr. Levy's letter for its full contents, and
deny each and every other allegation of paragraph 18.
19. As an alternative to the Bozell transaction, Mr. Levy stated that
Publicis is "prepared to propose a business combination between Publicis
Communication and True North in which each outstanding share of True North would
be valued at US$28":
Publicis has for some time believed that a combination of Publicis
Communication's businesses with those of True North would create a
powerful global presence with tremendous opportunities for
growth.... We at Publicis continue to believe that a merger between
Publicis Communication and True North is in the best interests of
both True North's and Publicis' stockholders and their respective
clients and employees ....
ANSWER:
Defendants admit that on November 10, 1997, True North received a letter
from Maurice Levy and admit that the letter contains the quoted language.
Defendants refer to the
-9-
<PAGE> 10
entirety of Mr. Levy's letter for its full contents, and deny each and every
other allegation of paragraph 19.
20. Mr. Levy concluded with an invitation "to discuss with True North
and its representatives the details of our proposal, including the cash and
stock components of our US$28 valuation":
We would be willing to meet with you and your advisors at your
earliest convenience to discuss our proposal and to answer any
questions you may have. Our preferred course would be to negotiate a
transaction that can be presented to our respective stockholders and
clients as the amicable and joint effort of Publicis, True North and
each of the companies' Boards of Directors and senior management.
I hope that each of you will give our proposal serious
consideration, and I look forward to your reply. We stand ready to
meet with the Board to present our plans.
ANSWER:
Defendants admit that on November 10, 1997, True North received a letter
from Maurice Levy and admit that the letter contains the quoted language.
Defendants refer to the entirety of Mr. Levy's letter for its full contents, and
deny each and every other allegation of paragraph 20.
TRUE NORTH'S ATTEMPTS TO STEAL THE SPECIAL SHAREHOLDER VOTE
21. True North did not disclose Publicis' letter to the public. Nor did it
respond in any way to Publicis. Instead, True North -- recognizing that
Publicis' opposition and counter-offer would seriously threaten its proposed
merger with Bozell -- immediately undertook to rig the vote at a special
shareholders' meeting (set for December 22, 1997) at which the Bozell
transaction would be voted upon by True North shareholders.
-10-
<PAGE> 11
ANSWER:
Defendants admit that True North did not disclose the letter to the public
until after Mr. Levy and Publicis voluntarily chose to disclose the letter
publicly on November 17, 1997. Defendants further state that Mr. Levy's letter
to the True North Board stated that it was "STRICTLY CONFIDENTIAL". Defendants
deny each and every other allegation of paragraph 21.
22. True North attempted to manipulate the vote by setting a premature
record date, the date used to determine who is entitled to vote at the special
shareholders' meeting. Without revealing to the New York Stock Exchange (the
"Exchange") or to the public the highly material information that it had
received from Publicis, True North set a record date of Tuesday, November 18.
True North sat silently upon this information as well, deliberately choosing not
to announce that it had set a record date for the special shareholders' meeting.
ANSWER:
Defendants state that on November 7, 1997, three days prior to Publicis'
"offer," True North initially attempted to set a record date with the New York
Stock Exchange. Defendants further state that its counsel first contacted the
New York Stock Exchange on the morning of November 10, 1997 prior to becoming
aware of the existence of Publicis' November 10, 1997 letter. True North's
counsel was advised that the earliest potential record date for the Special
Shareholders meeting was November 18, 1997. Accordingly, on the morning of
November 10, 1997 and without consideration of the letter received from Mr.
Levy, True North, in consultation with and with the approval of the New York
Stock Exchange, arranged for a record date of Tuesday, November 18, 1997.
Defendants deny each and every other allegation of paragraph 22.
-11-
<PAGE> 12
23. After a week had passed with no response, on November 17, Publicis
decided to disclose publicly the text of the letter. The stock market's reaction
was immediate and dramatic. On the day of the announcement, the price of a share
of True North common stock rose more than 12%, from 23 3/8 to 26 1/4.
Approximately one million shares were traded on November 17 and 18, more than
twelve times the average daily volume of the stock. The market's reaction to the
news of Publicis' opposition to the Bozell merger and its counter-proposal
demonstrates the significance of the news to True North shareholders.
ANSWER:
Defendants admit that Mr. Levy and Publicis chose to disclose the November
10, 1997 letter on November 17, 1997 and further admit that the stock market
reacted to the announcement. Defendants deny each and every other allegation of
paragraph 23.
24. True North's decision to set an early record date while it sat
silently upon this explosive news, if not remedied, will deprive the holders of
over a million True North shares of the opportunity to participate in a
contested special shareholders' meeting. Because trades of securities take three
business days to settle, every single shareholder who purchased True North
securities after Thursday, November 13 -- including persons who purchased at
higher prices that prevailed after the public announcement of Publicis'
opposition and counter-proposal -- has been disenfranchised.
ANSWER:
Defendants deny the allegations of paragraph 24.
25. True North's decisions to set a premature record date, to remain
silent about Publicis' opposition and counter-proposal, and not to announce its
record date have disenfranchised holders of millions of True North shares who
purchased because of their interest in, or at prices that reflected, Publicis'
counter-proposal. And True North shareholders who sold their shares before the
news about Publicis was released will be permitted to vote, notwithstanding
their lack of interest in the meeting. In short, because True North remained
silent about Publicis' opposition and counterproposal and furtively set an early
record date, no True North shareholder who purchased knowing of Publicis'
opposition and counter-proposal will be allowed to participate in the special
shareholders' meeting.
-12-
<PAGE> 13
ANSWER:
Defendants deny the allegations in paragraph 25.
26. True North's eight-day notice to the Exchange violated Section 401.02
of the rules set forth in the New York Stock Exchange Listed Company Manual,
which applies to True North. Section 401.02 provides that "[a] minimum of ten
days' notice is required prior to the record date established (or closing of the
transfer books) for determination of shareholders entitled to vote at the
meeting." True North also violated Securities and Exchange Commission ("SEC")
Rule 14a-13 regarding the solicitation of proxies, which requires the mailing
of broker inquiries twenty days in advance of the record date. 17 C.F.R
240.14a-13. In violation of Rule 14a-13, True North did not mail broker
inquiries until the day before and, in some cases, the day after the record date
to maintain the secrecy of its record-date maneuver.
ANSWER:
Defendants deny the allegations of paragraph 26 and further state that
plaintiff has intentionally and misleadingly quoted both the rules of the New
York Stock Exchange and the rules of the Securities and Exchange Commission.
Section 401.02 of the New York Stock Exchange rules specifically provides, in
pertinent part:
If it appears impossible to fix a record date which will permit ten
days advance notice to be given, that fact should be communicated to
the company's Exchange representative as soon as the difficulty
becomes apparent. When this is done early enough, it will generally
be possible to work out an alternative arrangement.
Securities and Exchange Commission Rule 14a-13 specifically provides that there
is no absolute rule for mailing broker inquiry cards twenty days prior to the
record date. Rather, the rule states in pertinent part:
if such inquiry is impracticable 20 business days prior to the
record date of a special meeting, as many days before the record
date of such meeting as is practicable.
-13-
<PAGE> 14
TRUE NORTH'S DELAYED RESPONSE TO PUBLICIS
27. After the close of trading on November 17 - and after Publicis had
publicly disclosed the contents of its November 10 letter - True North (through
its chairman, Bruce Mason) finally responded to Publicis' November 10 merger
proposal. Mason claimed that the Board of Directors discussed the proposal "at
length" but rejected the offer, even though it refused to meet with or discuss
the proposal with Publicis.
ANSWER:
Defendants admit that True North publicly disclosed its written response
to Mr. Levy's November 10, 1997 letter on November 17, 1997, and incorporates
herein the full text of that letter. Defendants deny each and every other
allegation of paragraph 27.
28. Also on November 17, 1997, True North filed a complaint in the
Delaware Court of Chancery against Publicis and its parent company, Publicis
S.A., seeking a preliminary and permanent injunction to provide certain
financial information and documentation to the SEC in connection with True
North's preliminary proxy and registration statements. No hearing or other
proceeding was held in the action and, on November 21, 1997, counsel for True
North informed the Delaware court that Publicis had fully complied with its
requests.
ANSWER:
Defendants admit that on November 17, 1997, True North was forced to file
a complaint in the Delaware Court of Chancery to compel Publicis Communication
and Publicis S.A. to abide by their contractual commitments to True North. Only
after the Delaware Court of Chancery had scheduled a conference at True North's
request did Publicis belatedly provide the requested information. Defendants
deny each and every other allegation of paragraph 28.
-14-
<PAGE> 15
COUNT I
BREACH OF FIDUCIARY DUTY
(INTERFERENCE WITH STOCKHOLDER FRANCHISE)
29. Plaintiff repeats and realleges paragraphs 1 through 28 as if fully
set forth herein.
ANSWER:
Defendants repeat and reallege their answers to paragraphs 1 through 28 as
if fully set forth herein.
30. Defendants' actions in setting a premature record date, in sitting
silently while that record date passed without disclosing Publicis' opposition
to the Bozell Merger and its counter-proposal, and in deliberately choosing not
to announce its record date were taken for the primary purpose of impeding
and/or interfering with the effective exercise of the stockholder franchise in
connection with the vote at the special shareholders' meeting. Defendants sat
silently upon the highly material news of Publicis' offer after surreptitiously
setting a record date in violation of the New York Stock Exchange Rules.
Defendants also violated Rule 14a-13 of the federal proxy rules by failing to
send out broker inquiries until approximately the record date.
ANSWER:
Defendants deny the allegations of paragraph 30.
31. Defendants took these actions to disenfranchise shareholders who
purchased or would be purchasing True North stock after the disclosure of
Publicis' opposition to the Bozell Merger and $28 per share counter-proposal. As
True North knew, those shareholders who purchased upon the news of Publicis'
opposition and counter-proposal would be likely to vote against the Bozell
Merger.
ANSWER:
Defendants deny the allegations of paragraph 31.
-15-
<PAGE> 16
32. Publicis is being, or will be, irreparably injured by Defendants'
misconduct and has no adequate remedy at law.
ANSWER:
Defendants deny the allegations of paragraph 32.
COUNT II
BREACH OF FIDUCIARY DUTY
(FAILURE TO MAXIMIZE STOCKHOLDER VALUE)
33. Plaintiff repeats and realleges paragraphs 1 through 32 as if
fully set forth herein.
ANSWER:
Defendants repeat and reallege their answers to paragraphs 1 through 32 as
if fully set forth herein.
34. The Bozell Merger will result in a change of the effective control of
True North. In this context, the Board's fiduciary duty is to seek to obtain the
best available terms for True North's shareholders and not to favor one
potential acquirer over another or one type of financial alternative over
another. In pursuing this objective, True North's Board of Directors have a duty
to inform themselves, prior to making business decisions, of all information
reasonably available to them.
ANSWER:
Defendants deny that the Merger Agreement with Bozell will result in a
change of control of True North and further deny each and every other allegation
of paragraph 34.
35. The True North Directors have not sought to obtain the best available
terms for the True North shareholders and have not properly informed themselves.
They have breached, and are continuing to breach their fiduciary duties.
-16-
<PAGE> 17
ANSWER:
Defendants deny the allegations of paragraph 35.
36. Publicis is being, or will be, irreparably injured by Defendants'
misconduct and has no adequate remedy at law.
ANSWER:
Defendants deny the allegations of paragraph 36.
COUNT III
BREACH OF FIDUCIARY DUTY
(BREACH OF DUTY OF LOYALTY)
37. Plaintiff repeats and realleges paragraphs 1 through 36 as if fully
set forth herein.
ANSWER:
Defendants repeat and reallege their answers to paragraphs 1 through 36 as
if fully set forth herein.
38. Upon information and belief, some or all of the Director Defendants
will receive exorbitant compensation - potentially tens of millions of dollars -
in the period following the consummation of the Bozell Merger. By placing their
own personal interests and the interests of new True North management ahead of
the shareholders' interests, these defendants have acted in bad faith and have
breached their duty of loyalty.
ANSWER:
Defendants deny the allegations of paragraph 38.
39. Publicis is being, or will be, irreparably injured by Director
Defendants' misconduct and has no adequate remedy at law.
-17-
<PAGE> 18
ANSWER:
Defendants deny the allegations of paragraph 39.
COUNT IV
BREACH OF FIDUCIARY DUTY
(UNREASONABLE PREEMPTIVE DEFENSIVE MEASURES)
40. Plaintiff repeats and realleges paragraphs 1 through 39 as if
fully set forth herein.
ANSWER:
Defendants repeat and reallege their answers to paragraphs 1 through 39 as
if fully set forth herein.
41. Upon information and belief, the Defendants sought and agreed to the
Bozell Merger as a defensive measure to dilute the holdings of its largest
shareholder, Publicis, with whom it has had a hostile relationship for years. By
the Bozell Merger, the Defendants sought to entrench senior True North
management. The Bozell Merger is not in the best interests of True North
shareholders and is an unreasonable and disproportionate response to the
perceived threat posed by Publicis.
ANSWER:
Defendants admit that, as a result of Publicis Communication's and
Publicis S.A.'s misconduct and lack of cooperation, there has long been an
extremely difficult relationship between True North and Publicis. It was as a
result of these difficulties that True North sought to and succeeded in
terminating the joint venture in May 1997. Defendants deny each and every other
allegation of paragraph 41.
42. Similarly, Defendants' restriction upon the offers that may be
considered under the Merger Agreement, their manipulation of the record date in
violation of the rules of the New York Stock Exchange, and their violation of
the federal proxy rules in failing to send out
-18-
<PAGE> 19
timely broker inquiries constitute unreasonable and disproportionate responses
by the True North Board of Directors to Publicis and Publicis' proposal. The
impact of these responses upon True North shareholders is disproportionately
large in relation to any "threat" allegedly posed by Publicis' proposal. The
Defendants thereby have breached, and are threatening to continue to breach,
their fiduciary duties.
ANSWER:
Defendants deny the allegations of paragraph 42.
43. Publicis is being, or will be, irreparably injured by Defendants'
misconduct and has no adequate remedy at law.
ANSWER:
Defendants deny the allegations of paragraph 43.
WHEREFORE, Publicis seeks judgment:
(a) enjoining the special shareholders' meeting until the True North
Board of Directors has engaged in serious, good faith discussions with
Publicis concerning the Publicis proposal;
(b) enjoining the special shareholders' meeting unless and until a
proper record date, including through compliance with all applicable laws,
rules, and regulations;
(c) rescinding the restrictions in the Merger Agreement purporting
to prohibit True North from engaging in discussions and/or negotiating a
transaction with Publicis;
(d) declaring that the Merger Agreement between True North and
Bozell is void;
(e) awarding Publicis damages in an amount to be determined at
trial, as well as the costs and fees incurred by Publicis in prosecuting
this lawsuit; and
(f) granting such other and further relief as the Court deems
just and proper.
-19-
<PAGE> 20
ANSWER:
Defendants deny that plaintiff is entitled to any relief, and defendants
seek an order dismissing the complaint with prejudice, as well as awarding costs
and fees to the defendants and granting such other and further relief as the
court deems just and proper.
AFFIRMATIVE DEFENSES
Defendants state the following affirmative defenses without assuming the
burden of proof on such issues that would otherwise rest on Plaintiff.
FIRST DEFENSE
The alleged causes of action set forth in the Complaint fail to state a
claim upon which relief may be granted.
SECOND DEFENSE
The alleged causes of action set forth in the Complaint seeking equitable
relief are barred by Plaintiff's unclean hands.
THIRD DEFENSE
The alleged causes of action set forth in the Complaint seeking equitable
relief are barred by Plaintiff's laches.
FOURTH DEFENSE
Plaintiff has no standing to bring the causes of action alleged in the
Complaint in its individual capacity. The alleged causes of action are
derivative, not direct.
-20-
<PAGE> 21
VERIFIED COUNTERCLAIM OF TRUE NORTH COMMUNICATIONS INC.
Counterclaim-Plaintiff True North Communications Inc. ("True
North"), by its undersigned counsel for its Verified Counterclaim alleges as
follows:
NATURE OF ACTION
1. This is an action for injunctive and other relief arising from
the concerted attempt by Counterclaim-Defendants Publicis S.A., Publicis
Communication and Maurice Levy to disrupt and prevent True North's acquisition
of Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"), one of the world's
leading advertising companies.
2. True North, a Delaware corporation, is a worldwide advertising
and marketing company. Counterclaim-Defendants Publicis S.A. and Publicis
Communication are French corporations, also involved in the communications and
advertising business. Counterclaim-Defendant Maurice Levy is a French citizen,
and is the President Directoire of Publicis S.A. and is the Director General
of Publicis Communication.
3. On July 31, 1991, True North announced that it had entered into a
merger agreement with Bozell, by which True North would acquire Bozell. True
North's opportunity to acquire Bozell is exceptional and uniquely valuable.
Completing the merger will significantly increase the size and market
capitalization of True North, and create one of the largest advertising
companies in the world.
4. Defendants have engaged and are engaging in a series of wrongful
and unlawful acts in an effort to disrupt True North's acquisition of Bozell.
These acts include: (1) the issuance of false and misleading statements in
violation of the United States securities laws,
-21-
<PAGE> 22
and specifically Section 14(a) of the Securities Exchange Act, 15 U.S.C. Section
18n(a), and Rule 14a-9, 17 C.F.R. Section 240.14a-9; (2) the inducement and
attempted inducement of breaches of fiduciary duty owed by True North's
directors to True North; (3) the repeated breach of contractual obligations owed
by Publicis S.A. and Publicis Communication in connection with the Agreement
dated as of May 19, 1997 among, inter alia, Publicis S.A., Publicis
Communication and True North; and (4) the repeated breaches of contractual
obligations owed by Publicis S.A. and Publicis Communication in connection with
the Pooling Agreement dated as of May 19, 1997 among Publicis S.A., Publicis
Communication and True North.
5. Though Publicis has publicly stated that it is opposing the True
North - Bozell transaction in the interests of shareholder value, its actions
have not been consistent with the best interests of an open shareholder vote.
Its real intention is to block the True North-Bozell transaction by any means,
to damage True North and its stock price for the benefit of Publicis -- as
Publicis would hope to acquire or merge with True North at a greatly reduced
price in order to address Publicis' significant strategic void.
6. Unless the Counterclaim-Defendants are enjoined from their course
of wrongful conduct, True North is at risk of losing its unique opportunity to
acquire a major global advertising company and the shareholders of True North
will continue to be misled.
THE PARTIES
7. Counterclaim-Plaintiff True North is a communications company
incorporated in Delaware with its principal place of business in Chicago,
Illinois. True North is engaged in all aspects of the advertising and marketing
business in the United States and
-22-
<PAGE> 23
abroad. Among its other assets, True North owns Foote, Cone & Belding, one of
the largest advertising agencies in the world.
8. Counterclaim-Defendants Publicis S.A. and Publicis
Communication are both French corporations. Publicis S.A. is a publicly
traded company listed on the French stock exchange. Publicis Communication
owns and operates numerous advertising agencies in various countries.
9. Counterclaim-Defendant Maurice Levy is a French citizen,
and is a principal executive officer of each of the two corporate
Counterclaim-Defendants. He is the President Directoire of Publicis S.A. and
is the Director General and Chief Executive Officer of Publicis Communication.
JURISDICTION AND VENUE
10. This Court has jurisdiction over Count I of this
counterclaim pursuant to Section 27 of the Securities Exchange Act of 1934
("Exchange Act"), 15 U.S.C. Section 78aa and 28 U.S.C. Section 1331.
11. Venue is proper in this District over Count I pursuant to
Section 27 of Exchange Act, 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391.
12. This Court has jurisdiction over Counts II, III, IV and V
of this counterclaim pursuant to 28 U.S.C. Section 1332 and Section 1367.
13. Venue is proper in this District over Counts II, III, IV and
V of this counterclaim pursuant to 28 U.S.C. Section 1391.
-23-
<PAGE> 24
14. This Court has personal jurisdiction over the
Counterclaim-Defendants as a result of, inter alia, their violations of the
federal securities laws and their commission of tortious acts within the State
of Illinois.
BACKGROUND ALLEGATIONS
COMMON TO ALL COUNTS
15. In 1989, True North and Publicis formed a global alliance. As a
part of that alliance, True North and Publicis created a joint venture company
called Publicis-FCB. The joint venture owned and operated numerous advertising
agencies located in Europe.
16. Almost from the beginning, the parties had great difficulty with
the global alliance and the joint venture. As a result of Publicis' failure to
cooperate and failure to function properly within the alliance and the joint
venture, the alliance between True North and Publicis did not work and relations
between the parties soured over time.
17. Accordingly, earlier this year, the parties mutually agreed to
unwind the alliance and joint venture. Therefore, on or about May 19, 1997, the
parties executed a series of agreements to dissolve the joint venture and divide
ownership of the advertising agencies operated by the joint venture. A
centerpiece of the May 19, 1997 unwind was the agreement that each party would
support the other party's pursuit of strategic acquisitions.
18. Subsequent to the agreement to unwind the joint venture, True
North negotiated extensively to acquire Bozell. The acquisition of Bozell
presented True North with a unique opportunity to expand and strengthen its
business by, inter alia, adding a second major brand to True North's
already-existing Foote, Cone & Belding subsidiary. Bozell is an
-24-
<PAGE> 25
international communications company with advertising and public relations
agencies in 53 countries around the world.
19. After extensive negotiations and the receipt of a fairness
opinion from its investment banker, the True North Board of Directors on July
30, 1997 approved the acquisition of Bozell.
20. On or about July 31, 1997, True North announced that it had
entered into an Agreement and Plan of Merger to acquire Bozell (the "Merger
Agreement") in a merger worth in excess of $1 billion. On or about August 6,
1997, True North filed a Form 8-K with the United States Securities And Exchange
Commission that included a copy of the Merger Agreement.
21. In accordance with the Merger Agreement, a wholly-owned True
North subsidiary (Cherokee Acquisition Corporation) will merge with and into
Bozell, with Bozell surviving as a wholly-owned subsidiary of True North. Each
share of Bozell common stock will be converted into 0.51 of a share of True
North common stock. As a consequence, the acquisition of Bozell essentially will
substantially increase the size and market capitalization of True North.
22. Under the Merger Agreement, the expiration date for the merger
is December 31, 1997. The Merger Agreement specifically provides that either
True North or Bozell may terminate the agreement if the merger is not closed by
December 31, 1997.
-25-
<PAGE> 26
COUNT I
(VIOLATION OF FEDERAL SECURITIES LAWS)
23. True North repeats and realleges its allegations in paragraphs
1-22 as if set forth fully herein.
THE COUNTERCLAIM-DEFENDANTS SOLICIT TRUE NORTH SHAREHOLDERS BY MEANS OF FALSE
AND MISLEADING COMMUNICATIONS.
24. On November 17, 1997, Publicis Communication and Publicis S.A.,
upon information and belief at the instruction of Mr. Levy , released a vague
and highly misleading November 10, 1997 letter to the press in an effort to
solicit True North's shareholders to vote against the Bozell acquisition by
falsely communicating to such shareholders that Publicis Communication and
Publicis S.A. were interested in acquiring True North at $28 per share. As Mr.
Levy and Publicis intended, the press coverage concerning the November 10, 1997
letter uniformly described Publicis' proposed "combination" as an acquisition by
Publicis of True North at $28.00 per share. For instance, on November 18, 1997,
The New York Times reported that "Publicis, the Paris-based ad agency company,
said it would seek to acquire True North Communications, a former partner, for
$577.4 million if True North abandons its pending acquisition of [Bozell]. "
That same day, the Chicago Sun Times reported that True North had rejected
Publicis' "takeover effort," stating that Publicis had "offered to purchase the
remainder of the shares [that Publicis did not already own] for $28 each in cash
and stock." Similarly, on December 1, 1997, Reuters Financial reported,
"Publicis last month offered $28 for every outstanding True North share ...."
25. Publicis' supposed proposal to acquire True North is nothing
more than a ruse designed to interfere with the proposed Bozell acquisition and
to mislead True North
-26-
<PAGE> 27
shareholders. Publicis has indicated to True North that the "combination"
Publicis had referred to in the November 10, 1997 letter was in actuality an
acquisition of Publicis by True North. In other words, Publicis' supposed
"combination" is in reality a proposal whereby True North would buy out Publicis
- -- not, as the Counterclaim-Defendants had told True North's shareholders, that
Publicis was seeking to acquire True North at $28 per share. There has been no
"offer to acquire" True North stock, but merely an unfounded speculation
promoted by Publicis and Mr. Levy as to what they think True North stock might
eventually be worth if Publicis Communication were merged into True North with
Publicis management taking control.
THE COUNTERCLAIM-DEFENDANTS ORCHESTRATE A CAMPAIGN TO MISLEAD TRUE NORTH
SHAREHOLDERS
26. Despite having been aware of the proposed True North-Bozell
merger since the end of July 1997, Mr. Levy , Publicis S.A. and Publicis
Communication waited until November 10, 1997 to send a letter to True North
expressing their objection to the proposed Bozell acquisition, and purporting to
set forth an "offer" regarding a "combination" between Publicis and True North.
A copy of their November 10, 1997 letter is attached as Exhibit A to Plaintiff's
Motion for Expedited Discovery and a Preliminary Injunction.
27. Mr. Levy's November 10, 1997 letter on behalf of Publicis S.A.
and Publicis Communication contained numerous knowingly false and misleading
statements. For instance, Mr. Levy falsely suggested that Publicis would propose
an alternative to the Bozell acquisition whereby Publicis would acquire True
North at a price of $28 per share of True North. Mr. Levy stated that Publicis
was "prepared to propose a business combination
-27-
<PAGE> 28
between Publicis Communication and True North in which the each [sic]
outstanding share of True North would be valued at US$28." Publicis also falsely
characterized its proposed acquisition as "a unique opportunity for the
stockholders of True North to maximize the value of their shares." (Emphasis
added.)
28. On November 12, 1997 the True North Board of Directors, after
considering Publicis' November 10, 1997 letter and consulting with its financial
and legal advisors, determined that it would decline Publicis' request for a
meeting. The Board's decision was the product of careful deliberation and a
detailed understanding of Publicis and Mr. Levy . The Board considered, inter
alia, True North's intention to proceed with the Bozell acquisition, the fact
that the financial terms of the November 10, 1997 letter were extremely vague
and, when construed in the best possible light to Publicis, did not appear to be
materially different from other strategic alternatives that had been explicitly
considered and rejected by the Board, the lengthy history of difficulties
between True North and Publicis, and True North's contractual obligations to
Bozell.
PUBLICIS HAS VIOLATED SECTION 14(a) AND RULE 14A-9 UNDER THE EXCHANGE ACT
29. Rule 14a-9 prohibits any solicitation of shareholders by means
of any . . . communication, written or oral, containing any
statement which, at the time and in the light of the circumstances
under which it is made, is false or misleading with respect to any
material fact, or which omits to state any material fact necessary
in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication
with respect to the solicitation of a proxy for the same meeting
or subject matter which has become false or misleading.
-28-
<PAGE> 29
30. In releasing the November 10, 1997 letter to the press, the
Counterclaim-Defendants intended to and did seek to solicit True North's
shareholders to vote against the Bozell acquisition by means of communications
containing false and misleading statements. In particular, each of these
communications to True North's shareholders concerning the purported
"combination" between True North and Publicis contained knowingly misleading and
false statements of material fact, or omitted material facts necessary to render
the statements not misleading, in that, as they have now acknowledged, Publicis
and Mr. Levy never had any intention of offering to pay $28 in stock and cash
for each share of True North. Moreover, the Counterclaim Defendants have stood
mute while these inaccuracies have been communicated to True North's
shareholders and have never attempted to clarify the true nature of the proposed
"combination" with True North, despite their clear legal obligation promptly to
correct any false and misleading statements to True North's shareholders.
31. Each of these false, deceptive, misleading and manipulative
statements and the information and facts omitted as set forth above was made
with knowledge of and/or reckless disregard for their falsity.
32. Each of these false, deceptive, misleading and manipulative
statements and the information and facts omitted as set forth above are material
to each and every True North shareholder in determining whether to vote in favor
of the Bozell acquisition.
33. Each of these false, deceptive, misleading and manipulative
statements and the information and facts omitted as set forth above was made,
directly or indirectly, by means of instrumentalities of interstate commerce
and/or of the mails.
-29-
<PAGE> 30
34. By reason of the foregoing, Mr. Levy , Publicis
Communication and Publicis S.A have violated Section 14(a) of the Exchange
Act, 15 U.S.C. Section 78n(a), and Rule 14a-9, 17 C.F.R. Section 240.14a-9,
promulgated thereunder. In addition, Mr. Levy is a controlling person within
the meaning of Section 20(a) of the Exchange Act, 15 U.S.C. Section 78p(a), and
is liable for Publicis Communication's and Publicis S.A.'s violations thereof.
35. Unless the injunctive relief sought under this claim is granted,
True North and its stockholders will be irreparably harmed in that the false,
deceptive, misleading and manipulative statements and the information and facts
omitted as set forth above will remain uncorrected and the
Counterclaim-Defendants will continue to seek to mislead and falsely solicit
proxies from the True North stockholders.
36. True North has no adequate remedy at law.
COUNT II
(TORTIOUS INTERFERENCE WITH FIDUCIARY DUTIES)
37. True North repeats and realleges its allegations in
paragraphs 1-36 as if set forth fully herein.
38. Pursuant to the agreements entered into in May 1997 by which
True North and Publicis Communication and Publicis S.A. agreed to terminate
their joint venture, Publicis Communication was afforded the contractual right
to nominate one person to the True North Board of Directors.
39. Pursuant to its contractual right, on or about May 23,
1997, Publicis Communication nominated Mr. Ali Wambold to the True North
Board. Mr. Wambold is a
-30-
<PAGE> 31
partner at Lazard Freres in Paris. Publicis Communication and Publicis S.A. have
retained Lazard Freres as their investment banker and financial advisor in
connection with their hostile actions to disrupt the Bozell merger.
40. As a director of True North, Mr. Wambold owes strict
fiduciary duties to True North and its shareholders.
41. On November 10, 1997, at the direction of
Counterclaim-Defendants Publicis S.A. and Publicis Communication and at the
specific instruction of Maurice Levy, Mr. Wambold privately telephoned three
members of the Board of Directors of True North.
42. During his conversations with these members of the True North
Board, Mr. Wambold urged these Board members to support the initiatives of
Publicis set forth in Mr. Levy's letter of November 10, 1997. Mr. Wambold stated
that Mr. Levy held these individuals in high esteem and, in certain instances,
Mr. Wambold stated that Mr. Levy believed that certain of these individuals
would play an important role in a combined Publicis - True North entity.
43. Mr. Wambold's statements to these members of the True North
Board were calculated to induce them to breach their fiduciary duties to True
North and were in gross violation of Mr. Wambold's fiduciary duties as a
director of True North.
44. Upon information and belief, Mr. Wambold's breach of his
fiduciary duties as set forth in paragraphs 42 and 43 was made at the direction
and insistence of Mr. Levy , Publicis Communication and Publicis S.A.
-31-
<PAGE> 32
45. Upon information and belief, Mr. Levy, Publicis Communication
and Publicis S.A. have caused Mr. Wambold to breach his fiduciary duties in
additional ways, including, inter alia, causing Mr. Wambold to disclose to them
confidential information of True North made known to Mr. Wambold by True North
solely in his capacity as a director of True North.
46. The actions of Mr. Levy, Publicis Communication and Publicis
S.A. in causing Mr. Wambold to breach his fiduciary duties have injured True
North and its shareholders.
47. Unless the injunctive relief sought under this claim is granted,
True North and its stockholders will be irreparably harmed by further efforts by
the Counterclaim-Defendants to induce breaches of fiduciary duties by the True
North directors.
48. True North has no adequate remedy at law.
COUNT III
(BREACH OF CONTRACT BY PUBLICIS S.A.
AND PUBLICIS COMMUNICATION)
49. True North repeats and realleges its allegations in
paragraphs 1-48 as if fully set forth herein.
50. As part of the termination of the parties' joint venture in May
1997, Publicis S.A. and Publicis Communication entered into a detailed agreement
with True North separating their respective worldwide agency networks (the "May
19 Agreement"). A copy of that agreement is attached as Exhibit 1.
-32-
<PAGE> 33
51. The May 19 Agreement contains a substantial number of terms
dealing with the ownership and operation of Publicis Communication. These terms
were needed because of True North's 26.5% minority ownership of Publicis
Communication and the potential that Publicis S.A. would abuse its dominant
73.5% ownership position.
52. Accordingly, to protect the interest of True North, Section
1.8 of the May 19 Agreement provides, as follows:
Communication Directors. As soon as practicable, but no later than
60 days after the consummation of the transactions contemplated by
this Agreement and in all events prior to the consummation or
corporate approval of any transaction to transfer to Communication
agencies owned by Publicis, and so long thereafter as True North
owns at least 10% of the issued and outstanding shares of
Communication Stock, Communication shall elect to its Board of
Directors three members who have no prior significant relationship
with Publicis, True North or the directors or senior officers of
either (the "Outside Directors"). Publicis and Communication shall
consult with True North prior to the appointment of the three
Outside Directors. A majority of the three Outside Directors and the
Board of Directors of Communication must approve any transaction
(other than those specifically contemplated by this Agreement or the
Memorandum of Agreement) of Communication, including transactions
with Publicis or any affiliates of Publicis, that a majority of the
three Outside Directors deem to be significant.
53. Notwithstanding the express provisions of Section 1.8,
Publicis S.A. has failed to cause the election of three independent directors
to the Board of Publicis Communication. Until such independent directors are
appointed, Publicis Communication is prohibited under Section 1.8 from
undertaking any "significant transaction."
-33-
<PAGE> 34
54. Even though Section 1.8 sets conditions that have not been met
on any "significant transaction" of the type purportedly contemplated by Mr.
Levy's November 10, 1997 letter, Publicis S.A and Publicis Communication have
acted and are threatening to continue to act in violation of the May 19
Agreement.
55. Similarly, Section 1.7 of the May 19 Agreement provides, in
pertinent part, as follows:
Transactions on Arm's Length Basis. So long as True North owns at
least 10% of the issued and outstanding shares of Communication
Stock, any significant transactions effected by Communication shall
be effected on an arm's length basis; ....
56. Notwithstanding this specific contractual provision drafted for
the protection of True North, Publicis S.A. and Publicis Communication have
breached Section 1.7. The terms of the November 10, 1997 letter written by Mr.
Levy on behalf of Publicis Communication clearly contemplate a "significant
transaction" within the meaning of Section 1.7, yet Publicis S.A. has not
treated Publicis Communication on an arm's length basis with respect to the
initiative set forth in Mr. Levy's November 10, 1997 letter.
57. Section 3.4 of the May 19 Agreement provides generally that
disputes between the parties with respect to the May 19 Agreement are subject to
arbitration. However, Section 3.4.10 further specifies, in pertinent part, that:
Governing Laws; Arbitration .... Nothing herein shall limit the
right of a party to seek provisional or injunctive relief pending
resolution of a dispute pursuant to this Agreement.
-34-
<PAGE> 35
58. True North has taken steps to commence an arbitration to
vindicate its rights under the May 19 Agreement.
59. Pending resolution of the arbitration, True North is entitled to
an injunction prohibiting Publicis S.A. and Publicis Communication from
breaching their obligations under the May 19 Agreement and prohibiting Publicis
Communication from considering any significant transaction unless and until the
requirements of Sections 1.7 and 1.8 are complied with.
60. True North has no adequate remedy at law.
COUNT IV
(BREACH OF CONTRACT)
61. True North repeats and realleges its allegations in
paragraphs 1-60 as if set forth fully herein.
62. In addition to the May 19 Agreement, in connection with the
parties' termination of their alliance and joint venture, Publicis
Communication, Publicis S.A. and True North entered into an additional contract
entitled the "Pooling Agreement." A copy of this contract is attached as Exhibit
2.
63. The Pooling Agreement was specifically entered into to prevent
Publicis S.A. or Publicis Communication from misusing Publicis Communication's
ownership in True North to undermine True North's subsequent acquisition
efforts.
-35-
<PAGE> 36
64. Accordingly, under the Pooling Agreement, Publicis S.A. and
Publicis Communication agreed that they would take any action reasonably
requested in support of a True North acquisition, other than committing to
vote for such a transaction.
65. Specifically, pursuant to section 1.1 of the Pooling
Agreement, Publicis S.A. and Publicis Communication agreed to take any action
reasonably requested by True North in support of a business transaction.
Thus, Publicis agreed to (a) provide True North with a "pooling letter" if
necessary to effect a pooling of interests transaction; and
(b) if reasonably requested, take such other action in support of
the transaction (other than a commitment to vote for such
transaction) as would be customary with respect to an acquisition or
other similar business transaction in which True North may
participate. (Emphasis added.)
In sum, short of committing to vote its shares in favor of a True North
acquisition, Publicis agreed to support a True North acquisition when and if
True North requests such support. Under section 1.2 of the Pooling Agreement,
True North undertook a reciprocal obligation to Publicis.
66. The Pooling Agreement further provides that any breach by
Publicis arising from a request by True North under section 1.1 entitles True
North to injunctive relief. In section 2.4.2 of the Pooling Agreement, Publicis
acknowledged that such "a breach would cause a loss to True North which could
not be reasonably or adequately compensated in damages" and "True North shall be
entitled to injunctive relief to prevent any breach or continuing breaches of
this Agreement arising out of a request under Section 1.1."
-36-
<PAGE> 37
67. Pursuant to the Pooling Agreement, True North has reasonably
requested that Publicis S.A and Publicis Communication refrain from taking
actions against the proposed Bozell transaction and take actions in furtherance
of that merger.
68. Publicis S.A and Publicis Communication have at every
opportunity taken action contrary to True North's reasonable request, and
willfully, deliberately and intentionally breached their obligations under the
Pooling Agreement. These actions include, inter alia, filing a meritless
complaint against True North and its directors seeking to deprive the True North
shareholders of an opportunity to vote on the Bozell transaction, and engaging
in the other various wrongful conduct which is set forth in this counterclaim.
69. Publicis S.A.'s and Publicis Communication's breach of the
Pooling Agreement threatens to sabotage the Bozell merger.
70. If Publicis and Publicis Communication succeed in stopping the
Bozell merger by violating their contractual obligations to True North, the
financial harm to True North and its shareholders will be substantial and
irreparable.
71. As a direct and proximate cause of their intentional breaches of
the Pooling Agreement, True North has been or will be injured in an amount that
cannot be fully measured in terms of money damages. Insofar as some portion of
the harm to True North is quantifiable, however, True North has been or will be
injured in an amount to be determined at trial of not less than $300 million,
not including punitive damages.
-37-
<PAGE> 38
COUNT V
(TORTIOUS INTERFERENCE WITH BUSINESS RELATIONS)
72. True North repeats and realleges the allegations contained in
paragraphs 1-71 of this complaint as if fully set forth herein.
73. By taking the foregoing wrongful actions, Publicis S.A.,
Publicis Communication and Mr. Levy threaten to and intend to interfere with and
defeat the pending merger of True North and Bozell. Their actions were
undertaken intentionally, maliciously and in bad faith with the deliberate
purpose of interfering with the merger of True North and Bozell.
74. By virtue of the foregoing, Publicis S.A., Publicis
Communication, and Mr. Levy have sought to intentionally interfere with the
pending merger of True North and Bozell for the purpose of terminating the
current and expected relationship between True North and Bozell.
75. As a direct and proximate cause of their tortious interference
with the merger of True North and Bozell, True North has been or will be injured
in an amount that cannot be fully measured in terms of money damages. Insofar as
some portion of the harm to True North is quantifiable, however, True North has
been or will be injured in an amount to be determined at trial of not less than
$300 million, not including punitive damages.
-38-
<PAGE> 39
WHEREFORE, True North demands judgment against Publicis S.A.,
Publicis Communication and Mr. Levy , and respectfully prays that this Court
enter orders as follows:
(a) Declaring that the Counterclaim-Defendants have violated
Section 14(a) of the Exchange Act, 15 U.S.C. Section 78n(a) and Rule 14a-9, 17
C.F.R. Section 240.14a-9 and ordering that corrective disclosures be made at the
expense of the Counterclaim-Defendants;
(b) Enjoining the Counterclaim-Defendants from making false and
misleading statements in connection with the solicitation of proxies;
(c) Enjoining the Counterclaim-Defendants from any further
interference with Mr. Wambold and/or directly or indirectly through any agents
or other persons acting in concert with them from any further interference with
True North directors;
(d) Enjoining Publicis S.A. and Publicis Communication from
proceeding with any significant transaction until three (3) independent
directors are seated and fully functioning on the Publicis Communication
Board of Directors;
(e) Enjoining Publicis S.A. to adhere to the terms of the
Pooling Agreement;
(f) Enjoining the Counterclaim-Defendants from any further
interference with the Bozell transaction;
-39-
<PAGE> 40
(g) Awarding True North compensatory and punitive damages in
amounts to be determined;
(h) Awarding True North the costs and disbursements related to
this action, including reasonable attorneys' fees; and
(i) Awarding such further and other relief as may be just and
proper.
/s/
One of the Attorneys for Defendants
and for Counterclaim Plaintiff
Robert D. McLean
Walter C. Carlson
Richard B. Kapnick
Bruce M. Zessar
James W. Ducayet
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 853-7000
Of Counsel:
Kenneth J. Nachbar
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899
(302) 658-9200
Martin London
Robert A. Atkins
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3000
-40-
<PAGE> 41
JURY TRIAL DEMANDED
Defendants and the Counterclaim Plaintiff hereby demand trial by
jury for all issues so triable under the Plaintiff's complaint and the
Counterclaim-Plaintiffs Counterclaim.
/s/
One of the Attorneys for Defendants
and for Counterclaim Plaintiff
Robert D. McLean
Walter C. Carlson
Richard B. Kapnick
Bruce M. Zessar
James W. Ducayet
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 853-7000
Of Counsel:
Kenneth J. Nachbar
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899
(302) 658-9200
Martin London
Robert A. Atkins
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 Avenue of the Americas
New York, NY 10019-6064
(212) 373-3000
-41-
<PAGE> 42
VERIFICATION
BRUCE MASON, being duly sworn, states that he is the Chairman of the
Board of Directors and Chief Executive Officer of Counterclaim Defendant True
North Communications Inc. and that the allegations of the foregoing Verified
Counterclaim are true and correct as to the best of his knowledge, except as to
matters alleged on information and belief, and that as to those matters he
believes to the best of his knowledge that such allegations are true.
/s/
BRUCE MASON
Sworn to before me this
[2nd] day of December 1997
/s/
Notary Public
[SEAL]
-42-
<PAGE> 1
Exhibit (h)(4)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PUBLICIS COMMUNICATION, )
)
Plaintiff, )
)
v. ) Civil No. 97 C 8263
) Judge Joan B. Gottschall
TRUE NORTH COMMUNICATIONS INC., )
BRUCE MASON, STEPHEN T. VEHSLAGE, )
GREGORY W. BLAINE, LAUREL CUTLER, )
J. BRENDAN RYAN, RICHARD S. )
BRADDOCK, MICHAEL P. MURPHY, )
RICHARD P. MAYER, and BOZELL, )
JACOBS, KENYON & ECKHARDT, INC. )
)
Defendants. )
- --------------------------------------------)
TRUE NORTH COMMUNICATIONS INC., a )
Delaware corporation, )
)
Counterclaim-Plaintiff, )
)
v. )
)
PUBLICIS COMMUNICATION, a )
French corporation, PUBLICIS S.A., a )
French corporation, and MAURICE LEVY, )
a French citizen, )
)
Counterclaim-Defendants )
COUNTERCLAIM PLAINTIFF'S
EMERGENCY MOTION FOR A
TEMPORARY RESTRAINING ORDER
Counterclaim-Plaintiff True North Communications Inc. ("True North"),
by its attorneys, hereby moves this Court, pursuant to Fed R. Civ. P. 65(b), for
a temporary restraining order against Counterclaim-Defendants Publicis
Communication, Publicis S.A. and Maurice Levy (collectively, the "Publicis
Parties").
<PAGE> 2
1. Enjoining the Publicis Parties from engaging in any conduct that is
not in support of the Bozell merger (other than committing to vote for such
transaction), including engaging in any unsolicited tender offer that is
conditioned upon the termination of the Bozell Agreement.
2. Enjoining the Publicis Parties from soliciting any True North
shareholders to vote against the Bozell merger.
In support of this motion, True North respectfully refers the Court to
its Verified Counterclaim, the Affidavit of Theodore J. Theophilos submitted
herewith and the accompanying Memorandum of Law.
Dated: December 5, 1997
/s/ Walter C. Carlson
-------------------------------------
One of the Attorneys for Counterclaim-
Plaintiff, True North Communications, Inc.
Robert D. McLean
Walter C. Carlson
Richard B. Kapnick
Bruce M. Zessar
James W. Ducayet
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 853-7000
Of Counsel:
Kenneth J. Nachbar
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899
(302) 658-9200
-2-
<PAGE> 1
EXHIBIT (h)(5)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PUBLICIS COMMUNICATION, )
)
Plaintiff, )
)
v. ) No. 97 C 826
)
TRUE NORTH COMMUNICATION INC., ) Judge Joan B Gottschall
BRUCE MASON, STEPHEN T. VEHSLAGE, )
GREGORY W. BLAINE, LAUREL CUTLER, )
J. BRENDAN RYAN, RICHARD S. )
BRADDOCK, MICHAEL P. MURPHY, and )
RICHARD P. MAYER, )
)
Defendants )
- -------------------------------- )
TRUE NORTH COMMUNICATIONS INC., a )
Delaware corporation, )
)
Counterclaim-Plaintiff, )
)
)
v. )
)
PUBLICIS COMMUNICATION, a )
French corporation, PUBLICIS S A., a )
French corporation, and MAURICE LEVY, )
a French citizen, )
)
Counterclaim-Defendants )
)
<PAGE> 2
PRELIMINARY INJUNCTION ORDER
Based upon the findings of fact, conclusions of law and additional reasons
stated in open court this day, the Court, pursuant to Federal Rule of Civil
Procedure 65(a), hereby enters its preliminary injunction order against Publicis
Communication, Publicis S.A., and Maurice Levy (collectively, the "Publicis
Parties"), enjoining the Publicis Parties and their respective officers,
agents, servants, employees and attorneys from engaging in any of the following
conduct with respect to or in connection with the Agreement and Plan of Merger
dated as of July 30, 1997 (the "Merger Agreement") among True North
Communications Inc. ("True North") and Bozell, Jacobs, Kenyon & Eckhardt, Inc
("Bozell") and the merger contemplated thereby (the "Bozell Merger"):
1. announcing, commencing or further proceeding with any tender offer for
any shares of capital stock of True North;
2. soliciting, contacting or otherwise communicating in any way with any
record or beneficial holder of capital stock of True North, by means
of soliciting proxies or otherwise, to urge such stockholders to vote
against the Bozell Merger or the other proposals to be voted on at the
True North Special Meeting of Stockholders set for December 30, 1997,
or to urge such stockholders not to vote on such Merger or the other
proposals to be voted on at said Special Meeting;
3. inducing, assisting or encouraging third parties to take actions in
opposition to True North's proposed combination with Bozell.
The Court finds that a bond in an amount of twelve million dollars
$12,000,000. be posted by True North. The Clerk is hereby directed to enter
this Order.
Dated December 10, 1997 /s/ JOAN B. GOTTSCHALL
----------------------
Joan B. Gottschall
United States District Judge
<PAGE> 1
EXHIBIT (h)(6)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PUBLICIS COMMUNICATION, )
)
Plaintiff, )
)
v. )
)
TRUE NORTH COMMUNICATIONS INC., )
BRUCE MASON, STEPHEN T. VEHSLAGE, ) 97 C 8263
GREGORY W. BLAINE, LAUREL CUTLER, ) Judge Joan B. Gottschall
J. BRENDAN RYAN, RICHARD S. )
BRADDOCK, MICHAEL P. MURPHY, )
RICHARD P. MAYER, and BOZELL, )
JACOBS, KENYON & ECKHARDT, INC. )
)
Defendants. )
AMENDED AND SUPPLEMENTAL
COMPLAINT
Publicis Communication ("Publicis"), through its undersigned
counsel, for its Amended and Supplemental Complaint against True North
Communications Inc. ("True North" and the "Company"), Bruce Mason, Gregory W.
Blaine, Richard S. Braddock, Laurel Cutler, Richard P. Mayer, Michael P.
Murphy, J. Brendan Ryan, and Stephen T. Vehslage (together, the "Director
Defendants"), and Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"), alleges
as follows:
Nature of the Action
1. Publicis brings this action for, among other remedies,
injunctive and/or declaratory relief:
<PAGE> 2
(a) to prevent the application of defendant True North's
anti-takeover devices and any other defensive measures to Publicis'
tender offer, proposed merger and solicitation of revocations and
conditional proxies, in violation of fiduciary duties owed to True
North's stockholders;
(b) to prevent True North from otherwise impeding Publicis'
tender offer, proposed merger and solicitation of revocations and
conditional proxies, which comply with all applicable laws and other
obligations;
(c) to enjoin True North from continuing its course of proxy
fraud, in violation of the federal securities laws;
(d) to enjoin the special meeting of True North stockholders
called for December 30, 1997 (the "Special Meeting") to approve a
merger between True North and another advertising firm, Bozell (the
"Bozell Merger"), until a proper record date is set, until True North
has engaged in serious, good faith discussions with Publicis
concerning Publicis' tender offer, proposed merger and solicitation of
revocations and conditional proxies and until the marketplace has
absorbed all corrective disclosures by True North; and
(e) to void the Merger Agreement between True North and Bozell
dated July 30, 1997 (the "Merger Agreement") and enjoin the
consummation of the Merger or, alternatively, to void the Merger
Agreement's so-called "fiduciary out" provision.
2. Publicis is True North's largest shareholder, holding
18.4% of its common stock. On December 4, 1997, Publicis announced its
intention to commence an all-cash tender offer for approximately 9.6 million
shares of True North common stock at
2
<PAGE> 3
a price of $28 per share (the "Offer"). These shares, when added to the shares
already owned by Publicis, will constitute a majority of the total number of
outstanding shares of True North. The Offer is conditioned on a number of
matters, including the termination of the Merger Agreement in accordance with
its terms and the removal or inapplicability of certain of True North's
anti-takeover devices. At the same time as it announced the Offer, Publicis
announced its intention to solicit revocations and conditional proxies to
defeat stockholder approval of the Bozell Merger at the Special Meeting (the
"Publicis Solicitation").
3. Upon consummation of the Offer, Publicis intends to
combine True North and Publicis to create a unified company run by one
successful management team (the "Proposed Publicis Merger"). The Offer is
non-coercive and fair to True North's stockholders. The Offer represents a
substantial premium over the market price for True North shares prior to the
disclosure on November 17, 1997 of Publicis' proposed merger. The Offer,
Proposed Publicis Merger and Publicis Solicitation provide True North
stockholders with a superior alternative to the Bozell Merger - evidenced by
the market's enthusiastic response upon the disclosure of the Proposed Publicis
Merger - and pose no threat to the interests of True North's stockholders or to
True North's corporate policy and effectiveness.
4. The Offer arises in the context of years of hostility by True
North senior management against Publicis. The parties formed a joint venture
over a decade ago, but have endured years of disagreements. For years, True
North management has viewed Publicis as a threat to its continued control over
True North and as a potential hostile acquirer. Indeed, True North management
has gone to great lengths to defend
3
<PAGE> 4
against the perceived threat of a hostile takeover from Publicis, including
upon information and belief investigations of Publicis' chairman, Maurice Levy:
- In August 1995, a True North employee was instructed to
enter the hotel room of Mr. Levy, without his consent, and
search his wastebasket for his Board of Directors' book. The
employee recovered a torn copy of Mr. Levy's personal agenda
from the wastebasket, pieced it together and delivered the
personal agenda to True North chairman Bruce Mason. Mr. Levy
was not told of the incident for a year.
- Between September 1995 and February 1996, True North
used a private investigator to investigate Mr. Levy. True
North decided to pursue the investigation in connection with
its anti-takeover defenses.
5. The Bozell Merger is True North's latest attempt to fend
off Publicis while enriching top management. If the Bozell Merger is
consummated, Publicis - as well as all other public stockholders of True North
- - will suffer a dilution in their stockholdings of approximately 50%. The
price to be paid for Bozell is far in excess of its real value to True North -
a fact that exposes the motives of True North management. Certain senior
members of True North management stand to gain employment contracts that will
pay them tens of millions of dollars over the years to come. Moreover, upon
information and belief the combined stock holdings of True North and Bozell
management will gain effective control over the surviving company and its Board
of Directors, thus ensuring its continued entrenchment. Such entrenchment
would be to the substantial detriment of True North stockholders, who have seen
the value of their investment in True North stagnate in a period of strong
growth for advertising companies.
4
<PAGE> 5
6. True North's Board of Directors has rejected Publicis'
merger proposal and has sought to preclude True North stockholders from having
a fair and full opportunity to decide the future of their Company and to
realize the full value of their stock. Instead, to gain stockholder approval
of the Bozell Merger and to defeat the Publicis proposal, Defendants have
embarked upon a campaign marked by breaches of their fiduciary duties to True
North stockholders and by proxy fraud. In breach of its fiduciary obligations,
the True North Board has refused to meet with Publicis to consider Publicis'
superior proposal; improperly restricted the Board's ability to consider
superior offers; and manipulated the corporate machinery in an attempt to fix
the upcoming special shareholder vote on the Bozell merger. Defendants have
violated the New York Stock Exchange Rules as well as the federal proxy rules
in order to disenfranchise those stockholders who are likely to vote against
the Bozell merger.
7. Publicis is not now and never has been a threat to
True North. True North's Board of Directors should not be allowed to deprive
the stockholders of the opportunity to decide upon the merits of the Offer for
themselves. True North has no reasonable grounds to view Publicis or its
proposal to merge as a threat, and True North's responses - proxy fraud,
interfering with the stockholder franchise, restricting the Board's ability to
consider a superior offer, and refusing even to discuss the Publicis' proposal
- - are unreasonable and disproportionate responses, designed to entrench and
enrich current management in violation of the Board of Directors' fiduciary
duties owed to True North's stockholders. These violations will cause Publicis
and True North's stockholders irreparable injury.
5
<PAGE> 6
8. Unless enjoined, the True North Board will use other
anti-takeover devices in its arsenal, such as its "poison pill", which limits
the ability of True North's stockholders' to consider, accept or approve any
tender offer unless True North's Board of Directors removes the poison pill.
It is for True North's stockholders to decide the fate of their company,
whether to merge with Bozell, merge with Publicis, or hold out for an
alternative offer. Publicis asks the Court to provide the stockholders with
the unfettered right to decide.
Jurisdiction and Venue
9. This Court has jurisdiction over this action pursuant to
28 U.S.C. Sections 1331, 1332 and 1367. The amount in dispute exceeds $75,000.
10. Venue is proper under 28 U.S.C. Section 1391.
The Parties
11. Publicis is a 73.5% owned subsidiary of Publicis, S.A.
The remaining 26.5% of Publicis is owned by True North. Both Publicis and
Publicis S.A. are French corporations with their principal place of business in
Paris, France. Publicis is one of Europe's largest advertising networks, with
offices in 50 countries and 97 cities. Publicis S.A.'s stock is publicly
traded on the Paris stock exchange.
12. Defendant True North is a Delaware company with its
principal place of business in Chicago, Illinois. True North is a
communications company and the parent of Foote, Cone & Belding, a national
advertising agency network. Its stock is traded on the New York Stock
Exchange.
6
<PAGE> 7
13. Defendant Bruce Mason is the Chairman of the Board of
Directors and Chief Executive Officer of True North. Defendants Stephen T.
Vehslage, Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer are
directors of True North. Defendants Gregory W. Blaine, Laurel Cutler, and J.
Brendan Ryan are officers and directors of True North. Upon information and
belief, the Director Defendants are citizens of Illinois, New York, and
Connecticut.
14. Defendant Bozell is an advertising network, incorporated
in Delaware, with its principal place of business in New York, New York.
Bozell is named as a defendant because of the relief being sought by Publicis
in this action. Publicis does not assert any claims specifically against
Bozell.
Background
15. In 1989, Publicis and True North formed a joint venture
in which the two companies combined certain of their European operations. As
part of the formation of the joint venture, the parties also became significant
shareholders of one another.
16. In the years since the formation of the Publicis/True
North joint venture, the parties have had disagreements concerning the nature
and scope of their joint efforts. Notwithstanding these disagreements,
Publicis has never posed any type of threat to True North's corporate policies
or effectiveness, although True North incorrectly perceived Publicis as a
threat with no reasonable grounds for its perception.
Publicis' 1995 Proposal to Merge with True North
17. At various times during 1995, Publicis officers discussed
with True North senior management and directors the possibility of a
merger of True North and
7
<PAGE> 8
Publicis. The reaction of True North's senior management was hostile. Upon
information and belief, True North senior management perceived Mr. Levy's
merger proposal as a threat to their continued control of True North and began
to explore and to implement various anti-takeover defenses to Publicis. Upon
information and belief, True North hired private investigators to conduct an
investigation of Mr. Levy in connection with anti-takeover devices against
Publicis.
18. Upon information and belief, after an August 16, 1995
True North Board of Directors' meeting - which Mr. Levy attended as a True
North director - True North directed an employee to enter Mr. Levy's hotel room
and search through his wastebasket to find, and to remove, his Board book. The
employee found a torn copy of Mr. Levy's personal agenda, which was pieced
together and delivered to Bruce Mason. The reconstructed agenda revealed,
among other matters, a planned meeting between Mr. Levy and Charles D. Peebler,
Jr., chairman of Bozell. (The meeting with Mr. Peebler was canceled and never
rescheduled.)
19. On November 15, 1995, Publicis chairman Maurice Levy
made a detailed presentation to the True North Board of Directors demonstrating
the rationale for a proposed merger of True North and Publicis. The merger
would create a global advertising network, offering a complete range of
services across North America and Europe. The merger also would create
significant incremental income as well as savings from the efficiencies
realized through the combined operations of the firms. Mr. Levy concluded
that the only logical and sensible solution to the obstacles faced by both
firms was a merger.
8
<PAGE> 9
20. True North rejected Publicis' merger proposal and
continued to press for a complete termination of their relationship. In May
1997, the parties signed a series of agreements that unwound their European
joint venture. After consummation of the transactions contemplated by the May
1997 agreements, Publicis remained an 18.5% owner of True North, and True North
became a 26.5% owner of Publicis.
The Bozell Merger
21. In February 1995, True North and Bozell entered into
significant discussions concerning a possible acquisition of Bozell by True
North. Upon information and belief, these discussions were prompted by True
North's concern over a possible Publicis proposal to merge. However, True
North had no reasonable grounds to believe that Publicis or its 1995 merger
proposal were a threat to True North or its corporate policies.
22. The discussions with Bozell continued throughout 1995
and, at an August 16, 1995, True North Board meeting, members of the True North
Board discussed the proposed transaction and determined that negotiations
should continue. Mr. Levy expressed his concerns about the proposal with
Bozell, including concerns (among others) that Bozell's recent profitability
might represent an anomaly and that conflicts between automotive clients of the
two firms could not be resolved, therefore risking the loss of a significant
account if the firms merged. (Attached as Exhibit A to the Complaint is a copy
of Mr. Levy's August 21, 1995 letter to Bruce Mason.). The negotiations
nonetheless continued, but ended late in the year.
23. In late 1995 and through the summer of 1996, True North
approached and was approached by a number of parties concerning possible
acquisitions
9
<PAGE> 10
or combinations. Some of these discussions became serious enough to warrant
the execution of confidentiality agreements to enable the parties to exchange
confidential and/or proprietary information.
24. Negotiations between True North and Bozell resumed in
early 1997. During the negotiations over the next several months, Bruce Mason
met with a senior executive of a large global advertising agency to see if the
agency had any interest in a merger with True North. True North also received
a substantial proposal for a merger from the chief executive offer of a
publicly held marketing services company. Simultaneously with its Bozell
negotiations, True North executives held several meetings with executives of
the marketing services company to explore its proposal, and entered into a
confidentiality agreement pursuant to which True North supplied confidential
information to the company. The negotiations between True North and the
marketing services firm involved a specific range for a purchase price of True
North. True North has never disclosed those specifics.
25. On July 31, 1997, True North announced its agreement to
merge with Bozell, an advertising firm with headquarters in New York City.
True North did not consult its largest stockholder, Publicis, with respect to
the Bozell Merger. On December 1, 1997, True North mailed final proxy
materials describing the transaction (the "True North Proxy Statement") and,
for the first time, publicly disclosing the Bozell Merger Agreement.
26. The Merger Agreement requires True North to issue
approximately 20 million new shares of common stock, nearly doubling the 25
million currently outstanding. Each share of Bozell common stock will be
converted into 0.51 shares of
10
<PAGE> 11
True North common stock upon completion of the Bozell Merger. Under the terms
of the transaction, True North will pay more than twice the price for Bozell
that was proposed in 1995, notwithstanding the fact that the 1995 proposal was
based upon projections of net income that were twice those actually realized.
27. The Bozell Merger significantly overvalues Bozell and
undervalues True North. Information in the True North Proxy Statement
indicates that True North is paying too high a price for a deal that does
nothing to address True North's basic strategic weakness: the lack of an
international presence. True North's proposed Bozell Merger fails to address
this basic flaw, and instead devotes additional resources to expanding the
domestic market in which True North already has a significant presence.
Further, by undervaluing True North and overvaluing Bozell, True North proposes
to pay dearly for this unnecessary acquisition. In addition to overpaying for
Bozell, the True North Proxy Statement also states that True North expects to
take a charge against earnings for the Bozell Merger of between $80 and $120
million on an after-tax basis, causing the Company effectively to pay even more
for Bozell. And, as Mr. Levy predicted in 1995, the surviving firm will not be
able to keep both of its automotive clients: one has announced that it has
pulled its account with True North.
28. Upon information and belief, post-merger management of
True North will effectively control the Company. Through the exercise of
options and distribution of newly issued shares, the post-merger management of
True North will gain voting control of a dominant block of the Company's shares
- - a block that will be significantly larger than the block owned by Publicis.
Publicis, as well as True North's public shareholders, will suffer an
approximate 50% dilution in their holdings. In addition, post-merger
11
<PAGE> 12
management will control the newly constituted and expanded Board of Directors.
Publicis may lose its single seat on the Board.
29. In connection with the Merger Agreement, upon
information and belief, employment agreements were entered into with certain
members of senior management of both companies that provide that, upon
consummation of the Merger, certain of the Defendants will receive exorbitant
compensation, potentially in excess of tens of millions of dollars over the
next several years.
30. The Merger Agreement prohibits True North and its
officers, directors, and employees from engaging in discussions or negotiations
with other potential bidders for True North except under very limited
circumstances (the "fiduciary out" provision). The Merger Agreement only
permits the True North Board to consider a "Superior Parent Takeover Proposal",
which is narrowly defined as a third-party offer for a business combination
with True North in which the sole consideration to be received by True North
shareholders is the stock of a widely-held public company.
The Proposed Publicis Merger
31. On November 10, 1997, Publicis chairman Maurice Levy
sent a letter to the True North Board of Directors stating Publicis' belief
that "True North's transaction with Bozell is contrary to the best interests of
True North's stockholders, of which Publicis is by far the largest with 18.5%
of True North's common stock." As Mr. Levy explained:
The acquisition does not solve True North's fundamental
strategic weakness, which has been its failure to establish a
global presence. Bozell is primarily a U.S.-based business
with a weak international presence, and Publicis believes
12
<PAGE> 13
that its acquisition by True North will compound, rather than solve,
True North's strategic weaknesses. As global marketers have
increasingly demanded worldwide coverage, True North has continued to
focus on its U.S. business and as a result, we believe that True
North now finds itself at a significant competitive disadvantage. In
short, True North's proposed acquisition of Bozell does nothing to
solve these problems, and we believe (based on the limited
information that has been made available to date) that the price to
be paid for Bozell significantly exceeds the value of Bozell's
business.
32. As an alternative to the Bozell transaction, Mr. Levy
stated that Publicis is "prepared to propose a business combination between
Publicis Communication and True North in which each outstanding share of True
North would be valued at US$28":
Publicis has for some time believed that a combination of Publicis
Communication's businesses with those of True North would create a
powerful global presence with tremendous opportunities for growth.
. . . We at Publicis continue to believe that a merger between
Publicis Communication and True North is in the best interests of
both True North's and Publicis' stockholders and their respective
clients and employees.
33. Mr. Levy concluded with an invitation "to discuss with
True North and its representatives the details of our proposal, including the
cash and stock components of our US$28 valuation":
We would be willing to meet with you and your advisors at your
earliest convenience to discuss our proposal and to answer any
questions you may have. Our preferred course would be to negotiate a
transaction that can be presented to our respective stockholders and
clients as the amicable and
13
<PAGE> 14
joint effort of Publicis, True North and each of the
companies' Boards of Directors and senior management. I hope
that each of you will give our proposal serious consideration,
and I look forward to your reply. We stand ready to meet with
the Board to present our plans.
True North's Attempts to Steal the Special Shareholder Vote
34. True North did not disclose Publicis' letter to the
public. Nor did it respond in any way to Publicis. Instead, True North -
recognizing that Publicis' opposition and merger proposal would seriously
threaten the Bozell Merger - immediately undertook to manipulate the vote at
the Special Meeting (then set for December 22, 1997) at which the Bozell
transaction would be voted upon by True North shareholders.
35. True North attempted to manipulate the vote by setting a
premature record date, the date used to determine who is entitled to vote at
the Special Meeting. Without revealing to the New York Stock Exchange (the
"Exchange") or to the public the highly material information that it had
received from Publicis, True North set a record date of Tuesday, November 18.
True North sat silently upon this information as well, deliberately choosing
not to announce that it had set a record date for the Special Meeting.
36. After a week had passed with no response, on November
17, Publicis decided to disclose publicly the text of the letter. The stock
market's reaction was immediate and dramatic. On the day of the announcement,
the price of a share of True North common stock rose more than 11%, from 23 3/8
to 26. Approximately one million shares were traded on November 17 and 18,
more than twelve times the average daily volume of the stock. The market's
reaction to the news of Publicis' merger proposal and
14
<PAGE> 15
opposition to the Bozell Merger demonstrates the significance of the news to
True North shareholders.
37. True North's decision to set an early record date while
it sat silently upon this explosive news, if not remedied, will deprive the
holders of over a million True North shares of the opportunity to participate
in a contested special shareholders' meeting. Because trades of securities
take three business days to settle, every single shareholder who purchased True
North securities after Thursday, November 13 - including persons who purchased
at higher prices that prevailed after the public announcement of Publicis'
merger proposal and opposition to the Bozell Merger - has been disenfranchised.
38. True North's decisions to set a premature record date,
to remain silent about Publicis' merger proposal and opposition to the Bozell
Merger, and not to announce its record date have disenfranchised holders of
millions of True North shares who purchased because of their interest in, or at
prices that reflected, Proposed Publicis Merger. And True North shareholders
who sold their shares before the news about Publicis was released will be
permitted to vote, notwithstanding their potential lack of interest in the
meeting. In short, because True North remained silent about Publicis' merger
proposal and opposition to the Bozell Merger and set an early record date, no
True North shareholder who purchased knowing of Publicis' merger proposal and
opposition to the Bozell Merger will be allowed to participate in the Special
Meeting.
39. True North's eight-day notice to the Exchange violated
Section 401.02 of the rules set forth in the New York Stock Exchange Listed
Company Manual, which applies to True North. Section 401.02 provides that "[a]
minimum of ten days' notice is required prior to the record date established
(or closing of the transfer books) for
15
<PAGE> 16
determination of shareholders entitled to vote at the meeting." True North
also violated Securities and Exchange Commission ("SEC") Rule 14a-13 regarding
the solicitation of proxies, which requires the mailing of broker inquiries
twenty days in advance of the record date. 17 C.F.R. Section 240.14a-13. In
violation of Rule 14a-13, True North did not mail broker inquiries until the
day before and, in some cases, the day after the record date to maintain the
secrecy of its record-date maneuver.
True North's Delayed Response to Publicis
40. After the close of trading on November 17 - and after
Publicis had publicly disclosed the contents of its November 10 letter - True
North (through its chairman) finally responded to Publicis' November 10 letter.
Bruce Mason claimed that the Board of Directors discussed the proposal "at
length" but rejected the offer, even though it refused to meet with or discuss
the proposal with Publicis.
41. Also on November 17, 1997, True North filed a complaint
in the Delaware Court of Chancery against Publicis and its parent company,
Publicis S.A., seeking a preliminary and permanent injunction to provide
certain statements from Publicis' accountants for submission to the SEC and to
True North's auditors in connection with True North's preliminary proxy and
registration statements. No hearing or other proceeding was held in the action
and, on November 21, 1997, counsel for True North informed the Delaware court
that Publicis had fully complied with its requests.
16
<PAGE> 17
True North's Misleading and Coercive
Statements about the Bozell Merger
42. On December 1, 1997, True North mailed its definitive
Proxy Statement/Prospectus to its stockholders. The True North Proxy Statement
paints a false and misleading picture of the potential for alternatives to the
proposed Bozell Merger.
43. The True North Proxy Statement states that from the
spring of 1995 through the summer of 1996, True North approached or was
approached by Publicis and other parties to discuss significant acquisitions or
combinations. All details of any offers it received from other parties -
including key elements such as price - are omitted. Thus, the True North Proxy
Statement does not provide any information about any offers received or
combinations discussed that would allow True North shareholders to compare the
Publicis merger proposal and the Bozell Merger with prior offers or proposed
combinations.
44. Of critical importance, the True North Proxy Statement
states that True North held particularly serious and detailed takeover
discussions with one unnamed "Interested Party" from May 1997 through July
1997, the same time frame as the Bozell Merger negotiations. The True North
Proxy Statement suggests that the Interested Party's proposed transaction was
of less value to True North shareholders than the Bozell Merger by stating that
the closing price of True North stock on November 25, 1997, the last day before
the filing of the True North Proxy Statement (but long after the announcement
of the Bozell Merger Agreement), was above the Interested Party's "final
tentative offering price."
17
<PAGE> 18
45. But the Proxy Statement fails to disclose to True North
shareholders that the price on November 25, 1997 reflected the $2.63 jump in
True North's share value on November 17, 1997, when Publicis disclosed its
proposed offer. This omission is materially misleading because it suggests
that the Interested Party transaction is of less value than the proposed Bozell
Merger, when no such inference can fairly be drawn from the price of True
North's shares on November 25, 1997.
True North's Misleading and Coercive Statements About Publicis
46. True North's determination to tilt the playing field
against Publicis is further demonstrated by its false and misleading public
statements about Publicis in connection with the True North proxy solicitation.
Those false and misleading statements are calculated to cast Publicis and its
proposed offer in an unfairly negative light, causing irreparable injury to
Publicis.
47. On December 2, 1997, True North filed definitive
additional proxy materials with the SEC, consisting of a letter directed to
True North shareholders who are also True North employees. The letter
erroneously states that "Publicis withh[eld] some obligatory financial
documentation [from True North]," and blames Publicis for causing an alleged
delay in obtaining SEC approval of True North's proxy solicitation materials.
Both statements are not only false but materially misleading, since they
incorrectly suggest that Publicis withheld information from True North and that
it did so to hinder the Bozell Merger.
48. First, it is false to say that Publicis withheld any
"financial documentation" from True North. True North did not ask Publicis for
"financial documentation," such as financial statements, but for a statement
from its accountants as
18
<PAGE> 19
to which accounting standards had been applied to Publicis' previously
disclosed 1994-96 financial statements. Further, Publicis did not withhold
anything., but requested its accountants to comply.
49. True North then sued Publicis in Delaware state court on
November 17, 1997 demanding that Publicis provide it with signed accountants'
statements. Two days later, on November 19, 1997, Publicis provided True North
with these signed statements. True North's suggestion that Publicis somehow
hindered the production of these documents is false and materially misleading.
50. Second, it is false to state that the SEC's process for
approving True North's Proxy Statement was "delayed due to Publicis
withholding" any documentation. On November 20, 1997, True North informed
Publicis that the accountants' statements - prepared precisely in accordance
with the form provided by True North - were insufficient due to True North's
own mistake. True North then asked Publicis again to provide it with new
signed statements; Publicis did so the next day, November 21, 1997. True North
did not file its definitive Proxy Statement or Amendment No. 2 to its Form 10-K
(in which True North's version of Publicis' consolidated financial statements
appears) until November 26, 1997, five days later. This delay could not
possibly have been caused by Publicis' provision of the accountants' statements
requested by True North. True North's suggestion that Publicis hindered the
SEC approval process is thus false and materially misleading.
19
<PAGE> 20
True North's Misleading and Coercive Statements
About the Proxy Solicitation
51. True North has also tried to mislead its shareholders
into believing that the results of the proxy solicitations, and the Bozell
Merger, are a forgone conclusion. Such statements plainly violate SEC Rule
14a-9, which prohibits True North from making any claim about the results of
its solicitation before the Special Meeting is held.
52. On November 21, 1997, Bruce Mason gave a live interview
on the CNBC network's "Power Lunch" program. Upon information and belief,
during this interview, Mason publicly predicted that True North shareholders
would vote to approve the Bozell Merger. Mason stated during the interview
that True North expected the Merger to be completed by December 31, 1997. This
would be possible only if the shareholders were to approve the Merger at the
Special Meeting.
53. On November 25, 1997, Mason gave an interview to the
Paris daily newspaper Le Figaro, in which he once again predicted that the
Merger was a virtual certainty, stating that True North and Bozell "are going
to constitute" a very powerful combination. The interview was published in the
November 26, 1997 issue of Le Figaro. An English-language summary of the
interview was transmitted across news wires into the United States in the early
morning of November 26, 1997.
Publicis' Offer
54. On December 4, 1997, Publicis announced its intention to
commence an all-cash offer to purchase 9,619,904 shares of True North common
stock or such greater number of shares that, when added to Publicis' existing
holdings, constitute a majority of outstanding shares of True North common
stock. The price offered by
20
<PAGE> 21
Publicis is $28 per share in cash. The Offer is a first step in consummating a
proposed business combination to create a unified company run by one successful
management team.
55. Publicis' Offer addresses True North's strategic
weaknesses. True North's failure to establish a global network is a
fundamental shortcoming. As global marketers have increasingly demanded
worldwide coverage, True North has continued to focus on the U.S. and, as a
result, True North has placed itself at a significant competitive disadvantage
to its global competitors. Publicis' Offer and the Proposed Publicis Merger
directly address these weaknesses by providing access to the type of integrated
global network that today's international advertisers demand and offering a
management team with a proven track record of achievement.
56. The combination of Publicis with True North will create
a creative, powerful presence in most of the world's significant markets.
Publicis believes that the resulting international network would be a market
leader in both the United States and Europe with tremendous opportunities for
growth around the world and that the strategic benefits of the Proposed
Publicis Merger are undeniable and far superior to the Bozell Merger, which
ignores the imperatives of True North's businesses and dissipates stockholder
value in an unnecessary transaction.
57. The Proposed Publicis Merger contemplates the
consolidation of True North and Publicis under one management. In this way,
the combined entity will have the tremendous advantage of a strong U.S. and
international network, as today's market requires. This structure avoids,
however, the difficulties inherent in the joint venture, formed by True North
and Publicis in 1989, in which the two companies
21
<PAGE> 22
combined certain of their European operations, which did not achieve its
potential because it lacked a clear chain of command and a fully integrated
structure.
58. Publicis' Offer is in the best interests of True North's
stockholders. It is an all-cash offer, available to all True North
stockholders, for approximately 9.6 million shares. It is not coercive in
nature. Moreover, it provides True North's stockholders with the opportunity
to realize a substantial premium over the market price of their shares prior to
announcement of the Offer. On November 14, 1997, the last New York Stock
Exchange trading day before Publicis' public disclosure of its merger proposal,
the closing price of True North shares was $23.38 per share. The Offer price
represents a premium of $4.63 per share (or nearly 20%) over the market price
of the shares immediately prior to the disclosure of Publicis' proposal.
59. Publicis' Offer, proposed merger and Publicis
Solicitation do not pose any threat to the interests of True North's
stockholders or to True North's corporate policy and effectiveness. The Offer,
Proposed Publicis Merger and Solicitation comply or will comply with all
applicable laws and other obligations, including, without limitation, the
securities laws, the antitrust laws, and all other legal obligations to which
plaintiffs are subject. The offering documents fairly disclose all information
material to the decision of True North's stockholders whether to accept or
reject the Offer, in compliance with plaintiffs' obligations under the
securities laws.
True North's "Poison Pill"
60. Publicis' Offer and proposed merger cannot be completed
successfully unless the True North Board of Directors agrees to remove or make
inapplicable True North's anti-takeover devices. The application of such
anti-takeover
22
<PAGE> 23
devices to the Offer and proposed merger in these circumstances would be an
unreasonable and disproportionate response, in breach of the True North Board
of Directors' fiduciary duties.
61. On November 16, 1988, the Board declared a dividend of
one Series A Junior Participating Preferred Stock purchase right (the "Right")
for each outstanding Share of the Company (the "Poison Pill"). The Poison Pill
effectively allows the Board of Directors to block any acquisition offers, even
those providing substantial benefit to True North's stockholders.
62. Each Right entitles the registered holder thereof to
purchase from True North, following the Distribution Date (as defined in the
Poison Pill), one two-thousandth of a share of True North's Series A Junior
Participating Preferred Stock at an exercise price of $42.50, subject to
adjustment. Furthermore, following the occurrence of certain other events,
including the acquisition of 20% or more of True North's common stock (or 25%
in the case of Publicis), each holder of a Right will be able to exercise that
Right and purchase common stock of True North (or the surviving company in the
event of merger) at half-price.
63. Because any current acquirer of 20% or more of True
North's common stock would not be entitled to exercise Rights, the dilutive
effect of the Poison Pill, if implemented, on the value of such acquirer's
common stock is overwhelming. Because of this prohibitive economic
consequence, the Poison Pill effectively precludes the Proposed Publicis Merger
without the consent of the True North Board.
64. True North's Board of Directors can redeem the Rights at
a redemption price of $.005 per Right, or alternatively, can amend the Poison
Pill to make
23
<PAGE> 24
the Rights inapplicable to the Offer and the Proposed Merger. Given the nature
and value of the Offer, a proper exercise of the True North Board of Directors'
fiduciary duties would require it to redeem the Rights, or amend the Poison
Pill to make the Rights inapplicable to the Offer and Proposed Publicis Merger,
to enable stockholders to decide upon the merits of the Offer for themselves.
Count I
False and Misleading Statements in Violation of Federal Securities Law
(Section 14(a) of the Securities Exchange Act and Rule 14a-9)
65. Plaintiff repeats and realleges paragraphs 1 through 64
as if fully set forth herein.
66. True North's Proxy Statement and Bruce Mason's letter of
December 2, 1997 were solicitations of proxies with respect to the Special
Meeting. Bruce Mason's interviews of November 21 and 25, 1997 were claims by
True North regarding the results of a solicitation.
67. These solicitations contained false or misleading
statements, or omitted facts that were necessary in order to make the
statements not false or misleading.
68. These statements are false or misleading as to facts
(whether omitted or affirmatively stated) that are material, because there is a
substantial likelihood that a reasonable True North shareholder would consider
these facts important in deciding how to vote on the merger and the other
proposals at the Special Meeting.
69. Because these solicitation statements are an essential
link in achieving a shareholder vote at the Special Meeting in favor of the
Merger, these statements have caused and are continuing to cause injury to
Publicis.
24
<PAGE> 25
70. By reason of the foregoing, True North has violated
Section 14a of the Securities Exchange Act of 1934 (the "Exchange Act"), 15
U.S.C. Section 78n(a), and Rule 14a-9, 17 C.F.R. Section 240.14a-9,
promulgated thereunder. Publicis is being, or will be, irreparably injured by
True North's misconduct and has no adequate remedy at law.
Count II
Breach of Fiduciary Duty
(Interference with Stockholder Franchise)
71. Plaintiff repeats and realleges paragraphs 1 through 70
as if fully set forth herein.
72. Defendants' actions in setting a premature record date,
in sitting silently while that record date passed without disclosing Publicis'
merger proposal and its opposition to the Bozell Merger, and in deliberately
choosing not to announce its record date were taken for the primary purpose of
impeding and/or interfering with the effective exercise of the stockholder
franchise in connection with the vote at the Special Meeting. Defendants sat
silently upon the highly material news of Publicis' offer after surreptitiously
setting a record date in violation of the New York Stock Exchange Rules.
Defendants also violated Rule 14a-13 of the federal proxy rules by failing to
send out broker inquiries until approximately the record date.
73. Defendants took these actions to disenfranchise
shareholders who purchased or would be purchasing True North stock after the
disclosure of Publicis' opposition to the Bozell Merger and $28 per share
merger proposal. As True North knew, those shareholders who purchased upon the
news of Publicis' merger proposal and opposition would be likely to vote
against the Bozell Merger.
25
<PAGE> 26
74. Publicis is being, or will be, irreparably injured by
Defendants' misconduct and has no adequate remedy at law.
Count III
Breach of Fiduciary Duty
(Failure to Maximize Stockholder Value)
75. Plaintiff repeats and realleges paragraphs 1 through 74
as if fully set forth herein.
76. The Bozell Merger will result in a change in the
effective control of True North. In this context, the Board's fiduciary duty
is to seek to obtain the best available terms for True North's shareholders and
not to favor one potential acquirer over another or one type of financial
alternative over another. In pursuing this objective, True North's Board of
Directors have a duty to inform themselves, prior to making business decisions,
of all information reasonably available to them.
77. The True North Directors have not sought to obtain the
best available terms for the True North shareholders and have not properly
informed themselves. They have breached, and are continuing to breach, their
fiduciary duties.
78. Publicis is being, or will be, irreparably injured by
Defendants' misconduct and has no adequate remedy at law.
Count IV
Breach of Fiduciary Duty
(Breach of Duty of Loyalty)
79. Plaintiff repeats and realleges paragraphs 1 through 78
as if fully set forth herein.
26
<PAGE> 27
80. Upon information and belief, some or all of the Director
Defendants will receive exorbitant compensation - potentially tens of millions
of dollars - in the period following the consummation of the Bozell Merger. By
placing their own personal interests and the interests of new True North
management ahead of the shareholders' interests, these defendants have acted in
bad faith and have breached their duty of loyalty.
81. Publicis is being, or will be, irreparably injured by
Director Defendants' misconduct and has no adequate remedy at law.
Count V
Breach of Fiduciary Duty
(Unreasonable Preemptive Defensive Measures)
82. Plaintiff repeats and realleges paragraphs 1 through 81
as if fully set forth herein.
83. Defendants have no reasonable grounds to perceive
Publicis or its merger proposals in 1995 or now as a threat to the Company or
to its policies. The Defendants sought and agreed to the Bozell Merger as a
defensive measure to dilute the holdings of its largest shareholder, Publicis,
with whom it has had a hostile relationship for years. By the Bozell Merger,
the Defendants sought to entrench senior True North management. The Bozell
Merger and the Merger Agreement are not in the best interests of True North
shareholders and are an unreasonable and disproportionate response to the
perceived threat posed by Publicis.
84. Similarly, Defendants' restriction upon the offers that
may be considered under the Merger Agreement, their manipulation of the record
date in violation of the rules of the New York Stock Exchange, and their
violation of the federal proxy rules in failing to send out timely broker
inquiries constitute unreasonable and
27
<PAGE> 28
disproportionate responses by the True North Board of Directors to Publicis and
Publicis' merger proposal. The impact of these responses upon True North
shareholders is disproportionately large in relation to any "threat" allegedly
posed by Publicis' merger proposal. The Defendants thereby have breached, and
are threatening to continue to breach, their fiduciary duties.
85. Publicis is being, or will be, irreparably injured by
Defendants' misconduct and has no adequate remedy at law.
Count VI
Breach of Fiduciary Duty
(Unreasonable Preemptive Defensive Measures)
86. Plaintiff repeats and realleges paragraphs 1 through 85
as if fully set forth herein.
87. Publicis' Offer is non-coercive and non-discriminatory;
it is fair to True North's stockholders; and it represents a substantial
premium over the market price of True North's shares prior to the disclosure of
Publicis' proposal to True North. Publicis' Offer, Proposed Merger and
Publicis Solicitation comply with all applicable laws and other obligations and
pose no threat to the interests of True North's stockholders or to True North's
corporate policy or effectiveness. Use of True North's anti-takeover devices
or any other defensive measures to prevent True North stockholders from
deciding for themselves whether or not to accept the Publicis Offer or Publicis
Solicitation is not proportionate, nor within the range of reasonable responses
to the Publicis Offer, Proposed Merger or Publicis Solicitation, and is a
breach of the Board of Directors' fiduciary duties to True North's
stockholders.
28
<PAGE> 29
88. Publicis is being, or will be, irreparably injured by
Defendants' misconduct and has no adequate remedy at law.
WHEREFORE, Publicis seeks judgment:
(a) enjoining Defendants from making false and misleading
statements in connection with the solicitation of proxies;
(b) ordering corrective disclosures at the expense of
Defendants;
(c) enjoining the Special Meeting until the market has
absorbed Defendants' corrective disclosures;
(d) enjoining the Special Meeting until the True North Board
of Directors has engaged in serious, good faith discussions with
Publicis concerning the Publicis merger proposal;
(e) enjoining the Special Meeting unless and until a proper
record date is set, including through compliance with all applicable
laws, rules, and regulations;
(f) declaring void the restrictions in the Merger Agreement
purporting to prohibit True North from engaging in discussions and/or
negotiating a transaction with Publicis;
(g) declaring that the Merger Agreement between True North
and Bozell is void and enjoining the consummation of the Bozell
Merger;
(h) awarding Publicis damages in an amount to be determined
at trial, as well as the costs and fees incurred by Publicis in
prosecuting this lawsuit; and
(i) granting such other and further relief as the Court deems
just and proper.
29
<PAGE> 30
Dated: December 4, 1997
--------------------------------------
One of the Attorneys for Plaintiff
C. William Phillips
HOWARD, DARBY & LEVIN
1330 Avenue of the Americas
New York, New York 10019
(212) 841-1000
Local Counsel:
Stephen J. Bisgeier (00213756)
MILLER, SHAKMAN, HAMILTON,
KURTZON & SCHLIFKE
208 South LaSalle Street
Chicago, Illinois 60604
(312) 263-3700
30
<PAGE> 1
EXHIBIT H7
IN THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
-----------------------------------
No. 97-4096
PUBLICIS COMMUNICATION,
Plaintiff-Appellant
v.
TRUE NORTH COMMUNICATIONS INC., et al,
Defendants-Appellees.
-----------------------------------
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division
No. 97 C 8263 - Joan B. Gottschall, Judge
-----------------------------------
SUBMITTED DECEMBER 12, 1997 - DECIDED DECEMBER 15, 1997*
-----------------------------------
Before BAUER, FLAUM, and EASTERBROOK, Circuit Judges.
EASTERBROOK. Circuit Judge. Last February Publicis Communications and True
North Communications (parent of the Foote, Cone & Belding agency) dissolved
their joint venture in the advertising industry. One of eight agreements
ancillary to this dissolution requires Publicis to participate in pooling of
financial statements should True North acquire a third corporation and deem a
pooled statement of accounts advantageous. Section 1.1 of this
- -------------------------
* This opinion is being released in typescript, a printed copy will follow
<PAGE> 2
No. 97-4096 Page 2
contract, applicable as long as Publicis owns at least 10% of True North's
stock, requires Publicis to
(a) furnish True North . . . with a "pooling letter" [in a prescribed
form] under generally accepted accounting principles applied in the United
States and, (b) if reasonably requested, take such other action in support
of the transaction (other than a commitment to vote for such transaction)
as would be customary with respect to an acquisition or other similar
business transaction in which True North may participate).
In August 1997 True North announced that it had agreed to merge with Bozell,
Jacobs, Kenyon & Eckhardt, Inc. and asked Publicis to provide a pooling letter.
Publicis, which owns some 19% of True North stock, is obliged to comply. But it
thinks the acquisition a mistake and announced its intention to vote its shares
against the transaction at the stockholders' meeting (now scheduled for
December 30), as the parenthetical expression in the contract allows. Publicis
also has solicited proxies from other investors in an effort to defeat the
transactions and, backing up words with deeds, has commenced a tender offer for
True North's stock, offering $28 per share. The market price of True North's
stock rose from $23 to $26 when the bid was announced. True North opposes the
offer, and litigation predictably ensued.
True North sued Publicis in the Chancery Court of Delaware, contending
that Publicis has failed to provide information needed to facilitate
registration of the stock that will be issued as part of the merger. Delaware
is the parties' chosen forum for disputes about the pooling agreement. One
clause of this contract reads: "Any claim arising out of a request under
Section 1.1 of this Agreement shall be brought only in a court of the State of
Delaware or in a United States District Court located within the State of
Delaware." Publicis, by contrast, does not make any claim based on True North's
request under the pooling agreement and therefore has more choice of forum.
Publicis filed suit in the federal district court in Chicago under 28 U.S.C.
Section 1332(a)(2) (it is a French corporation), arguing that by proposing a
merger with Bozell and opposing the tender offer, True North's board violated
its duties to investors.
<PAGE> 3
No. 97-4096 Page 3
True North quickly filed counterclaims, arguing among other things that the
proxy solicitation and tender offer should be enjoined because they violate
Publicis' duty under Section 1.1(b) of the pooling agreement to take "action in
support of the transaction" on True North's request. The district court on
December 10 issued an injunction requiring Publicis to desist from its tender
offer and proxy solicitation. Publicis complied (depressing the market price of
True North shares) but has asked us for a stay pending appeal. This case has
been as fully briefed on the stay motion as most cases ever are, and it is clear
that the district judge should not have entertained the counterclaim. True North
promised to litigate such matters in Delaware, and to Delaware it must go if it
desires relief based on the pooling agreement. We summarily vacate the
injunction, mooting the motion for a stay.
The claim on which the district court issued the injunction arises out of
a request under Section 1.1 of the pooling agreement and therefore "shall be
brought only in a court of the State of Delaware or in a United States District
Court located within the State of Delaware." The district judge put this
requirement to one side, however, after concluding that True North's arguments
form a compulsory counterclaim within the scope of Fed. R. Civ. P. 13(a). We
shall assume that True North's claim fits Rule 13(a) because it "arises out of
the transaction or occurrence that is the subject matter of the opposing
party's claim" and that the suit already on file in Delaware presents a
different "claim" under the pooling agreement and therefore is not subject to
the second sentence of Rule 13(a): "the pleader need not state the claim if (1)
at the time the action was commenced the claim was the subject of another
pending action". Neither of these assumptions supports the district court's
conclusion that the forum-selection clause may be ignored.
Despite the impression one might get from the name of the doctrine, no one
is "compelled" to present a compulsory counterclaim. Only a litigation that
wants to avoid a later defense of preclusion need do so. The definition of a
compulsory counterclaim -- a claim that "arises out of the trans-
<PAGE> 4
No. 97-4096 Page 4
action or occurrence that is the subject matter of the opposing party's
claim"-- mirrors the condition that triggers a defense of claim preclusion (res
judicata) if a claim was left out of a prior suit. The aspect of preclusion
known as "merger and bar", see Migra v. Warren City School District Board of
Education, 465 U.S. 75 (1984); Cromwell v. County of Sac, 94 U.S. 351 (1877),
prevents the plaintiff in the first suit from later making any claim that arose
out of the same transaction but was omitted from the initial suit. See Herrmann
v. Cencom Cable Associates, Inc., 999 F.2d 223 (7th Cir. 1993); Supporters to
Oppose Pollution, Inc. a Heritage Group, 973 F.2d 1320 (7th Cir. 1992). Rule
13(a) establishes that a defendant's omission has the same consequences as a
plaintiff's. Southern Construction Co. v. Pickard, 371 U.S. 57. 60 (1962).
Whether this is strictly an application of claim preclusion may be debated, see
Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, 6 Federal Practice and
Procedures Section 1417 (2d ed. 1990), but both the scope of the doctrine and
its rationale are the same as those of claim preclusion, and most of the time
the label is inconsequential.
Preclusion is an affirmative defense, and like other legal affairs is
subject to contractual adjustment by the parties. Just as one litigant may
promise not to plead the statute of limitations, so it may promise not to plead
the defense of claim preclusion. If A promises B not to assert preclusion
against some claim if adjudication is postponed, then B safely may omit that
claim from pending litigation, even if it meets the standards of Rule 13(a).
Publicis did not in so many words promise not to invoke the defense of
preclusion in Delaware, but any forum selection clause has this effect. If the
parties promise to litigate a dispute only in a particular forum, a party to
the contract cannot seek to bar the litigation in that forum because the claim
was not presented in some other forum. So much would be clear if Publicis and
True North had agreed to arbitrate any dispute arising out of the pooling
agreement. Electrical Workers Local No. 11 v. G.P. Thompson Electric, Inc., 363
F.2d 181 (9th Cir. 1966), holds that a dispute covered by a contract's
<PAGE> 5
No. 97-4096 Page 5
arbitration clause need not--indeed, may not--be asserted
as a compulsory counterclaim in litigation. Accord, Bristol
Farmers Market & Auction Co. v. Arlen Realty &
Development Corp., 589 F.2d 1214, 1220-21 (3d Cir. 1978).
See Federal Practice and Procedure Section 1412 at 96-97. An
arbitration clause is just a particular kind of forum-selection
clause. See Rodriguez de Quijas v. Shearson/American
Express, Inc., 490 U.S. 477 (1989), Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985); Scherk v.
Alberto-Culver Co., 417 U.S. 506 (1974); The Bremen v.
Zapata Off-Shore Co., 407 U.S. 1 (1972); Omron Healthcare,
Inc. v. Maclaren Exports Ltd., 28 F.3d 600 (7th Cir. 1994);
Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993); What
holds for arbitration therefore must hold for other forum-
selection clauses. One court of appeals has expressed in
dictum the view that a party to a forum-selection clause
may not raise in a different forum, even as a compulsory
counterclaim, a dispute within the scope of that clause, Karl
Koch Erecting Co. v. New York Convention Center Development Corp.,
838 F.2d 656, 659 (2nd Cir. 1988). That conclusion must be
right. By agreeing to litigate in Delaware all claims
arising out of requests under Section 1.1 of the
pooling agreement. True North promised not to assert such
claims in other forums whether or not they would be
"compulsory" counterclaims, and Publicis promised not to
contend (in Delaware) that True North should have raised
the claim somewhere else. By presenting the claim in
Chicago, True North broke its promise. The district court
should have enforced the pooling agreement by dismissing
the counterclaim.
Perhaps one could argue that to prevent duplication the
district court should dismiss the principal claim as well --
for if True North's claim under the pooling agreement is a
compulsory counterclaim to Publicis' suit, then Publicis'
claims are equally compulsory counterclaims to True
North's invocation of the pooling agreement, which now
will occur in Delaware. Only in Delaware may all claims
arising out of the merger be handled together. But True
North has not asked for this relief, and at all events
<PAGE> 6
No. 97-4096 Page 6
Delaware's counterpart to Rule 13(a)(l) (see Del. Ch. R 13(a)) may save
Publicis' claims from being consolidated there with True North's. These
subjects, not now before us, are open to consideration by the district court or
the state court should they be raised there.
Publicis has asked us to postpone the shareholders' vote on the merger
agreement in order to avoid prejudice from the erroneously-issued injunction.
True North replies that the vote is scheduled the day before the drop-dead date
in the merger agreement, and that the remedy Publicis seeks therefore would be
equivalent to an outright award of victory. We doubt this: True North and Bozell
can renegotiate the closing date if they really want to carry through with the
merger. But it is difficult from our perspective to tell whether the brief
interruption caused by the injunction is likely to affect the shareholders'
vote or the outcome of the tender offer. Perhaps True North would prefer to
postpone its election as an alternative to damages for procuring an improper
injunction -- the district court made the injunction contingent on the posting
of $12 million bond. This remedial issue is something the parties and the
district judge should address on remand, and the timing of the shareholders'
vote is a subject on which the Chancery Court of Delaware is entitled to
express an independent view. Nothing we say here is designed to affect
proceedings pending (or soon to be commenced) in that court.
The injunction is vacated, and the case is remanded for further
proceedings consistent with this opinion.
