PROSPECTUS dated 26 November 1999 Pursuant to rule 424(b)(3), File Number
333-90595
THIS OFFER DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you
are in doubt about the Offer you should consult an independent financial
adviser authorised under the UK Financial Services Act 1986.
Neither the SEC nor any securities commission of any state of the United States
has approved or disapproved of the securities offered on behalf of Interpublic
or determined if this offer document is truthful or complete. Any
representation to the contrary is a criminal offence.
If you have sold or otherwise transferred all of your Brands Hatch Shares, you
should send this offer document, together with the accompanying Form of
Acceptance and reply-paid envelope, at once to the purchaser or transferee, or
to the stockbroker, bank or other agent through or to whom the sale or transfer
was effected, for transmission to the purchaser or transferee. However, these
documents should not be forwarded or transmitted in or into Canada, Australia
or Japan.
- -------------------------------------------------------------------------------
RECOMMENDED OFFER
BY
THE INTERPUBLIC GROUP OF COMPANIES, INC.
for all of the issued and to be issued share capital of
BRANDS HATCH LEISURE PLC
- -------------------------------------------------------------------------------
This is an offer by Interpublic to acquire all of the issued and to be issued
share capital of Brands Hatch. Subject to the terms and Conditions set out in
this offer document, the Offer will be made on the following basis: for every
100 Brands Hatch Shares, 22.67 shares of New Interpublic Common Stock.
Interpublic Common Stock is traded on the New York Stock Exchange under the
symbol "IPG" .
Your attention is drawn to the letter of recommendation from Sir Rodney M.
Walker, the Chairman of Brands Hatch, which appears on pages 7 to 9 of this
offer document.
This document should be read in conjunction with the accompanying Form of
Acceptance.
See Appendix VII for definitions of terms used in this offer document.
The procedure for acceptance is set out on pages 18 to 21 of this offer
document and in the accompanying Form of Acceptance. Acceptances should be
despatched by you as soon as possible, but in any event so as to be received by
the Receiving Agent by no later than 3.00 pm (London time) on 30 November 1999.
The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan. Accordingly, neither this offer document nor the
accompanying Form of Acceptance is being mailed or otherwise distributed or
sent in or into Canada, Australia or Japan and persons receiving this offer
document and the Form of Acceptance (including custodians, nominees and
trustees) may not distribute or send either this offer document or the Form of
Acceptance in or into or from Canada, Australia or Japan. Persons who intend to
forward this offer document and its accompanying documents outside the United
Kingdom should read paragraph 7 of Part B as well as Part C of Appendix I to
this offer document and the relevant provisions of the Form of Acceptance
before taking any action.
<PAGE>
The directors of Interpublic, whose names appear on page IV-I of this offer
document, accept responsibility for the information contained in this offer
document other than that relating to the Brands Hatch Group, the directors of
Brands Hatch and their immediate families. To the best of the knowledge and
belief of the directors of Interpublic (who have taken all reasonable care to
ensure that such is the case), the information contained herein for which they
take responsibility is in accordance with the facts and does not omit anything
likely to affect the import of such information.
The directors of Brands Hatch, whose names appear on page IV-I of this offer
document, accept responsibility for the information contained in this offer
document relating to the Brands Hatch Group, the directors of Brands Hatch and
their immediate families. To the best of the knowledge and belief of the
directors of Brands Hatch (who have taken all reasonable care to ensure that
such is the case), the information contained herein for which they take
responsibility is in accordance with the facts and does not omit anything
likely to affect the import of such information.
This offer document incorporates documents by reference which were previously
filed by Interpublic with the SEC and are not presented herein or delivered
herewith. These documents are available without charge, upon written or oral
request, from Interpublic at the addresses and telephone numbers set out on
page II-3 of this offer document. In order to ensure timely delivery of the
documents, any requests should be made by 17 November 1999.
You should rely only on information contained in this offer document. Neither
Interpublic nor Brands Hatch has authorised anyone to provide you with
information that is different. The information in this offer document may be
accurate only on the date of this offer document.
The extracts from the consolidated financial statements of, and other
information about, Interpublic appearing in this offer document are presented
in US dollars ($) and have been prepared in accordance with US GAAP. The
extracts from the consolidated financial statements of, and other information
about, Brands Hatch appearing in this offer document are presented in pounds
sterling (L) or pence (p) and have been prepared in accordance with UK GAAP. US
GAAP and UK GAAP differ in certain significant respects.
This offer document has been approved by PricewaterhouseCoopers as an
investment advertisement solely for the purposes of Section 57 of the UK
Financial Services Act 1986.
PricewaterhouseCoopers, which is authorised to carry on investment business by
The Institute of Chartered Accountants in England and Wales, is acting
exclusively for Interpublic and no one else in connection with the Offer and
will not be responsible to anyone other than Interpublic for providing the
protections afforded to clients of PricewaterhouseCoopers or for giving advice
in relation to the Offer.
Pannell Kerr Forster, which is authorised to carry on investment business by
The Institute of Chartered Accountants in England and Wales, is acting
exclusively for Brands Hatch and no one else in connection with the Offer and
will not be responsible to anyone other than Brands Hatch for providing the
protections afforded to clients of Pannell Kerr Forster or for giving advice in
relation to the Offer.
2
<PAGE>
Contents
Page
Timetable 4
Summary 5
Letter from the Chairman of Brands Hatch 7
Letter from Interpublic 10
1. Introduction 10
2. The Offer 10
3. Fractions 11
4. New Interpublic Common Stock 11
5. Irrevocable undertakings 11
6. Information relating to Interpublic 12
7. Information relating to Brands Hatch 12
8. Reasons for the Offer 12
9. Illustrative comparative per share data 13
10. Financial effects of acceptance 13
11. Board, management and employees 14
12. Brands Hatch Share Option Schemes 14
13. Taxation 14
14. Accounting treatment 18
15. Procedure for acceptance of the Offer 18
16. Settlement 21
17. Compulsory acquisition and delisting 22
18. Further information 22
Appendix I Conditions and further terms of the Offer I-1
Appendix II Further information on Interpublic II-1
Appendix III Further information on Brands Hatch III-1
Appendix IV Additional information IV-1
Appendix V Description of Interpublic capital stock and
changes in the rights of Brands Hatch
Shareholders V-1
Appendix VI Certain provisions of the Companies Act VI-1
Appendix VII Definitions VII-1
3
<PAGE>
Timetable
Offer announced and Offer Document posted 9 November 1999
Initial Closing Date of the Offer 30 November 1999
Assuming the Offer becomes unconditional
in all respects on the Initial Closing
Date, the expected commencement of
dealings in New Interpublic Common Stock
on the New York Stock Exchange 2 December 1999
4
<PAGE>
Summary
This summary highlights selected information from this offer document and may
not contain all of the information that is important to Brands Hatch
Shareholders. This offer document includes specific terms of the Interpublic
Common Stock being offered as well as information regarding Interpublic and
Brands Hatch and detailed financial data. Brands Hatch Shareholders are
strongly urged to read and consider carefully this offer document in its
entirety.
* The boards of Interpublic and Brands Hatch announced today the terms of a
proposed offer to be made by Interpublic to acquire all of the issued and
to be issued share capital of Brands Hatch. Brands Hatch will become part
of Octagon, Interpublic's sports marketing and entertainment division.
* Subject to the satisfaction or, to the extent permitted, waiver of the
Conditions, the Offer will be made on the following basis:
for every 100 Brands Hatch Shares 22.67 shares of New
Interpublic Common Stock
* Based on the closing price of $39 1/8 per share of Interpublic Common
Stock on the New York Stock Exchange on 8 November 1999 (being the latest
practicable date prior to the posting of this offer document) and using
the Illustrative Exchange Rate, the Offer:
* values each Brands Hatch Share at approximately 546 pence;
* represents a premium of approximately 36 per cent over the average
middle-market closing price of 402p per Brands Hatch Share for the
30 dealing days prior to 22 October 1999, the date on which Brands
Hatch announced that it had received an approach that might lead
to an offer being made for the company;
* represents a premium of approximately 14 per cent over the middle-
market closing price of 478p per Brands Hatch Share on 21 October
1999, the day immediately before the start of the Offer Period;
* values the entire issued share capital of Brands Hatch at
approximately L120 million; and
* represents a multiple of 37.4 times Brands Hatch's basic earnings
per share for the year ended 31 December 1998.
* Brands Hatch Shares will be acquired by Interpublic under the Offer fully
paid and free from all liens, equities, charges, encumbrances and other
interests of any nature and together with all rights attaching to them
from 9 November 1999, including the right to receive and retain all
dividends and other distributions declared, made or paid on or after 9
November 1999.
* The shares of New Interpublic Common Stock to be issued under the Offer
will be validly issued and fully paid and non-assessable and will rank
equally in all respects with the existing issued shares of Interpublic
Common Stock. Assuming full acceptance of the Offer, Interpublic will
deliver approximately 5.2 million shares of New Interpublic Common Stock
to Brands Hatch Shareholders which will comprise approximately 1.7 per
cent of the enlarged issued and outstanding share capital of Interpublic
Common Stock.
* The shares of New Interpublic Common Stock delivered to Brands Hatch
Shareholders pursuant to the Offer will be listed on the New York Stock
Exchange (and not the London Stock Exchange). Since Brands Hatch
Shareholders may not be able to deal easily or economically in the US
market, a dealing facility has been established utilising the services of
Charles Schwab Europe Limited and Durlacher Limited.
* Irrevocable undertakings to accept the Offer have been received by
Interpublic from Awak Limited, a company owned by the J.G. Foulston
Children's Settlement Trust, and from Nicola M. Foulston, Sir Rodney M.
Walker and Roger R.G. North in respect of an aggregate of 6,573,804
Brands Hatch Shares (representing approximately 30.0 per cent of Brands
Hatch's entire issued share capital). Robert S. Bain has also given an
irrevocable undertaking to accept the Offer in respect of any Brands
Hatch Shares issued to him pursuant to the exercise by him of his
Options.
5
<PAGE>
* The directors of Brands Hatch have unanimously recommended acceptance of
the Offer.
* Brands Hatch is a leading promoter of motorsport events, as well as an
operator of leisure venues, in the United Kingdom. Interpublic is one of
the largest advertising and marketing communications groups in the world.
Octagon is the sports marketing and entertainment division of
Interpublic, and is one of the leading sports and event marketing and
television distribution agencies in the world.
* Interpublic believes that the combination of Octagon and Brands Hatch
will strengthen both companies and help expand the sale of Brands Hatch's
marketing services outside the United Kingdom.
* The Offer is conditional, among other things, on the receipt by
Interpublic of a letter from its auditors confirming, on the date the
Offer becomes or is declared unconditional, that the acquisition of
Brands Hatch may be accounted for as a pooling of interests under US
GAAP.
* The full Conditions and further terms of the Offer are set out in
Appendix I to this offer document.
This summary highlights some of the information from this offer document and
Brands Hatch Shareholders are strongly encouraged to read the full text of this
offer document, including the Appendices.
6
<PAGE>
Letter from the Chairman
[GRAPHIC OMITTED]
Brands Hatch Leisure PLC
(Registered in England number 3031120)
Directors: Registered and Head Office:
Sir Rodney Myerscough Walker, Non-Executive Chairman Brands Hatch Circuit
Nicola Mary Foulston, Chief Executive Fawkham
Robert Simpson Bain BA ACA, Group Finance Director Longfield
Roger Richard George North FCCA, Non-Executive Director Kent DA3 8NG
9 November 1999
To Brands Hatch Shareholders and, for information only, to participants in the
Brands Hatch Share Option Schemes
Dear Shareholder,
Recommended Offer by Interpublic
1. Background
The boards of Brands Hatch and Interpublic announced today that they had
reached agreement on the terms of a recommended offer to be made by Interpublic
for all of the issued and to be issued share capital of Brands Hatch. Brands
Hatch will become part of Octagon, Interpublic's sports marketing and
entertainment division.
The formal Offer is set out in the letter from Interpublic on pages 10 to 22 of
this offer document.
2. The Recommended Offer
The Offer is:
for every 100 Brands Hatch Shares 22.67 shares of New Interpublic Common
Stock
3. Value of the Offer
Based on the closing Interpublic Common Stock price of $39 1/8 on the New York
Stock Exchange on 8 November 1999 (being the latest practicable date prior to
the posting of this offer document) and using the Illustrative Exchange Rate,
the Offer values each Brands Hatch Share at approximately 546p and the entire
issued share capital of Brands Hatch at approximately L120 million. This
represents a premium of approximately 36 per cent over the average middle-
market closing price of 402p per Brands Hatch Share for the 30 dealing days
prior to 22 October 1999, the date on which Brands Hatch announced that it had
received an approach that might lead to an offer being made for the company. It
also represents a premium of approximately 14 per cent over the middle-market
closing price of 478p per Brands Hatch Share on 21 October 1999, the day
immediately before the start of the Offer Period.
Brands Hatch Shareholders should bear in mind that the sterling value of any
investment in Interpublic Common Stock and any dividend income from that
investment (payable in US dollars and subject to US withholding tax) will be
affected by the dollar to sterling exchange rate from time to time.
4. Dealing facility
The New Interpublic Common Stock will be traded on the New York Stock Exchange
but will not be listed or traded on the London Stock Exchange. Since Brands
Hatch Shareholders may not be able to deal easily or economically in the US
market, a dealing facility has been established utilising the services of
Charles Schwab Europe Limited and Durlacher Limited. This arrangement will
enable Brands Hatch Shareholders who wish to sell their New Interpublic Common
Stock to deal at a competitive rate of commission. Further details of these
7
<PAGE>
facilities are set out in paragraph 4 of the letter from Interpublic, headed
"New Interpublic Common Stock", on page 11.
5. Irrevocable undertakings
Irrevocable undertakings to accept the Offer have been received by Interpublic
from Awak Limited, a company owned by the J.G. Foulston Children's Settlement
Trust, and from Nicola M. Foulston, Sir Rodney M. Walker and Roger R.G. North
in respect of an aggregate of 6,573,804 Brands Hatch Shares (representing
approximately 30.0 per cent of Brands Hatch's entire issued share capital).
Robert S. Bain has also given an irrevocable undertaking to accept the Offer in
respect of any Brands Hatch Shares issued to him pursuant to the exercise by
him of his Options.
For further information on irrevocable undertakings, Brands Hatch Shareholders
should read paragraph 5 of the letter from Interpublic, headed "Irrevocable
undertakings", beginning on page 11.
6. Current trading and recent developments
In the interim results statement for the six months ended 30 June 1999 made on
27 September 1999, I stated that strong organic growth underpinned by Brands
Hatch's capital investment programme and continued investment in and training
of its management team, coupled with many exciting strategic developments,
demonstrated the board's optimism about the future. The full text of Brands
Hatch's interim results is set out in Appendix III beginning on page III-30.
In an announcement on 14 May 1999, Brands Hatch announced that its subsidiary,
Brands Hatch Leisure Group Limited, had secured an exclusive contract with
Formula One Administration Limited to host the British Grand Prix at Brands
Hatch from 2002. In order to obtain approval for the changes to the Brands
Hatch Circuit that are required for the hosting of the British Grand Prix, a
planning application was made by Brands Hatch on 9 September 1999 to Sevenoaks
District Council.
7. Reasons for recommending the Offer
The board of Brands Hatch believes that the merger of Interpublic and Brands
Hatch represents an important opportunity for Brands Hatch's business.
The board of Brands Hatch believes that:
* Brands Hatch Shareholders will achieve an uplift in capital value and a
significant improvement in liquidity by exchanging their Brands Hatch
Shares for New Interpublic Common Stock;
* the merger with Interpublic and Octagon, Interpublic's sports marketing
and entertainment division, will provide Brands Hatch with the financial
and operational resources to exploit strategic opportunities and expand
its venues and venue promotion activities without the funding constraints
to which it is currently subject;
* the merger with Interpublic and Octagon will allow Brands Hatch to expand
its motorsport event promotion and leisure venue operation services using
the international network and series management expertise of Octagon; and
* the Brands Hatch business, which is marketing-led, will benefit from
becoming part of one of the largest advertising and marketing
communications groups in the world and Brands Hatch's position as a
leading promoter of motorsport events, as well as an operator of leisure
venues, in the United Kingdom will be enhanced, improving its ability to
serve global clients and providing better career opportunities for staff.
8. Board, management and employees
Interpublic has assured your board that the existing employment rights of
employees of Brands Hatch and its subsidiaries, including pension rights, will
be fully safeguarded.
It is intended that Nicola Foulston, Chief Executive of Brands Hatch, will join
the management board of Octagon.
9. Brands Hatch Share Option Schemes
The Offer extends to Brands Hatch Shares which are unconditionally allotted or
issued while the Offer remains open for acceptance (or, subject to the City
Code, such earlier date as Interpublic may decide), including any Brands Hatch
Shares unconditionally allotted or issued pursuant to the exercise of Options
under the Brands
8
<PAGE>
Hatch Share Option Schemes. If the Offer becomes or is declared unconditional
in all respects, all outstanding Options will become exercisable at that time.
Optionholders may then exercise their Options and either sell their Brands
Hatch Shares in the market (to the extent that a market in Brands Hatch Shares
exists at that time) or accept the Offer. A letter explaining these
alternatives will be sent to Optionholders at that time.
10. Taxation
Your attention is drawn to paragraph 13 of the letter from Interpublic, headed
"Taxation", beginning on page 14. If you are in any doubt as to your own tax
position, you should consult your independent financial adviser.
11. Action to be taken to accept the Offer
Your attention is drawn to paragraph 15 of the letter from Interpublic, headed
"Procedure for acceptance of the Offer", beginning on page 18, and to the Form
of Acceptance, which set out the procedure for acceptance of the Offer.
If you wish to accept the Offer, you should complete and return the enclosed
Form of Acceptance, whether or not your Brands Hatch Shares are in CREST, in
accordance with the instructions printed on it as soon as possible to the
Receiving Agent and, in any event, so as to be received by no later than 3.00
pm (London time) on 30 November 1999 together (if your Brands Hatch Shares are
held in certificated form) with your share certificate or any other documents
of title. A reply-paid addressed envelope, for use in the UK only, is enclosed
for your convenience. If your Brands Hatch Shares are held in uncertificated
form, you should also take the action specified in paragraph 15(d) of the
letter from Interpublic. If you require further assistance on how to complete
the Form of Acceptance, please call the Receiving Agent, Lloyds TSB Registrars,
on 01903 702767. Please note that the Receiving Agent will be unable to advise
you whether or not to accept the Offer.
12. Recommendation
The directors of Brands Hatch, who have been so advised by Pannell Kerr
Forster, consider the terms of the Offer to be fair and reasonable. In
providing advice to the directors of Brands Hatch, Pannell Kerr Forster has
taken into account the commercial assessments of the directors of Brands Hatch.
Accordingly, the directors of Brands Hatch unanimously recommend that Brands
Hatch Shareholders accept the Offer, as they have each irrevocably undertaken
to do in respect of their own beneficial shareholdings and those of certain
persons connected with them amounting to 6,573,804 Brands Hatch Shares, which
represent approximately 30.0 per cent of the issued share capital of Brands
Hatch.
Yours faithfully,
/s/ Sir Rodney M. Walker
--------------------
Sir Rodney M. Walker
Chairman
9
<PAGE>
Letter from The Interpublic Group of Companies, Inc.
[GRAPHIC OMITTED]
(a Delaware corporation)
Directors: Principal Office:
Philip H. Geier, Jr., Chairman of the Board, 1271 Avenue of the Americas
President and Chief Executive Officer New York, New York 10020
Eugene P. Beard, Vice Chairman, Finance and Operations USA
John J. Dooner, Jr., Chairman and Chief Executive
Officer of McCann-Erickson WorldGroup 9 November 1999
Frank B. Lowe, Chairman of the Board and Chief Executive Officer of
The Lowe Group and Octagon
Frank J. Borelli, Non-Executive Director
Reginald K. Brack, Non-Executive Director
Jill M. Considine, Non-Executive Director
Leif H. Olsen, Non-Executive Director
Allen Questrom, Non-Executive Director
J. Phillip Samper, Non-Executive Director
1. Introduction
The boards of Brands Hatch and Interpublic jointly announced today a
recommended offer to be made by Interpublic to acquire the whole of the issued
and to be issued share capital of Brands Hatch. Brands Hatch will become part
of Octagon, Interpublic's sports marketing and entertainment division.
The attention of Brands Hatch Shareholders is drawn to the letter from Sir
Rodney M. Walker, Chairman of Brands Hatch, on pages 7 to 9 of this offer
document.
2. The Offer
Interpublic offers to acquire, on the terms and Conditions set out or referred
to in this offer document and in the Form of Acceptance, all the issued and to
be issued Brands Hatch Shares on the following basis:
for every 100 Brands Hatch Shares 22.67 shares of New
Interpublic Common Stock
Based on the closing price of $39 1/8 per share of Interpublic Common Stock on
the New York Stock Exchange on 8 November 1999 (being the latest practicable
date prior to the posting of this offer document) and using the Illustrative
Exchange Rate, the Offer:
* values each Brands Hatch Share at approximately 546p;
* represents a premium of approximately 36 per cent over the average
middle-market closing price of 402p per Brands Hatch Share for the 30
dealing days prior to 22 October 1999, the date on which Brands Hatch
announced that it had received an approach that might lead to an offer
being made for the company;
* represents a premium of approximately 14 per cent over the middle-market
closing price of 478p per Brands Hatch Share on 21 October 1999, the day
immediately before the start of the Offer Period;
* values the existing issued share capital of Brands Hatch at approximately
L120 million; and
* represents a multiple of 37.4 times Brands Hatch's basic earnings per
share for the year ended 31 December 1998.
Brands Hatch Shares will be acquired by Interpublic under the Offer fully paid
and free from all liens, equities, charges, encumbrances and other interests of
any nature and together with all rights attaching to them from 9 November 1999,
including the right to receive and retain all dividends and other distributions
declared, made or paid on or after 9 November 1999.
The Offer extends to Brands Hatch Shares that are unconditionally allotted or
issued while the Offer remains open for acceptance (or, subject to the City
Code, until such earlier date as Interpublic may decide) including any
10
<PAGE>
Brands Hatch Shares unconditionally allotted or issued pursuant to the exercise
of Options under the Brands Hatch Share Option Schemes or otherwise.
Further terms and conditions of the Offer are set out in Appendix I and in the
accompanying Form of Acceptance.
To accept the Offer, Brands Hatch Shareholders should complete and return the
Form of Acceptance, whether or not their Brands Hatch Shares are in CREST, as
soon as possible to the Receiving Agent and, in any event, so as to be received
by no later than 3.00 pm (London time) on 30 November 1999. The procedure for
acceptance (including the additional steps necessary if Brands Hatch Shares are
held in uncertificated form) is set out in paragraph 15 of this letter and in
the Form of Acceptance.
3. Fractions
If the Offer becomes or is declared unconditional in all respects, fractions of
shares of New Interpublic Common Stock will not be issued to accepting Brands
Hatch Shareholders who will instead receive from Interpublic an amount in cash
in lieu of any entitlements to a fraction of a share of New Interpublic Common
Stock. However, individual entitlements of less than L3.00 will not be paid to
Brands Hatch Shareholders but will be retained for the benefit of the Enlarged
Interpublic Group.
4. New Interpublic Common Stock
The New Interpublic Common Stock will rank pari passu in all respects with the
existing Interpublic Common Stock, including the right to any dividends and
other distributions declared, paid or made after the date on which the Offer
becomes or is declared unconditional in all respects. For the avoidance of
doubt, Brands Hatch Shareholders will not be entitled to Interpublic's
quarterly dividend of 8 1/2 cents per share payable to Interpublic Stockholders
of record on 29 November 1999. The New Interpublic Common Stock will be
delivered in accordance with the terms of the Offer without regard to any lien,
right of set-off, counterclaim or other analogous right to which Interpublic
may otherwise be, or claim to be, entitled against Brands Hatch Shareholders.
Brands Hatch Shareholders should bear in mind that the sterling value of any
investment in Interpublic Common Stock and any dividend income from that
investment (payable in US dollars and subject to US withholding tax) will be
affected by the dollar to sterling exchange rate from time to time.
The New Interpublic Common Stock will be listed on the New York Stock Exchange
but will not be listed or traded on the London Stock Exchange. Since Brands
Hatch Shareholders may not be able to deal easily or economically in the US
market, arrangements to enable individual Brands Hatch Shareholders to deal in
the shares of New Interpublic Common Stock received by them as consideration
under the Offer have been set up with Charles Schwab Europe Limited and
Durlacher Limited.
For long term investment purposes, Brands Hatch Shareholders should contact
Charles Schwab Europe Limited (Crosby Court, 38 Bishopsgate, London EC2N 4AJ)
on 0870 601 8888, to order a US dealing account application and information
pack, or on 0870 608 0142 to speak with an investment specialist. Investors
must meet the minimum initial deposit of $10,000 in cash and/or securities.
Charles Schwab Europe Limited offers investors a nominee service with a wide
selection of UK and US investments.
For advisory and/or execution only services, Brands Hatch Shareholders should
contact Durlacher Limited (4 Chiswell Street, London EC1Y 4UP), on 0171 459
3656 (Jinni Featherstone-Witty). Durlacher Limited offers dealing services,
which include facilities to deal on most overseas stock markets.
Each of Charles Schwab Europe Limited and Durlacher Limited is regulated by The
Securities and Futures Authority Limited.
5. Irrevocable undertakings
An irrevocable undertaking to accept the Offer has been received by Interpublic
from Awak Limited, a company owned by the J. G. Foulston Children's Settlement
Trust, in respect of 6,519,015 Brands Hatch Shares (representing approximately
29.8 per cent of Brands Hatch's entire issued share capital). The J.G. Foulston
Children's Settlement Trust is a trust settled by the late John Foulston for
the benefit of his children.
Irrevocable undertakings to accept the Offer have also been received by
Interpublic from Nicola M. Foulston and from Sir Rodney M. Walker and Roger R.
G. North, non-executive directors of Brands Hatch, in respect of an aggregate
of 54,789 Brands Hatch Shares (representing approximately 0.25 per cent of
Brands Hatch's entire issued share capital).
11
<PAGE>
Interpublic has also received an irrevocable undertaking from Robert S. Bain, a
director of Brands Hatch, that, if he exercises any of his Options, he will
accept the Offer in respect of all Brands Hatch Shares issued to him on
exercise. Robert S. Bain has Options over 200,000 Brands Hatch Shares.
All of these irrevocable undertakings will cease to be binding if a third party
makes a competing offer in cash in excess of the value of the Offer.
6. Information relating to Interpublic
Interpublic is one of the largest advertising and marketing communications
groups in the world. The Interpublic Group employs more than 34,000 people and
conducts business in 120 countries worldwide. Interpublic's primary holdings
include two wholly-owned global advertising agency networks, McCann-Erickson
WorldGroup and The Lowe Group, which includes Lowe Lintas & Partners Worldwide,
as well as four specialised communication services units, Western Initiative
Media Worldwide, Draft Worldwide, International Public Relations, Octagon and
other related companies. Octagon is the sports marketing and entertainment
division of Interpublic, and is one of the leading sports and event marketing
and television distribution agencies in the world.
Interpublic Common Stock is traded on the New York Stock Exchange. Based on the
closing price of $39 1/8 per share of Interpublic Common Stock on 8 November
1999 (being the latest practicable date prior to the posting of this offer
document), Interpublic had a market value of approximately $11.0 billion.
For the year ended 31 December 1998, Interpublic reported net income of $309.9
million (1997: $200.4 million) on gross income of $4.0 billion (1997: $3.5
billion), reported net income per share of $1.14 (1997: $0.77) and paid
dividends of $0.29 per share (1997: $0.25). As at 31 December 1998, Interpublic
reported gross assets of $6.9 billion (1997: $6.0 billion).
For the six months ended 30 June 1999, Interpublic reported net income of
$184.2 million (1998: $156.3 million) on gross income of $2.1 billion (1998:
$1.9 billion) and reported net income per share of $0.67 (1998: $0.58). As at
30 June 1999, Interpublic reported gross assets of $7.7 billion (1998: $6.3
billion).
For the nine months ended 30 September 1999, Interpublic reported net income of
$243 million (1998: $203 million) on gross income of $3.1 billion (1998: $2.8
billion) and reported net income per share of $0.89 (1998: $0.75).
For further information on Interpublic, Brands Hatch Shareholders should read
"Appendix II -- Further information on Interpublic" beginning on page II-1 of
this offer document.
7. Information relating to Brands Hatch
Brands Hatch is the largest single organiser and promoter of motorsport events
in the United Kingdom, owning and operating four motorsport circuits at Brands
Hatch, Oulton Park, Snetterton and Cadwell Park. Over the past ten years it has
organised and promoted an average of over 150 motorsports events each year.
Brands Hatch also operates a successful motorsport leisure business, which
offers a wide range of activities including motor racing and rally schools,
corporate entertainment days, testing and track-hire, supported by its own
catering and merchandising operation. Earlier this year Brands Hatch expanded
its leisure operations with the acquisition of the Rebel Group, a karting group
whose venues are branded Daytona.
For the year ended 31 December 1998, Brands Hatch reported operating profit of
L5.06 million (1997: L4.01 million) on turnover of L19.33 million (1997: L16.01
million), reported earnings per share of 14.6p (1997: 11.1p) and paid dividends
of 4.0p per share (1997: 3.7p). As at 31 December 1998, Brands Hatch reported
net assets of L33.96 million (1997: L18.18 million).
For the six months ended 30 June 1999, Brands Hatch reported operating profit
of L2.36 million (1998: L2.00 million) on turnover of L10.41 million (1998:
L8.32 million) and reported earnings per share of 6.6p (1998: 5.5p). As at 30
June 1999, Brands Hatch reported net assets of L35.40 million (1998: L19.39
million).
For further information on Brands Hatch, Brands Hatch Shareholders should read
"Appendix III -- Further information on Brands Hatch" beginning on page III-1
of this offer document.
8. Reasons for the Offer
The boards of Interpublic and Brands Hatch believe that the merger of
Interpublic and Brands Hatch represents an important opportunity for their
respective businesses.
The board of Interpublic believes that the merger with Brands Hatch will:
12
<PAGE>
* mark the continuation of Interpublic's successful growth strategy to
build incremental revenue streams through diversification, as the
combination of Brands Hatch and Octagon will result in a multinational
sports and event group with more than 40 offices in 17 countries, making
it one of the largest multinational sports marketing and entertainment
organisations in the world;
* establish Octagon as a leading operator in the fast growing motorsport
event promotion and venue management industry;
* provide Octagon with racing circuit and motorsports venue management
skills to add to its series ownership, a powerful combination leading to
strategic and revenue-enhancing benefits; and
* complement Octagon's multinational business base and provide additional
proven management strength in sports marketing and entertainment.
For the reasons why the directors of Brands Hatch are recommending the Offer,
Brands Hatch Shareholders should read paragraph 7 of the letter from the
Chairman of Brands Hatch, headed "Reasons for recommending the Offer", on page
8 of this offer document.
9. Illustrative comparative per share data
The following table is included for the purposes of the SEC and illustrates
certain historical comparative per share data of Interpublic and Brands Hatch
(pro forma combined financial information has not been included in this offer
document due to the immateriality of Brands Hatch to Interpublic):
<TABLE>
<CAPTION>
Six months ended June Year ended 31 December
1999 1998 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Interpublic
Historic per share data(1)
Net income $0.67 $0.58 $1.14 $0.77 $0.82
Cash dividends declared $0.16 $0.14 $0.29 $0.25 $0.22
Book value(2) $4.77 --- $4.54 --- ---
Brands Hatch(3)
Historic per share data
Earnings $0.11 $0.09 $0.24 $0.18 $0.15
Cash dividends declared $0.00 $0.00 $0.07 $0.06 $0.01
Book value $2.55 --- $2.57 --- ---
Equivalent per share data(4)
Earnings $0.15 $0.13 $0.26 $0.17 $0.19
Cash dividends declared $0.04 $0.03 $0.07 $0.06 $0.05
Book value $1.08 --- $1.03 --- ---
</TABLE>
Notes:
(1) All per share data has been adjusted to reflect the two for one
Interpublic stock split effective 15 July 1999.
(2) The historical book value per common share is computed by dividing total
stockholder's equity by the number of shares of common stock outstanding
at the end of the period.
(3) Pounds sterling amounts have been converted into US dollars at either the
exchange rate at the end of the period presented or the weighted average
exchange rate, as appropriate. A table setting forth the pound-dollar
exchange rate at the end of certain financial periods, the average rate
for each period and the range of high and low rates for each period is set
out below:
<TABLE>
<CAPTION>
As of and for the six months As of and for the financial year
ended 30 June ended 31 December
1999 1998 1998 1997 1996
<S> <C> <C> <C> <C> <C>
At period end 1.575 1.670 1.658 1.645 1.713
Average for period 1.620 1.650 1.658 1.639 1.563
High 1.659 1.692 1.721 1.713 1.713
Low 1.575 1.613 1.613 1.577 1.495
</TABLE>
(4) The Brands Hatch per share equivalents are calculated by multiplying the
Interpublic historical per share amounts by 0.2267, the fraction of a
share of Interpublic Common Stock that will be exchanged for each Brands
Hatch Share.
10. Financial effects of acceptance
The following tables set out, for illustrative purposes only and on the bases
and assumptions set out below, the financial effects of acceptance on capital
value and income for a holder of 100 Brands Hatch Shares accepting the Offer if
the Offer becomes or is declared unconditional in all respects:
13
<PAGE>
(a) Capital value(1)
<TABLE>
<CAPTION>
A B
<S> <C> <C>
Sterling equivalent value of 22.67
shares of New Interpublic Common
Stock(2) L546.19 L546.19
Market value of 100 Brands Hatch
Shares(3) L401.98 L478.00
---------------- ----------------
Increase in value L144.21 L68.19
================ ================
Percentage increase 35.9% 14.3%
================ ================
</TABLE>
Notes:
(1) No account has been taken of any liability to taxation or for the
treatment of fractional entitlements to Interpublic Common Stock. The New
Interpublic Common Stock will not include Interpublic's quarterly dividend
of 8 1/2 cents per share payable to Interpublic Stockholders of record on
29 November 1999.
(2) The sterling equivalent value of New Interpublic Common Stock is based on
the New York Stock Exchange closing price of $39 1/8 per share of
Interpublic Common Stock on the New York Stock Exchange on 8 November 1999
(being the latest practicable date prior to the posting of this offer
document) and using the Illustrative Exchange Rate.
(3) The market value of Brands Hatch Shares is based, in column A, on the
average middle-market closing price of 401.98p per Brands Hatch Share for
the 30 dealing days prior to 22 October 1999, the date on which Brands
Hatch announced that it had received an approach that might lead to an
offer being made for the company, and, in column B, on the middle-market
closing price of 478p per Brands Hatch Share on 21 October 1999, the day
immediately before the start of the Offer Period.
(b) Income(1)
<TABLE>
<CAPTION>
<S> <C>
Dividend income from 100 Brands Hatch Shares(2) L4.00
Dividend income from 22.67 shares of New Interpublic
Common Stock(3) L4.30
----------------
Increase in dividend income L0.30
================
Percentage increase 7.5%
================
</TABLE>
Notes:
(1) No account has been taken of any liability to taxation of income.
(2) Being the 4.0 pence (net) final dividend for the financial year ended 31
December 1998 (no interim dividend was declared for the financial year
ending 31 December 1999).
(3) Based on aggregate dividends of 31.0 cents, being the four quarterly
dividends of $0.075, $0.075, $0.075 and $0.085 in respect of the three
month periods ended 30 September 1998, 31 December 1998, 31 March 1999 and
30 June 1999, respectively, converted at exchange rates of L1.00 for
$1.6989, $1.6580, $1.6143 and $1.5753, respectively, being the US dollar
to pound sterling spot exchange rate in respect of the relevant period-end
date.
11. Board, management and employees
Interpublic has assured the board of Brands Hatch that the existing employment
rights of employees of Brands Hatch and its subsidiaries, including pension
rights, will be fully safeguarded.
It is intended that Nicola Foulston, Chief Executive of Brands Hatch, will join
the management board of Octagon.
12. Brands Hatch Share Option Schemes
The Offer extends to any Brands Hatch Shares which are unconditionally allotted
or issued while the Offer remains open for acceptance (or, subject to the City
Code, until such earlier date as Interpublic may decide), including Brands
Hatch Shares unconditionally allotted or issued pursuant to the exercise of
Options under the Brands Hatch Share Option Schemes. If the Offer becomes or is
declared unconditional in all respects, all outstanding Options will become
exercisable at that time. Optionholders may then exercise their Options and
either sell their Brands Hatch Shares in the market (to the extent that a
market in Brands Hatch Shares exists at that time) or accept the Offer. A
letter explaining these alternatives will be sent to Optionholders at that
time.
13. Taxation
The following discussion of taxation is included for general information and
relates only to the position of a person who is a UK Resident and a non-US
person and who is the absolute beneficial owner of Brands Hatch Shares and
accepts the Offer as to all such Brands Hatch Shares. In particular, the
following does not discuss all of the tax consequences that may be relevant to
a Brands Hatch Shareholder in light of such shareholder's particular
circumstances or to holders subject to special rules, such as life insurance
companies, dealers in
14
<PAGE>
securities, financial institutions, tax-exempt entities, persons who have
acquired or acquire Brands Hatch Shares pursuant to the exercise of options
under the Brands Hatch Share Option Schemes (or otherwise as compensation),
persons who are UK Residents and US Residents, or certain US non-resident alien
individuals who were US citizens or US lawful permanent residents within the
past ten years. The explanation of US and UK tax laws set out below is based on
laws and, in the case of the UK, practice at present in effect, including the
income tax convention between the United Kingdom and the United States, and, in
the case of both the US and the UK, judicial and administrative precedent as of
8 November 1999. This explanation is subject to any changes in those laws,
practice (in the case of the UK) and precedent occurring after that date,
possibly with retroactive effect, and does not discuss any tax laws other than
those of the US and the UK. No US state or local tax considerations are
discussed. All Brands Hatch Shareholders are urged to consult their
professional tax advisers regarding the specific tax consequences of the Offer
to them, including the applicability of UK tax laws, US federal, state and
local tax laws and tax laws of any other jurisdiction to which they may be
subject.
UK taxation
The following discussion summarises for a Brands Hatch Shareholder who is a UK
Resident and who holds Brands Hatch Shares as an investment the principal UK
tax consequences associated with the exchange of securities pursuant to the
Offer.
(i) Taxation of capital gains
The exchange of Brands Hatch Shares by a Brands Hatch Shareholder in
return for New Interpublic Common Stock will not be treated as a disposal
of Brands Hatch Shares for the purposes of UK taxation of capital gains,
provided that either the Brands Hatch Shareholder, together with persons
connected with him, owns not more than five per cent of, or of any class
of, the shares in or debentures of Brands Hatch or the clearance from the
Inland Revenue referred to below is granted. The New Interpublic Common
Stock will instead be treated as the same asset as the Brands Hatch
Shares, acquired as and when the Brands Hatch Shares were acquired.
Brands Hatch applied on 25 October 1999 to the Inland Revenue for a tax
clearance under Section 138 of the UK Taxation of Chargeable Gains Act
1992 confirming that the Inland Revenue is satisfied that the exchange of
securities pursuant to the Offer is being effected for bona fide
commercial reasons and not for tax avoidance purposes.
The directors of Interpublic and of Brands Hatch believe that this tax
clearance should be forthcoming, but the Offer is not conditional upon
this tax clearance being granted.
A Brands Hatch Shareholder will, to the extent that he/she receives cash
in lieu of a fraction of a share of New Interpublic Common Stock, be
treated as making a part disposal of his/her Brands Hatch Shares which
may, depending upon his/her individual circumstances, give rise to a
liability to UK taxation of capital gains.
A subsequent disposal of New Interpublic Common Stock by a UK Resident
may give rise to a liability to UK taxation of capital gains.
(ii) Stamp duty and stamp duty reserve tax
No UK stamp duty or stamp duty reserve tax will be payable by a Brands
Hatch Shareholder on the transfer of Brands Hatch Shares to Interpublic.
Any liability to UK stamp duty or stamp duty reserve tax on the transfer
of such Brands Hatch Shares to Interpublic will be borne by Interpublic.
No UK stamp duty or stamp duty reserve tax will be payable on the issue
of New Interpublic Common Stock.
(iii) Dividends
A UK Resident will generally be liable to income tax or corporation tax
in the UK on the aggregate of any dividend received from Interpublic and
any tax withheld at source in the US (see below under "US taxation of
non-US persons") and any tax withheld in the UK (see below). In computing
that liability to taxation, credit will be given for any tax withheld in
the US and any tax withheld in the UK. No repayment of the tax credit in
respect of US tax will be available to a UK Resident. In the case of a
corporate UK Resident which controls ten per cent or more of the voting
stock of Interpublic, credit will also be available for underlying tax
against UK taxes in respect of the dividend.
Special rules apply to UK Residents who are not domiciled in the UK.
15
<PAGE>
An agent in the UK, who on behalf of a UK Resident, collects (or directs
or secures payment of) a dividend paid by Interpublic may be required to
withhold a sum on account of UK income tax or corporation tax, currently
at the rate of 10 per cent. Regulations, however, allow credit to be
given for tax withheld in the US, thereby reducing the aggregate
withholding to 10 per cent of the gross dividend (or the amount of US tax
withheld, if higher).
(iv) Inheritance tax
Where Interpublic Common Stock is held by an individual who is neither
domiciled nor deemed to be domiciled in the UK, no liability to UK
inheritance tax will arise. Where Interpublic Common Stock is held by an
individual who is either domiciled or deemed to be domiciled in the UK,
liability to UK inheritance tax may arise on the death of, or on a gift
(or disposal at an undervalue) of the Interpublic Common Stock by, that
individual.
US taxation of non-US persons
(i) General
The following is a general discussion of US federal income and estate tax
consequences of the ownership and disposition of Interpublic Common Stock
that may be relevant to the Brands Hatch Shareholders if they are "non-US
persons". For purposes of this summary, a "non-US person" is a beneficial
owner of Interpublic Common Stock who or that is, for US federal income
tax purposes, (1) a nonresident alien individual, (2) a foreign
corporation, (3) a nonresident alien fiduciary of a foreign estate or
trust or (4) a foreign partnership one or more of the members of which
is, for US federal income tax purposes, a nonresident alien individual, a
foreign corporation or a nonresident alien fiduciary of a foreign estate
or trust.
This discussion does not address all aspects of US federal income and
estate taxation that may be relevant to Brands Hatch Shareholders in
light of their particular circumstances and does not address any foreign,
state or local tax consequences. Furthermore, this discussion is based on
provisions of the IRC, Treasury regulations and administrative and
judicial interpretations as of the date hereof. All of these are subject
to change, possibly with retroactive effect or different interpretations.
Brands Hatch Shareholders should consult their own tax advisers about
current and possible future tax consequences of holding and disposing of
Interpublic Common Stock in their particular situation.
(ii) Distributions
Distributions paid on the shares of Interpublic Common Stock generally
will constitute dividends for US federal income tax purposes to the
extent paid from Interpublic's current or accumulated earnings and
profits, as determined under US federal income tax principles. Dividends
paid to a non-US person that are not effectively connected with a US
trade or business of the non-US person will be subject to United States
withholding tax at a 30% rate or, if a tax treaty applies, a lower rate
specified by the treaty. To receive a reduced treaty rate, a non-US
person must furnish to Interpublic or Interpublic's paying agent a duly
completed Form 1001 or Form W-8BEN (or substitute form) certifying to its
qualification for such rate. To the extent that the amount of a
distribution exceeds Interpublic's current and accumulated earnings and
profits (as determined for US federal income tax purposes), the
distribution will be treated as a return of capital, thus reducing (as
determined for US federal income tax purposes) the non-US person's
adjusted tax basis in such Interpublic Common Stock.
Dividends that are effectively connected with the conduct of a trade or
business within the US and, if a tax treaty applies, are attributable to
a US permanent establishment of the non-US person, are exempt from US
federal withholding tax, provided that the non-US person furnishes to
Interpublic or Interpublic's paying agent a duly completed Form 4224 or
Form W-8ECI (or substitute form) certifying the exemption. However,
dividends exempt from US withholding because they are effectively
connected or they are attributable to a US permanent establishment are
subject to US federal income tax on a net income basis at the regular
graduated US federal income tax rates. Any such effectively connected
dividends received by a foreign corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30%
rate or a lower rate specified by an applicable income tax treaty.
(iii) Gain on disposition of Interpublic Common Stock
A non-US person will generally not be subjected to US federal income tax
with respect to gain recognised on a sale or other disposition of
Interpublic Common Stock unless one of the following apply:
16
<PAGE>
* If the gain is effectively connected with a trade or business of
the non-US person in the United States and, if a tax treaty
applies, the gain is attributable to a US permanent establishment
maintained by the non-US person, the non-US person will, unless an
applicable treaty provides otherwise, be taxed on its net gain
derived from the sale under regular graduated US federal income
tax rates. If the non-US person is a foreign corporation, it may
be subject to an additional branch profits tax equal to 30 per
cent of its effectively connected earnings and profits within the
meaning of the IRC for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable
income tax treaty and duly demonstrates such qualifications.
* If a non-US person who is an individual and holds Interpublic
Common Stock as a capital asset is present in the United States
for 183 or more days in the taxable year of the disposition and
certain other conditions are met, the non-US person may be subject
to a flat 30% tax on the gain derived from the sale, which may be
offset by certain US capital losses despite the fact that the
individual is not considered a resident of the United States.
(iv) Federal estate tax
Interpublic Common Stock held by an individual who is not a resident of
the United States for US federal estate tax purposes at the time of death
will be included in such holder's gross estate for US federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
(v) Information reporting and backup withholding tax
United States federal backup withholding generally is imposed at the rate
of 31 per cent on certain payments to persons that fail to furnish
certain required information. Backup withholding and US information
reporting requirements will generally not apply to dividends paid on
Interpublic Common Stock to a non-US person at an address outside the
United States, except that, with respect to payments made after 31
December 2000, a non-US person will be entitled to such exemption only if
such non-US person provides a Form W-8BEN (or satisfies certain
documentary evidence requirements for establishing that such person is a
non-US person) or otherwise establishes an exemption. Brands Hatch
Shareholders should consult their own tax adviser concerning the effect,
if any, of the rules affecting post-31 December 2000 dividends on an
investment in Interpublic Common Stock.
As a general matter, information reporting and backup withholding will
not apply to a payment by or through a foreign office of a foreign broker
of the proceeds of a sale of Interpublic Common Stock effected outside
the United States. However, information reporting requirements, but not
backup withholding, will apply to a payment by or through a foreign
office of a broker of the proceeds of a sale of Interpublic Common Stock
effected outside the United States if that broker:
* is a US person;
* is a foreign person that derives 50% or more of his/her/its gross
income for certain periods from the conduct of a trade or business
in the US;
* is a "controlled foreign corporation" as defined in the IRC; or
* is a foreign partnership with certain US connections (for payments
made after 31 December 2000).
Information reporting requirements will not apply in the above cases if
the broker has documentary evidence in its records that the holder is a
non-US person and certain conditions are met or the holder otherwise
establishes an exemption.
Payment by or through a US office of a broker of the proceeds of a sale
of Interpublic Common Stock is subject to both backup withholding and
information reporting unless the holder certifies to the payer in the
manner required as to its non-US status under penalties of perjury or
otherwise establishes an exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate US federal income tax. Rather, any amounts withheld under the
backup withholding rules will be refunded or allowed as a credit against
the holder's US federal income tax liability, if any, provided the
required information or appropriate claim for refund is filed with the
IRS.
The foregoing discussion is a summary of certain US federal income and estate
tax consequences of the ownership, sale or other disposition of Interpublic
Common Stock by non-US persons. Brands Hatch
17
<PAGE>
Shareholders are urged to consult their own tax adviser with respect to the
particular tax consequences to such Brands Hatch Shareholders of the ownership
and disposition of Interpublic Common Stock, including the effect of any state,
local, foreign or other tax laws.
14. Accounting treatment
Pooling of interests
It is a condition of the Offer that Interpublic receives a letter from
PricewaterhouseCoopers LLP, Interpublic's auditors, dated as of the date on
which the Offer becomes or is declared unconditional in all respects
(equivalent to the consummation of the transaction under US law), confirming
that they concur with Interpublic management's conclusion that the acquisition
of Brands Hatch may be accounted for as a pooling of interests under US GAAP.
PricewaterhouseCoopers LLP has confirmed to Interpublic that they are not
currently aware of any information which would contradict Interpublic
management's current conclusion that the acquisition of Brands Hatch may be
accounted for as a pooling of interests under US GAAP.
If it proves impossible or impracticable to achieve this accounting treatment
prior to the Offer becoming or being declared wholly unconditional, the Offer
will lapse.
Should the Offer become or be declared unconditional in all respects and not
qualify for pooling of interests treatment, the purchase method of accounting
may be applied. Under that method, the fair market value of the New Interpublic
Common Stock delivered to effect the Offer would be recorded as the cost of
acquiring Brands Hatch's business. That cost would be allocated to the
individual assets acquired and liabilities assumed according to their
respective fair values. The fair market value of the New Interpublic Common
Stock to be delivered in the Offer in excess of the amounts at which the net
assets are carried in Brands Hatch's accounts would be capitalised as an
intangible asset and amortised over a certain period of time. Such treatment
could have a material adverse impact on the future reported operating results
of the combined companies.
Affiliate Agreements
In connection with the intended treatment of the acquisition of Brands Hatch by
Interpublic as a pooling of interests for accounting purposes, certain
directors and shareholders of Brands Hatch have agreed not to sell, transfer or
otherwise dispose of, or reduce their risk relative to, any New Interpublic
Common Stock or Brands Hatch Shares during the period commencing 30 days before
the consummation of the transaction until the date that Interpublic notifies
the director or shareholder that it has published financial results covering at
least 30 days of combined operations of Brands Hatch and Interpublic following
the consummation of the transaction. Assuming that the Offer becomes or is
declared wholly unconditional on or before 1 December 1999, it is expected that
such notification will be given in February 2000 when Interpublic expects to
publish its results for the year ending 31 December 1999.
Each of these directors and shareholders of Brands Hatch has also agreed that
prior to the effective date of the acquisition of Brands Hatch, he/she will
have registered in his/her name all New Interpublic Common Stock or Brands
Hatch Shares that he/she owns. In the case of shares of New Interpublic Common
Stock or Brands Hatch Shares owned by another party but deemed to be
beneficially owned by the director or shareholder, each of these directors or
shareholders has agreed to have caused those shares to be registered in the
name of the party that owns the shares. Each of these directors and
shareholders has also agreed to use his/her best efforts, to the extent that
he/she is able, to abide by any additional restrictions that Interpublic advise
him/her of in writing that must be taken in order for Interpublic to be
entitled to use the pooling of interests accounting method, based on the advice
of an independent international accounting firm.
15. Procedure for acceptance of the Offer
This paragraph 15 should be read in conjunction with Appendix I and the notes
on the Form of Acceptance.
(a) Completion of Form of Acceptance
If the Brands Hatch Shareholder holds Brands Hatch Shares in both certificated
and uncertificated form he/she should complete a separate Form of Acceptance
for each holding. In addition, he/she should complete separate Forms of
Acceptance for Brands Hatch Shares held in uncertificated form but under
different member account IDs, and for Brands Hatch Shares held in certificated
form but under different designations. Additional Forms of Acceptance are
available from Lloyds TSB Registrars (telephone number 01903 702767).
18
<PAGE>
(i) To accept the Offer
To accept the Offer in respect of all of one's Brands Hatch Shares, the
Brands Hatch Shareholder must complete Boxes 1 and 3 and, if his/her
Brands Hatch Shares are in CREST, Box 4. In all cases, Box 2 of the
accompanying Form of Acceptance must be signed. All Brands Hatch
Shareholders who are individuals should sign Box 2 of the Form of
Acceptance in the presence of a witness, who should also sign in
accordance with the instructions printed on the Form of Acceptance.
(ii) To accept the Offer in respect of less than all his/her Brands Hatch
Shares
To accept the Offer in respect of less than all of one's Brands Hatch
Shares, the Brands Hatch Shareholder must insert in Box 1 on the
accompanying Form of Acceptance that lesser number of Brands Hatch Shares
in respect of which he/she wishes to accept the Offer, in accordance with
the instructions printed on it. The Brands Hatch Shareholder should then
follow the procedure set out in paragraph 15(a)(i) of this letter in
respect of that lesser number of Brands Hatch Shares. If he/she does not
insert a number, or inserts a number greater than his/her entire holding
of Brands Hatch Shares in Box 1, acceptance will be deemed to be in
respect of all of the Brands Hatch Shares held by the Brands Hatch
Shareholder.
If Brands Hatch Shareholders have any questions as to how to complete the Form
of Acceptance, they may telephone Lloyds TSB Registrars on telephone number
01903 702767. Please note that the Receiving Agent is unable to advise on
whether or not to accept the Offer.
(b) Return of Form of Acceptance
To accept the Offer, the completed Form of Acceptance should be returned
whether or not the Brands Hatch Shareholder's Brands Hatch Shares are in CREST.
The completed Form of Acceptance should be returned by post, or by hand, to
Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA or, by hand
(during normal business hours only), to Lloyds TSB Registrars, Antholin House,
71 Queen Street, London EC4N 1SL together (if the relevant Brands Hatch Shares
are in certificated form) with the relevant share certificate(s) or any other
document(s) of title in each case as soon as possible, but in any event so as
to be received not later than 3.00 pm (London time) on 30 November 1999. A
reply-paid envelope for use in the UK only is enclosed for the Brands Hatch
Shareholder's convenience. No acknowledgment of receipt of documents will be
given by or on behalf of Interpublic. All documents sent by, to or from Brands
Hatch Shareholders or their appointed agents will be sent at their own risk.
(c) Documents of title not available or lost
If the Brands Hatch Shareholder holds Brands Hatch Shares and, for any reason,
the relevant share certificate(s) or any other document(s) of title is/are not
readily available or is/are lost, he/she should still complete, sign and lodge
the Form of Acceptance as stated in paragraph 15(a)(i) of this letter so as to
be received by the Receiving Agent by not later than 3.00 pm (London time) on
30 November 1999. He/she should send with the Form of Acceptance, any share
certificate(s) or any other document(s) of title which he/she may have
available and a letter stating that the remaining documents will follow as soon
as possible or that he/she has lost one or more of the share certificate(s) or
any other document(s) of title. The Brands Hatch Shareholder should then
arrange for the relevant share certificate(s) or any other document(s) of title
to be forwarded as soon as possible after that. No acknowledgment of receipt of
documents will be given. If the Brands Hatch Shareholder has lost his/her share
certificate(s) or any other document(s) of title, he/she should write as soon
as possible to Brands Hatch's registrars, Lloyds TSB Registrars, The Causeway,
Worthing, West Sussex BN99 6DA for a letter of indemnity for the lost share
certificate(s) or any other document(s) of title which, when completed in
accordance with the instructions given, should be returned to the Receiving
Agent as described in paragraph 15(b) of this letter.
(d) Additional procedures for Brands Hatch Shares in uncertificated form (that
is, in CREST)
If the Brands Hatch Shareholder holds Brands Hatch Shares in uncertificated
form, he/she should insert in Box 4 of the accompanying Form of Acceptance the
participant ID and member account ID under which those shares are held by him/
her in CREST and otherwise complete and return the Form of Acceptance as
described in paragraphs 15(a) and (b) of this letter.
In addition, the Brands Hatch Shareholder should take (or procure to be taken)
the action set out below to transfer the Brands Hatch Shares in uncertificated
form in respect of which he/she wishes to accept the Offer to an escrow balance
(that is, send a TTE instruction) specifying the Receiving Agent (in its
capacity as a CREST participant under its participant ID referred to in
paragraph 15(d)(iv) of this letter) as the Escrow Agent, as soon as possible
19
<PAGE>
and in any event so that the transfer to escrow settles by not later than 3.00
pm (London time) on 30 November 1999.
If the Brands Hatch Shareholder is a CREST sponsored member, he/she should
refer to his/her CREST sponsor before taking any action. His/her CREST sponsor
will be able to confirm details of his/her participant ID and the member
account ID under which his/her Brands Hatch Shares in uncertificated form are
held. In addition, only his/her CREST sponsor will be able to send the TTE
instruction to CRESTCo in relation to his/her Brands Hatch Shares in
uncertificated form.
He/she should send (or, if the Brands Hatch Shareholder is a CREST sponsored
member, procure that his/her CREST sponsor sends) a TTE instruction to CRESTCo
which must be properly authenticated in accordance with CRESTCo's
specifications and which must contain, in addition to the other information
that is required for a TTE instruction to settle in CREST, the following
details:
(i) the number of Brands Hatch Shares to be transferred to an escrow balance;
(ii) the Brands Hatch Shareholder's member account ID. This must be the same
member account ID as the member account ID that is inserted in Box 4 of
the Form of Acceptance;
(iii) his/her participant ID. This must be the same participant ID as the
participant ID that is inserted in Box 4 of the Form of Acceptance;
(iv) the participant ID of the Escrow Agent. This is 6RA73;
(v) the member account ID of the Escrow Agent. This is RA157701;
(vi) the Form of Acceptance reference number. This is the Form of Acceptance
reference number which appears next to Box 4 on page 3 of the Form of
Acceptance. This Form of Acceptance reference number should be inserted
in the first eight characters of the shared note field on the TTE
instruction. This insertion will enable the Lloyds TSB Registrars to
match the transfer to escrow to his/her Form of Acceptance. The Brands
Hatch Shareholder should keep a separate record of this Form of
Acceptance reference number for future reference;
(vii) the intended settlement date. This should be as soon as possible and in
any event by no later than 3.00 pm (London time) on 30 November 1999;
(viii) the corporate action number for the Offer, which is allocated by CRESTCo
and can be found by viewing the relevant corporate action details in
CREST; and
(ix) input with standard delivery instruction of Priority 80.
The Form of Acceptance reference number is printed next to Box 4 on page 3 of
the Form of Acceptance.
After settlement of the TTE instruction, the Brands Hatch Shareholder will not
be able to access the Brands Hatch Shares concerned in CREST for any
transaction or charging purposes. If the Offer becomes or is declared
unconditional in all respects, the Escrow Agent will transfer the Brands Hatch
Shares concerned to itself in accordance with paragraph (h) of Part C of
Appendix I.
The Brands Hatch Shareholder is recommended to refer to the CREST Manual
published by CRESTCo for further information on the CREST procedures outlined
above. For ease of processing, the Brands Hatch Shareholder is requested,
wherever possible, to ensure that a Form of Acceptance relates to only one
transfer to escrow.
If no Form of Acceptance reference number, or an incorrect Form of Acceptance
reference number, is included on the TTE instruction, Interpublic may treat any
amount of Brands Hatch Shares transferred to an escrow balance in favour of the
Escrow Agent specified above from the participant ID and member account ID
identified in the TTE instruction as relating to any Form(s) of Acceptance
which relate(s) to the same participant ID and member account ID (up to the
amount of Brands Hatch Shares inserted or deemed to be inserted in Box 1 on the
Form(s) of Acceptance concerned).
The Brands Hatch Shareholder should note that CRESTCo does not make available
special procedures in CREST for any particular corporate action. Normal system
timings and limitations will therefore apply in connection with a TTE
instruction and its settlement. He/she should therefore ensure that all
necessary action is taken by him/her (or by his/her CREST sponsor) to enable a
TTE instruction relating to his/her
20
<PAGE>
Brands Hatch Shares to settle by not later than 3.00 pm (London time) on 30
November 1999. In this connection, he/she is referred in particular to those
sections of the CREST Manual concerning practical limitations of the CREST
system and timings.
Interpublic will make an appropriate announcement if any of the details
contained in this paragraph 15(d) alter for any reason.
(e) Deposits of Brands Hatch Shares into, and withdrawals of Brands Hatch
Shares from, CREST
Normal CREST procedures (including timings) apply in relation to any Brands
Hatch Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Offer (whether any conversion of that kind arises as a result of
a transfer of Brands Hatch Shares or otherwise). Holders of Brands Hatch Shares
who are so proposing to convert any of those shares are recommended to ensure
that the conversion procedures are implemented in sufficient time to enable the
person holding or acquiring the Brands Hatch Shares as a result of the
conversion to take all necessary steps in connection with an acceptance of the
Offer (in particular, as regards delivery of share certificate(s) or any other
documents of title or transfers to an escrow balance as described in this
paragraph 15) by not later than 3.00 pm (London time) on 30 November 1999.
(f) Validity of acceptances
Without prejudice to Parts B and C of Appendix I, Interpublic may, subject to
the City Code, treat as valid in whole or in part any acceptance of the Offer
which is not entirely in order or which is not accompanied by the relevant TTE
instruction or (as applicable) the relevant share certificate(s) or any other
document(s) of title. In that event, no shares of Interpublic Common Stock will
be issued under the Offer until after the relevant transfer to escrow has
settled or (as applicable) the relevant share certificate(s) or any other
document(s) of title or indemnities satisfactory to Interpublic have been
received.
(g) Overseas Brands Hatch Shareholders
Brands Hatch Shareholders who are residents or citizens of jurisdictions
outside the United Kingdom and any person (including, without limitation, any
nominee, custodian or trustee) who intends to forward this offer document and
its accompanying documents outside the United Kingdom should read paragraph 7
of Part B as well as Part C of Appendix I and the relevant provisions of the
Form of Acceptance.
The Offer is not being made, directly or indirectly, in or into or by use of
the mails of, or by any means or instrumentality of interstate or foreign
commerce of, or any facilities of a securities exchange of Canada, Australia or
Japan (including, without limitation, post, facsimile transmission, e-mail,
telex and telephone). Accordingly, any purported acceptance of the Offer by a
Brands Hatch Shareholder who is unable to give the warranty set out in
paragraph (b) of Part C of Appendix I, is liable to be disregarded.
If the Brands Hatch Shareholder is in any doubt as to the procedure for
acceptance, he/she may contact Lloyds TSB Registrars by telephone on 01903
702767 or at The Causeway, Worthing, West Sussex BN99 6DA. He/she is reminded
that, if he/she is a CREST sponsored member, he/she should contact his/her
CREST sponsor before taking any action.
16. Settlement
(a) Timing
Subject to the Offer becoming or being declared unconditional in all respects
(and, in the case of certain overseas Brands Hatch Shareholders, except as
provided in paragraph 7 of Part B of Appendix I), settlement of the
consideration to which any Brands Hatch Shareholder is entitled under the Offer
will be effected:
(i) in the case of acceptances received, complete in all respects, by the
date on which the Offer becomes or is declared unconditional in all
respects, within 14 days of that date; or
(ii) in the case of acceptances of the Offer received, complete in all
respects, after the date on which the Offer becomes or is declared
unconditional in all respects but while it remains open for acceptance,
within 14 days of that receipt;
and in the manner set out in paragraph 15(b) of this letter.
(b) Consideration
Certificates for New Interpublic Common Stock and, where applicable, cheques
representing fractional entitlements will be despatched to Brands Hatch
Shareholders. In the case of joint holders of Brands Hatch
21
<PAGE>
Shares, these will be despatched to the joint holder whose name appears first
in the register of members. All documents will be sent by pre-paid post at the
risk of the person entitled thereto. Accepting Brands Hatch Shareholders will
receive their New Interpublic Common Stock certificates without having to take
any further action. Dealings in New Interpublic Common Stock are expected to
commence on the New York Stock Exchange on the second dealing day after the
Offer becomes or is declared unconditional in all respects. Pending despatch of
certificates, transfers of New Interpublic Common Stock will be certified
against the register of members of Interpublic. All cash payments will be made
in pounds sterling by cheque drawn on a branch of a UK clearing bank.
(c) General
If the Offer does not become or is not declared unconditional in all respects:
(i) share certificate(s) or any other document(s) of title will be returned
by post (or by such other method as may be approved by the Panel), within
14 days of the Offer lapsing, to the person or agent whose name and
address outside Canada, Australia and Japan is set out in Box 6 of the
Form of Acceptance or, if none is set out, to the first named holder at
his/her registered address outside Canada, Australia and Japan; and
(ii) the Escrow Agent will, immediately after the lapsing of the Offer (or
within such longer period, not exceeding 14 days after the Offer lapsing,
as the Panel may permit) give TFE instructions to CRESTCo to transfer all
Brands Hatch Shares held in escrow balances and in relation to which it
is the Escrow Agent for the purposes of the Offer to the original
available balances of the Brands Hatch Shareholders concerned.
All documents and remittances sent by, to or from Brands Hatch Shareholders or
their appointed agents will be sent at their own risk.
17. Compulsory acquisition and delisting
If all the Conditions are satisfied or (to the extent permitted) waived and
Interpublic has acquired, or contracted to acquire, pursuant to the Offer or
otherwise, at least 90 per cent in nominal value of the Brands Hatch Shares to
which the Offer relates, Interpublic intends to acquire the remaining Brands
Hatch Shares on the same terms as the Offer pursuant to the Compulsory
Acquisition Procedures. If the Brands Hatch Shares become subject to the
Compulsory Acquisition Procedures in this manner, Interpublic intends (subject
to applicable requirements of the London Stock Exchange) that Brands Hatch
should apply to the London Stock Exchange for the Brands Hatch Shares to be
delisted.
18. Further information
Please see the Appendices and the Form of Acceptance for further information.
Yours truly
/s/ Nicholas J. Camera
-------------------
Nicholas J. Camera, Vice President,
General Counsel and Secretary
for and on behalf of
The Interpublic Group of Companies, Inc.
22
<PAGE>
Appendix I --- Conditions and further terms of the Offer
Part A -- Conditions of the Offer
The Offer is governed by English law and is subject to the following
Conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by
not later than the Initial Closing Date in respect of not less than 90
per cent (or such lower percentage as Interpublic may decide) of the
Brands Hatch Shares to which the Offer relates and Interpublic (together
with any of its wholly owned subsidiaries) having acquired or agreed to
acquire (pursuant to the Offer or otherwise) Brands Hatch Shares carrying
in aggregate more than 50 per cent of the votes then normally exercisable
at a general meeting of Brands Hatch. For the purposes of this Condition:
(i) the expression "Brands Hatch Shares to which the Offer relates" is
to be construed in accordance with Sections 428 to 430F of the
Companies Act; and
(ii) Brands Hatch Shares which have been unconditionally allotted but
not issued are deemed to carry the voting rights which they will
carry on being entered in the register of members of Brands Hatch;
(b) the Registration Statement, and any post-effective amendments thereto,
having become effective under the Securities Act and no stop order
suspending the effectiveness of such registration statement or any part
thereof having been issued and no proceeding for that purpose having been
initiated or threatened by the SEC;
(c) Interpublic having received a letter from PricewaterhouseCoopers LLP,
dated as of the date on which the Offer becomes or is declared
unconditional in all respects, confirming their concurrence with
Interpublic management's conclusion that the acquisition of Brands Hatch
may be accounted for as a pooling of interests under US GAAP;
(d) no Authority having, before the date when the Offer otherwise becomes
unconditional in all respects, intervened in a manner which would or
might reasonably be expected to:
(i) make the Offer, its implementation or the acquisition or proposed
acquisition of any or all Brands Hatch Shares or of control of
Brands Hatch by Interpublic or any member of the Wider Interpublic
Group, void, illegal or unenforceable under the laws of any
jurisdiction, in each case to a material extent;
(ii) directly or indirectly restrict, restrain, prohibit, delay or
otherwise interfere in the implementation of the Offer or the
acquisition or proposed acquisition of any or all Brands Hatch
Shares or of control of Brands Hatch by Interpublic or any member
of the Wider Interpublic Group or impose additional conditions or
obligations with respect to the Offer or otherwise challenge the
Offer or such acquisition or proposed acquisition, in each case to
a material extent;
(iii) result, directly or indirectly, in a material delay in the ability
of any member of the Wider Interpublic Group, or render any member
of the Wider Interpublic Group unable, to acquire some or all of
the Brands Hatch Shares;
(iv) require, prevent or delay the divestiture by any member of the
Wider Interpublic Group of any shares or other securities (or the
equivalent) in Brands Hatch;
(v) require, prevent or delay the divestiture by any member of the
Wider Interpublic Group or by any member of the Wider Brands Hatch
Group of all or any material part of their respective businesses,
assets or properties or impose any limitation on the ability of
any of them to conduct any of their respective businesses or own
their respective assets or properties or any material part of
them;
(vi) impose any material limitation on, or result in a material delay
in, the ability of any member of the Wider Interpublic Group or
any member of the Wider Brands Hatch Group to acquire or to hold
or exercise effectively, directly or indirectly, all or any rights
of ownership in respect of shares or other securities (or the
equivalent) in, or to exercise management control over, any member
of the Wider Interpublic Group or any member of the Wider Brands
Hatch Group respectively;
I-1
<PAGE>
(vii) save pursuant to the Offer or Part XIII A of the Companies Act,
require any member of the Wider Interpublic Group or the Wider
Brands Hatch Group to acquire, or to offer to acquire, any shares
or other securities (or the equivalent) or interest in any member
of the Wider Interpublic Group or any member of the Wider Brands
Hatch Group owned by any third party, in each case to an extent
which is material;
(viii)impose any material limitation on the ability of any member of the
Wider Interpublic Group or any member of the Wider Brands Hatch
Group to integrate or co-ordinate its business, or any part of it,
with all or any part of the businesses of any other member of the
Wider Interpublic Group or any member of the Wider Brands Hatch
Group;
(ix) result in any member of the Wider Interpublic Group or any member
of the Wider Brands Hatch Group ceasing to be able to carry on
business under any name under which it presently does so, in each
case to an extent which is material; or
(x) otherwise adversely affect any or all of the businesses, assets,
profits or prospects of any member of the Wider Interpublic Group
or any member of the Wider Brands Hatch Group, in each case to an
extent which is material in the context of the relevant group
taken as a whole;
and all applicable waiting and other time periods (including any
extensions of these) during which any Authority could intervene under the
laws of any jurisdiction having expired, lapsed or been terminated;
(e) save as disclosed in the Annual Report and Accounts of Brands Hatch or as
disclosed in the interim statement of Brands Hatch for the six months
ended 30 June 1999 or as otherwise publicly announced in accordance with
the Listing Rules by Brands Hatch before 9 November 1999 or as disclosed
to Interpublic or its advisers before 9 November 1999, no member of the
Wider Brands Hatch Group having (since 31 December 1998):
(i) recommended, declared, paid or made or proposed to recommend,
declare, pay or make, any dividend, bonus or other distribution
(payable in cash or otherwise) other than to Brands Hatch (or
wholly-owned subsidiaries of Brands Hatch);
(ii) issued or agreed to, authorised, proposed or announced an
intention to authorise or propose, the issue or grant of,
additional shares of any class or securities convertible into
shares of any class or rights, warrants or options to subscribe
for or acquire, shares of any class or securities into shares of
any class (save as between Brands Hatch and wholly-owned
subsidiaries of Brands Hatch and save for Options granted, and the
issue of shares pursuant to the exercise of Options granted,
before 9 November 1999;
(iii) issued or agreed to, authorised, proposed or announced an
intention to authorise or propose, the issue of, any debentures or
incurred or increased any indebtedness or contingent liability
(save as between Brands Hatch and wholly-owned subsidiaries of
Brands Hatch);
(iv) merged with or demerged or acquired or disposed of any body
corporate or authorised, proposed or announced an intention to
authorise or propose the merger, acquisition, demerger or transfer
of any asset of material value or any right, title or interest in
any material asset (including, without limitation, shares and
trade investments), save as between Brands Hatch and its wholly-
owned subsidiaries and to an extent which is material in the
context of the Wider Brands Hatch Group taken as a whole;
(v) made, proposed, authorised or announced an intention to make,
propose or authorise, any change in its share or (save as between
Brands Hatch and its wholly-owned subsidiaries) loan capital, save
for any shares allotted pursuant to the exercise of Options
granted before 9 November 1999;
(vi) without limitation to paragraph (e)(v) of this Part A of Appendix
I, purchased, redeemed or repaid or proposed the purchase,
redemption or repayment of any of, its own shares or other
securities (or equivalent) or reduced or made any other change to
any part of its share capital which is in any such case material
(save as between Brands Hatch and its wholly-owned subsidiaries);
(vii) entered into, varied, authorised, proposed or announced its
intention to enter into or vary any contract, transaction,
arrangement or commitment (in respect of capital expenditure or
otherwise) which:
I-2
<PAGE>
(aa) is of a loss making, long-term, onerous or unusual nature
or magnitude;
(bb) would be restrictive on the business of any member of the
Wider Brands Hatch Group or any member of the Wider
Interpublic Group; or
(cc) involves or could involve an obligation which is of a loss
making, long term, onerous or unusual nature or magnitude
or could be restrictive on the business of any member of
the Wider Brands Hatch Group or any member of the Wider
Interpublic Group;
(viii)mortgaged, charged, encumbered or created any other security
interest over any material right, title or interest in the whole
or any part of the business, property or assets of any member of
the Wider Brands Hatch Group;
(ix) entered into or varied or made any offer (which remains open for
acceptance) to enter into or vary the terms of any agreement,
arrangement or commitment with any of the directors, officers or
employees of any member of the Wider Brands Hatch Group or
increased in any manner the compensation or benefits of any
director, officer or employee of any member of the Wider Brands
Hatch Group, in each case to an extent which is material;
(x) taken or proposed any corporate action or had any legal
proceedings instituted or threatened or petition presented for its
winding-up (voluntarily or otherwise), dissolution or
reorganisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer
of all or any of its assets and revenues or for any analogous
proceedings or steps in any jurisdiction or for the appointment of
any analogous person in any jurisdiction;
(xi) been unable or admitted in writing that it is unable to pay its
debts or having stopped or suspended (or threatened to stop or
suspend) payment of its debts generally or ceased or threatened to
cease carrying on all or a substantial part of its business;
(xii) made any alteration to its memorandum and articles of association
or any other incorporation documents;
(xiii)waived, compromised or settled any material claim; or
(xiv) entered into any agreement, arrangement or commitment or passed
any resolution or made any offer (which remains open for
acceptance) or announced any proposal or intention with respect to
any of the transactions, matters or events referred to in this
paragraph (e).
(f) save as disclosed in the Annual Report and Accounts of Brands Hatch or as
disclosed in the interim statement of Brands Hatch for the six months
ended on 30 June 1999 or as otherwise publicly announced by Brands Hatch
in accordance with the Listing Rules before 9 November 1999 or as
disclosed to Interpublic or its advisers before 9 November 1999 and since
31 December 1998:
(i) there having been no adverse material change or deterioration of
the business, assets, financial or trading position or profits or
prospects of the Wider Brands Hatch Group taken as a whole;
(ii) no litigation or arbitration proceedings, prosecution or other
legal proceedings having been instituted, threatened, announced,
intimated or remaining outstanding to which any member of the
Wider Brands Hatch Group is or may become a party (as claimant or
defendant or otherwise);
(iii) no enquiry or investigation by or complaint or reference to any
Authority (save as a result of the Offer) having been instituted,
threatened, announced by or against or remaining outstanding in
respect of any member of the Wider Brands Hatch Group which in any
of those cases might have a materially adverse effect on the Wider
Brands Hatch Group taken as a whole; or
(iv) no contingent or other liability having arisen or become apparent
or increased which might be likely to have a materially adverse
effect on the Wider Brands Hatch Group taken as a whole;
(g) save as disclosed to Interpublic or any of its advisers before 9 November
1999, there being no provision of any Instrument to which any member of
the Wider Brands Hatch Group is a party or by or to which any member of
the Wider Brands Hatch Group or any of its assets may be bound, entitled
or subject or any circumstance, which could, as a consequence of the
making of the Offer or the acquisition or proposed
I-3
<PAGE>
acquisition by Interpublic of the share capital of Brands Hatch or any
part of it or a change in the control or management of any member of the
Wider Brands Hatch Group or otherwise, result in:
(i) any monies borrowed by, or any other indebtedness or liabilities
(actual or contingent) of, or grant available to, any member of
the Wider Brands Hatch Group being or becoming repayable or
capable of being declared repayable, immediately or before the
stated repayment date in the relevant Instrument, or the ability
of any member of the Wider Brands Hatch Group to borrow monies or
incur any indebtedness being withdrawn or inhibited or becoming
capable of being withdrawn or inhibited;
(ii) the creation or enforcement of any mortgage, charge or other
security interest on or in relation to the whole or any part of
the business, property, assets or interests of any member of the
Wider Brands Hatch Group or any mortgage, charge or other security
interest (whenever arising or having arisen) becoming enforceable;
(iii) any Instrument or the rights, liabilities, obligations or
interests of any member of the Wider Brands Hatch Group arising
under any Instrument being, or becoming capable of being,
terminated or adversely modified or affected or any adverse action
being taken or any obligation or liability arising under any
Instrument;
(iv) any interest, assets or property of any member of the Wider Brands
Hatch Group being or becoming capable of being required to be
disposed of or charged otherwise than in the ordinary course of
business;
(v) the rights, liabilities, obligations interests or business of any
member of the Wider Brands Hatch Group in or with any other
venture, person, firm, company or body, or any arrangements
relating to those interests or that business, being terminated,
adversely modified or affected;
(vi) any member of the Wider Brands Hatch Group ceasing to be able to
carry on business under any name under which it presently does so;
(vii) the respective value, or the financial or trading position, profit
or prospects of any member of the Wider Brands Hatch Group being
adversely affected; or
(viii)the creation of any liabilities (actual or contingent) by any
member of the Wider Brands Hatch Group, otherwise than in the
ordinary course of business;
(in any case to an extent which is material in the context of the Wider
Brands Hatch Group taken as a whole) and no event having occurred which,
under any provision of any Instrument to which any member of the Wider
Brands Hatch Group is a party, or to which any member of the Wider Brands
Hatch Group or any of its assets may be bound, entitled or subject, could
result in any of the events or circumstances referred to in this
paragraph (g); and
(h) Interpublic not having discovered, after 8 November 1999, that:
(i) any financial, business or other information concerning the Wider
Brands Hatch Group disclosed at any time by or on behalf of any
member of the Wider Brands Hatch Group (publicly, to any member of
the Wider Interpublic Group or otherwise) is misleading or contains
a misrepresentation of fact or omits to state a fact necessary to
make any information contained in it not misleading in any case
which has not been corrected by any subsequent public announcement
before 9 November 1999 and which is material in the context of the
Wider Brands Hatch Group taken as a whole;
(ii) any member of the Wider Brands Hatch Group will, or is likely to,
be adversely affected by any failure of any computer hardware,
software or embedded chip technology relied on by any member of the
Wider Brands Hatch Group to be Year 2000 Compliant or by the cost
or disruption to normal activities caused by work carried out or to
be carried out to ensure that the relevant computer hardware,
software or embedded chip technology is Year 2000 Compliant;
(iii) any member of the Wider Brands Hatch Group or partnership, company
or other entity in which any member of the Wider Brands Hatch Group
has an interest and which is not a subsidiary undertaking of Brands
Hatch, is subject to any liability, contingent or otherwise, which
is not
I-4
<PAGE>
disclosed in the Annual Report and Accounts of Brands Hatch
or in the interim statement of Brands Hatch for the six months
ended 30 June 1999 or has not otherwise been disclosed to
Interpublic or publicly announced by Brands Hatch in accordance
with the Listing Rules before 9 November 1999 which is material in
the context of the Wider Brands Hatch Group taken as a whole;
(iv) any past or present member of the Wider Brands Hatch Group has not
complied with all applicable legislation or regulations in any
jurisdiction or any contractual term or arrangement with regard to
the storage, disposal, discharge, spillage, leak or emission of
any waste or hazardous substances or any substance likely to
impair the environment or harm human health, or otherwise relating
to environmental matters, or that there has otherwise been such
disposal, discharge, spillage, leak or emission (whether or not
the same constituted a non-compliance by any person with any such
legislation or regulations or contractual term or arrangement and
wherever the same may have taken place) which would or might give
rise to any liability for cost (actual, prospective or contingent)
on the part of any member of the Wider Brands Hatch Group which is
material in the context of the Wider Brands Hatch Group taken as a
whole;
(v)
(aa) there has been, or is likely to be, a disposal, discharge,
spillage or leak of waste or hazardous substances or any
substance likely to impair the environment or harm human
health, on; or
(bb) there has been, or is likely to be, an emission of waste or
hazardous substances or any substance likely to impair the
environment or harm human health, from;
any property now or previously owned, occupied or made use of by
any past or present member of the Wider Brands Hatch Group or in
which any past or present member of the Wider Brands Hatch Group
may have or previously have had or be deemed to have or to have
had an interest under any environmental legislation, regulation,
notice, circular or order of any Authority or otherwise which
would be likely to give rise to any liability (actual, prospective
or contingent) on the part of any member of the Wider Brands Hatch
Group;
(vi) there is, or is likely to be, any liability (actual, prospective
or contingent) or requirement to make good, repair, reinstate or
clean up any property now or previously owned, occupied or made
use of by any past or present member of the Wider Brands Hatch
Group or in which any member of the Wider Brands Hatch Group may
have or previously have had or be deemed to have or to have had an
interest under any statute, regulation, notice, circular, order or
decision of any Authority or otherwise; or
(vii) circumstances exist (as a result of the making of the Offer or
otherwise):
(aa) which would be likely to lead to any Authority instituting;
or
(bb) in which any member of the Wider Interpublic Group or any
present or past member of the Wider Brands Hatch Group
would be likely to be required to institute;
any environmental audit or take any other steps which would in any
case be likely to result in any actual, prospective or contingent
liability to make good, repair, reinstate or clean up any property
now or previously owned, occupied or made use of by any past or
present member of the Wider Brands Hatch Group or in which any
member of the Wider Brands Hatch Group may have or previously have
had or be deemed to have or to have had an interest under any
statute, regulation, notice, circular, order or decision of any
Authority or otherwise.
I-5
<PAGE>
For the purposes of these Conditions:
(1) "Authority" means any government, government department or governmental,
quasi-governmental, state or local government, supranational, statutory,
regulatory, administrative or investigative body, authority (including
any national anti-trust or merger control authorities), court, trade
agency, association, institution or professional or environmental body or
any other person or body in any jurisdiction;
(2) an Authority shall be regarded as having "intervened" if it has decided
to take, institute, implement or threaten any action, proceedings, suit,
investigation, inquiry or reference or made, proposed or enacted any
statute, regulation, decision or order or taken any measures or other
steps or required any action to be taken or information to be provided or
otherwise having done anything and "intervene" is to be construed
accordingly; and
(3) "Instrument" means any arrangement, agreement, lease, licence, permit,
franchise or other instrument.
Interpublic may waive in whole or in part all or any of the Conditions, except
the Acceptance Condition and Condition (b).
Interpublic will not invoke any of the Conditions (e) to (h) (inclusive) in
relation to circumstances which would otherwise give rise to the right to
invoke any of these Conditions where there has been fair disclosure of the
relevant circumstances to Interpublic or its advisers by or on behalf of Brands
Hatch before 9 November 1999.
Conditions (b) to (d) must be satisfied or (to the extent permitted) waived by
midnight (London time) on 21 December 1999 or, if later, by midnight on the 21st
day after the date on which the Acceptance Condition is fulfilled or is declared
fulfilled (or in each case, any later date as the Panel may agree), failing
which the Offer will lapse. Interpublic will not be obliged to waive (to the
extent permitted) or treat as satisfied any of Conditions (b) to (d) before the
latest date specified in this paragraph for the satisfaction of these Conditions
even if the other Conditions of the Offer may have already been waived or
satisfied and there are no circumstances indicating that any of Conditions (b)
to (d) may not be capable of satisfaction.
If Interpublic is required by the Panel to make an offer or offers for Brands
Hatch Shares under Rule 9 of the City Code, Interpublic may make those
alterations to the terms and Conditions of the Offer, including to the
Acceptance Condition, as may be necessary to comply with that Rule.
Unless the Panel agrees otherwise the Offer will lapse if:
(a) it is referred to the UK Competition Commission by the UK Secretary of
State for Trade and Industry; or
(b) the European Commission either initiates proceedings under Article
6(1)(c) of the Council Regulation or makes a referral to a competent
authority of the United Kingdom under Article 9(1) of the Council
Regulation and there is a subsequent reference to the UK Competition
Commission;
in each case, before 3.00 pm on 30 November 1999 or the date when the
Offer becomes or is declared unconditional as to acceptances, whichever is the
later.
If the Offer lapses, the Offer will cease to be capable of further acceptance
and Brands Hatch Shareholders accepting the Offer and Interpublic will
immediately cease to be bound by acceptances delivered on or before the date on
which the Offer lapses.
I-6
<PAGE>
Part B -- Further terms of the Offer
Unless the context requires otherwise, references in this Part B as well as
Part C of Appendix I and in the Form of Acceptance to "acceptances of the
Offer" include deemed acceptances of the Offer.
The following further terms apply, unless the context otherwise requires, to
the Offer.
1. Acceptance period
(a) The Offer is initially open for acceptance until 3.00 pm (London time) on
30 November 1999.
(b) Although no revision is currently envisaged, if the Offer is revised, the
Initial Offer Period will be extended, if necessary, for a period of at
least 14 days (or such lesser period as may be permitted by the Panel)
from the date on which the revised Offer Document is posted to Brands
Hatch Shareholders. Except with the consent of the Panel, no revision of
the Offer may be made or posted after 25 December 1999 or, if
later, the day which is 14 days before the last date on which the Offer
is able to become unconditional as to acceptances.
(c) The Initial Offer Period is not (without the consent of the Panel)
capable of being extended after midnight on 8 January 2000 (or any
earlier time or date beyond which Interpublic has stated that the Offer
will not be extended and has not withdrawn that statement). However,
Interpublic may, with the permission of the Panel, extend the final date
for expiry of the Initial Offer Period to such later time(s) or date(s)
as the Panel may agree. Save where the permission of the Panel has been
given, Interpublic may not, for the purpose of determining whether the
Acceptance Condition has been satisfied, take into account acceptances of
the Offer received, or purchases of Brands Hatch Shares made, after 1.00
pm (London time) on 8 January 2000 (or any other date beyond
which Interpublic has stated the Initial Offer Period will not be
extended and in respect of which it has not withdrawn that statement) or
any later time(s) or date(s) as Interpublic, with the permission of the
Panel, may determine.
(d) If the Acceptance Condition is or is declared satisfied and the Initial
Offer Period expires, the Offer will remain open for acceptance for the
Subsequent Offer Period of not less than 14 days from the expiry of the
Initial Offer Period. If Interpublic states that the Offer will remain
open until further notice, then Interpublic will give not less than 14
days' notice to Brands Hatch Shareholders who have not accepted the Offer
before closing the Subsequent Offer Period.
(e) If a competitive situation arises after Interpublic (or any person acting
on Interpublic's behalf) has made a "no extension" or "no increase" (as
determined by the Panel) statement (or a statement including both),
Interpublic may, if it has specifically reserved the right to do so at
the time the statement is made (or otherwise with the consent of the
Panel), withdraw the statement and extend or increase the Offer if it
complies with the requirements of the City Code and any other
requirements stipulated by the Panel and in particular if it:
(i) announces the withdrawal as soon as possible and in any event
within four business days after the date of the announcement of
the competing offer; and
(ii) notifies the Brands Hatch Shareholders of the withdrawal in
writing or (in the case of Brands Hatch Shareholders with
registered addresses outside the United Kingdom or whom
Interpublic knows to be nominees, trustees or custodians holding
Brands Hatch Shares for those persons) by announcement in the
United Kingdom at the earliest practicable opportunity.
(f) Interpublic may choose not to be bound by the terms of a "no extension"
or "no increase" statement (or a statement including both) and may post
an increased or improved Offer if:
(i) Interpublic has specifically reserved the right to do so at the
time the statement is made or the consent of the Panel has been
obtained; and
(ii) the increased or improved Offer is recommended for acceptance by
the board of Brands Hatch.
2. Acceptance Condition
(a) For the purposes of determining whether the Acceptance Condition has been
satisfied, Interpublic may, save as otherwise agreed by the Panel, only
take into account acceptances of the Offer received or purchases of
Brands Hatch Shares made in respect of which all relevant documents are
received by the Receiving Agent:
I-7
<PAGE>
(i) by 1.00 p.m. (London time) on 8 January 2000 (or any other date
beyond which Interpublic has stated that the Initial Offer Period
will not be extended and has not withdrawn that statement); or
(ii) if the Initial Offer Period is extended with the consent of the
Panel, any later time(s) or date(s) or both as the Panel may agree.
If the Initial Offer Period is extended beyond midnight (London time) on
8 January 2000, acceptances of the Offer received and purchases made in
respect of which the relevant documents are received by the Receiving
Agent after 1.00 p.m. (London time) on that date may only be taken into
account with the agreement of the Panel, except where the City Code
permits otherwise.
(b) Save as otherwise agreed by the Panel:
(i) an acceptance of the Offer will only be counted towards satisfying
the Acceptance Condition if the requirements of Note 4 and, if
applicable, Note 6 on Rule 10 of the City Code are satisfied in
respect of it;
(ii) a purchase of Brands Hatch Shares by Interpublic or its nominee or
(if Interpublic is required by the Panel to make an offer for
Brands Hatch Shares under Rule 9 of the City Code) by a person
acting in concert with Interpublic or its nominee, will only be
counted towards satisfying the Acceptance Condition if the
requirements of Note 5 and, if applicable, Note 6 on Rule 10 of
the City Code are satisfied in respect of it; and
(iii) the Offer will not become unconditional as to acceptances until
the Receiving Agent has issued a certificate to Interpublic which
states the number of Brands Hatch Shares in respect of which
acceptances of the Offer have been received and not validly
withdrawn which comply with Note 4 on Rule 10 of the City Code and
the number of Brands Hatch Shares otherwise acquired (before or
during the Offer Period) which comply with Note 5 on Rule 10 of
the City Code and, in each case, if appropriate, Note 6 on Rule 10
of the City Code. Copies of that certificate are to be sent to the
Panel and to Interpublic as soon as possible after it is issued.
(c) For the purpose of determining whether the Acceptance Condition has been
satisfied, Interpublic is not bound (unless otherwise required by the
Panel) to take into account any Brands Hatch Shares which are
unconditionally allotted or issued or which arise as a result of the
exercise of conversion or subscription rights before the determination is
made unless Brands Hatch or its agent has already notified Interpublic or
the Receiving Agent on behalf of Interpublic in writing of the relevant
details of the relevant issue or allotment. Notification by e-mail, telex
or facsimile transmission or copies does not constitute written notice
for this purpose.
3. Announcement
(a) By 8.00 am (London time) on the business day (the "relevant day") after
the day on which the Offer is due to expire or becomes unconditional as
to acceptances or is revised or extended (or any later time or date or
both as the Panel may agree), Interpublic will make an appropriate
announcement and simultaneously inform the London Stock Exchange of the
position. In the announcement Interpublic will state (unless otherwise
permitted by the Panel) the total number of Brands Hatch Shares and
rights over Brands Hatch Shares (as nearly as practicable):
(i) for which acceptances of the Offer have been received, showing the
extent, if any, to which these acceptances of the Offer have been
received from persons acting or deemed to be acting in concert
with Interpublic for the purposes of the Offer during the Offer
Period;
(ii) acquired or agreed to be acquired during the Offer Period by or on
behalf of Interpublic and any persons acting or deemed to be
acting in concert with Interpublic for the purposes of the Offer
during the Offer Period;
(iii) held before the Offer Period by or on behalf of Interpublic and
any persons acting or deemed to be acting in concert with
Interpublic for the purposes of the Offer during the Offer Period;
and
(iv) for which acceptances of the Offer have been received from persons
acting in concert with Interpublic for the purposes of the Offer
during the Offer Period;
I-8
<PAGE>
and will specify the percentages of Brands Hatch Shares represented by
each of these figures. In computing the number of Brands Hatch Shares
represented by acceptances of the Offer and purchases for the purposes
set out in this paragraph 3(a), Interpublic may only include those
acceptances of the Offer and purchases permitted to be counted towards
fulfilling the Acceptance Condition in accordance with paragraph 2(b) of
this Part B of Appendix I (save as otherwise agreed by the Panel).
(b) Any decision by Interpublic to extend the Initial Offer Period may be
made at any time up to, and will be announced by, 8.00 am (London time)
on the relevant day (or any later time or date or both as the Panel may
agree) and the announcement will state the next expiry time and date of
the Initial Offer Period (unless the Offer is then unconditional as to
acceptances, in which case Interpublic may instead make an announcement
by 8.00 am on the relevant day stating that the Offer will remain open
until further notice).
(c) In this Appendix I, references to the making of an announcement or the
giving of notice in each case by or on behalf of Interpublic include the
release of an announcement by Interpublic or public relations consultants
of Interpublic to the press and the delivery by hand or telephone,
facsimile, e-mail, telex transmission or other electronic transmission of
an announcement to the London Stock Exchange. An announcement made
otherwise than to the London Stock Exchange will be notified
simultaneously to the London Stock Exchange.
4. Rights of withdrawal
(a) If Interpublic, having announced that the Acceptance Condition has been
satisfied, fails to comply by 3.30 pm (London time) on the relevant day
(or any later time or date as the Panel may agree) with any of the other
requirements specified in paragraph 3(a) of this Part B of Appendix I, an
accepting Brands Hatch Shareholder may withdraw his/her acceptance of the
Offer by written notice, given either by post, or (during normal business
hours) by hand, to Lloyds TSB Registrars, The Causeway, Worthing, West
Sussex BN99 6DA or by hand only to Lloyds TSB Registrars, Antholin House,
71 Queen Street, London EC4N 1SL. Subject to paragraph 1(c) of this Part
B of Appendix I, this right of withdrawal may be terminated not less than
eight days after the relevant day by Interpublic confirming that the
Offer is still unconditional as to acceptances and complying with the
other requirements specified in paragraph 3(a) of this Part B of Appendix
I. If that confirmation is given, the first period of 14 days referred to
in paragraph 1(d) of this Part B of Appendix I will run from the date of
that confirmation and compliance.
(b) If by 3.00 pm (London time) on 21 December 1999 (or any later time or
date as the Panel may agree) the Offer has not become unconditional as to
acceptances, an accepting Brands Hatch Shareholder may withdraw his/ her
acceptance of the Offer by written notice to the Receiving Agent,
received either by post or by hand at any time before the earlier of:
(i) the time when the Offer becomes or is declared unconditional as to
acceptances; and
(ii) the final time for lodgement of acceptances of the Offer which can
be taken into account in accordance with paragraph 2(a) of this
Part B of Appendix I.
(c) If a "no increase" or "no extension" statement (or a statement including
both) has been withdrawn in accordance with paragraph 1(e) of this Part B
of Appendix I, any Brands Hatch Shareholder who accepts the Offer after
the date of that statement may withdraw his/her acceptance of the Offer
in the manner referred to in paragraph 4(a) of this Part B of Appendix I
before the eighth day after the date on which written notice of the
withdrawal is posted to the relevant Brands Hatch Shareholder.
(d) In this paragraph 4, "written notice" (including any letter of
appointment, direction or authority) means notice in writing bearing the
original signature(s) of the relevant accepting Brands Hatch
Shareholder(s) or his/her or their agent(s) duly appointed in writing
(evidence of whose appointment, in a form reasonably satisfactory to
Interpublic, is produced with the notice). Telex, e-mail or facsimile
transmission or copies will not be sufficient. No notice which is
postmarked in or otherwise appears to Interpublic or its agents to have
been sent from Canada, Australia or Japan will be treated as valid.
(e) Withdrawals of tendered Brands Hatch Shares may not be rescinded (without
Interpublic's consent) and any Brands Hatch Shares withdrawn and not
properly tendered will be deemed not validly tendered for the purposes of
the Offer. Withdrawn Brands Hatch Shares may be subsequently tendered,
however, by following one of the procedures in paragraph 15 of the letter
from Interpublic.
I-9
<PAGE>
(f) All questions as to the validity (including time of receipt) of any
notice of withdrawal will be determined by Interpublic whose
determination (save as required by the Panel) will be final and binding.
Neither of Interpublic nor the Receiving Agent or any other person will
be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give
that notification.
(g) Save as provided by this paragraph 4, acceptances of the Offer are
irrevocable.
5. Revisions of the Offer
(a) Although no revision of the Offer is envisaged, if the Offer (in its
original or any previously revised form(s)) is revised (either in its
terms or conditions or in the value or form of the consideration offered
or otherwise), which Interpublic reserves the right to do, and that
revised Offer represents, on the date on which it is announced (on any
basis which Pannell Kerr Forster may consider appropriate) an improvement
(or no diminution) in the value of the consideration previously offered,
the benefit of the revised Offer, will, subject as provided in this
paragraph 5 and in paragraph 6 of this Part B of Appendix I, be made
available to any Brands Hatch Shareholder who has accepted the Offer in
its original or any previously revised form(s) and not validly withdrawn
his/her acceptance of the Offer (each a "Previous Acceptor"). The
acceptance by or on behalf of a Previous Acceptor of the Offer in its
original or any previously revised form(s) will, subject as provided in
this paragraph 5 and in paragraph 6 of this Part B of Appendix I, be
deemed to be an acceptance of the Offer in its latest revised form and
will constitute the appointment of Interpublic or any director of
Interpublic as his/her attorney and agent with authority:
(i) to accept the Offer in its latest revised form on the Previous
Acceptor's behalf;
(ii) if the Offer in its latest revised form includes alternative forms
of consideration, to make on the Previous Acceptor's behalf
elections for and accept the alternative forms of consideration on
the Previous Acceptor's behalf in the proportions the attorney and
agent in his/her absolute discretion thinks fit; and
(iii) to execute on the Previous Acceptor's behalf and in the Previous
Acceptor's name all further documents and take any further actions
as may be required to give full effect to the acceptances of the
Offer and elections referred to in paragraphs 5(a)(i) and (ii) of
this Part B of Appendix I. In making any acceptance of the Offer
or any election, the attorney and agent must take into account the
nature of any previous acceptance of the Offer or election made by
or on behalf of the Previous Acceptor and those other factors or
matters as the attorney and agent may reasonably consider
relevant.
(b) The deemed acceptances of the Offer and elections referred to in
paragraph 5(a) of this Part B of Appendix I will not apply and the powers
of attorney and authorities conferred by that paragraph may not be
exercised by Interpublic or any director of Interpublic if, as a result,
the Previous Acceptor would (on any basis which Pannell Kerr Forster
may consider appropriate) receive less in aggregate in consideration than
he/ she would have received in aggregate in consideration as a result of
his/ her acceptance of the Offer in the form in which it was originally
accepted or of any election made by him/her in respect of the Offer in
any previous form (unless the Previous Acceptor has previously agreed in
writing to receive less in aggregate in consideration).
(c) The deemed acceptances referred to in paragraph 5(a) of this Part B of
Appendix I do not apply and the exercise of the powers of attorney and
authorities conferred by this paragraph 5 will be ineffective in the case
of a Previous Acceptor who lodges with the Receiving Agent, within 14
days of the posting of the document containing the revised Offer, a Form
of Acceptance or some other form issued by or on behalf of Interpublic in
which the Previous Acceptor validly elects to receive the consideration
receivable by the Previous Acceptor under the revised Offer in some other
manner than that set out in the Previous Acceptor's original acceptance
of the Offer.
(d) Subject to paragraphs 5(b) and (c) of this Part B of Appendix I, the
powers of attorney and authorities referred to in paragraph 5(a) of this
Part B of Appendix I and any acceptance of a revised Offer and any
election pursuant to a revised Offer are irrevocable unless and until the
Previous Acceptor withdraws his/her acceptance of the Offer under
paragraph 4 of this Part B of Appendix I.
(e) Interpublic may treat an executed Form of Acceptance relating to the
Offer (in its original or any previously revised form(s)) which is
received (or dated) on or after the announcement or issue of any
I-10
<PAGE>
revised Offer as a valid acceptance of the revised Offer and election in
respect of the revised Offer and that acceptance will constitute an
authority in the terms of paragraph 5(a) of this Part B of Appendix I,
with the necessary changes, on behalf of the relevant Brands Hatch
Shareholder.
6. General
(a) Save with the consent of the Panel, the Offer will lapse unless all the
Conditions have been satisfied or (to the extent permitted) waived or,
where appropriate, have been determined by Interpublic in its reasonable
opinion to be or remain satisfied by midnight on 21 December 1999 or by
midnight on the date which is 21 days after the date on which the Offer
becomes unconditional as to acceptances, whichever is the later, or
any later date as Interpublic may, with the consent of the Panel, decide.
(b) Save, in the case of any New Interpublic Common Stock to be delivered to
any Affiliate, as agreed under the terms of the Affiliate Agreements, and
except with the consent of the Panel:
(i) the New Interpublic Common Stock will be delivered in accordance
with the terms of the Offer without regard to any lien, right of
set-off, counterclaim or other analogous right to which
Interpublic may otherwise be, or claim to be, entitled against
Brands Hatch Shareholders; and
(ii) the New Interpublic Common Stock will rank pari passu in all
respects with the existing Interpublic Common Stock, including the
right to any dividends and other distributions declared, paid or
made after the date on which the Offer becomes or is declared
unconditional in all respects (which, for the avoidance of doubt,
will not include Interpublic's quarterly dividend of 8 1/2 cents
per share payable to Interpublic Stockholders of record on 29
November 1999).
(c) The instructions, terms, authorities and provisions contained in or
deemed to be incorporated in the Form of Acceptance constitute part of
the terms of the Offer. Words and expressions defined in this offer
document have the same meaning when used in the Form of Acceptance unless
the context otherwise requires. The terms and Conditions of the Offer
contained in this offer document are deemed to be incorporated in, and
form part of, the Form of Acceptance.
(d) Interpublic may treat as valid in whole or in part any acceptance of the
Offer if received by the Receiving Agent or otherwise on behalf of
Interpublic which is not entirely in order or in the correct form or not
accompanied by (as applicable) the relevant share certificate(s) or any
other relevant document(s) of title or by the relevant TTE instruction,
or if received, by or on behalf of either of them, at any place or places
or in any manner determined by them otherwise than as specified in this
offer document or in the Form of Acceptance. In that event, no shares of
New Interpublic Common Stock will be issued under the Offer until after
the acceptance of the Offer is entirely in order and (as applicable) the
relevant transfer to escrow has settled or the relevant share
certificate(s) or any other documents of title or indemnities
satisfactory to Interpublic have been received by the Receiving Agent.
(e) Any omission or failure to despatch this offer document, the Form of
Acceptance, any other document relating to the Offer or any notice
required to be despatched under the terms of the Offer to, or any failure
to receive the same by, any person to whom the Offer is, or should be,
made, will not invalidate the Offer in any way. Subject to paragraph 7 of
this Part B of Appendix I, the Offer is made to those persons to whom
this offer document, the Form of Acceptance, and any other relevant
document or notice may not have been despatched or who may not receive
those documents and those persons may collect copies of those documents
during normal business hours from Lloyds TSB Registrars, The Causeway,
Worthing, West Sussex BN99 6DA.
(f) All powers of attorney, appointments of agents and authorities on the
terms conferred by or referred to in this Appendix I or in the Form of
Acceptance are given by way of security for the performance of the
obligations of the Brands Hatch Shareholder concerned and are irrevocable
(in respect of powers of attorney, in accordance with Section 4 of the UK
Powers of Attorney Act 1971) except in circumstances where the donor of
the power of attorney, appointment or authority withdraws his/her
acceptance of the Offer in accordance with paragraph 4 of this Part B of
Appendix I.
(g) All communications, notices, certificates, documents of title and
remittances to be delivered by or sent to or from Brands Hatch
Shareholders (or their designated agents) will be delivered by or sent to
or from them (or their designated agents) at their risk. No
acknowledgment of receipt of any Form of Acceptance, share certificate(s)
or any other document(s) of title will be given by or on behalf of
Interpublic.
I-11
<PAGE>
(h) The Offer, the Offer Document, the Form of Acceptance, all acceptances of
the Offer and all elections in respect of it are governed by and are to
be construed in accordance with English law. Execution by or on
behalf of a Brands Hatch Shareholder of a Form of Acceptance constitutes
his/her irrevocable submission, in relation to all matters arising out of
or in connection with the Offer, to the jurisdiction of the courts of
England and his/her agreement that nothing limits the right of
Interpublic or PricewaterhouseCoopers to bring any action, suit or
proceeding arising out of or in connection with the Offer and the Form of
Acceptance in any other manner permitted by law or in any court of
competent jurisdiction.
(i) In relation to any acceptance of the Offer in respect of a holding of
Brands Hatch Shares which are in uncertificated form, Interpublic may
make any alterations, additions or modifications (being consistent with
the requirements of the City Code or made with the consent of the Panel)
as may be necessary or desirable to give effect to any purported
acceptance of the Offer, whether to comply with the facilities or
requirements of CREST or otherwise.
(j) The Offer is made on 9 November 1999 and is capable of acceptance from
and after that time. Forms of Acceptance and copies of this offer
document may be collected from Lloyds TSB Registrars, The Causeway,
Worthing, West Sussex BN99 6DA.
(k) If the Offer Period is extended, a reference in this offer document and
in the Form of Acceptance to 30 November 1999 is (except in the
definition of Initial Closing Date and paragraph 1(a) of this Part B of
Appendix I and where the context requires otherwise) to be deemed to
refer to the expiry date of the Offer as so extended.
7. Overseas Brands Hatch Shareholders
(a) The making of the Offer in, or to Brands Hatch Shareholders who are, or
are custodians, nominees or trustees for, citizens, residents or
nationals of, jurisdictions outside the United Kingdom may be prohibited
or affected by the laws of the relevant overseas jurisdiction. Overseas
Brands Hatch Shareholders should inform themselves about and observe any
applicable legal requirements. It is the responsibility of each overseas
Brands Hatch Shareholder wishing to accept the Offer to satisfy himself/
herself as to the full observance of the laws of the relevant overseas
jurisdiction in connection with the Offer. This includes the obtaining of
any governmental, exchange control or other consents which may be
required, the compliance with other necessary formalities needing to be
observed and the payment of any issue, transfer or other taxes or duties
or other requisite payments due in any jurisdiction by whomsoever
payable. Interpublic and any person acting on its behalf shall be fully
indemnified and held harmless by any Brands Hatch Shareholder for whom
Interpublic is required to pay any issue, transfer or other taxes or
duties or other requisite payments due in any jurisdiction.
(b) The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan, or by use of the mails of Canada, Australia or Japan
or by any means or instrumentality of interstate or foreign commerce of,
or of any facilities of a securities exchange of Canada, Australia or
Japan (including, without limitation, facsimile transmission, e-mail,
telex and telephone). Furthermore, the relevant clearances will not be
obtained from the regulatory authority of any province or territory of
Canada. No prospectus in relation to the New Interpublic Common Stock has
been, or will be, lodged with or registered by the Australian Securities
Commission and no steps have been, nor will any be, taken to enable the
New Interpublic Common Stock to be offered in compliance with applicable
securities laws in Japan.
Accordingly, copies of this offer document, the Form of Acceptance and
any related offer documents are not being, and must not be, mailed or
otherwise distributed or sent in, into or from Canada, Australia or
Japan. Persons receiving these documents (including, without limitation,
custodians, nominees and trustees) must not distribute, send or mail them
in, into or from Canada, Australia or Japan including to Brands Hatch
Shareholders, or use Canadian, Australian or Japanese mails or any means,
instrumentality or facility mentioned in this paragraph 7(b) for any
purpose, directly or indirectly, in connection with the Offer, and so
doing may invalidate any related purported acceptance of the Offer.
Persons wishing to accept the Offer must not use Canadian, Australian or
Japanese mails or any means, instrumentality or facility mentioned in
this paragraph 7(b) for any purpose directly or indirectly related to
acceptance of the Offer. Envelopes containing Form(s) of Acceptance
should not be postmarked in Canada, Australia or Japan or otherwise
despatched from Canada, Australia or Japan, and all acceptors must
provide addresses outside Canada, Australia and Japan for the receipt of
New Interpublic Common Stock, or for the return of Form(s) of Acceptance,
certificate(s) for Brands Hatch Shares and/or other document(s) of title.
Unless an exemption under the relevant securities laws is available and
save as aforesaid Interpublic will not issue
I-12
<PAGE>
New Interpublic Common Stock or authorise the delivery of any document(s)
of title in respect of New Interpublic Common Stock to (i) any person who
is, or who Interpublic has reason to believe is, resident in Canada,
Australia or Japan or a nominee, trustee or custodian holding Brands
Hatch Shares for such person, (ii) any person who is unable or fails to
give the warranty set out in paragraph (b) of Part C of Appendix I or
(iii) any person with a registered address in Canada, Australia or Japan.
(c) A Brands Hatch Shareholder may be deemed NOT to have validly accepted the
Offer if:
(i) he/she cannot give the representation and warranty set out in
paragraph (b) of Part C of Appendix I;
(ii) having completed Box 3 of the Form of Acceptance with an address
in Canada, Australia or Japan or having a registered address in
Canada, Australia or Japan he/she does not insert in Box 6 of the
Form of Acceptance the name and address of a person or agent
outside Canada, Australia and Japan to whom he/she wishes the
consideration to which he/she is entitled under the Offer to be
sent;
(iii) he/she inserts in Box 6 of the Form of Acceptance the name and
address of a person or agent in Canada, Australia or Japan to whom
he/she wishes the consideration to which he/she is entitled under
the Offer to be sent; or
(iv) the Form of Acceptance received from him/her is in an envelope
postmarked in, or which otherwise appears to Interpublic or its
agents to have been sent from, Canada, Australia or Japan.
Interpublic may, in its sole discretion, investigate, in relation to any
acceptance of the Offer, whether the representation and warranty set out
in paragraph (b) of Part C of this Appendix I could have truthfully been
given by the relevant Brands Hatch Shareholder and, if that investigation
is made and, as a result, Interpublic cannot satisfy itself that the
representation and warranty was true and correct, the acceptance will not
be valid.
(d) Interpublic nor any of its agents or directors nor any of their
respective advisers nor any person acting on behalf of any of them has
any liability to any person for any loss or alleged loss arising from any
decision as to the treatment of acceptance of the Offer on any of the
bases set out in this paragraph 7 or otherwise in connection with the
decision.
(e) If, in connection with the making of the Offer, notwithstanding the
restrictions described in this paragraph 7, any person (including,
without limitation, custodians, nominees and trustees), whether pursuant
to a contractual or legal obligation or otherwise, forwards this offer
document, the Form of Acceptance or any related offer documents in, into
or from Canada, Australia or Japan or uses the mails of or any means or
instrumentality (including, without limitation, facsimile transmission,
e-mail, telex and telephone) of interstate or foreign commerce of, or any
facility of a securities exchange of Canada, Australia or Japan in
connection with that forwarding, that person should:
(i) inform the recipient of that fact;
(ii) explain to the recipient that action will invalidate any purported
acceptance of the Offer by the recipient; and
(iii) draw the attention of the recipient to this paragraph 7.
(f) Interpublic may notify any matter, including the making of the Offer, to
all or any Brands Hatch Shareholders:
(i) with a registered address outside the United Kingdom; or
(ii) whom Interpublic knows to be a custodian, trustee or nominee
holding Brands Hatch Shares for persons who are citizens,
residents or nationals of jurisdictions outside the United
Kingdom;
by announcement in the United Kingdom to the London Stock Exchange or in
any other appropriate manner or by paid advertisement in a daily national
newspaper published and circulated in the United Kingdom (in which event
the notice is to be deemed to have been sufficiently given, despite any
failure by any Brands Hatch Shareholder to receive or see the notice) and
all references in this offer document to notice or the provision of
information in writing by or on behalf of Interpublic are to be construed
accordingly.
I-13
<PAGE>
(g) If any written notice from a Brands Hatch Shareholder withdrawing his/her
acceptance of the Offer in accordance with paragraph 4 of this Part B of
Appendix I is received in an envelope postmarked in, or which otherwise
appears to Interpublic or its agents to have been sent from, Canada,
Australia or Japan, Interpublic may, in its absolute discretion, treat
that notice as invalid.
(h) The provisions of this paragraph 7 and other terms of the Offer relating
to overseas Brands Hatch Shareholders may be waived or varied as regards
specific Brands Hatch Shareholders or on a general basis by Interpublic
in its absolute and sole discretion. References in this paragraph 7 to a
Brands Hatch Shareholder include references to the person or persons
executing a Form of Acceptance and, in the event of more than one person
executing a Form of Acceptance, the provisions of this paragraph 7 apply
to them jointly and severally.
(i) The provisions of this paragraph 7 supersede any terms of the Offer
inconsistent with them.
I-14
<PAGE>
Part C -- Form of Acceptance
Each Brands Hatch Shareholder who executes or has executed on his/her behalf a
Form of Acceptance irrevocably (so as to bind him/her, his/her personal
representatives, his/her heirs, successors and assigns):
(a) (i) accepts the Offer in respect of the number of Brands Hatch Shares
inserted or deemed to be inserted in Box 1 of the Form of
Acceptance; and
(ii) agrees to execute any further documents, take any further action
and give any further assurances which may be required to enable
Interpublic to obtain the full benefit of paragraph 15 of
Interpublic's letter and this Part C of Appendix I and to perfect
any of the authorities expressed to be given under these;
in each case on and subject to the terms and Conditions set out or
referred to in this offer document and the Form of Acceptance;
(b) represents and warrants to Interpublic that, unless "YES" is inserted in
Box 5 of the Form of Acceptance:
(i) he/she has not received or sent copies or originals of this offer
document, the Form of Acceptance or any related offer documents
in, into or from Canada, Australia or Japan;
(ii) he/she has not otherwise used in connection with the Offer or the
execution or delivery of the Form of Acceptance, directly or
indirectly, the mails of, or any means or instrumentality
(including, without limitation, the post, facsimile transmission,
e-mail, telex and telephone) of interstate or foreign commerce, or
any facilities of a securities exchange, of Canada, Australia or
Japan;
(iii) he/she is accepting the Offer from outside Canada, Australia or
Japan;
(iv) he/she is not a resident of Canada, Australia or Japan nor a
holder whose registered address is in Canada, Australia or Japan
and does not hold Brands Hatch Shares on behalf of any person of
that kind;
(v) he/she is not an agent or fiduciary acting on a non-discretionary
basis for a principal, unless that agent or fiduciary is an
authorised employee of that principal or that principal has given
any instructions with respect to the Offer from outside Canada,
Australia or Japan; and
(vi) if he/she is a resident in, national or citizen of a jurisdiction
outside the United Kingdom he/she has, in connection with the
Offer, observed the laws of the relevant jurisdiction, obtained
any governmental, exchange control, or other consents which may be
required, complied with other necessary formalities needing to be
observed and paid any issue, transfer or other taxes or duties or
other requisite payments due in that jurisdiction by whomsoever
payable, in connection with that acceptance, and that he/she has
not taken or omitted to take any action which will or may result
in Interpublic or any other person acting in breach of the legal
or regulatory requirements of any jurisdiction in connection with
the Offer or his/her acceptance of it;
(c) appoints Interpublic or any director of Interpublic as his/her attorney
and agent (subject to the Offer becoming unconditional in all respects
and him/her not having validly withdrawn his/her acceptance) within the
terms of paragraph 5 of Part B and this Part C of Appendix I and with an
irrevocable instruction and authority to:
(i) complete and execute any form of transfer, renunciation or other
document in relation to the Brands Hatch Shares referred to in
paragraph (a)(i) of this Part C of Appendix I in favour of
Interpublic or as it may direct;
(ii) deliver any form of transfer, renunciation or other document with
any share certificate(s) or any other document(s) of title for
registration within six months of the Offer becoming unconditional
in all respects; and
(iii) give any further assurances which may be required and take any
other action as the attorney and agent may think necessary or
expedient in connection with his/her acceptance of the Offer and
to vest in Interpublic (or as it may direct) the Brands Hatch
Shares referred to in paragraph (a)(i) of this Part C of Appendix
I;
I-15
<PAGE>
(d) authorises and requests (subject to the Offer becoming unconditional in
all respects and him/her not having validly withdrawn his/her
acceptance):
(i) Brands Hatch or its agents to procure the registration of the
transfer of the Brands Hatch Shares referred to in paragraph
(a)(i) of this Part C of Appendix I that are in certificated form
pursuant to the Offer and the delivery of the share certificates
or any other documents of title in respect of those Brands Hatch
Shares to Interpublic or as it may direct;
(ii) (subject to the provisions of paragraph 7 of Part B of Appendix I),
Interpublic or its agents to procure that such Brands Hatch
Shareholder's name is entered on the register of stockholders of
Interpublic in respect of the New Interpublic Common Stock (if any)
to which such Brands Hatch Shareholder becomes entitled under the
Offer (subject to the provisions of Interpublic's certificate of
incorporation and by-laws);
(iii) Interpublic or its agents to procure the despatch by post or by
such other method as may be approved by the Panel of (subject to
the provisions of paragraph 7 of Part B of Appendix I) a
certificate or other document(s) of title for any New Interpublic
Common Stock and any cash consideration to which an accepting
Brands Hatch Shareholder becomes entitled pursuant to his/her
acceptance of the Offer (and at the risk of such person) to the
person whose name and address is set out in Box 6 of the Form of
Acceptance or, if none is set out, to the person whose name and
address is set out in Box 3 of the Form of Acceptance or to the
first named holder at his/her registered address; and
(iv) Interpublic or its agents to record and act, in respect of any New
Interpublic Common Stock to be received by such Brands Hatch
Shareholder, upon any instructions with regard to payments or
notices which have been recorded in the records of Brands Hatch in
respect of such shareholder's holding(s) of Brands Hatch Shares;
(e) subject to the Offer becoming unconditional and him/her not having
validly withdrawn his/her acceptance (or if the Offer would become
unconditional in all respects or lapse on the outcome of the resolution
in question or if the Panel gives its consent) and pending registration:
(i) authorises Interpublic or its agent to direct the exercise of any
votes and any other rights and privileges (including the right to
requisition the convening of a general or separate class meeting
of Brands Hatch) attaching to the Brands Hatch Shares referred to
in paragraph (a)(i) of this Part C of Appendix I;
(ii) authorises Brands Hatch or its agent to send any notice, circular,
warrant or other document or communication which may be required
to be sent to him/her as a member of Brands Hatch to Interpublic;
(iii) authorises any director of, or person authorised by, Interpublic to
sign any document and do those things as may in the opinion of that
person seem necessary or desirable in connection with the exercise
of any votes or other rights or privileges attaching to the Brands
Hatch Shares referred to in paragraph (a)(i) of this Part C of
Appendix I (including, without limitation, signing any consent to
short notice of a general or separate class meeting on his/her
behalf and executing a form of proxy appointing any person
nominated by Interpublic to attend general meetings and separate
class meetings of Brands Hatch and attending any of those meetings
and exercising the votes attaching to the Brands Hatch Shares
referred to in paragraph (a)(i) of this Part C of Appendix I on
his/her behalf, where relevant, those votes to be cast so far as
possible to satisfy any outstanding Condition of the Offer); and
(iv) agrees not to:
(aa) exercise any of the votes, rights and privileges referred
to in paragraph (e)(i) of this Part C of Appendix I;
(bb) appoint a proxy; or
(cc) attend any general meeting or separate class meeting of
Brands Hatch;
without in each case the consent of Interpublic;
I-16
<PAGE>
(f) agrees that he/she will deliver or procure the delivery to the Receiving
Agent of his/her share certificate(s) or any other document(s) of title
in respect of the Brands Hatch Shares referred to in paragraph (a)(i) of
this Part C of Appendix I held by him/her in certificated form, or an
indemnity acceptable to Interpublic in place of them as soon as possible
and in any event within six months of the Offer becoming unconditional in
all respects;
(g) agrees that the execution of the Form of Acceptance constitutes the
irrevocable appointment of the Receiving Agent as his/her attorney and
agent and an irrevocable instruction and authority to that attorney and
agent:
(i) subject to the Offer becoming or being declared unconditional in
all respects and to him/her not having validly withdrawn his/her
acceptance, to transfer to Interpublic (or to any other person or
persons as Interpublic or its agents may direct) by means of CREST
all or any of the Relevant Brands Hatch Shares (as defined in
paragraph (g)(ii) of this Part C of Appendix I) (but not exceeding
the number of Brands Hatch Shares in respect of which the Offer is
accepted or deemed to be accepted); and
(ii) if the Offer does not become unconditional in all respects, to
give instructions to CRESTCo, immediately after the lapsing of the
Offer (or within any longer period as the Panel may permit, not
exceeding 14 days of the lapsing of the Offer), to transfer all
Relevant Brands Hatch Shares to the original available balance of
the accepting Brands Hatch Shareholder. "Relevant Brands Hatch
Shares" means Brands Hatch Shares in uncertificated form and in
respect of which a transfer or transfers to escrow has or have
been effected pursuant to the procedures described in paragraph
15(d) of the letter from Interpublic and where the transfer(s) to
escrow was or were made in respect of Brands Hatch Shares held
under the same member account ID and participant ID as the member
account ID and participant ID relating to the Form of Acceptance
concerned (but irrespective of whether or not any Form of
Acceptance reference number, or a Form of Acceptance reference
number corresponding to that appearing on the Form of Acceptance
concerned, was included in the TTE instruction concerned);
(h) agrees that he/she will take (or procure to be taken) the action set out
in paragraph 15(d) of the letter from Interpublic to transfer the Brands
Hatch Shares referred to in paragraph (a)(i) of this Part C of Appendix I
held by him/her in uncertificated form to an escrow balance as soon as
possible and in any event so that the transfer to escrow settles within
six months of the Offer becoming unconditional in all respects;
(i) agrees that, if for any reason, any Brands Hatch Shares in respect of
which a transfer to an escrow balance has been effected in accordance
with paragraph 15(d) of the letter from Interpublic are converted to
certificated form, he/she will (without prejudice to paragraph (e) of
this Part C of Appendix I) immediately deliver or procure the immediate
delivery of the share certificate(s) or any other document(s) of title in
respect of all those Brands Hatch Shares that are converted to Lloyds TSB
Registrars, The Causeway, Worthing, West Sussex BN99 6DA or as
Interpublic or its agents may direct;
(j) agrees that he/she will do all acts and things as shall, in the opinion
of Interpublic or its agents, be necessary or expedient to vest in
Interpublic or its nominee(s) or any other person as Interpublic may
decide the Brands Hatch Shares referred to in paragraph (a)(i) of this
Part C of Appendix I and to enable the Receiving Agent to perform its
function as Escrow Agent for the purposes of the Offer;
(k) agrees to ratify each and every act or thing which may be done by
Interpublic or any of its directors or agents in exercise of any of the
powers, appointments and authorities under this Appendix I;
(l) agrees that, if any provisions of Part B or this Part C of Appendix I are
unenforceable or invalid or do not operate to give Interpublic or the
Receiving Agent or any of their respective directors or persons
authorised by them the benefit of the authority expressed to be given in
Part B or this Part C of Appendix I, he/she shall, with all practicable
speed, do all those acts and things and execute all those documents that
may be required or desirable to enable Interpublic, the Receiving Agent
or their respective directors or persons authorised by them to secure the
full benefit of Part B and this Part C of Appendix I;
(m) represents and warrants that he/she is entitled to sell and transfer the
beneficial ownership of the Brands Hatch Shares referred to in paragraph
(a)(i) of this Part C of Appendix I and that those Brands Hatch Shares
are sold fully paid and free from all liens, charges, equities,
encumbrances, rights of pre-emption and other third party rights or
interests of any nature and together with all rights attaching to them on
or
I-17
<PAGE>
after 9 November 1999 including, without limitation, voting rights and
the right to receive all dividends and other distributions (if any)
declared, made or paid on or after 9 November 1999;
(n) agrees that the terms and Conditions of the Offer contained in this offer
document are deemed to be incorporated in, and form part of, the Form of
Acceptance;
(o) agrees that, on execution, the Form of Acceptance takes effect as a deed;
(p) agrees that the execution of the Form of Acceptance constitutes his/her
submission, in relation to all matters arising out of the Offer and the
Form of Acceptance, to the jurisdiction of the courts of England; and
(q) agrees and acknowledges that he/she is not a customer (as defined in the
rules of The Securities and Futures Authority Limited) of
PricewaterhouseCoopers in connection with the Offer.
References in this Part C of Appendix I to a Brands Hatch Shareholder include
references to the person or persons executing the Form of Acceptance and, in
the event of more than one person executing a Form of Acceptance, this Part C
of Appendix I applies to them jointly and to each of them.
I-18
<PAGE>
Appendix II --- Further Information on Interpublic
1. Business description II-2
2. Preliminary announcement of Interpublic's third quarter
1999 financial results II-4
3. Report of PricewaterhouseCoopers LLP, independent
accountants II-5
4. Audited annual consolidated financial statements II-7
5. Unaudited consolidated financial statements for the six
months ended 30 June 1999 II-33
II-1
<PAGE>
1. Business description
General
Interpublic is one of the largest advertising and marketing communications
groups in the world. The Interpublic Group employs more than 34,000 people and
conducts business in 120 countries worldwide. Interpublic's primary holdings
include two wholly-owned global advertising agency networks, McCann-Erickson
WorldGroup and The Lowe Group, which includes Lowe Lintas & Partners Worldwide,
as well as four specialised communication services units, Western Initiative
Media Worldwide, Draft Worldwide, International Public Relations, Octagon and
other related companies.
The advertising agency business is the primary business of Interpublic. This
business is conducted throughout the world through McCann-Erickson WorldGroup
and The Lowe Group. Interpublic also carries on a media-buying business through
its ownership of Western Initiative Media Worldwide and its affiliates, a direct
and promotional marketing business through its ownership of Draft Worldwide, a
global public relations business through its ownership of International Public
Relations and a multinational sports and entertainment marketing business
through its ownership of Octagon. Other activities conducted by Interpublic
within the area of "marketing communications" include brand equity and corporate
identity services, graphic design and interactive services, management
consulting and market research, sales meetings and events, sales promotion and
other related specialised marketing and communications services.
Octagon was formed in 1997 following the acquisition by Interpublic of two
leading global sports marketing companies, Advantage International and API. It
was launched with the intention of creating an international group involved in
all aspects of global sports and entertainment marketing. Octagon operates in
the following areas: athlete representation, consultancy, event management,
property representation, television rights sales and distribution, television
production and archive, rights ownership and licensing and merchandising.
Octagon ranks among the top three sports marketing agencies in the world with
over 800 employees in 17 countries around the world.
Interpublic Common Stock is traded on the New York Stock Exchange and based on
the closing price of $39 1/8 per share of Interpublic Common Stock on 8 November
1999 (being the latest practicable date prior to the posting of this offer
document), Interpublic had a market value of approximately $11 billion.
For the year ended 31 December 1998, Interpublic reported net income of $309.9
million (1997: $200.4 million) on gross income of $4.0 billion (1997: $3.5
billion), reported net income per share of $1.14 (1997: $0.77) and paid
dividends of $0.29 per share (1997: $0.25). As at 31 December 1998,
Interpublic reported gross assets of $6.9 billion (1997: $6.0 billion).
For the six months ended 30 June 1999, Interpublic reported net income of
$184.2 million (1998: $156.3 million) on gross income of $2.1 billion (1998:
$1.9 billion) and reported net income per share of $0.67 (1998: $0.58). As at
30 June 1999, Interpublic reported gross assets of $7.7 billion (1998: $6.3
billion).
The figures above are extracted from the Forms 10-K and 10-Q of Interpublic
(which were based on numbers as of 31 December 1998 and 30 June 1999,
respectively, which were restated to adjust for previous acquisitions accounted
for as a pooling of interest under US GAAP).
For the nine months ended 30 September 1999, Interpublic reported net income of
$243 million (1998: $203 million) on gross income of $3.1 billion (1998:
$2.8 billion) and reported net income per share of $0.89 (1998: $0.75).
Where you can find additional information about Interpublic
Interpublic files annual, quarterly and special reports, proxy statements and
other information with the SEC. Brands Hatch Shareholders may read and copy any
materials Interpublic has filed with the SEC at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington D.C. 20549, USA. Brands Hatch
Shareholders may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-732-0330 (although the toll-free number is not
free of charge when accessed from outside the United States). The SEC maintains
an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that is filed electronically with the
SEC. Interpublic's filings with the SEC are also available at the website
maintained by SEC at http://www.sec.gov as well as from commercial document
retrieval services.
In addition, Interpublic will file a Registration Statement on Form S-4 to
register with the SEC the New Interpublic Common Stock to be delivered to
Brands Hatch Shareholders in exchange for their Brands Hatch
II-2
<PAGE>
Shares. This offer document will be a part of that Registration Statement and
will constitute a prospectus of Interpublic. As allowed by SEC rules, this offer
document does not contain all the information Brands Hatch Shareholders will be
able to find in the Registration Statement or the exhibits to the Registration
Statement.
Further, all of Interpublic's reports and statements filed with the SEC,
including, in due course, the Registration Statement on Form S-4 relating to
the Offer, may be inspected at the New York Stock Exchange at 11 Wall Street,
New York, New York 10005, USA.
The SEC allows Interpublic to "incorporate by reference" information in this
offer document, which means that Interpublic can disclose important information
to Brands Hatch Shareholders by referring them to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this offer document, except for any information superseded by
information in this offer document. This offer document incorporates by
reference the documents set forth below that Interpublic has previously filed
with the SEC. These documents contain important information about Interpublic
and its finances.
Interpublic SEC Filings (File No. 1-6686) Period
Annual Report on Form 10-K Fiscal Year ended 31 December 1998
Quarterly Reports on Form 10-Q Quarters ended 31 March and
30 June 1999
Definitive Proxy Statement 1999 Annual Meeting of
Shareholders
Interpublic is also incorporating by reference additional documents that it
files with the SEC between the date of this offer document and the date the
Offer becomes or is declared wholly unconditional.
Brands Hatch Shareholders can obtain any of these documents through
Interpublic or the SEC. Documents incorporated by reference are available from
Interpublic without charge, excluding all exhibits unless Interpublic has
specifically incorporated by reference an exhibit in this offer document.
Brands Hatch Shareholders also may obtain documents incorporated by reference
in this offer document by either inspecting them during normal business hours
on any weekday (public holidays excepted) while the Offer remains open for
acceptance or requesting them in writing or orally from Interpublic or its
legal counsel in the United Kingdom, Lovell White Durrant, at the following
addresses and telephone numbers:
The Interpublic Group of Companies, Inc. Lovell White Durrant
1271 Avenue of the Americas 65 Holborn Viaduct
New York, New York 10020 London
USA EC1A 2DY
Attention: Nicholas J. Camera, Esq. Attention: John Davidson, Esq.
Telephone:0 +1 212 399 8000 Telephone:0 020 7236 0066
Brands Hatch Shareholders may rely only on the information concerning
Interpublic contained or incorporated by reference in this Offer in determining
whether to accept the Offer. Interpublic has not authorised anyone to provide
Brands Hatch Shareholders with information that is different from what is
contained in this offer document. This offer document is dated 9 November 1999.
Brands Hatch Shareholders should not assume that the information contained in
this offer document is accurate as of any date other than such date, and
neither the mailing of this offer document to Brands Hatch Shareholders nor the
delivery of New Interpublic Common Stock in exchange for Brands Hatch Shares
will create any implication to the contrary.
II-3
<PAGE>
2. Preliminary announcement of Interpublic's third quarter 1999 financial
results
On 27 October 1999, Interpublic announced its unaudited third quarter 1999
financial results. The following information summarizes those results:
INTERPUBLIC AND ITS SUBSIDIARIES
CONSOLIDATED SUMMARY OF EARNINGS
THIRD QUARTER REPORT 1999 AND 1998 (UNAUDITED)
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
% Change
Third Quarter Favorable
1999 1998(a) (Unfavorable)
<S> <C> <C> <C>
Gross Income:
United States $ 565,041 $ 460,626 22.7
International 478,962 449,904 6.5
------------------- -------------------
Total Gross Income $ 1,044,003 $ 910,530 14.7
Costs and Expenses $ 914,821 $ 804,912 (13.7)
Interest Expense $ 17,478 $ 16,029 (9.0)
------------------- -------------------
Income Before Provision for Income Taxes $ 111,704 $ 89,589 24.7
Provision for Income Taxes $ 47,698 $ 38,604 (23.6)
Net Equity Interests(b) $ (4,962) $ (3,997) (24.1)
Net Income $ 59,044 $ 46,988 25.7
Per Share Data:
Basic EPS $ .22 $ .17 29.4
Diluted EPS(c) $ .21 $ .17 23.5
Dividend per share $ .085 $ .075 13.3
Weighted Average Shares:
Basic 274,301,278 270,915,168
Diluted 284,743,575 280,464,242
</TABLE>
<TABLE>
<CAPTION>
% Change
Nine Months Ended September 30 Favorable
1999 1998(a) (Unfavorable)
<S> <C> <C> <C>
Gross Income:
United States $ 1,646,281 $ 1,421,066 15.8
International 1,457,235 1,352,889 7.7
------------------- -------------------
Total Gross Income $ 3,103,516 $ 2,773,955 11.9
Costs and Expenses $ 2,618,122 $ 2,365,428 (10.7)
Interest Expense $ 47,921 $ 43,394 (10.4)
------------------- -------------------
Income Before Provision for Income Taxes $ 437,473 $ 365,133 19.8
Provision for Income Taxes $ 180,192 $ 150,767 (19.5)
Net Equity Interests(b) $ (14,043) $ (11,128) (26.2)
Net Income $ 243,238 $ 203,238 19.7
Per Share Data:
Basic EPS $ .89 $ .75 18.7
Diluted EPS(c) $ .86 $ .72 19.4
Dividend per share $ .245 $ .215 14.0
Weighted Average Shares:
Basic 273,565,998 270,908,867
Diluted 284,086,231 281,068,263
</TABLE>
(a) All per share data adjusted to reflect 2 for 1 stock split effective July
15, 1999.
(b) Net equity interests is the equity in income of unconsolidated affiliates
less income attributable to minority interests of consolidated
subsidiaries.
(c) Includes the addback of restricted stock dividends in 1999 and 1998 and
interest on convertible subordinated debentures in 1999 year to date.
II-4
<PAGE>
3. Report of PricewaterhouseCoopers LLP, independent accountants
To the Board of Directors and Stockholders of
The Interpublic Group of Companies, Inc.
In our opinion, based upon our audits and the reports of other auditors, the
accompanying consolidated balance sheets and the related consolidated
statements of income, of cash flows, and of stockholders' equity and
comprehensive income present fairly, in all material respects, the financial
position of The Interpublic Group of Companies, Inc. and its subsidiaries (the
"Company") at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of International Public
Relations plc ("IPR"), a wholly-owned subsidiary, which statements reflect
revenues constituting approximately 6% and 7% of the related 1997 and 1996
consolidated financial statement total. Additionally, we did not audit the
financial statements of Hill, Holliday, Connors, Cosmopulos, Inc. ("Hill
Holliday"), a wholly-owned subsidiary, which statements reflect total net loss
constituting approximately 17% of the related 1997 consolidated financial
statement total. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for IPR and Hill Holliday, is based solely
on the reports of the other auditors. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the reports of
other auditors provide a reasonable basis for the opinion expressed above.
/s/ By: PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
New York, New York
February 19, 1999, except as to the stock split which is as of July 26,
1999.
REPORT OF INDEPENDENT AUDITORS TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
INTERNATIONAL PUBLIC RELATIONS PLC
We have audited the consolidated balance sheets of International Public
Relations plc and subsidiaries as of 31 December 1997 and 31 October 1996, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the two years in the periods ended 31 December 1997 and 31
October 1996, all expressed in pounds sterling. These financial statements,
which are not separately presented herein, are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom, which are similar to those generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Public Relations plc and subsidiaries at 31 December 1997 and 31 November 1996,
and the consolidated results of their operations and their cash flows for each
of the two years in the periods ended 31 December 1997 and 31 October 1996 in
conformity with generally accepted accounting principles in the United States.
Ernst & Young
London
3 February 1999
II-5
<PAGE>
Report of Independent Auditors
Board of Directors
Hill, Holliday, Connors, Cosmopulos, Inc.
We have audited the consolidated balance sheet of Hill, Holliday, Connors,
Cosmopulos, Inc. and Subsidiaries (the Company) as of December 31, 1997, and
the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the twelve-month period then ended (not
separately presented herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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 Hill,
Holliday, Connors, Cosmopulos, Inc. and Subsidiaries at December 31, 1997, and
the consolidated results of their operations and their cash flows for the
twelve-month period then ended, in conformity with generally accepted
accounting principles.
/s/Ernst & Young LLP
Boston, Massachusetts
March 13, 1998
II-6
<PAGE>
4. Audited annual consolidated financial statements
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents (includes
certificates of deposit:
1998 -- $152,064; 1997 -- $256,934) $ 808,803 $ 738,112
Marketable securities 31,733 31,944
Receivables (net of allowance for doubtful
accounts:
1998 -- $53,093; 1997 -- $44,110) 3,522,616 3,104,606
Expenditures billable to clients 276,610 242,965
Prepaid expenses and other current assets 137,183 115,895
-------------- --------------
Total current assets 4,776,945 4,233,522
-------------- --------------
Other Assets:
Investment in unconsolidated affiliates 47,561 46,665
Deferred taxes on income 97,350 75,661
Other investments and miscellaneous assets 299,967 223,832
-------------- --------------
Total other assets 444,878 346,158
-------------- --------------
Fixed Assets, at Cost:
Land and buildings 95,228 83,621
Furniture and equipment 650,037 554,608
-------------- --------------
745,265 638,229
Less: accumulated depreciation 420,864 365,877
-------------- --------------
324,401 272,352
Unamortized leasehold improvements 115,200 103,494
-------------- --------------
Total fixed assets 439,601 375,846
-------------- --------------
Intangible assets (net of accumulated
amortization:
1998 -- $504,787; 1997 -- $448,952) 1,281,399 1,027,917
-------------- --------------
Total Assets $ 6,942,823 $ 5,983,443
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
II-7
<PAGE>
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1998 1997
-------------- --------------
<S> <C> <C>
Current Liabilities:
Payable to banks $ 214,464 $ 187,820
Accounts payable 3,613,699 3,189,137
Accrued expenses 624,517 478,962
Accrued income taxes 205,672 161,236
-------------- --------------
Total current liabilities 4,658,352 4,017,155
-------------- --------------
Noncurrent Liabilities:
Long-term debt 298,691 317,268
Convertible subordinated debentures and
notes 207,927 201,768
Deferred compensation and reserve for
termination allowances 319,526 273,408
Accrued postretirement benefits 48,616 47,404
Other noncurrent liabilities 88,691 72,986
Minority interests in consolidated
subsidiaries 55,928 31,917
-------------- --------------
Total noncurrent liabilities 1,019,379 944,751
-------------- --------------
Stockholders' Equity:
Preferred Stock, no par value shares
authorized: 20,000,000
shares issued: none
Common Stock, $.10 par value shares
authorized: 550,000,000
shares issued:
1998 -- 291,445,158;
1997 -- 287,135,686 29,144 28,714
Additional paid-in capital 652,692 515,892
Retained earnings 1,101,793 871,844
Adjustment for minimum pension liability (36,612) (13,207)
Net unrealized gain on equity securities 9,889 12,405
Cumulative translation adjustment (133,753) (158,969)
-------------- --------------
1,623,153 1,256,679
Less:
Treasury stock, at cost:
1998 -- 12,374,344 shares;
1997 -- 10,542,092 shares 286,713 171,088
Unearned ESOP compensation --- 7,420
Unamortized expense of restricted stock
grants 71,348 56,634
-------------- --------------
Total stockholders' equity 1,265,092 1,021,537
Commitments and contingencies (See Note 14)
-------------- --------------
Total Liabilities and Stockholders' Equity $ 6,942,823 $ 5,983,443
============== ==============
</TABLE>
Information for 1997 has been restated to reflect the aggregate effect of the
acquisitions accounted for as poolings of interests.
All share data adjusted to reflect two-for-one stock split effective July
15, 1999.
II-8
<PAGE>
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS
SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Commissions and fees $ 3,844,340 $3,352,776 $2,874,417
Other income, net 124,388 129,608 109,482
-------------- -------------- --------------
Gross income 3,968,728 3,482,384 2,983,899
-------------- -------------- --------------
Salaries and related expenses 2,167,931 1,913,356 1,619,619
Office and general expenses 1,179,227 1,075,176 938,717
Interest expense 58,699 57,793 51,695
Special compensation charges --- 32,229 ---
-------------- -------------- --------------
Total costs and expenses 3,405,857 3,078,554 2,610,031
-------------- -------------- --------------
Income before provision for income taxes 562,871 403,830 373,868
Provision for income taxes 232,005 186,246 156,783
-------------- -------------- --------------
Income of consolidated companies 330,866 217,584 217,085
Income applicable to minority interests (28,125) (23,754) (14,914)
Equity in net income of unconsolidated affiliates 7,164 6,548 12,448
-------------- -------------- --------------
Net Income $ 309,905 $ 200,378 $ 214,619
-------------- -------------- --------------
Per Share Data:
Basic EPS $ 1.14 $ .77 $ .82
Diluted EPS $ 1.10 $ .74 $ .80
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Information for 1996 and 1997 has been restated to reflect the aggregate effect
of the acquisitions accounted for as poolings of interests.
All per share data adjusted to reflect two-for-one stock split effective July
15, 1999.
II-9
<PAGE>
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $309,905 $200,378 $214,619
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of fixed assets 103,029 84,371 69,997
Amortization of intangible assets 55,835 41,110 36,858
Amortization of restricted stock awards 20,272 16,222 14,451
Stock bonus plans/ESOP --- 1,389 4,067
Provision for deferred income taxes (12,941) 7,743 3,661
Noncash pension plan charges --- 16,700 ---
Equity in net income of unconsolidated affiliates (7,164) (6,548) (12,448)
Income applicable to minority interests 28,125 23,754 14,914
Translation losses/(gains) 1,847 (319) 3,262
Special compensation charges --- 31,553 ---
Net gain on investments (34,737) (44,626) (35,211)
Other 9,519 (11,092) 4,091
Change in assets and liabilities, net of acquisitions:
Receivables (243,966) (340,804) (291,351)
Expenditures billable to clients (25,988) (46,512) (26,809)
Prepaid expenses and other assets (38,613) (13,483) (39,188)
Accounts payable and accrued expenses 305,076 296,849 302,676
Accrued income taxes 20,108 2,311 27,015
Deferred compensation and reserve for termination allowances 14,398 18,397 (13,503)
-------------- -------------- --------------
Net cash provided by operating activities 504,705 277,393 277,101
-------------- -------------- --------------
Cash Flows from Investing Activities:
Acquisitions, net (121,751) (90,297) (55,833)
Capital expenditures (136,738) (107,065) (91,904)
Proceeds from sales of assets 27,483 114,023 40,146
Net proceeds from marketable securities 3,934 324 476
Investment in unconsolidated affiliates (16,660) (8,371) 17,210
-------------- -------------- --------------
Net cash used in investing activities (243,732) (91,386) (89,905)
-------------- -------------- --------------
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings 15,304 31,188 (28,450)
Proceeds from long-term debt 12,253 256,337 152,058
Payments of long-term debt (25,882) (31,223) (128,717)
Proceeds from ESOP 7,420 --- ---
Treasury stock acquired (164,928) (144,094) (86,949)
Issuance of common stock 33,688 37,750 20,091
Cash dividends -- Interpublic (76,894) (61,242) (51,786)
Cash dividends -- pooled companies (2,847) (10,770) (6,933)
-------------- -------------- --------------
Net cash (used in) provided by financing activities (201,886) 77,946 (130,686)
-------------- -------------- --------------
Effect of exchange rates on cash and cash equivalents 11,604 (41,892) (2,554)
-------------- -------------- --------------
Increase in cash and cash equivalents 70,691 222,061 53,956
Cash and cash equivalents at beginning of year 738,112 516,051 462,095
-------------- -------------- --------------
Cash and cash equivalents at end of year $808,803 $738,112 $516,051
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Information for 1996 and 1997 has been restated to reflect the aggregate effect
of the acquisitions accounted for as poolings of interest.
II-10
<PAGE>
FINANCIAL STATEMENTS
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND ITS
SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional Paid- Retained
Common Stock in Capital Earnings
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balances, December 31, 1997 $28,714 $515,892 $871,844
Comprehensive income:
Net income $309,905
Adjustment for minimum pension liability
Change in market value of securities available-for-sale
Foreign currency translation adjustment
---------------- ---------------- ----------------
Total comprehensive income
Cash dividends -- IPG (76,894)
Equity adjustments -- pooled companies (2,847)
Awards of stock under Company plans:
Achievement stock and incentive awards 274
Restricted stock, net of forfeitures 63 36,619
Employee stock purchases 26 13,325
Exercise of stock options, including tax benefit 123 42,518
Purchase of Company's own stock
Issuance of shares for acquisitions 43,062
Conversion of convertible debentures 3 1,002
Payments from ESOP
Par value of shares issued for two-for-one stock split 215 (215)
---------------- ---------------- ----------------
Balances, December 31, 1998 $29,144 $652,692 $1,101,793
---------------- ---------------- ----------------
Balances, December 31, 1996 $27,282 $246,063 $746,346
Comprehensive income:
Net income $200,378
Adjustment for minimum pension liability
Change in market value of securities available-for-sale
Foreign currency translation adjustment
---------------- ---------------- ----------------
Total comprehensive income
Cash dividends -- IPG (61,242)
Equity adjustments -- pooled companies (12,922)
Awards of stock under Company plans:
Achievement stock and incentive awards 787
Restricted stock, net of forfeitures 53 27,821
Employee stock purchases 23 9,684
Exercise of stock options, including tax benefit 138 40,855
Purchase of Company's own stock
Issuance of shares for acquisitions 49,877
Conversion of convertible debentures 443 118,357
Par value of shares issued for three-for-two stock split 59
Par value of shares issued for two-for-one stock split 716 (716)
Payments from ESOP
Special compensation charges 27,324
Deferred stock bonus charges (4,876)
---------------- ---------------- ----------------
Balances, December 31, 1997 $28,714 $515,892 $871,844
---------------- ---------------- ----------------
Balances, December 31, 1995 $17,926 $234,007 $600,720
Comprehensive income:
Net income $214,619
Adjustment for minimum pension liability
Foreign currency translation adjustment
---------------- ---------------- ----------------
Total comprehensive income
Cash dividends -- IPG (51,786)
Equity adjustments -- pooled companies (40,874) (7,982)
Awards of stock under Company plans:
Achievement stock and incentive awards 331
Restricted stock, net of forfeitures 49 22,831
Employee stock purchases 19 7,273
Exercise of stock options, including tax benefit 61 17,119
Purchase of Company's own stock
Issuance of shares for acquisitions 4,453
Conversion of convertible debentures 2 923
Par value of shares issued for three-for-two stock split 4,547 (4,547)
Payments from ESOP
Par value of shares issued for two-for-one stock split 4,678 (4,678)
---------------- ---------------- ----------------
Balances, December 31, 1996 $27,282 $246,063 $746,346
---------------- ---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated Unamortized
Other Expense of
Comprehensive Restricted Stock
Income (loss) Treasury Stock Grants
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balances, December 31, 1997 $(159,771) $(171,088) $(56,634)
Comprehensive income:
Net income
Adjustment for minimum pension liability (23,405)
Change in market value of securities available-for-sale (2,516)
Foreign currency translation adjustment 25,216
---------------- ---------------- ----------------
Total comprehensive income
Cash dividends -- IPG
Equity adjustments -- pooled companies
Awards of stock under Company plans:
Achievement stock and incentive awards 110
Restricted stock, net of forfeitures (2,406) (14,714)
Employee stock purchases
Exercise of stock options, including tax benefit
Purchase of Company's own stock (164,928)
Issuance of shares for acquisitions 51,599
Conversion of convertible debentures
Payments from ESOP
Par value of shares issued for two-for-one stock split
---------------- ---------------- ----------------
Balances, December 31, 1998 $(160,476) $(286,713) $(71,348)
---------------- ---------------- ----------------
Balances, December 31, 1996 $(96,972) $(49,082) $(47,350)
Comprehensive income:
Net income
Adjustment for minimum pension liability (228)
Change in market value of securities available-for-sale 12,405
Foreign currency translation adjustment (74,976)
---------------- ---------------- ----------------
Total comprehensive income
Cash dividends -- IPG
Equity adjustments -- pooled companies
Awards of stock under Company plans:
Achievement stock and incentive awards 175
Restricted stock, net of forfeitures (3,664) (9,284)
Employee stock purchases
Exercise of stock options, including tax benefit
Purchase of Company's own stock (144,094)
Issuance of shares for acquisitions 25,577
Conversion of convertible debentures
Par value of shares issued for three-for-two stock split
Par value of shares issued for two-for-one stock split
Payments from ESOP
Special compensation charges
Deferred stock bonus charges
---------------- ---------------- ----------------
Balances, December 31, 1997 $(159,771) $(171,088) $(56,634)
---------------- ---------------- ----------------
Balances, December 31, 1995 $(106,280) $--- $(39,664)
Comprehensive income:
Net income
Adjustment for minimum pension liability (3,891)
Foreign currency translation adjustment 13,199
---------------- ---------------- ----------------
Total comprehensive income
Cash dividends -- IPG
Equity adjustments -- pooled companies 40,874
Awards of stock under Company plans:
Achievement stock and incentive awards 103
Restricted stock, net of forfeitures (1,244) (7,686)
Employee stock purchases
Exercise of stock options, including tax benefit
Purchase of Company's own stock (86,949)
Issuance of shares for acquisitions (1,866)
Conversion of convertible debentures
Par value of shares issued for three-for-two stock split
Payments from ESOP
Par value of shares issued for two-for-one stock split
---------------- ---------------- ----------------
Balances, December 31, 1996 $(96,972) $(49,082) $(47,350)
---------------- ---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
Unearned ESOP
Plan Total
---------------- ----------------
<S> <C> <C>
Balances, December 31, 1997 $(7,420) $1,021,537
Comprehensive income:
Net income $309,905
Adjustment for minimum pension liability (23,405)
Change in market value of securities available-for-sale
Foreign currency translation adjustment 25,216
---------------- ----------------
Total comprehensive income $309,200
Cash dividends -- IPG (76,894)
Equity adjustments -- pooled companies (2,847)
Awards of stock under Company plans:
Achievement stock and incentive awards 384
Restricted stock, net of forfeitures 19,562
Employee stock purchases 13,351
Exercise of stock options, including tax benefit 42,641
Purchase of Company's own stock (164,928)
Issuance of shares for acquisitions 94,661
Conversion of convertible debentures 1,005
Payments from ESOP 7,420 7,420
Par value of shares issued for two-for-one stock split ---
---------------- ----------------
Balances, December 31, 1998 $--- $1,265,092
---------------- ----------------
Balances, December 31, 1996 $(7,800) $818,487
Comprehensive income:
Net income $200,378
Adjustment for minimum pension liability (228)
Change in market value of securities available-for-sale 12,405
Foreign currency translation adjustment (74,976)
---------------- ----------------
Total comprehensive income $137,579
Cash dividends -- IPG (61,242)
Equity adjustments -- pooled companies (12,922)
Awards of stock under Company plans:
Achievement stock and incentive awards 962
Restricted stock, net of forfeitures 14,926
Employee stock purchases 9,707
Exercise of stock options, including tax benefit 40,993
Purchase of Company's own stock (144,094)
Issuance of shares for acquisitions 75,454
Conversion of convertible debentures 118,800
Par value of shares issued for three-for-two stock split 59
Par value of shares issued for two-for-one stock split ---
Payments from ESOP 380 380
Special compensation charges 27,324
Deferred stock bonus charges (4,876)
---------------- ----------------
Balances, December 31, 1997 $(7,420) $1,021,537
---------------- ----------------
Balances, December 31, 1995 $(9,900) $696,809
Comprehensive income:
Net income $214,619
Adjustment for minimum pension liability (3,891)
Foreign currency translation adjustment 13,199
---------------- ----------------
Total comprehensive income $223,927
Cash dividends -- IPG (51,786)
Equity adjustments -- pooled companies (7,982)
Awards of stock under Company plans:
Achievement stock and incentive awards 434
Restricted stock, net of forfeitures 13,950
Employee stock purchases 7,292
Exercise of stock options, including tax benefit 17,180
Purchase of Company's own stock (86,949)
Issuance of shares for acquisitions 2,587
Conversion of convertible debentures 925
Par value of shares issued for three-for-two stock split ---
Payments from ESOP 2,100 2,100
Par value of shares issued for two-for-one stock split ---
---------------- ----------------
Balances, December 31, 1996 $(7,800) $818,487
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Information for 1995, 1996 and 1997 has been restated to reflect the aggregate
effect of the acquisitions accounted for as poolings of interests.
II-11
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of significant accounting policies
Nature of Operations
The Company is a worldwide provider of advertising agency and related services.
The Company conducts business through the following subsidiaries: McCann-
Erickson WorldGroup, Ammirati Puris Lintas, The Lowe Group, Western Initiative
Media Worldwide, DraftWorldwide, Allied Communications Group, Octagon,
International Public Relations and other related companies. The Company also
has arrangements through association with local agencies in various parts of
the world. Other "marketing communications" activities conducted by the Company
are market research, sales promotion, product development, direct marketing,
telemarketing, public relations and other related services.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, most of which are wholly owned. The Company also has certain
investments in unconsolidated affiliates that are carried on the equity basis.
The Company acquired five companies in 1998 which were accounted for as
poolings of interests. The Company's consolidated financial statements,
including the related notes, have been restated as of the earliest period
presented to include the results of operations, financial position and cash
flows of the 1998 pooled entities in addition to all prior pooled entities.
Short-term and Long-term Investments
The Company's investments in marketable and equity securities are categorized
as available-for-sale securities, as defined by Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities". Unrealized holding gains and losses are reflected
as a net amount as a separate component of stockholders' equity until realized.
The cost of securities sold is based on the average cost of securities when
computing realized gains and losses.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Translation of Foreign Currencies
Balance sheet accounts are translated principally at rates of exchange
prevailing at the end of the year except for fixed assets and related
depreciation in countries with highly inflationary economies which are
translated at rates in effect on dates of acquisition. Revenue and expense
accounts are translated at average rates of exchange in effect during each
year. Translation adjustments are included as a separate component of
stockholders' equity except for countries with highly inflationary economies,
in which case they are included in current operations.
Commissions, Fees and Costs
Commissions and fees are generally recognized when media placements appear and
production costs are incurred. Salaries and other agency costs are generally
expensed as incurred.
Depreciation and Amortization
Depreciation is computed principally using the straight-line method over
estimated useful lives of the related assets, ranging generally from 3 to 20
years for furniture and equipment and from 10 to 45 years for various component
parts of buildings.
Leasehold improvements and rights are amortized over the terms of related
leases. Company policy provides for the capitalization of all major
expenditures for renewal and improvements and for current charges to income for
repairs and maintenance.
Long-lived Assets
The excess of purchase price over the fair value of net tangible assets
acquired is amortized on a straight-line basis over periods not exceeding 40
years.
The Company evaluates the recoverability of the carrying value of long-lived
assets whenever events or changes in circumstances indicate that the net book
value of an operation may not be recoverable. If the sum of projected
II-12
<PAGE>
future undiscounted cash flows of an operation is less than its carrying value,
an impairment loss is recognized. The impairment loss is measured by the excess
of the carrying value over fair value based on estimated discounted future cash
flows or other valuation measures.
Income Taxes
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for income tax purposes.
Earnings per Common and Common Equivalent Share
As further discussed in Note 3, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share", in the fourth
quarter of 1997. Basic earnings per share is based on the weighted-average
number of common shares outstanding during each year. Diluted earnings per
share also includes common equivalent shares applicable to grants under the
stock incentive and stock option plans and the assumed conversion of
convertible subordinated debentures and notes, if they are determined to be
dilutive.
Treasury Stock
Treasury stock is acquired at market value and is recorded at cost. Issuances
are accounted for on a first-in, first-out basis.
Concentrations of Credit Risk
The Company's clients are in various businesses, located primarily in North
America, Latin America, Europe and the Pacific Region. The Company performs
ongoing credit evaluations of its clients. Reserves for credit losses are
maintained at levels considered adequate by management. The Company invests its
excess cash in deposits with major banks and in money market securities. These
securities typically mature within 90 days and bear minimal risk.
Segment Reporting
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures
about Segments of an Enterprise and Related Information," which changes the way
public companies report financial and descriptive information about their
operating segments. The Company provides advertising and many other closely
related marketing communications services. All of these services fall within
one reportable segment as defined in SFAS 131.
Retirement Plans
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132 (SFAS 132), "Employers' Disclosures about Pensions and Other
Postretirement Benefits". SFAS 132 does not change the measurement or
recognition of such plans, but does standardize the disclosure requirements for
pensions and other postretirement benefits to the extent practicable. SFAS 132
also requires disclosures of additional information about changes in benefit
obligations and fair values of plan assets, and eliminates certain other
disclosures that were previously required. The Company has adopted SFAS 132 for
its 1998 financial statements (See Note 8).
Reclassifications
Certain amounts for prior years have been reclassified to conform with current
year presentation.
2. Stockholders' Equity
On May 19, 1997, the stockholders approved an increase in the number of
authorized common shares from 150,000,000 shares to 225,000,000 shares. The
stockholders also approved a three-for-two stock split, effected in the form of
a 50% stock dividend paid on July 15, 1997 to stockholders of record as of June
27, 1997. The number of shares reserved for issuance pursuant to various plans
under which stock is issued was increased by 50%. The three-for-two stock split
has been reflected retroactively in the consolidated financial statements and
all per share data, shares, and market prices of the Company's common stock
included in the consolidated financial statements and notes thereto have been
adjusted to give effect to the stock split.
The Company has a Preferred Share Rights Plan designed to deter coercive
takeover tactics. Pursuant to this plan, common stockholders are entitled to
purchase 1/100 of a share of preferred stock at an exercise price of $100 if a
person or group acquires or commences a tender offer for 15% or more of
Interpublic's common stock. Rights holders (other than the 15% stockholder)
will also be entitled to buy, for the $100 exercise price, shares of
Interpublic's common stock with a market value of $200 in the event a person or
group actually acquires 15% or more of Interpublic's common stock. Rights may
be redeemed at $.01 per right under certain circumstances.
II-13
<PAGE>
3. Earnings per share
In the fourth quarter of 1997, the Company adopted SFAS 128, which specifies
the method of computation, presentation and disclosure for earnings per share
(EPS). SFAS 128 replaces the presentation of primary EPS with basic EPS and
requires dual presentation of basic and diluted EPS. All prior period EPS data
has been restated to comply with SFAS 128.
In accordance with SFAS 128, the following is a reconciliation of the
components of the basic and diluted EPS computations for income available to
common stockholders:
FOR THE YEAR ENDED DECEMBER 31,
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1998 1997
Per Share Per Share
Income Shares Amount Income Shares Amount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to common stockholders $309,905 270,970,652 $1.14 $200,378 260,499,892 $0.77
Effect of Dilutive Securities:
Options 6,620,734 5,821,296
Restricted stock 541 3,453,838 447 3,277,294
3 3/4% Convertible subordinated debentures 5,320 5,929 8,020,582
Diluted EPS $310,446 281,050,544 $1.10 $206,754 277,619,064 $0.74
</TABLE>
<TABLE>
<CAPTION>
1996
Per Share
Income Shares Amount
---------- ---------- ----------
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $214,619 260,594,738 $0.82
Effect of Dilutive Securities:
Options 4,438,746
Restricted stock 384 3,211,128
3 3/4% Convertible subordinated debentures 6,410 8,933,004
Diluted EPS $221,413 277,177,616 $0.80
</TABLE>
The computation of diluted EPS for 1998 and 1997 excludes the assumed
conversion of the 1.80% Convertible Subordinated Notes (See Note 10), because
they were antidilutive.
4. Acquisitions
The Company acquired a number of advertising and communications companies
during the three-year period ended December 31, 1998. The aggregate purchase
price, including cash and stock payments, was $660 million, $302 million and
$173 million in 1998, 1997 and 1996, respectively. The aggregate purchase price
includes the value of stock issued for pooled companies.
In 1998, 14,956,534 shares of the Company's common stock were issued for
acquisitions accounted for as poolings of interests. The companies pooled and
the respective shares of the Company's common stock issued were: International
Public Relations -- 5,280,346 shares, Hill, Holliday, Connors, Cosmopulos, Inc.
("Hill Holliday") -- 4,124,868 shares, The Jack Morton Company -- 4,271,992
shares, Carmichael Lynch, Inc. -- 973,808 shares and KBA Marketing -- 305,520
shares.
The Company's consolidated financial statements, including the related notes,
have been restated as of the earliest period presented to include the results
of operations, financial position and cash flows of the above 1998 pooled
entities in addition to all prior pooled entities. A gross income and net
income reconciliation for the years ending December 31, 1997 and 1996 is
summarized below:
<TABLE>
<CAPTION>
Net Income/
Gross Income (Loss)
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
For the Year 1997:
As Reported $3,264,120 $205,033
Pooled Companies 218,264 (4,655)
As Restated $3,482,384 $200,378
For the Year 1996:
As Reported $2,786,655 $211,113
Pooled Companies 197,244 3,506
As Restated $2,983,899 $214,619
</TABLE>
The "As Reported" balances shown above reflect amounts previously reported,
which were restated to incorporate the results of three companies acquired in
April 1998 as well as all prior pooled entities. The "As Restated" balances
reflect the restatement for two companies pooled in the second half of 1998.
In 1998, the Company also paid $140 million in cash and issued 2,718,504 shares
of its common stock for acquisitions accounted for as purchases and equity
investments. These acquisitions included Gillespie, Ryan
II-14
<PAGE>
McGinn, CSI, Flammini, Gingko and Defederico and Herrero Y Ochoa. The Company
also recorded a liability for acquisition related deferred payments of $24
million.
In 1997, the Company issued 8,118,510 shares of its common stock for
acquisitions accounted for as poolings of interests. Some of the companies
pooled and the respective shares of the Company's common stock issued were:
Complete Medical Group -- 1,417,578 shares, Integrated Communications
Corporation -- 1,170,108 shares, Advantage International -- 1,158,412 shares
and Ludgate -- 1,078,918 shares. Additional companies accounted for as poolings
of interests include Adler Boschetto Peebles, Barnett Fletcher, Davies Baron,
Diefenbach Elkins, D.L. Blair, Rubin Barney & Birger, Inc. and Technology
Solutions Inc.
In 1997, the Company also paid $81 million in cash and issued 2,400,118 shares
of its common stock for acquisitions accounted for as purchases and equity
investments. These acquisitions included Marketing Corporation of America,
Medialog, The Sponsorship Group, Kaleidoscope and Addis Wechsler (51%
interest). The Company increased its interest in Campbell Mithun Esty by 25%.
The Company also recorded a liability for acquisition related deferred payments
of $38 million.
In 1996, the Company issued 7,039,694 shares of its stock for acquisitions
accounted for as poolings of interests. Pooled companies included DraftDirect
- -- 5,473,828 shares, The Weber Group -- 991,992 shares and Torre Renta Lazur --
573,874 shares.
During 1996, the Company paid $57 million in cash and issued 381,306 shares of
its common stock for acquisitions accounted for as purchases and equity
investments. These acquisitions included Angotti Thomas Hedge, Jay Advertising,
Media Inc., McAdams Healthcare, GGK (49% interest) and Goldberg Moser O'Neill
(49% interest).
Deferred payments of both cash and shares of the Company's common stock for
prior years' acquisitions were $75 million, $43 million, and $20 million in
1998, 1997 and 1996, respectively.
During 1998, the Company sold a portion of its investments in Applied Graphics
Technologies, Inc., CKS Group, Inc. and Lycos with combined proceeds of
approximately $20 million. These investments are being accounted for as
available-for-sale securities, pursuant to the requirements of SFAS 115. During
1997, the Company sold its investment in All American Communications, Inc. for
approximately $77 million. During 1996, the Company sold its 50% investment in
Mark Goodson Productions for approximately $29 million, a portion of its
investment in CKS Group, Inc. for $37.6 million and its investment in Spotlink
for $11.7 million in shares of the purchaser's common stock.
5. Provision for Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109 applies
an asset and liability approach that requires the recognition of deferred tax
assets and liabilities with respect to the expected future tax consequences of
events that have been recognized in the consolidated financial statements and
tax returns.
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Domestic $292,931 $174,177 $178,717
Foreign 269,940 229,653 195,151
-------------- -------------- --------------
Total $562,871 $403,830 $373,868
-------------- -------------- --------------
</TABLE>
II-15
<PAGE>
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Federal Income Taxes (Including Foreign Withholding Taxes):
Current $105,049 $ 68,920 $ 59,414
Deferred 3,669 4,312 (78)
-------------- -------------- --------------
108,718 73,232 59,336
============== ============== ==============
State and Local Income Taxes:
Current 21,285 22,350 20,759
Deferred 725 393 2,581
-------------- -------------- --------------
22,010 22,743 23,340
============== ============== ==============
Foreign Income Taxes:
Current 118,612 87,233 72,949
Deferred (17,335) 3,038 1,158
-------------- -------------- --------------
101,277 90,271 74,107
-------------- -------------- --------------
Total $232,005 $186,246 $156,783
============== ============== ==============
</TABLE>
At December 31, 1998 and 1997 the deferred tax assets/(liabilities) consisted
of the following items:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Postretirement/
postemployment
benefits $46,394 $40,978
Deferred compensation 34,285 25,468
Pension costs 13,715 12,094
Depreciation (6,102) (8,824)
Rent (6,424) (842)
Interest 4,598 2,056
Accrued reserves 8,569 11,708
Investments in equity
securities (10,677) (1,375)
Tax loss/tax credit
carryforwards 46,682 35,000
Other (2,279) (2,904)
-------------- --------------
Total deferred tax
assets 128,761 113,359
Deferred tax
valuation allowance 31,411 37,698
-------------- --------------
Net deferred tax
assets $97,350 $75,661
============== ==============
</TABLE>
The valuation allowance of $31.4 million and $37.7 million at December 31, 1998
and 1997, respectively, represents a provision for uncertainty as to the
realization of certain deferred tax assets, including U.S. tax credit and net
operating loss carryforwards in certain jurisdictions. The change during 1998
in the deferred tax valuation allowance primarily relates to changes in the
deferred compensation tax item, net operating loss carryforwards and tax
credits. At December 31, 1998, there was $6.9 million of tax credit
carryforwards with expiration periods through 2003 and net operating loss
carryforwards with a tax effect of $39.8 million with various expiration
periods. The Company has concluded that based upon expected future results, it
is more likely than not that the net deferred tax asset balance will be
realized.
II-16
<PAGE>
A reconciliation of the effective income tax rate as shown in the consolidated
statement of income to the federal statutory rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal income tax benefit 3.7 4.1 3.0
Impact of foreign operations, including withholding taxes 0.4 0.3 1.0
Goodwill and intangible assets 2.8 2.7 2.4
Effect of pooled companies (0.1) 3.9 1.1
Other (0.6) 0.1 (0.6)
-------------- -------------- --------------
Effective tax rate 41.2% 46.1% 41.9%
-------------- -------------- --------------
</TABLE>
The total amount of undistributed earnings of foreign subsidiaries for income
tax purposes was approximately $497.6 million at December 31, 1998. No
provision has been made for foreign withholding taxes or United States income
taxes which may become payable if undistributed earnings of foreign
subsidiaries were paid as dividends to the Company, since a major portion of
these earnings has been reinvested in working capital and other business needs.
The additional taxes on that portion of undistributed earnings which is
available for dividends are not practicably determinable.
6. Supplemental Cash Flow Information
For purposes of the consolidated statement of cash flows, the Company considers
all highly liquid investments with a maturity of three months or less to be
cash equivalents.
Income Tax and Interest Payments
Cash paid for income taxes was approximately $193.9 million, $126.9 million and
$106.9 million in 1998, 1997 and 1996, respectively. Interest payments were
approximately $37.2 million in 1998, $31.2 million in 1997 and $35.9 million in
1996.
Noncash Financing Activity
As more fully described in Note 10, during 1997 the Company redeemed all
outstanding issues under the 3 3/4% Convertible Subordinated Debentures due
2002. Substantially all of the outstanding debentures were converted into
approximately 4.3 million shares of the Company's common stock.
Acquisitions
As more fully described in Note 4, the Company issued 17,675,038 shares,
10,518,628 shares, and 7,421,000 shares of the Company's common stock in
connection with acquisitions during 1998, 1997 and 1996, respectively. Details
of businesses acquired in transactions accounted for as purchases were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Fair value of assets acquired $452,237 $263,312 $186,557
Liabilities assumed 184,187 89,686 106,289
-------------- -------------- --------------
Net assets acquired 268,050 173,626 80,268
Less: noncash consideration 86,446 76,794 7,568
Less: cash acquired 59,853 6,535 16,867
-------------- -------------- --------------
Net cash paid for acquisitions $121,751 $ 90,297 $ 55,833
============== ============== ==============
</TABLE>
The amounts shown above exclude acquisition related deferred payments due in
subsequent years, but include cash deferred payments of $55 million, $30
million and $18 million made during 1998, 1997 and 1996, respectively.
II-17
<PAGE>
7. Incentive Plans
The 1997 Performance Incentive Plan ("1997 PIP Plan"), approved by the
Company's stockholders in May 1997, replaced the Company's Management Incentive
Compensation Plan, Long-Term Performance Incentive Plan, 1996 Stock Incentive
Plan and the 1986 Stock Incentive Plan ("Predecessor Plans"). Awards made under
the Predecessor Plans remain subject to their terms and conditions. The 1997
PIP Plan includes the following types of awards: (1) stock options, (2) stock
appreciation rights, (3) restricted stock, (4) phantom shares, (5) performance
units and (6) management incentive compensation performance awards.
The maximum number of shares of the Company's common stock which may be granted
in any year under the 1997 PIP Plan, excluding management incentive
compensation performance awards, is equal to a base amount (1.85% of the total
number of shares of the Company's common stock outstanding on the first day of
the year) supplemented by additional shares as defined in the 1997 PIP Plan
document. The 1997 PIP Plan also limits the number of shares available with
respect to stock option and stock appreciation rights awards made each year to
any one participant as well as the number of shares available under certain
types of awards.
The following discussion relates to transactions under the 1997 PIP Plan, the
Predecessor Plans and other incentive plans. Except as otherwise noted, awards
under the 1997 PIP Plan have terms similar to awards made under the respective
Predecessor Plans.
Stock Options
The 1997 PIP Plan provides for the granting of either incentive stock options
(ISOs) or nonstatutory options to purchase shares at the fair value of the
Company's common stock on the date of grant. The Compensation Committee of the
Board of Directors ( the "Committee"), is responsible for determining the
vesting terms and the exercise period of each grant within the limitations set
forth in the 1997 PIP Plan document.
Outstanding options are generally granted at the fair market value of the
Company's common stock on the date of grant and are exercisable based on a
schedule determined by the Committee. Generally, options become exercisable
between two and five years after the date of grant and expire ten years from
the date of grant.
The Company also maintains a stock plan for outside directors. Under this plan,
600,000 shares of common stock of the Company are reserved for issuance. Stock
options under this plan are awarded at the fair market value of the Company's
common stock on the date the option is granted. Options generally become
exercisable three years after the date of grant and expire ten years from the
date of grant.
Following is a summary of stock option transactions during the three-year
period ended December 31, 1998:
<TABLE>
<CAPTION>
Number of Weighted-
Shares Average
Under Option Exercise Price
----------------- -----------------
<S> <C> <C>
Balance, December 31, 1995 19,874,304 $9
Exercisable, December 31, 1995 9,076,966 6
New Awards 7,007,160 16
Exercised (1,815,732) 7
Cancelled (933,846) 11
Balance, December 31, 1996 24,131,886 11
Exercisable, December 31, 1996 7,692,004 7
----------------- -----------------
New Awards 4,421,960 19
Exercised (3,467,118) 8
Cancelled (1,042,320) 12
Balance, December 31, 1997 24,044,408 13
Exercisable, December 31, 1997 8,402,438 9
----------------- -----------------
New Awards 7,898,382 32
Exercised (2,990,006) 8
Cancelled (1,237,496) 15
Balance, December 31, 1998 27,715,288 19
Exercisable, December 31, 1998 5,977,438 9
----------------- -----------------
</TABLE>
II-18
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Range of Exercise Prices at 12/31/98 Life Price at 12/31/98 Price
-------------------------------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$4.33 to $9.99 4,699,944 3.25 $8 4,686,444 $8
10.00 to 14.99 5,351,452 6.04 11 1,248,094 11
15.00 to 17.49 6,470,246 7.44 16 42,900 16
17.50 to 34.60 11,193,646 9.34 28 --- ---
</TABLE>
Stock Appreciation Rights
The 1997 PIP Plan permits the Company to grant stock appreciation rights. A
stock appreciation right entitles the holder to receive an amount equal to the
fair market value of a share of common stock of the Company on the date of
exercise over a base price. No such awards have been made to date.
Restricted Stock
Various incentive plans, including the 1997 PIP Plan, incorporate the issuance
of restricted stock subject to certain restrictions and vesting requirements
determined by the Committee. The vesting period is generally five to seven
years. No monetary consideration is paid by a recipient for a restricted stock
award and the grant date fair value of these shares is amortized over the
restriction periods. The Committee is authorized to direct that discretionary
tax assistance payments may be made to recipients when the restrictions lapse.
Such payments are expensed as awarded. At December 31, 1998, there were a total
of 7,142,194 shares of restricted stock outstanding. During 1998, 1997 and
1996, the Company awarded 1,259,956 shares, 1,398,514 shares and 1,441,806
shares of restricted stock with a weighted-average grant date fair value of
$28.99, $19.48 and $15.57, respectively.
Restricted shares under the Outside Directors' Plan generally vest after five
years. At December 31, 1998, there were 36,000 shares of restricted stock
outstanding. During 1998, no shares were awarded under this Plan.
Phantom Shares
The 1997 PIP Plan permits the Company to grant phantom shares. A phantom share
represents the right of the holder to receive an amount determined by the
Committee based on the achievement of performance goals. No such grants have
been made under the 1997 PIP Plan.
Performance Units
The 1997 PIP Plan and its predecessor, the Long-Term Performance Incentive
Plan, permit the Company to grant performance units. Performance units
represent the contractual right of the holder to receive a payment that becomes
vested upon the attainment of performance objectives determined by the
Committee.
Grants consisting of performance units have been awarded to certain key
employees of the Company and its subsidiaries. The ultimate value of these
performance units is contingent upon the annual growth in profits (as defined)
of the Company, its operating components or both, over the 1995-1998 and 1997-
2000 performance periods. The awards are generally paid in cash. The projected
value of these units is accrued by the Company and charged to expense over the
four-year performance period.
The Company expensed $19.9 million in each of 1998 and 1997 and $13.6 million
in 1996 relating to performance units. As of December 31, 1998, the Company's
liability for the 1995-1998 and 1997-2000 performance periods was $54.7
million, which represents a proportionate part of the total estimated amounts
payable for the two performance periods. The Company's liability to
participants for the 1995-1998 performance period as of December 31, 1998 was
approximately $34.6 million.
Management Incentive Compensation Plan
Under the management incentive compensation component of the 1997 PIP Plan
management incentive compensation awards are made to selected employees of the
Company in the form of cash or stock, subject to the limitation that no
individual may receive in excess of $2 million and certain limitations on
common shares issued.
II-19
<PAGE>
Other Incentive Arrangements
Under the Employee Stock Purchase Plan (ESPP), employees may purchase common
stock of the Company through payroll deductions not exceeding 10% of their
compensation. The price an employee pays for a share of stock is 85% of the
market price on the last business day of the month. The Company issued 524,306
shares, 563,704 shares and 559,758 shares during 1998, 1997 and 1996,
respectively, under the ESPP. An additional 16,086,450 shares were reserved for
issuance at December 31, 1998.
Under the Company's Achievement Stock Award Plan, awards may be made up to an
aggregate of 3,744,000 shares of common stock together with cash awards to
cover any applicable withholding taxes. The Company issued 8,610 shares, 20,260
shares and 17,010 shares during 1998, 1997 and 1996, respectively, under this
Plan. The weighted-average fair value on the dates of grant in 1998, 1997 and
1996 was $28.35, $21.13 and $15.43, respectively.
SFAS 123 Disclosures
The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS
123), "Accounting for Stock-Based Compensation" in the fourth quarter of 1996.
As permitted by the provisions of SFAS 123, the Company applies APB Opinion 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for its stock-based employee compensation plans. Accordingly, no
compensation cost has been recognized for the Company's stock options or for
shares purchased under the ESPP. The cost recorded for restricted stock and
achievement stock awards in 1998, 1997 and 1996 was $20.5 million, $16.7
million and $14.5 million, respectively. If compensation cost for the Company's
stock option plans and its ESPP had been determined based on the fair value at
the grant dates as defined by SFAS 123, the Company's pro forma net income and
earnings per share would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
Net Income As reported $309,905 $200,378 $214,619
Pro forma $295,059 $190,542 $207,633
Earnings Per Share
Basic As reported 1.14 0.77 0.82
Pro forma 1.09 0.73 0.79
Diluted As reported 1.10 0.74 0.80
Pro forma 1.05 0.71 0.77
---------------- ---------------- ----------------
</TABLE>
For purposes of this pro forma information, the fair value of shares issued
under the ESPP was based on the 15% discount received by employees. The
weighted-average fair value (discount) on the date of purchase for stock
purchased under this Plan was $3.82, $2.68 and $2.30 in 1998, 1997 and 1996,
respectively.
For purposes of this pro forma information, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in 1998, 1997
and 1996, respectively: dividend yield of 0.95%, 1.3% and 1.41%; expected
volatility of 19.17%, 19.17% and 20.71%; risk-free interest rate of 4.87%,
6.51% and 6.43%; and expected life of six years for each of the three years.
The weighted-average fair value on the dates of grant for options granted in
1998, 1997 and 1996 was $8.85, $5.92 and $4.82, respectively. As required by
SFAS 123, this pro forma information is based on stock awards beginning in 1995
and accordingly is not likely to be representative of the pro forma effects in
future years because options vest over several years and additional awards
generally are made each year.
Hill Holliday Compensation Plans
Hill Holliday had an Equity Participation Plan (the "EPP") for various members
of management and certain agreements (the "Awards") with three key members of
their management, which provided for participants to receive a portion of the
proceeds in the event of the sale or merger of Hill Holliday. As a result of
the merger discussions initiated in November 1997 and the subsequent agreement
entered into on February 19, 1998, Hill Holliday recognized $26.0 million of
compensation expense based on management's assessment that as of December 31,
1997, it was probable that the obligations under the EPP and the Awards would
become payable. Also included in the special compensation charge was $.9
million related to the value of certain compensatory stock options and $.5
million related to other stock grants. The remaining balance of the special
charge consisted
II-20
<PAGE>
of $4.2 million of payments on a consulting and supplemental retirement
agreement under which no future services are expected, $1.0 million payable
under an employment agreement in the event of the sale of Hill Holliday and
$1.0 million of other expenses.
Carmichael Lynch, Inc. Compensation Plans
Carmichael Lynch maintained an Employee Stock Ownership Program ("ESOP") which
was funded by a loan in the original amount of $10.5 million and contributions
from Carmichael Lynch which were approximately $.7 million in 1997 and $2.4
million in 1996. At December 31, 1997, the loan had a balance of $7.4 million,
which was repaid from proceeds from the sale of Company stock received in the
merger, and the Plan was terminated. Carmichael Lynch also had a deferred stock
equivalent plan payable in cash or stock. In 1997, it was determined that the
units would be paid in cash and accordingly the balance of $4.9 million was
reclassified from "Additional Paid in Capital" to "Deferred Compensation". At
December 31, 1998, the outstanding units had been paid.
International Public Relations Compensation Plans
International Public Relations maintained several stock option plans, which
will expire in early 1999, and a maximum of 120,000 shares of the Company's
common stock may be issued on exercise of the options.
8. Retirement Plans
Defined Benefit Pension Plans
Through March 31, 1998 the Company and certain of its domestic subsidiaries had
a defined benefit plan ("Domestic Plan") which covered substantially all
regular domestic employees. Effective April 1, 1998 this Plan was curtailed,
and participants with five or less years of service became fully vested in the
Plan. Participants with five or more years of service as of March 31, 1998
retain their vested balances and participate in a new compensation plan. Under
the new plan, each participant's account will be credited with an annual
allocation, equal to the projected discounted pension benefit accrual plus
interest, while they continue to work for the Company. Participants in active
service will be eligible to receive up to ten years of allocations coinciding
with the number of years of service with the Company after March 31, 1998. As a
result of the change in the Domestic Plan, the Company recorded charges of
approximately $16.7 million in the fourth quarter of 1997.
The Company's policy was to fund pension costs as permitted by applicable tax
regulations. Pension costs were determined by the projected unit credit method
based upon career average pay. Funding requirements for the Domestic Plan were
determined using the accrued benefit unit credit method. Under the "cash
balance" formula, the participant's account balance was credited each year with
an amount equal to the percentage of the year's annual compensation, plus
interest credits.
The Company recorded a reduction to stockholders' equity for minimum pension
liability of $36.6 million, $13.2 million and $13.0 million in 1998, 1997 and
1996, respectively.
The Company also has several foreign pension plans in which benefits are based
primarily on years of service and employee compensation. It is the Company's
policy to fund these plans in accordance with local laws and income tax
regulations.
Net periodic pension costs for the Domestic Plan for 1998, 1997 and 1996
included the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $ 16 $ 4,179 $ 4,057
Interest cost 9,841 10,567 10,248
Expected return on plan assets (11,575) (11,011) (10,854)
Amortization of unrecognized transition obligation --- 1,887 1,887
</TABLE>
II-21
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C>
Amortization of prior service cost --- (1,276) (1,769)
Recognized actuarial loss 2,601 943 1,005
Curtailment charge --- 9,727 ---
---------------- ---------------- ----------------
Net periodic pension cost $ 883 $ 15,016 $ 4,574
---------------- ---------------- ----------------
</TABLE>
Net periodic pension costs for foreign pension plans for 1998, 1997 and 1996
included the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $ 6,847 $ 5,460 $ 5,130
Interest cost 10,908 10,633 10,150
Expected return on plan assets (9,437) (10,537) (9,112)
Amortization of unrecognized transition obligation 373 324 544
Amortization of prior service cost 482 552 732
Recognized actuarial (gain) (70) (1,440) (2,026)
Other --- --- (50)
---------------- ---------------- ----------------
Net periodic pension cost $ 9,103 $ 4,992 $ 5,368
---------------- ---------------- ----------------
</TABLE>
II-22
<PAGE>
The following table sets forth the change in the benefit obligation, the change
in plan assets, the funded status and amounts recognized for the pension plans
in the Company's consolidated balance sheet at December 31, 1998, and 1997:
<TABLE>
<CAPTION>
Domestic Foreign
Pension Plan Pension Plans
------------------------------------ ------------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation
Beginning obligation $ 134,347 $ 139,142 $ 179,016 $ 165,654
Service cost 16 4,179 6,847 5,460
Interest cost 9,841 10,567 10,908 10,633
Benefits paid (12,244) (17,016) (9,447) (11,677)
Participant contributions --- --- 1,606 1,311
Actuarial losses 26,363 6,070 29,882 18,022
Curtailment --- (8,595) --- ---
Currency effect --- --- 5,245 (10,387)
Other --- --- (3,093) ---
---------------- ---------------- ---------------- ----------------
Ending obligation 158,323 134,347 220,964 179,016
---------------- ---------------- ---------------- ----------------
Change in plan assets
Beginning fair value 115,943 112,284 145,942 136,575
Actual return on plan assets 11,932 14,346 17,363 18,309
Employer contributions 7,638 6,329 2,473 3,592
Participant contributions --- --- 1,606 1,311
Benefits paid (12,244) (17,016) (9,447) (11,677)
Currency effect --- --- 1,300 (4,427)
Other --- --- 2,738 2,259
---------------- ---------------- ---------------- ----------------
Ending fair value 123,269 115,943 161,975 145,942
---------------- ---------------- ---------------- ----------------
Funded status of the plans (35,054) (18,404) (58,989) (33,074)
Unrecognized net actuarial loss/(gain) 36,612 13,207 11,536 (12,711)
Unrecognized prior service cost --- --- 2,921 3,524
Unrecognized transition cost --- --- 3,796 2,980
---------------- ---------------- ---------------- ----------------
Net amount recognized $ 1,558 $ (5,197) $ (40,736) $ (39,281)
---------------- ---------------- ---------------- ----------------
</TABLE>
At December 31, 1998 and 1997, the assets of the Domestic Plan and the foreign
pension plans were primarily invested in fixed income and equity securities.
For the Domestic Plan, a discount rate of 6.75% in 1998, 7.25% in 1997 and 7.5%
in 1996 and a salary increase assumption of 6% in 1998, 1997 and 1996 were used
in determining the actuarial present value of the projected benefit obligation.
The expected return on Domestic Plan assets was 10% in 1998, 1997 and 1996. For
the foreign pension plans, discount rates ranging from 4.0% to 14% in 1998,
3.5% to 14% in 1997, and 5.5% to 12% in 1996 and salary increase assumptions
ranging from 2.0% to 10% in 1998, 1997, and 1996, were used in determining the
actuarial present value of the projected benefit obligation. The expected rates
of return on the assets of the foreign pension plans ranged from 2.0% to 14% in
1998, 3.5% to 14% in 1997, and 4.0% to 12% in 1996.
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the Domestic Plan were $158 million, $158 million and $123
million, respectively, as of December 31, 1998, and $134 million, $134 million,
and $116 million, respectively, as of December 31, 1997. The projected benefit
obligation, accumulated benefit obligation, and fair value of plan assets for
the foreign pension plans with accumulated benefit obligations in excess of
plan assets were $81.4 million, $74 million, and $3.3 million respectively, as
of December 31, 1998, and $74 million, $66 million, and $4.7 million
respectively, as of December 31, 1997.
II-23
<PAGE>
Other Benefit Arrangements
The Company also has special unqualified deferred benefit arrangements with
certain key employees. Vesting is based upon the age of the employee and the
terms of the employee's contract. Life insurance contracts have been purchased
in amounts which may be used to fund these arrangements.
In addition to the defined benefit plan described above, the Company also
sponsors a defined contribution plan ("Savings Plan") that covers substantially
all domestic employees of the Company and participating subsidiaries. The
Savings Plan permits participants to make contributions on a pre-tax and/or
after-tax basis. The Savings Plan allows participants to choose among several
investment alternatives. The Company matches a portion of participants'
contributions based upon the number of years of service. The Company
contributed $8.1 million, $6.3 million and $5.4 million to the Savings Plan in
1998, 1997 and 1996, respectively. One of the 1998 pooled companies also had a
defined contribution plan in which a percentage of the participants'
contributions were matched. Contributions were $.7 million, $2.2 million and
$2.4 million in 1998, 1997 and 1996, respectively.
Postretirement Benefit Plans
The Company and its subsidiaries provide certain postretirement health care
benefits for employees who were in the employ of the Company as of January 1,
1988, and life insurance benefits for employees who were in the employ of the
Company as of December 1, 1961. The plans cover certain employees in the United
States and certain key employees in foreign countries. Effective January 1,
1993, the Company's plan covering postretirement medical benefits was amended
to place a cap on annual benefits payable to retirees. The coverage is self-
insured, but is administered by an insurance company.
The Company accrues the expected cost of postretirement benefits other than
pensions over the period in which the active employees become eligible for such
postretirement benefits.
The components of periodic expense for these postretirement benefits for 1998,
1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $ 682 $ 612 $ 610
Interest cost 3,082 2,958 2,824
Amortization of prior service cost (934) (934) (934)
---------------- ---------------- ----------------
Total periodic expense $2,830 $2,636 $2,500
---------------- ---------------- ----------------
</TABLE>
II-24
<PAGE>
The following table sets forth the change in benefit obligation, change in plan
assets, funded status and amounts recognized for the Company's postretirement
benefit plans in the consolidated balance sheet at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Change in benefit obligation
Beginning obligation $ 41,637 $ 38,757
Service cost 682 612
Interest cost 3,082 2,958
Participant contributions 77 89
Benefits paid (1,695) (1,958)
Actuarial (gain)/loss (3,190) 1,179
---------------- ----------------
Ending obligation 40,593 41,637
---------------- ----------------
Change in plan assets
Beginning fair value --- ---
Actual return on plan assets --- ---
Employer contributions 1,618 1,869
Participant contributions 77 89
Benefits paid (1,695) (1,958)
---------------- ----------------
Ending fair value --- ---
---------------- ----------------
Funded status of the plans (40,593) (41,637)
Unrecognized net actuarial gain (5,195) (2,004)
Unrecognized prior service cost (2,829) (3,763)
---------------- ----------------
Net amount recognized $ (48,617) $ (47,404)
---------------- ----------------
</TABLE>
A discount rate of 6.75% in 1998, 7.25% in 1997 and 7.50% in 1996 and a salary
increase assumption of 6.0% in 1998, 1997 and 1996 were used in determining the
accumulated postretirement benefit obligation. An 8.0% and a 9.0% increase in
the cost of covered health care benefits was assumed for 1998 and 1997,
respectively. This rate is assumed to decrease incrementally to 5.5% in the
year 2002 and remain at that level thereafter. The health care cost trend rate
assumption does not have a significant effect on the amounts reported. For
example, a 1% increase in the health care cost trend rate would increase the
accumulated postretirement benefit obligation at December 31, 1998 by
approximately $2.8 million, and the combination of the service cost and the
interest cost for 1998 by approximately $.2 million. A 1% decrease in the
health care cost trend rate would decrease the accumulated postretirement
benefit obligation at December 31, 1998 by approximately $3.2 million, and the
combination of the service cost and the interest cost for 1998 by approximately
$.3 million.
Postemployment Benefits
In accordance with SFAS 112 "Employers' Accounting for Postemployment
Benefits", the Company accrues costs relating to certain benefits including
severance, workers' compensation and health care coverage over an employee's
service life.
The Company's liability for postemployment benefits totaled $50.3 million and
$56.7 million at December 31, 1998 and 1997, respectively, and is included in
deferred compensation and reserve for termination allowances. The net periodic
expense recognized in 1998, 1997 and 1996 was $32.2 million, $31.3 million and
$23.4 million, respectively.
9. Short-term borrowings
The Company and its domestic subsidiaries have lines of credit with various
banks. These credit lines permit borrowings at fluctuating interest rates
determined by the banks. Short-term borrowings by subsidiaries outside the
United States principally consist of drawings against bank overdraft facilities
and lines of credit. These borrowings bear interest at the prevailing local
rates. Where required, the Company has guaranteed the repayment of these
borrowings. Unused lines of credit by the Company and its subsidiaries at
December 31, 1998 and 1997 aggregated $458 million and $432 million,
respectively. The weighted-average interest rate on outstanding
II-25
<PAGE>
balances at December 31, 1998 was approximately 7.3%. Current maturities of
long-term debt are included in the payable to banks balance.
10. Long-term debt
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
(Dollars in thousands)
<S> <C> <C>
Convertible Subordinated Notes -- 1.80% $207,927 $201,768
Term loans -- 6.45% to 7.91% (6.45% to
14.0% in 1997) 255,000 276,833
Germany mortgage note payable -- 7.6% 31,680 29,846
Other mortgage notes payable and long-
term loans -- generally 2% to 10% 34,513 40,845
---------------- ----------------
529,120 549,292
Less: current portion 22,502 30,256
---------------- ----------------
Long-term debt $ 506,618 $ 519,036
---------------- ----------------
</TABLE>
On September 16, 1997, the Company issued $250 million face amount of
Convertible Subordinated Notes due 2004 ("2004 Notes") with a coupon rate of
1.80%. The 2004 Notes were issued at an original price of 80% of the face
amount, generating proceeds of approximately $200 million. The notes are
convertible into 6.6 million shares of the Company's common stock at a
conversion rate of 26.772 shares per $1,000 face amount. These shares have been
reserved for the conversion of the notes. The fair value of the 2004 Notes as
of December 31, 1998 was approximately $283 million and was determined by
obtaining quotes from brokers.
In the fourth quarter of 1997, the Company redeemed its 3 3/4% Convertible
Subordinated Debentures due 2002. Substantially all of the outstanding
debentures were converted into approximately 8.6 million shares of the
Company's common stock.
The decrease in term loans during 1998 was primarily due to the payment of
various loans with Prudential.
Under various loan agreements, the Company must maintain specified levels of
net worth and meet certain cash flow requirements and is limited in the level
of indebtedness. The Company has complied with the limitations under the terms
of these loan agreements.
Long-term debt maturing over the next five years is as follows: 1999 -- $22.5
million; 2000 -- $24.0 million; 2001 -- $25.5 million; 2002 -- $61.5 million;
2003 -- $30.4 million and $365.2 million thereafter.
All material long-term debt is carried in the consolidated balance sheet at
amounts which approximate fair values based upon current borrowing rates
available to the Company unless otherwise disclosed.
II-26
<PAGE>
11. Results by Quarter (Unaudited)
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter
---------------------------- ----------------------------
Restated As Reported Restated As Reported
------------ ------------ ------------ ------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
1998
Gross income $831,183 $775,300 $1,032,242 $972,363
Operating expenses 752,956 700,567 807,560 751,522
Interest expense 12,801 10,936 14,564 12,672
Income before provision for income taxes 65,426 63,797 210,118 208,169
Provision for income taxes 25,498 25,768 86,665 86,871
Net equity interests (2,189) (2,189) (4,942) (4,945)
------------ ------------ ------------ ------------
Net income $ 37,739 $ 35,840 $ 118,511 $116,353
------------ ------------ ------------ ------------
Per share data:
Basic EPS $.14 $.14 $.44 $.44
Diluted EPS $.13 $.13 $.41 $.41
Cash dividends per share $.065 $.065 $.075 $.075
Weighted average Shares:
Basic 270,374,096 264,788,230 271,437,338 265,851,472
Diluted 280,477,976 274,892,110 288,955,570 283,369,704
Stock price:
High $31 1/3 $31 1/3 $32 1/4 $32 1/4
Low $23 5/6 $23 5/6 $27 2/3 $27 2/3
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
3rd Quarter 4th Quarter
---------------------------- ------------
Restated As Reported
------------ ------------ ------------
(Dollars in thousands except per share data)
<S> <C> <C> <C>
1998
Gross income $910,530 $861,448 $1,194,773
Operating expenses 804,912 759,869 981,730
Interest expense 16,029 14,210 15,305
Income before provision for income taxes 89,589 87,369 197,738
Provision for income taxes 38,604 38,207 81,238
Net equity interests (3,997) (4,000) (9,833)
------------ ------------ ------------
Net income $ 46,988 $ 45,162 $ 106,667
------------ ------------ ------------
Per share data:
Basic EPS $.17 $.17 $.39
Diluted EPS $.17 $.16 $.37
Cash dividends per share $.075 $.075 $.075
Weighted average Shares:
Basic 270,915,168 265,585,008 271,156,006
Diluted 280,464,242 275,134,082 287,690,390
Stock price:
High $32 4/9 $32 4/9 $39 7/8
Low $26 $26 $23 1/2
------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter
------------------------- -------------------------
Restated As Reported Restated As Reported
----------- ----------- ----------- -----------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
1997
Gross income $730,068 $679,297 $881,316 $825,358
Operating expenses 660,541 614,874 701,278 649,291
Special compensation charges --- --- --- ---
Interest expense 12,406 10,698 13,113 11,306
Income before provision for income taxes 57,121 53,725 166,925 164,761
Provision for income taxes 22,524 21,590 66,901 66,428
Net equity interests (2,698) (2,704) (5,100) (5,113)
----------- ----------- ----------- -----------
Net income $ 31,899 $ 29,431 $ 94,924 $ 93,220
=========== =========== =========== ===========
Per share data:
Basic EPS $.12 $.12 $.37 $.37
Diluted EPS $.12 $.11 $.34 $.34
Cash dividends per share $.056 $.056 $.065 $.065
Weighted average Shares:
Basic 259,054,878 253,469,012 259,908,894 254,323,028
Diluted 266,924,378 261,338,512 277,675,446 272,089,580
Stock price:
High $18 7/24 $18 7/24 $20 17/24 $20 17/24
Low $16 1/8 $16 1/8 $17 13/24 $17 13/24
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
3rd Quarter 4th Quarter
------------------------- -------------------------
Restated As Reported Restated As Reported
----------- ----------- ----------- -----------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
1997
Gross income $787,151 $732,959 $1,083,849 $1,026,506
Operating expenses 713,034 660,465 913,679 850,181
Special compensation charges --- --- 32,229 32,229
Interest expense 15,967 14,343 16,307 14,227
Income before provision for income taxes 58,150 58,151 121,634 129,869
Provision for income taxes 27,246 26,124 69,575 70,085
Net equity interests (935) (942) (8,473) (8,487)
----------- ----------- ----------- -----------
Net income $ 29,969 $ 31,085 $ 43,586 $ 51,297
=========== =========== =========== ===========
Per share data:
Basic EPS $.12 $.12 $.17 $.20
Diluted EPS $.11 $.12 $.16 $.19
Cash dividends per share $.065 $.065 $.065 $.065
Weighted average Shares
Basic 259,742,388 254,156,522 263,293,410 257,707,544
Diluted 269,949,228 264,363,362 272,770,882 267,185,016
Stock price:
High $25 2/3 $25 2/3 $26 1/4 $26 1/4
Low $20 3/4 $20 3/4 $22 5/8 $22 5/8
----------- ----------- ----------- -----------
</TABLE>
The "As Reported" balances reflect amounts previously reported, which
incorporated the results of three companies acquired in April 1998 as well as
all prior pooled entities. The "Restated" balances reflect the restatement for
two companies pooled in the second half of 1998.
II-27
<PAGE>
12. Geographic Areas
Total assets, income from commissions and fees and income before provision for
income taxes are presented below by major geographic area:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Total Assets:
United States $3,506,826 $3,229,797 $2,500,938
-------------- -------------- --------------
International
United Kingdom 676,664 664,698 556,485
All other Europe 1,760,551 1,107,774 1,139,166
Asia Pacific 558,532 583,975 558,504
Latin America 313,615 257,730 224,683
Other 126,635 139,469 140,151
-------------- -------------- --------------
Total International 3,435,997 2,753,646 2,618,989
-------------- -------------- --------------
Total Consolidated $6,942,823 $5,983,443 $5,119,927
-------------- -------------- --------------
Income From Commissions and Fees:
United States $1,925,030 $1,670,555 $1,325,167
-------------- -------------- --------------
International
United Kingdom 387,618 301,883 244,066
All other Europe 880,919 748,720 723,329
Asia Pacific 325,758 348,707 338,416
Latin America 232,940 204,894 170,024
Other 92,075 78,017 73,415
-------------- -------------- --------------
Total International 1,919,310 1,682,221 1,549,250
-------------- -------------- --------------
Total Consolidated $3,844,340 $3,352,776 $2,874,417
-------------- -------------- --------------
Income Before Provision for Income Taxes:
United States $330,268 $216,057 $216,428
-------------- -------------- --------------
International
United Kingdom 47,788 23,102 19,006
All other Europe 140,749 110,376 85,910
Asia Pacific 53,658 53,414 57,617
Latin America 50,473 48,067 35,578
Other (1,366) 10,607 11,024
-------------- -------------- --------------
Total International 291,302 245,566 209,135
-------------- -------------- --------------
Items not allocated to operations, principally interest expense:
United States (37,337) (41,880) (37,711)
International (21,362) (15,913) (13,984)
-------------- -------------- --------------
Total Consolidated $562,871 $403,830 $373,868
-------------- -------------- --------------
</TABLE>
Commissions and fees are attributed to geographic areas based on where the
services are performed.
The largest client of the Company contributed approximately 7% in 1998, 10% in
1997 and 9% in 1996 to income from commissions and fees. The Company's second
largest client contributed approximately 5% in 1998, 6% in 1997 and 7% in 1996
to income from commissions and fees.
II-28
<PAGE>
Dividends received from foreign subsidiaries were approximately $51.1 million
in 1998, $40.8 million in 1997 and $35.2 million in 1996.
Consolidated net income includes losses from exchange and translation of
foreign currencies of $3.2 million, $5.6 million and $4.1 million in 1998, 1997
and 1996, respectively.
13. Financial Instruments
Financial assets, which include cash and cash equivalents, marketable
securities and receivables, have carrying values which approximate fair value.
Long-term equity securities, included in other investments and miscellaneous
assets in the Consolidated Balance Sheet, are deemed to be available-for-sale
as defined by SFAS 115 and accordingly are reported at fair value, with net
unrealized gains and losses reported within stockholders' equity. At December
31, 1998, long-term equity securities had a cost basis of $73 million with a
market value of $91 million, and an unrealized pre-tax gain of $18 million. At
December 31, 1997, the cost basis was $20 million with a market value of $42
million, and an unrealized pre-tax gain of $22 million.
Financial liabilities with carrying values approximating fair value include
accounts payable and accrued expenses, as well as payable to banks and long-
term debt. As of December 31, 1998, the 1.80% Convertible Subordinated Notes
due 2004 had a cost basis of $208 million with a market value of $283 million.
As of December 31, 1997, the cost basis was $202 million with a market value of
$208 million. The fair values were determined by obtaining quotes from brokers
(refer to Note 10 for additional information on long-term debt).
The Company occasionally uses forwards and options to hedge a portion of its
net investment in foreign subsidiaries and certain intercompany transactions in
order to mitigate the impact of changes in foreign exchange rates on working
capital. The notional value and fair value of all outstanding forwards and
options contracts at the end of the year as well as the net cost of all settled
contracts during the year were not significant.
The Company's management continuously evaluates and manages its exposure to
foreign exchange, economic and political risks. The foreign exchange crisis in
Asia had a minimal impact on the Company partly due to the agency systems'
contingency plans that included active hedging, repatriation of cash, cost-
cutting and limiting capital expenditures. Additionally, the Company believes
that the more recent economic developments in Brazil will not have a
significant impact.
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), which the Company is required
to adopt effective January 1, 2000. SFAS 133 will require the Company to record
all derivatives on the balance sheet at fair value. Changes in derivative fair
values will either be recognized in earnings as offsets to the changes in fair
value of related hedged assets, liabilities and firm commitments or, for
forecasted transactions, deferred and later recognized in earnings. The impact
of SFAS 133 on the Company's financial statements will depend on a variety of
factors, including future interpretative guidance from the FASB, the future
level of forecasted and actual foreign currency transactions, the extent of the
Company's hedging activities, the types of hedging instruments used and the
effectiveness of such instruments. However, the Company does not believe the
effect of adopting SFAS 133 will be material to its financial condition.
14. Commitments and Contingencies
At December 31, 1998 the Company's subsidiaries operating primarily outside the
United States were contingently liable for discounted notes receivable of $10.8
million.
The Company and its subsidiaries lease certain facilities and equipment. Gross
rental expense amounted to approximately $208 million for 1998, $217 million
for 1997 and $208 million for 1996, which was reduced by sublease income of $16
million in 1998, $30.5 million in 1997 and $29.1 million in 1996.
II-29
<PAGE>
Minimum rental commitments for the rental of office premises and equipment
under noncancellable leases, some of which provide for rental adjustments due
to increased property taxes and operating costs for 1999 and thereafter, are as
follows:
<TABLE>
<CAPTION>
Gross Rental Sublease
Period Commitment Income
- --------------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C>
1999 $187,472 $16,969
2000 167,548 14,357
2001 149,724 12,030
2002 126,489 9,366
2003 108,302 4,948
2004 and thereafter 445,604 6,844
</TABLE>
Certain of the Company's acquisition agreements provide for deferred payments
by the Company, contingent upon future revenues or profits of the companies
acquired.
The Company and certain of its subsidiaries are party to various tax
examinations, some of which have resulted in assessments. The Company intends
to vigorously defend any and all assessments and believes that additional taxes
(if any) that may ultimately result from the settlement of such assessments or
open examinations would not have a material adverse effect on the consolidated
financial statements.
15. Subsequent events
On March 25, 1999, the Board of Directors approved an increase in the number of
authorized common shares from 225,000,000 to 550,000,000 shares. On May 17,
1999, the Board of Directors announced a two-for-one stock split, effected in
the form of a stock dividend paid on July 15, 1999 to the stockholders of
record as of June 29, 1999. The number of shares reserved for issuance pursuant
to various plans under which stock is issued was increased by 100%. The two-
for-one stock split has been reflected retroactively in the consolidated
financial statements and all per share data, shares and market prices of the
Company's common stock included in the consolidated financial statements and
the notes thereto have been adjusted to give effect to the stock split.
II-30
<PAGE>
Selected Financial Data for five years
<TABLE>
<CAPTION>
Six months
ended June 30 For the financial year ended December 31
1999 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Operating Data
Gross income $2,059,513 $3,968,728 $3,482,384 $2,983,899 $2,606,467 $2,350,809
Operating expenses 1,703,300 3,347,158 2,988,532 2,558,336 2,257,138 2,059,233
Restructuring charge --- --- --- --- --- 48,715
Write-down of goodwill and other
related assets --- --- --- --- 38,687 ---
Special compensation charge --- --- 32,229 --- --- ---
Interest expense 30,443 58,699 57,793 51,695 47,940 41,500
Provision for income taxes 132,495 232,005 186,246 156,783 126,537 92,311
Income before effect of accounting
change 184,194 309,905 200,378 214,619 134,311 108,767
Effect of accounting change --- --- --- --- (34,325)
------------ ------------ ------------ ------------ ------------ ------------
Net Income $184,194 $309,905 $200,378 $214,619 $134,311 $74,442
Per Share Data
Basic Income before effect of
accounting change $0.67 $1.14 $0.77 $0.82 $0.53 $0.43
Effect of accounting change --- --- --- --- --- (0.13)
------------ ------------ ------------ ------------ ------------ ------------
Net Income $0.67 $1.14 $0.77 $0.82 $0.53 $0.30
Weighted-average shares 273,198,358 270,970,652 260,499,892 260,594,738 255,605,266 251,127,454
Diluted Income before effect of
accounting change $0.65 $1.10 $0.74 $0.80 $0.51 $0.42
Effect of accounting change --- --- --- --- --- (0.13)
------------ ------------ ------------ ------------ ------------ ------------
Net Income $0.65 $1.10 $0.74 $0.80 $0.51 $0.29
Weighted-average shares 290,450,560 281,050,544 277,619,064 277,177,616 263,609,246 257,917,658
Financial Position
Working capital $386,243 $118,593 $216,367 $128,808 $101,833 $56,748
Total assets 7,689,347 6,942,823 5,983,443 5,119,927 4,631,912 4,090,906
Long-term debt 847,444 506,618 519,036 418,618 361,945 320,902
Book value per share $4.77 $4.54 $3.70 $3.07 $2.60 $2.24
Other Data
Cash dividends (Interpublic) $43,755 $76,894 $61,242 $51,786 $46,124 $40,360
Cash dividends per share
(Interpublic) $0.16 $0.29 $0.25 $0.22 $0.20 $0.18
Number of employees 34,978 34,200 31,100 25,500 23,700 21,400
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
All periods prior to 1998 have been restated to reflect the aggregate effect of
acquisitions accounted for as poolings of interests.
1 Reflects the cumulative effect of adopting SFAS 112, "Employers' Accounting
for Postemployment Benefits."
II-31
<PAGE>
Vice Chairman's Report of Management
The financial statements, including the financial analysis and all other
information in this Annual Report, were prepared by management, who is
responsible for their integrity and objectivity. Management believes the
financial statements, which require the use of certain estimates and judgments,
reflect the Company's financial position and operating results in conformity
with generally accepted accounting principles. All financial information in
this Annual report is consistent with the financial statements.
Management maintains a system of internal accounting controls which provides
reasonable assurance that, in all material respects, assets are maintained and
accounted for in accordance with management's authorization, and transactions
are recorded accurately in the books and records. To assure the effectiveness
of the internal control system, the organizational structure provides for
defined lines of responsibility and delegation of authority.
The Finance Committee of the Board of Directors, which is comprised of the
Company's Chairman and Vice Chairman and three outside Directors, is
responsible for defining these lines of responsibility and delegating the
authority to management to conduct the day-to-day financial affairs of the
Company. In carrying out its duties, the Finance Committee primarily focuses on
monitoring financial and operational goals and guidelines; approving and
monitoring specific proposals for acquisitions; approving capital expenditures;
working capital, cash and balance sheet management; and overseeing the hedging
of foreign exchange, interest-rate and other financial risks. The Committee
meets regularly to review presentations and reports on these and other
financial matters to the Board. It also works closely with, but is separate
from, the Audit Committee of the Board of Directors.
The Company has formally stated and communicated policies requiring of
employees high ethical standards in their conduct of its business. As a further
enhancement of the above, the Company's comprehensive internal audit program is
designed for continual evaluation of the adequacy and effectiveness of its
internal controls and measures adherence to established policies and
procedures.
The Audit Committee of the Board of Directors is comprised of four directors
who are not employees of the Company. The Committee reviews audit plans,
internal controls, financial reports and related matters, and meets regularly
with management, internal auditors and independent accountants. The independent
accountants and the internal auditors have free access to the Audit Committee,
without management being present, to discuss the results of their audits or any
other matters.
The Company is addressing the Year 2000 Compliance Project with the
mobilization of required resources at the Corporate offices and all operating
units. Project plans have been developed to assess and prioritize the
operational applications, supplier and network compliance and required
remediation. The Audit Committee is overseeing the timely implementation and
completion of this project.
The independent accountants, PricewaterhouseCoopers LLP, were recommended by
the Audit Committee of the Board of Directors and selected by the Board of
Directors, and their appointment was ratified by the stockholders. The
independent accountants have examined the financial statements of the Company
and their opinion is presented on page II-5.
II-32
<PAGE>
5. Unaudited consolidated financial statements for the six months ended 30
June 1999
The following is the text of the unaudited financial statements for the quarter
ended 30 June 1999 extracted from the 10-Q filed by Interpublic with the SEC:
"CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(unaudited)
----------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (includes
certificates of deposit:
-- 1999-$303,125;
-- 1998-$152,064) $ 853,027 $ 808,803
Marketable securities, at cost which
approximates market 46,386 31,733
Receivables (less allowance for
doubtful accounts:
-- 1999-$46,466;
-- 1998-$53,093) 3,981,285 3,522,616
Expenditures billable to clients 340,145 276,610
Prepaid expenses and other current
assets 152,391 137,183
----------------- -----------------
Total current assets 5,373,234 4,776,945
----------------- -----------------
Other Assets:
Investment in unconsolidated
affiliates 57,532 47,561
Deferred taxes on income 93,926 97,350
Other investments and miscellaneous
assets 333,496 299,967
----------------- -----------------
Total other assets 484,954 444,878
----------------- -----------------
Fixed Assets, at cost:
Land and buildings 88,468 95,228
Furniture and equipment 667,243 650,037
----------------- -----------------
755,711 745,265
Less: accumulated depreciation 438,550 420,864
----------------- -----------------
317,161 324,401
Unamortized leasehold improvements 120,757 115,200
----------------- -----------------
Total fixed assets 437,918 439,601
----------------- -----------------
Intangible Assets (net of accumulated
amortization:
-- 1999-$536,282;
-- 1998-$504,787) 1,393,241 1,281,399
----------------- -----------------
Total Assets $7,689,347 $6,942,823
================= =================
</TABLE>
II-33
<PAGE>
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1999 19981
(unaudited)
----------------- -----------------
<S> <C> <C>
Current Liabilities:
Payable to banks $ 249,327 $ 214,464
Accounts payable 4,059,203 3,613,699
Accrued expenses 450,416 624,517
Accrued income taxes 228,045 205,672
----------------- -----------------
Total current liabilities 4,986,991 4,658,352
----------------- -----------------
Noncurrent Liabilities:
Long-term debt 335,997 298,691
Convertible subordinated notes 511,447 207,927
Deferred compensation and reserve
for termination liabilities 308,690 319,526
Accrued postretirement benefits 49,046 48,616
Other noncurrent liabilities 93,458 88,691
Minority interests in consolidated
subsidiaries 59,718 55,928
----------------- -----------------
Total noncurrent liabilities 1,358,356 1,019,379
----------------- -----------------
Stockholder' Equity:
Preferred Stock, no par value shares
authorized: 20,000,000
shares issued: none
Common Stock, $.10 par value
shares authorized: 550,000,000
shares issued:
1999 -- 295,179,952
1998 -- 291,445,158 29,518 29,145
Additional paid-in capital 759,097 652,692
Retained earnings 1,240,798 1,101,792
Accumulated other comprehensive
income (241,811) (160,476)
----------------- -----------------
1,787,602 1,623,153
Less: Treasury stock, at cost:
1999 -- 13,634,912 shares
1998 -- 12,374,344 shares 363,746 286,713
Unamortized expense of restricted
stock grants 79,856 71,348
----------------- -----------------
Total Stockholders' Equity 1,344,000 1,265,092
----------------- -----------------
Commitments and Contingencies
Total Liabilities and Stockholders'
Equity $7,689,347 $6,942,823
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1 All share data adjusted to reflect two-for-one stock split effective July 15,
1999.
II-34
<PAGE>
CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED JUNE 30
(Dollars in Thousands Except Per Share Data)
(unaudited)
<TABLE>
<CAPTION>
1999 1998(1)
-------------- --------------
<S> <C> <C>
Revenue $1,096,621 $1,003,090
Other income, net 37,812 29,152
-------------- --------------
Gross income 1,134,433 1,032,242
-------------- --------------
Costs and expenses:
Operating expenses 873,170 807,560
Interest 16,497 14,564
-------------- --------------
Total costs and expenses 889,667 822,124
-------------- --------------
Income before provision for income taxes 244,766 210,118
Provision for income taxes 98,878 86,665
-------------- --------------
Income of consolidated companies 145,888 123,453
Income applicable to minority interests (8,905) (6,360)
Equity in net income of unconsolidated
affiliates 2,426 1,418
-------------- --------------
Net income $ 139,409 $ 118,511
============== ==============
Weighted average shares:
Basic 273,862,855 271,437,338
Diluted 292,978,367 288,955,570
Earnings Per Share:
Basic $.51 $.44
Diluted $.49 $.42
Dividends per share $.085 $.075
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1 All share data adjusted to reflect two-for-one stock split effective July 15,
1999.
II-35
<PAGE>
CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30
(Dollars in Thousands Except Per Share Data)
(unaudited)
<TABLE>
<CAPTION>
1999 1998(1)
-------------- --------------
<S> <C> <C>
Revenue $2,004,702 $1,820,120
Other income, net 54,811 43,305
-------------- --------------
Gross income 2,059,513 1,863,425
-------------- --------------
Costs and expenses:
Operating expenses 1,703,300 1,560,516
Interest 30,443 27,365
-------------- --------------
Total costs and expenses 1,733,743 1,587,881
-------------- --------------
Income before provision for income taxes 325,770 275,544
Provision for income taxes 132,495 112,163
-------------- --------------
Income of consolidated companies 193,275 163,381
Income applicable to minority interests (12,505) (9,200)
Equity in net income of unconsolidated
affiliates 3,424 2,069
-------------- --------------
Net income $ 184,194 $ 156,250
============== ==============
Weighted average shares:
Basic 273,198,358 270,905,717
Diluted 290,450,560 281,370,273
Earnings Per Share:
Basic $.67 $.58
Diluted $.65 $.56
Dividends per share $.16 $.14
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1 All share data adjusted to reflect two-for-one stock split effective July 15,
1999.
II-36
<PAGE>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Net Income $139,409 $118,511
-------------- --------------
Other Comprehensive Income, net of tax:
Foreign Currency Translation Adjustments (20,189) (2,711)
Net Unrealized Gains/(Losses) on Securities (23,452) (3,206)
-------------- --------------
Other Comprehensive Income/(Loss) (43,641) (5,917)
-------------- --------------
Comprehensive Income $ 95,768 $112,594
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-37
<PAGE>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Net Income $184,194 $156,250
-------------- --------------
Other Comprehensive Income, net of tax:
Foreign Currency Translation Adjustments (80,656) (17,519)
Net Unrealized Gains/(Losses) on Securities (679) 955
-------------- --------------
Other Comprehensive Income/(Loss) (81,335) (16,564)
-------------- --------------
Comprehensive Income $102,859 $139,686
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-38
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $184,194 $156,250
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization of fixed
assets 52,200 46,380
Amortization of intangible assets 31,495 26,137
Amortization of restricted stock awards 12,227 9,582
Equity in net income of unconsolidated
affiliates (3,424) (2,069)
Income applicable to minority interests 12,505 9,200
Translation losses 798 (8,966)
Net gain from sale of investments (9,738) (6,255)
Other 1,429 (7,474)
Changes in assets and liabilities, net of
acquisitions:
Receivables (544,290) (231,002)
Expenditures billable to clients (61,063) (48,099)
Prepaid expenses and other assets (17,030) (24,245)
Accounts payable and other liabilities 355,862 139,303
Accrued income taxes 26,368 18,567
Deferred income taxes (1,387) 810
Deferred compensation and reserve for
termination allowances (366) 5,818
-------------- --------------
Net cash provided by operating activities 39,780 83,937
-------------- --------------
Cash Flows from Investing Activities:
Acquisitions (130,792) (58,583)
Proceeds from sale of investments 17,019 16,199
Capital expenditures (52,209) (60,376)
Net purchases of marketable securities (18,308) (21,939)
Other investments and miscellaneous assets (41,685) (8,452)
Investments in unconsolidated affiliates (4,160) (7,073)
-------------- --------------
Net cash used in investing activities (230,135) (140,224)
-------------- --------------
Cash Flows from Financing Activities:
Increase in short-term borrowings 45,704 88,206
Proceeds from long-term debt 354,078 7,078
Payments of long-term debt (5,791) (4,285)
Treasury stock acquired (126,977) (106,146)
Issuance of common stock 40,400 19,805
Cash dividends -- pooled companies --- (2,915)
Cash dividends -- Interpublic (43,755) (36,612)
-------------- --------------
Net cash provided by/(used in) financing
activities 263,659 (34,869)
-------------- --------------
Effect of exchange rates on cash and cash
equivalents (29,080) (7,965)
-------------- --------------
Increase/(decrease) in cash and cash
equivalents 44,224 (99,121)
Cash and cash equivalents at beginning of
year 808,803 738,112
-------------- --------------
Cash and cash equivalents at end of period $853,027 $638,991
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
(a) In the opinion of management, the consolidated balance sheet as of June
30, 1999, the consolidated income statements for the three months and six
months ended June 30, 1999 and 1998, the consolidated statement of
comprehensive income for the three months and six months ended June 30,
1999 and 1998, and the consolidated statement of cash flows for the six
months ended June 30, 1999 and 1998, contain all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at June 30,
1999 and for all periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted. It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements and notes
thereto included in the Interpublic Group of Companies, Inc.'s (the
"Company") December 31, 1998 annual report to stockholders.
(b) Statement of Financial Accounting Standards (SFAS) No. 95 "Statement of
Cash Flows" requires disclosures of specific cash payments and noncash
investing and financing activities. The Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents. Income tax cash payments were approximately $65.8 million
and $103.9 million in the first six months of 1999 and 1998,
respectively. Interest payments during the first six months of 1999 and
1998 were approximately $17.7 million and $20.8 million, respectively.
(c) In June 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133
will require the Company to record all derivatives on the balance sheet
at fair value. Changes in derivative fair values will either be
recognized in earnings as offsets to the changes in fair value of related
hedged assets, liabilities and firm commitments or, for forecasted
transactions, deferred and later recognized in earnings at the same time
as the related hedged transactions. The impact of SFAS 133 on the
Company's financial statements will depend on a variety of factors,
including future interpretative guidance from the FASB, the future level
of forecasted and actual foreign currency transactions, the extent of the
Company's hedging activities, the types of hedging instruments used and
the effectiveness of such instruments. However, the Company does not
believe the effect of adopting SFAS 133 will be material to its financial
condition. In June 1999, the FASB issued Statement of Financial
Accounting Standards No.137, "Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement
No. 133" ("SFAS 137"). SFAS 137 defers the effective date of SFAS 133 for
one year to fiscal years beginning after June 15, 2000.
(d) On May 17, 1999, the Board of Directors announced a 2 for 1 stock split,
payable July 15, 1999, to shareholders of record at the close of business
on June 29, 1999. All per share data has been restated in the
accompanying consolidated financial statements to reflect the 2 for 1
stock split.
II-40
<PAGE>
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
June 30
--------------- ---------------
1999 1998(1)
--------------- ---------------
<S> <C> <C>
Basic
Net income $139,409 $118,511
Weighted average number of common shares
outstanding 273,862,855 271,437,338
Earnings per common and common equivalent
share $.51 $.44
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30
--------------- ---------------
1999 1998(1)
--------------- ---------------
<S> <C> <C>
Diluted
Net income $139,409 $118,511
Add:
After tax savings on assumed conversion
of subordinated debentures and notes 2,813 2,132
Dividends paid net of related income tax
applicable to restricted stock 160 153
--------------- ---------------
Net income, as adjusted $142,382 $120,796
=============== ===============
Weighted average number of common shares
outstanding 273,862,855 271,437,338
Weighted average number of incremental
shares in connection with restricted
stock and assumed exercise of stock
options 10,302,720 10,820,290
Assumed conversion of subordinated
debentures and notes 8,812,792 6,697,942
--------------- ---------------
Total 292,978,367 288,955,570
=============== ===============
Earnings per common and common equivalent
share $.49 $.42
=============== ===============
</TABLE>
(1) All share data adjusted to reflect two-for-one stock split effective July
15, 1999.
II-41
<PAGE>
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Six Months Ended June 30
--------------- ---------------
1999 1998(1)
--------------- ---------------
<S> <C> <C>
Basic
Net income $184,194 $156,250
Weighted average number of common shares
outstanding 273,198,358 270,905,717
Earnings per common share $.67 $.58
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30
--------------- ---------------
1999 1998(1)
--------------- ---------------
<S> <C> <C>
Diluted
Net income $184,194 $156,250
Add:
After tax interest savings on assumed
conversion of subordinated debentures and
notes 3,898 ---
Dividends paid net of related income tax
applicable to restricted stock 303 276
--------------- ---------------
Net income, as adjusted $188,395 $156,526
=============== ===============
Weighted average number of common shares
outstanding 273,198,358 270,905,717
Weighted average number of incremental
shares in connection with restricted
stock and assumed exercise of stock
options 10,559,202 10,453,915
Assumed conversion of subordinated
debentures and notes 6,693,000 10,641
--------------- ---------------
Total 290,450,560 281,370,273
=============== ===============
Earnings per common and common equivalent
share $.65 $.56
=============== ===============
</TABLE>
Note: The computation of diluted EPS for 1999 and 1998 excludes the assumed
conversion of the 1.87% and 1.8% Convertible Subordinated Notes, respectively,
because they were anti-dilutive.
(1) All share data adjusted to reflect two-for-one stock split effective July
15, 1999."
II-42
Appendix III Further information on Brands Hatch
1. Business description III-2
2. Selected financial data III-8
3. Management's discussion and analysis of financial condition and
result of operations III-9
4. Report of Ernst & Young, independent auditors III-14
5. Audited annual consolidated financial statements III-15
6. Unaudited results for the six months ended 30 June 1999 III-32
III-1
<PAGE>
1. Business description
Introduction
The Brands Hatch Group is the largest single organiser and promoter of
motorsport in the United Kingdom, owning and operating four motorsport circuits
at the Brands Hatch Circuit, Oulton Park, Snetterton and Cadwell Park and two
karting venues in London and Milton Keynes. The Brands Hatch Group is also a
multi-site leisure operator, organising a wide range of activities which
include motor racing schools, corporate entertainment days, testing and
trackhire. The Brands Hatch Group provides its own catering and merchandising
operations for these events. Over the past ten years, the Brands Hatch Group
has organised and promoted an average of more than 150 motorsport events each
year.
Brands Hatch was incorporated and registered in England and Wales on 9 March
1995 as a private company (under registered number 3031120) with limited
liability under the Companies Act under the name Fetter Four Limited. Brands
Hatch changed its name to Brands Hatch Leisure Holdings Limited on 4 May 1995
and re-registered as a public limited company with the name Brands Hatch
Leisure PLC on 15 October 1996.
On 7 November 1996 Brands Hatch was admitted to the Official List.
History
Brands Hatch traces its history back to 1926 when the Brands Hatch Circuit was
first used for cycle racing. Gradually over the next 30 years the track was
developed and in 1956 Brands Hatch hosted its first Formula One event at the
Brands Hatch Circuit. In 1960, Brands Hatch built the Grand Prix Loop at the
Brands Hatch Circuit. In 1964 Brands Hatch hosted its first Grand Prix at the
Brands Hatch Circuit, by which time it had acquired its circuits at Snetterton
and Oulton Park.
In 1986 the Brands Hatch Circuit, Oulton Park and Snetterton were acquired by a
company controlled by Foulston family interests, creating the Brands Hatch
Group. The Brands Hatch Group acquired Cadwell Park in 1987. Nicola Foulston
joined the Brands Hatch Group in 1989 and became Chief Executive on 1 January
1990.
The Brands Hatch Group was acquired in April 1995 by a consortium of investors
led by Apax Partners. In August 1996 the Brands Hatch Group acquired the
freehold interests in all of the land occupied by its circuits and facilities.
Background to the British motorsport industry
In the United Kingdom, motor racing is governed by the Motor Sports Association
("MSA") and motorcycle racing by the Auto Cycle Union ("ACU"). The worldwide
governing body of the MSA is the Federation Internationale Automobiliste
("FIA") and the Federation Internationale Motorcycliste ("FIM") is the
worldwide governing body of the ACU. The FIA or FIM select the location for
international events. Motorsport clubs operate most of these events except
certain events that are organised by the MSA, such as the FIA Formula One
British Grand Prix. Motorsport clubs, in conjunction with British motorsport
circuits, apply to the UK governing bodies to receive permission to operate
events.
For each motorsport circuit, licences are required for national events from the
MSA or ACU and from the FIA/FIM for all international and World Championship
events. Licences are graded according to the suitability of the circuit to hold
events for different types of motor races and are granted after an annual or
bi-annual inspection of safety standards. Currently there are 17 MSA- or ACU-
licensed motorcar and motorcycle racing circuits in the United Kingdom.
Motor racing and motorcycle racing events are generally operated by clubs
affiliated with national governing bodies. Competitors in these events must
hold a valid competition licence issued by their national governing body.
Certain championships are commercially controlled by other organisations such
as TOCA, which controls the British Touring Car Championship, and SBK Superbike
International Limited, which controls the FIM World Superbike Championship. In
1999 the Brands Hatch Group organised 5 of the 13 British Touring Car events
held in the United Kingdom and organised the European round of the FIM
Superbike World Championship. The Brands Hatch Group expects to promote and
organise 124 events in 1999, the majority taking place between March and
October. By the end of September 1999, the Brands Hatch Group had organised
and/or promoted 105 events.
III-2
<PAGE>
Operations of the Brands Hatch Group
The Brands Hatch Group operates a wide range of leisure activities. Turnover
for the six months ended June 30 1999 was as follows:
<TABLE>
<CAPTION>
L'000 %
<S> <C> <C>
Motorsport events 2,828 27.0
Racing schools 2,635 25.0
Trackhire and testing 1,622 16.0
Corporate entertainment and catering 2,158 21.0
Karting 1,166 11.0
--------------------- ---------------------
Total turnover 10,409 100
</TABLE>
Motorsport events
The Brands Hatch Group has established a reputation for promoting and
organising major motorsport events that offer the customer value-for-money
entertainment. The Brands Hatch Group organises motorsport events at all of its
circuits, with the majority of its premier events held at the Brands Hatch
Circuit and Oulton Park. Revenue is generated through gate receipts, motorsport
club trackhire fees, hospitality packages, programme sales, advertising,
sponsorship and merchandising. In the six months to 30 June 1999, Oulton Park,
Snetterton and Cadwell Park generated approximately 48 per cent of the Brands
Hatch Group's motorsport turnover. Events are organised and promoted by the
Brands Hatch Group but operated by the respective motorsport club that hires
the track. The motorsport club that operates the event also takes primary
responsibility for the detailed on-track operation of the event. This
responsibility includes obtaining liability insurance, marshalling, safety and
timekeeping, in accordance with MSA and ACU regulations.
The Brands Hatch Group calendar of sporting events held at its circuits in 1999
includes:
The Superbike World Championship
The British Touring Car Championship
British Formula Three
The British Superbike Championship
FIA International Historic Superprix
The Brands Hatch Group places emphasis on promoting extra activities which
appeal to families as well as the motorsport enthusiasts. A range of additional
leisure activities facilities are normally available at events, broadening the
revenue-earning potential of these events. These additional leisure activities
and facilities include motorsport-related simulators, video and virtual-reality
games and Off-Road Experiences.
The Brands Hatch Group has a total of 102 hospitality suites at its four
motorsport circuits, 63 of which are currently leased on one- and two-year
contracts to a range of corporate and other clients and the remainder of which
are retained for hire on an event by event basis. In April 1998, the Brands
Hatch Group opened the Rally School at Oulton Park, which includes recently
refurbished hospitality suites in the pit lane of the circuit. In addition, in
April 1999 at Oulton Park, the Brands Hatch Group opened a new high-
specification multi-purpose hospitality centre, known as the Jackie Stewart
Business Centre.
Exhibition and trade stands are also available at each event organised by the
Brands Hatch Group. These are hired to sellers of a wide range of products,
both connected to and separate from the motorsport industry.
Racing schools
Over the last ten years the Brands Hatch Group has operated racing schools at
the Brands Hatch Circuit, Oulton Park and Snetterton. In 1994, the motor racing
schools were endorsed by Nigel Mansell, the former Formula I World Champion and
Indy Champion, under a ten-year licence agreement that allows the use of his
endorsement in the Brands Hatch Group's advertising and promotion and the use
of his name in connection with the Nigel Mansell Racing Schools.
The racing schools offer various packages, including basic and advanced courses
on BMW saloon cars and single-seater Formula First racing cars under the
guidance of qualified instructors. In 1998 the Brands Hatch Group introduced
the Ducati Experience and Driving Dynamics in association with BMW which is an
advanced driver training course.
III-3
<PAGE>
As well as the Nigel Mansell Racing Schools, the Brands Hatch Group offers
courses on either the Ducati 748 or Ducati 996 motorcycles at the Ducati
Experience with introductory and advanced courses at Cadwell Park, the Brands
Hatch Site and Oulton Park. In addition, the schools offer both corporate and
individual packages for racing courses for groups of up to 1,000 people at a
time.
In 1999, the Brands Hatch Group began to offer its new Supercar Experience,
which offers drivers the chance to test drive high-quality sports cars such as
the Ferrari F355, the Lotus Esprit, the Dodge Viper and the Porsche 911
Carrera.
Trackhire and testing
With its four circuits, the Brands Hatch Group believes that it offers the most
comprehensive trackhire and testing facilities in the United Kingdom. The
Brands Hatch Group offers the exclusive use of any of its four circuits for
hire to motor racing teams and vehicle manufacturers for vehicle testing,
product launches and motor dealer promotions. Trackhire includes the provision
of marshalling, medical facilities and supervision by the circuit's track
safety team.
The Brands Hatch Group also hires the tracks at its four circuits to motorsport
clubs for testing to enable drivers and riders with a competition licence to
test their cars and motorcycles.
Corporate entertainment and catering
The Brands Hatch Group provides corporate entertainment, principally at the
Brands Hatch Circuit but also at Oulton Park, Daytona Park Royal, London and
Milton Keynes and Snetterton. The entertainment is tailored to the client's
individual requirements and normally includes a combination of activities such
as the Nigel Mansell Racing School, the Rally School, Karting, Four Wheel
Driving, Autotest Cars and Quad Biking.
Marketing of corporate entertainment focuses on activities that the Brands
Hatch Group operates, although other activities such as hot-air ballooning and
helicopter rides are organised on request. The Brands Hatch Group's corporate
entertainment heavily emphasises participation and excitement. The Brands Hatch
Site and Oulton Park venues have facilities that can be used for conferences,
exhibitions and banqueting events, providing an additional stream of revenue.
The Brands Hatch Group provides a wide range of in-house catering facilities
which are available to users of hospitality suites and conference facilities as
well as spectators, customers of the racing schools and trackhire users. At
each circuit mobile catering facilities are available, most of which are sub-
contracted to third parties.
Karting
In February 1999 the Brands Hatch Group acquired Rebel, which operates the
Daytona Karting venues, an outdoor karting venue at Milton Keynes and an indoor
karting venue at Wood Lane, West London. The UK karting market is highly
fragmented and the quality of existing venues varies greatly. Through its
acquisition of Rebel and by retaining Rebel's management, the Brands Hatch
Group plans to offer high-quality karting venues in the major cities in the
United Kingdom, offering a reliable brand to compete in this market.
Other income
The Brands Hatch Group attracts corporate sponsorship for its motor racing,
motorcycle racing and rally schools, karting facilities and other activities at
the circuits.
The Brands Hatch Rally School is located alongside the Brands Hatch Circuit
using Cosworth rally motor cars on purpose-built rally stages. The Brands Hatch
Circuit facilities also include a kart track, a Land Rover four-wheel drive
area and an under-17 driver training program named "Earlydrive". Some of these
activities are used as part of the corporate entertainment packages.
The Brands Hatch Group attracts sponsorship for its motorsport events and for
the other activities it offers at the circuits by directly selling the right to
advertise in the event title, trackside and vehicle branding, programme
advertising and product display sites. The Brands Hatch Group generates
advertising income by selling trackside advertising and space in its fixture
book which is the yearly calendar of events of the Brands Hatch Group and is
distributed both at events and to the contacts listed in the Brands Hatch
Group's marketing database. The Brands Hatch Group often sells this advertising
as part of an overall event sponsorship package.
The Brands Hatch Group currently generates a modest amount of income from the
sale of motorsport merchandise at its circuits, particularly "Brands Hatch"
clothing and related items.
III-4
<PAGE>
Safety and insurance
The Brands Hatch Group considers the safety of all of their customers of utmost
importance and maintains a strict and comprehensive health and safety policy.
For United Kingdom circuits, circuit safety is governed by the MSA and the ACU,
which will only grant a licence to operate circuits if they are satisfied that
the circuits meet the required safety standards. In addition, the MSA and the
ACU operate an insurance master policy covering claims made against themselves,
the motor racing clubs and the Brands Hatch Group and its four circuits.
For all other activities the Brands Hatch Group provides appropriate safety
insurance coverage, including marshalling and medical cover and on-site medical
personnel. All clients participating in activities are briefed and supervised
by qualified instructors. In addition the Brands Hatch Group maintains public
liability insurance coverage.
Sales and marketing
The Brands Hatch Group operates a proactive sales and marketing department to
promote its activities and the quality and reputation of the "Brands Hatch"
name. The Brands Hatch Group's telesales department deals with the sale of the
Brands Hatch Group's activities as well as spectator tickets for motorsport
events. The activities are often sold as gift packages through the "Brands
Hatch" gift brochure. The Brands Hatch Group's market database includes over
200,000 individuals and corporate entities who have previously used, or
expressed an interest in using, the Brands Hatch Group's facilities.
Additionally, in 1998 the Brands Hatch Group launched the Brands Hatch Club,
which offers various levels of membership from social through to "On-Track"
driving and in 1998 attracted 2,500 members.
The Brands Hatch Group promotes its activities to the corporate market either
as corporate entertainment or advertising and sponsorship opportunities. The
corporate sales team consists of 18 salespersons who receive incentives in the
form of commissions on the sales they make. The team arranges corporate
packages at all the circuits and also hires out the circuits for corporate
promotional activities. At the beginning of each year the Brands Hatch Group
produces its fixture book which details the upcoming season's events,
activities and corporate information.
Competition
The Brands Hatch Group believes that it competes successfully in terms of
motorsport events with other motorsport locations in the United Kingdom through
the effective use of its brand name and its wide geographical coverage in the
United Kingdom.
The corporate entertainment sector is very competitive, although if the
entertainment sought involves motorsport the competition is significantly
reduced. The Brands Hatch Group endeavours to make its facilities more
attractive and flexible than those of its competitors and believes that it
competes successfully in the corporate motorsport and entertainment sector.
Freehold properties
The Brands Hatch Group holds four freehold properties on which it operates its
circuits, activities and events.
The Brands Hatch Circuit
The Brands Hatch Circuit in Kent is one of the leading motor racing circuits in
the United Kingdom. It is 20 miles from central London and is easily accessible
by road or rail. The 400 acre site contains a 2.60 mile circuit, including an
integral 1.20 mile Indy circuit which is licensed by both the FIA and the FIM
and, accordingly, is capable of holding most motor racing events, whether
national or international.
The circuit has a large variety of customer facilities, including hospitality
suites, grandstands, a pits complex, including the Nigel Mansell Racing School,
catering outlets, exhibition sites, conferencing facilities and parking
facilities. It is also the Brands Hatch Group's headquarters.
Oulton Park
The 275 acre site contains a 2.77 mile circuit incorporating the 1.70 mile
Fosters circuit which is licensed by both the MSA and the ACU and, accordingly,
can hold any national motor racing or motorcycle racing event. In addition, the
circuit has a pits complex in accordance with its grade of circuit licence and
other customer facilities including grandstands, hospitality suites and
catering outlets.
III-5
<PAGE>
Oulton Park is located in the North West of England, within 70 miles of
Manchester, Birmingham and Liverpool.
Snetterton
The 232 acre site contains a 1.95 mile circuit, which is licensed by both the
MSA and the ACU and, accordingly, can hold any national motor racing or
motorcycle racing event. In addition, the circuit has a pits complex in
accordance with its grade of circuit licence and other customer facilities
including grandstands, hospitality suites and catering outlets.
Snetterton is located in Norfolk, within 20 miles of Norwich.
Cadwell Park
The 180 acre site contains a 2.17 mile circuit, which is licensed by both the
MSA and the ACU to hold national motorcycle racing events and certain motor
racing events. The circuit's facilities include open seating and catering
outlets.
Cadwell Park is located in Lincolnshire within 50 miles of Grimsby, Hull and
Lincoln.
Leasehold properties
The Brands Hatch Group's leasehold properties comprise karting venues at Milton
Keynes, Wood Lane (West London) and Park Royal, London and are at market rents.
The Wood Lane lease ends shortly and Park Royal has been leased to replace it.
Employees
The total number of full-time employees of the Brands Hatch Group (excluding
casual flexi-staff on short fixed-term contracts), as at 30 June 1999, is shown
on the table below:
<TABLE>
<CAPTION>
<S> <C>
Administration 45
Sales and marketing 54
Operations 114
-------------------------------------
Total 213
=====================================
</TABLE>
In addition to the full-time employees above, the Brands Hatch Group uses self-
employed activity instructors and hires catering staff on a fixed-term contract
basis during the racing season.
The Brands Hatch Group does not recognise any unions. The Brands Hatch Group
considers its work relations with its employees to be good.
Legal proceedings
A claim for unfair dismissal was brought before the UK Employment Tribunal
against the Brands Hatch Group and Rebel on 29 September 1999 by the former
Chief Executive Officer of Rebel, now a subsidiary of the Brands Hatch Group.
The claim alleges constructive dismissal. The Brands Hatch Group believes that
it will be successful in defending this claim. However, if it is not, the
former Chief Executive Officer of Rebel may be entitled to receive a payment of
up to L1,708,750 in deferred consideration.
The Brands Hatch Group is not currently involved in any other legal or
arbitration proceedings that have had or may have a significant effect on its
financial position. The Brands Hatch Group also is not aware of any threatened
or potential legal or arbitration proceedings which could have a significant
effect on its financial position.
Nature of trading market
Brands Hatch Shares have been traded on the London Stock Exchange since 7
November 1996. There is no trading market for Brands Hatch Shares in the United
States.
As at 29 October 1999, there were no holders of record of Brands Hatch Shares
with registered addresses in the United States. Brands Hatch has advised
Interpublic that it is not aware of any beneficial owners of Brands Hatch
Shares in the United States. Certain US holdings may be held in nominee
accounts with registered addresses outside the United States.
III-6
<PAGE>
The following table sets out, for the quarters indicated, the reported highest
and lowest middle-market quotations for Brands Hatch Shares, as derived from
the Official List:
<TABLE>
<CAPTION>
Quarter pence per ordinary pence per ordinary
share low share high
<S> <C> <C>
1 July-30 September
1997 175.0 192.5
1 October-31 December
1997 160.0 190.0
1 January-31 March
1998 149.0 161.5
1 April-30 June 1998 155.5 199.0
1 July-30 September
1998 143.5 198.5
1 October-31 December
1998 154.5 166.0
1 January-31 March
1999 153.5 287.5
1 April-30 June 1999 297.5 361.0
</TABLE>
Current trading and recent developments
In its interim results statement for the six months ended 30 June 1999 made on
27 September 1999, the Chairman of Brands Hatch stated that strong organic
growth underpinned by Brands Hatch's capital investment programme and continued
investment in and training of its management team, coupled with many exciting
strategic developments, demonstrated the board's optimism about the future.
In an announcement on 14 May 1999, Brands Hatch announced that its subsidiary,
Brands Hatch Leisure Group Limited, had secured an exclusive contract with
Formula One Administration Limited to host the British Grand Prix at Brands
Hatch from 2002. In order to obtain approval for the changes to the Brands
Hatch Circuit that are required for the hosting of the British Grand Prix, a
planning application was made by Brands Hatch on 9 September 1999 to Sevenoaks
District Council.
III-7
<PAGE>
2. Selected financial data
<TABLE>
<CAPTION>
As of and for the six
months ended 30 June As of and for the financial year ended 31 December
L'000 1999 1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Profit and loss account data
Turnover 10,409 8,321 19,330 16,012 14,260 11,658 11,655
Operating profit 2,359 2,004 5,063 4,006 3,036 1,884 683
Profit on ordinary activities before
taxation 2,006 1,751 4,586 3,550 2,114 1,139 582
Profit for the period attributable to
ordinary shareholders 1,445 1,208 3,199 2,414 1,755 817 151
Earnings per share 6.6 5.5 14.6 11.1 9.5 --- ---
Dividends per share --- --- 4.0 3.7 0.5 --- ---
Balance sheet data
Total assets 55,114 33,688 46,480 29,814 26,973 12,938 11,731
Long-term obligations and redeemable
preference stock (9,493) (6,406) (9,131) (8,321) (8,853) (10,743) (3,824)
Net assets 35,401 19,388 33,957 18,179 16,581 (426) 5,477
</TABLE>
Note:
The earnings per share for the two years ended 31 December 1995 are not
directly comparable to subsequent periods due to changes in the capital
structure of Brands Hatch prior to its flotation in November 1996.
III-8
<PAGE>
3. Management's discussion and analysis of financial condition and result of
operations
You should read the following discussion in conjunction with the audited
consolidated financial statements of the Brands Hatch Group, including the
notes to the consolidated financial statements, included elsewhere in this
offer document. The consolidated financial statements of the Brands Hatch Group
have been prepared in accordance with UK GAAP. UK GAAP differs in certain
material respects from US GAAP. For a description of the material differences
between UK GAAP and US GAAP as they relate to the Brands Hatch Group, you
should refer to Note 26 to the audited annual consolidated financial
statements.
Overview
Brands Hatch opened its first motoring circuit in 1926 and hosted its first
Formula One event in 1956. Brands Hatch was incorporated and registered in
England and Wales on 9 March 1995 as a private company (under registered number
3031120) with limited liability under the Companies Act under the name Fetter
Four Limited. Brands Hatch changed its name to Brands Hatch Leisure Holdings
Limited on 4 May 1995 and re-registered as a public limited company with the
name Brands Hatch Leisure PLC on 15 October 1996.
On 7 November 1996 Brands Hatch was admitted to the Official List.
The Brands Hatch Group has made significant strides in creating new lines of
business such as the Ducati Experience, the Super Car Experience, Driving
Dynamics, karting activities and the Earlydrive programme. These expanded
activities have resulted in an increase in turnover from L14.3 million in 1996
to L19.3 million in 1998. In addition, the Brands Hatch Group's gross profit
has increased from L8.6 million in 1996 to L11.4 million in 1998. In that
period, the Brands Hatch Group made significant investments in its
infrastructure, particularly at Oulton Park and Snetterton. The Brands Hatch
Group's profit retained for the year in 1998 was L2.3 million, or 14.6 pence
per share.
Results of operations
Comparison of the six-month periods ended 30 June 1998 and 1999
Turnover
The Brands Hatch Group derives its turnover from its activities in the
promotion of motorsport events, the operation of leisure venues and the sale of
participatory leisure experiences to corporate and public customers.
In the first six months of 1999, the Brands Hatch Group's turnover amounted to
L10.4 million. This represented a 25.1 per cent increase in turnover for the
same period in 1998, in which turnover amounted to L8.3 million. This growth in
part reflects the acquisition of Rebel, which had turnover of L1.7 million in
the first six months of 1999, the introduction of the Supercar Experience and
the opening of the Jackie Stewart Business Centre at Oulton Park.
Cost of sales
Cost of sales principally includes costs of instructors, safety, maintenance,
automotive support and direct salaries.
In the first six months of 1999, the Brands Hatch Group's cost of sales was
L3.9 million, an increase of 21.2 per cent from L3.2 million in the same period
in 1998. This increase was principally a result of the increased activity
described above.
Administrative costs
Administrative costs, which include administrative salary costs, advertising
and promotion, depreciation and costs of maintenance of the Brands Hatch
Group's circuits and facilities, increased 25.9 per cent, from L3.3 million in
the first six months of 1998 to L4.2 million in the same period in 1999. This
increase principally reflected the ongoing investment in Brands Hatch's
management.
Other operating income
Other operating income in 1999 includes rental from industrial buildings, which
decreased 56.4 per cent, from L243,000 in the first six months of 1998 to
L106,000 in the same period in 1999. Other operating income in 1998 was higher
than in 1999 due to a one-off profit from the disposal of fixed assets in 1998.
Operating profit
Operating profit is stated after charging or crediting depreciation, operating
lease rentals of plant and equipment and other leases, and remuneration for
auditors. Operating profit increased 17.7 per cent, from L2.0 million in the
III-9
<PAGE>
first six months of 1998 to L2.4 million during the same period in 1999. This
increase in operating profit was primarily a result of the increased turnover
described above.
Interest receivable and interest payable and similar charges
Interest receivable decreased from L40,000 in the first six months of 1998 to
L1,000 in the same period in 1999. Interest payable and similar charges
increased 20.8 per cent, from L293,000 in the first six months of 1998 to
L354,000 in the same period in 1999. In the first six months of 1999, the
Brands Hatch Group drew down on its debt facilities in order to finance its
ongoing capital investment programme and its acquisition of Rebel.
Tax on profit on ordinary activities
Tax on profit on ordinary activities was equal to 28.0 per cent in the first
six months of 1999, compared to 31.0 per cent in the same period in 1998. The
statutory rate of corporation tax in the United Kingdom is 30 per cent.
Preference dividend on non-equity shares
No preference dividends on non-equity shares were paid in the first six months
of 1999 because there are no such shares.
Ordinary dividend on equity shares
No ordinary dividends on equity shares were paid in the first six months of
1999.
Earnings per share
Earnings per share increased 20.0 per cent, from 5.5 pence in the first six
months of 1998 to 6.6 pence in the same period in 1999.
Diluted earnings per share
Diluted earnings per share increased 18.2 per cent, from 5.5 pence in the first
six months of 1998 to 6.5 pence in the same period in 1999.
Comparison of years ended 31 December 1996, 1997 and 1998
Turnover
Total turnover grew 12.3 per cent, from L14.3 million in 1996 to L16.0 million
in 1997, and 20.7 per cent to L19.3 million in 1998.
Turnover in the events sector increased 4.0 per cent, from L5.3 million in 1996
to L5.5 million in 1997, and 20 per cent in 1998 to L6.6 million. Turnover in
testing and track hire increased 20 per cent, from L1.8 million in 1996 to
L2.16 million in 1997, and 27 per cent in 1998 to L2.7 million. Turnover from
activities offered by the Brands Hatch Group increased 23 per cent, from L3.9
million in 1996 to L4.7 million in 1997, and 13 per cent in 1998 to L5.4
million. Turnover generated by conferencing and catering activities increased
12 per cent, from L3.2 million in 1996 to L3.6 million in 1997, and 28 per cent
to L4.6 million in 1998.
Turnover growth in 1997 was stimulated by the new Brands Hatch Rally School and
the continued success of the Nigel Mansell Driving School. Turnover growth in
1998 reflected the success of various initiatives, including: a sales and
marketing focus on events, investment in Snetterton's pit facility and paddock,
which generated significant increases in testing and trackhire income,
continued growth of the new Brands Hatch Rally School with the introduction of
new Rally stages, and growth in the number of members of the corporate sales
team and focus on the conferencing market.
Cost of sales
Cost of sales increased 21.0 per cent from L5.7 million in 1996 to L6.9 million
in 1997, and 15.6 per cent to L8.0 million in 1998. The resultant gross margin
was 57.0 per cent in 1997 and 59.0 per cent in 1998. This increase was driven
in part by changes in the Brands Hatch Group's sales mix and by improved
efficiency in event and activity management.
Administrative costs
Administrative costs decreased 3.8 per cent from L5.8 million in 1996 to L5.6
million in 1997, and increased 21.7 per cent to L6.8 million in 1998. The
decrease in administrative costs in 1997 was primarily a result of a
III-10
<PAGE>
detailed cost containment exercise with a rationalisation of overhead base. The
increase in administrative costs in 1998 primarily reflected an increase in
staff principally in the area of sales and marketing.
Other operating income
Other operating income increased 68.3 per cent from L290,000 in 1996 to
L488,000 in 1997, and 5.7 per cent to L516,000 in 1998. The increases in other
operating income in 1997 and 1998 principally reflected the sale of surplus
fixed assets.
Operating profit
Operating profit increased 31.9 per cent from L3.0 million in 1996 to L4.0
million in 1997, and 26.3 per cent to L5.1 million in 1998. The increases in
operating profit in 1997 and 1998 were primarily attributable to turnover
growth, improved operating efficiencies and the cost containment exercise
described above.
Interest receivable and interest payable and similar charges
Interest receivable increased 18.4 per cent from L87,000 in 1996 to L103,000 in
1997, and decreased 29.1 per cent to L73,000 in 1998. The increase in interest
receivable in 1997 principally reflected interest received on the proceeds of
the sale of Brands Hatch's shares in connection with its 1996 flotation and
listing on the London Stock Exchange. The decrease in interest receivable in
1998 was primarily due to Brands Hatch's use of the cash received from the
proceeds of its 1996 listing.
Interest payable and similar charges decreased 44.6 per cent from L1.0 million
in 1996 to L0.6 million in 1997, and 1.6 per cent to L0.5 million in 1998.
Because of cash generated by the 1996 flotation of Brands Hatch's shares, the
Brands Hatch Group's borrowing needs declined in 1997, resulting in the
decrease in interest payable and similar charges. The decrease in interest
payable and similar charges in 1998 was due to better treasury management and
lower base lending rates in the United Kingdom. Interest payable was covered by
profit before interest 3.3 times in 1996, 8.8 times in 1997 and 10.6 times in
1998.
Tax on profit on ordinary activities
The Brands Hatch Group paid tax on profit on ordinary activities equal to
14.4 per cent in 1996, 32.0 per cent in 1997 and 30.2 per cent in 1998. The
statutory rate of corporation tax in the United Kingdom is 30 per cent. The
1996 effective tax rate reflected the resolution of outstanding tax matters
relating to previous periods.
Preference dividend on non-equity shares
The Brands Hatch Group paid a one-time preference dividend on non-equity shares
in 1996 of L55,000. No preference dividend on non-equity shares was paid in
1997 or 1998.
Ordinary dividend on equity shares
Ordinary dividend on equity shares increased 641.3 per cent from L109,000 in
1996 to L808,000 in 1997, and 8.4 per cent to L876,000 in 1998. The increases
in ordinary dividend on equity shares in 1997 and 1998 were principally due to
the Brands Hatch Group's progressive dividend policy.
Additional finance cost of non-equity shares
Additional finance cost of non-equity shares was L364,000 in 1996. This
represented the amortisation of redemption premium on preference shares. There
was no additional finance cost of non-equity shares recorded in 1997 or in
1998.
Earnings per share
Earnings per share increased 16.8 per cent from 9.5 pence in 1996 to 11.1 pence
in 1997, and 31.5 per cent to 14.6 pence in 1998.
Diluted earnings per share
Diluted earnings per share increased 15.8 per cent from 9.5 pence in 1996 to
11.0 pence in 1997, and 32.7 per cent to 14.6 pence in 1998.
Financial condition
As of 30 June 1999, the Brands Hatch Group's total long-term (non-current)
assets were L51.4 million, an increase of 18.0 per cent from 31 December 1998.
This increase was primarily due to the ongoing capital
III-11
<PAGE>
investment programme and the goodwill arising on the Rebel acquisition. Total
current assets amounted to L4.0 million, an increase of 38.0 per cent from 31
December 1998. This increase is primarily due to increased stocks, debtors and
prepayments resulting from the seasonality of the Brands Hatch Group's trading
cycle and its resultant increased turnover during the summer months.
Liquidity and capital resources
Cash inflow from operating activities remained unchanged from 1996 to 1997 at
L4.3 million, and increased to L5.0 million in 1998.
Cash outflow before financing was L13.4 million in 1996, which included L16.7
million in the purchase of fixed assets. Cash outflow before financing
decreased to L96,000 in 1997 and to L16,000 in 1998, primarily due to the
reinvestment of all available cash generation into the capital programme.
Net cash provided by financing activities amounted to L13.1 million in 1996,
due mainly to L20.2 million in cash proceeds generated by the issuance of
shares in the flotation of Brands Hatch and new long-term loans of L10.5
million. Net cash outflow from financing activities amounted to L8,000 in 1997
and L481,000 in 1998.
The Brands Hatch Group had L5.8 million in bank loans and overdraft facilities
outstanding in 1997 and L5.3 million in bank loans and overdraft facilities
outstanding in 1998. The bank loans of the Brands Hatch Group are secured by a
fixed and floating charge over its assets. The Brands Hatch Group has
significant surplus bank facilities available from the Bank of Scotland.
The principal financial commitment of the Brands Hatch Group consists of a
letter of credit to Formula One Administration Limited.
The Brands Hatch Group does not currently possess any derivative financial
instruments, derivative commodity instruments or any other financial
instruments that would expose the Brands Hatch Group to market risk.
The Brands Hatch Group believes that its existing cash and available lines of
credit, bank lending facilities and borrowings will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at
least 12 months from the date of this offer document. The Brands Hatch Group's
capital requirements will depend on a number of factors, including continued
capital investment and completion of its strategic projects.
Although the Brands Hatch Group believes that it has sufficient capital
resources to meet its anticipated working capital and capital expenditure
requirements for 12 months from the date of this offer document, unanticipated
events and opportunities may require it to procure additional financing. If
financing is not available when required or is not available on acceptable
terms, the Brands Hatch Group may be unable to develop or enhance its
activities or services or take advantage of business opportunities or respond
to competitive pressures. Any of these events could have a material and adverse
effect on the Brands Hatch Group's business, financial condition and results of
operations.
Year 2000 readiness
The Brands Hatch Group uses computer software, systems and microprocessors with
date-sensitive software that uses two digits rather than four digits to define
the year. This could result in the date "00" being recognised as the year 1900
instead of the year 2000. The operation of the Brands Hatch Group's business
depends not only on its own computer systems, but also to some degree on those
of its suppliers and customers. If the equipment the Brands Hatch Group uses is
unable to manage and manipulate data involving dates occurring beyond
31 December 1999 without functional or data abnormality and without inaccurate
results, then the Brands Hatch Group's results of operations, liquidity and
financial condition may be materially adversely affected. If customers or
suppliers on which the Brands Hatch Group relies materially fail to achieve
year 2000 compliance, then the Brands Hatch Group's business may be similarly
affected.
The Brands Hatch Group's year 2000 programme
The Brands Hatch Group has undertaken a full review of its operating systems to
assess the risks to its business in relation to year 2000 compliance. From this
review, a programme has been implemented and an executive director of the
Brands Hatch Group assigned to ensure that the Brands Hatch Group has reached
an acceptable state of readiness before the end of 1999.
The Brands Hatch Group is also a member of the Action 2000 Monitoring Scheme
established by the UK Government to assist companies in achieving year 2000
compliance.
The Brands Hatch Group's correction and testing programmes are completed, and
it believes that at least 98 per cent of its systems are already year 2000
compliant and its systems are expected to be 100 per cent compliant by 30
November 1999.
III-12
<PAGE>
In view of the progress the Brands Hatch Group has achieved to date, it does
not feel that there are any areas of significant exposure in its year 2000
programme that jeopardise its completion. During the remainder of 1999 there
will be some continuing infrastructure upgrades and systems changes, and these
are being monitored carefully to ensure that they do not adversely impact the
Brands Hatch Group's year 2000 compliance status.
The Brands Hatch Group has contacted all of its key suppliers, including its
key software supplier Ticketmaster, to ascertain the status of their year 2000
compliance. Based on the responses given by these suppliers, the Brands Hatch
Group believes that all of its key suppliers are year 2000 compliant.
The Brands Hatch Group has also considered non-information technology systems'
year 2000 compliance. These systems include lifts and other equipment in the
Brands Hatch Group's buildings and operations upon which its relies. The Brands
Hatch Group's approach has been to establish priorities among its buildings and
its components that may pose year 2000 compliance issues for it, and to test
these systems. The Brands Hatch Group has also contacted the suppliers of key
components, including lifts, security systems, fire monitoring and other
mechanical systems, to determine the status of year 2000 compliance of these
components. The Brands Hatch Group believes that all of these systems are year
2000 compliant.
The Brands Hatch Group's worst-case scenario
The Brands Hatch Group believes that the most likely worst-case scenario is
that short-term, localised disruptions to its business or processes will occur
in connection with the transition to the year 2000. In particular, there is the
possibility that Brands Hatch's Ticketmaster ticketing software would not
function and Brands Hatch would encounter problems selling tickets. The Brands
Hatch Group has, however, received confirmation from Ticketmaster that this
software is year 2000 compliant and has plans to use alternative ticketing
software suppliers in the worst-case scenario. The Brands Hatch Group does not
believe, however, that it will face systemic or long-term disruptions affecting
its operations as a whole.
The Brands Hatch Group's contingency plans
The Brands Hatch Group's year 2000 initiatives will continue through the first
quarter of 2000, and it believes that its programmes will minimise residual
risks associated with the transition to the year 2000. The Brands Hatch Group
has reviewed its existing disaster recovery procedures to evaluate their
appropriateness for the year 2000 transition and is adapting them as necessary.
The Brands Hatch Group has developed a contingency plan with Ticketmaster, and
hardware disaster recovery plans with Orbital Solutions.
Although the Brands Hatch Group does not anticipate any serious disruption to
its operations, it has developed contingency plans and transition plans and
will continue to update these as it becomes aware of new information. The
Brands Hatch Group's contingency plans are intended to minimise the risks to it
posed by third parties, including suppliers and customers, and from possible
systems errors despite the extensive testing completed as part of the systems-
assurance process. The Brands Hatch Group has identified the business processes
that it regards as critical to its operations, considered how these processes
may be disrupted and prepared response plans and options to address any
disruptions.
The cost of the Brands Hatch Group's year 2000 programme
The Brands Hatch Group estimates that the investment cost to it of its year
2000 programme will be approximately L0.3 million, of which L0.1 million was
spent in 1999. These costs include the purchase/replacement of systems hardware
and the modification of systems.
The Brands Hatch Group may be adversely affected by the broader scope of the
year 2000 issue
In common with all other businesses, the Brands Hatch Group is uncertain about
the broader scope of the year 2000 issue as this issue may affect it and third
parties, including the Brands Hatch Group's suppliers, business partners and
customers. Where it is able, the Brands Hatch Group is actively monitoring the
progress of national infrastructure year 2000 compliance programmes. The Brands
Hatch Group believes its actions should have the effect of reducing its year
2000 risks; however, it is unable to eliminate these risks or estimate their
ultimate impact on the Brands Hatch Group's operating results.
III-13
<PAGE>
4. Report of Ernst & Young, independent auditors
To the Board of Directors
Brands Hatch Leisure PLC
We have audited the accompanying consolidated balance sheets of Brands Hatch
Leisure PLC as at 31 December 1998 and 1997 and related consolidated statements
of income, total recognised gains and losses, changes in shareholders' equity
and cash flows for each of the three years in the period ended 31 December
1998. These financial statements are the responsibility of Brands Hatch Leisure
PLC's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conduct our audits in accordance with United Kingdom auditing standards,
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting policies used and
significant estimates made by the management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Brands
Hatch Leisure PLC at 31 December 1998 and 1997, and the consolidated results of
its operations and its consolidated cash flows for each of the three years in
the period ended 31 December 1998 in conformity with accounting principles
generally accepted in the United Kingdom which differ in certain respects from
those generally accepted in the United States (see Note 26 of Notes to the
Financial Statements).
Ernst & Young
London, England
19 February 1999
III-14
<PAGE>
5. Audited annual consolidated financial statements
The following have been extracted from the Financial Statements of Brands Hatch
(with the exception of the UK GAAP/US GAAP reconciliation in Note 26 of Notes
to the Financial Statements):
Consolidated profit and loss accounts
Year ended 31 December
<TABLE>
<CAPTION>
1998 1997 1996
Notes L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C> <C>
Turnover (2) 19,330 16,012 14,260
Cost of sales (7,973) (6,900) (5,699)
-------------- -------------- --------------
Gross profit 11,357 9,112 8,561
Administrative costs (6,810) (5,594) (5,815)
-------------- -------------- --------------
4,547 3,518 2,746
Other operating income (3) 516 488 290
-------------- -------------- --------------
Operating profit (4) 5,063 4,006 3,036
Interest receivable 73 103 87
Interest payable and similar charges (5) (550) (559) (1,009)
-------------- -------------- --------------
Profit on ordinary activities before taxation(i) 4,586 3,550 2,114
Tax on profit on ordinary activities (7) (1,387) (1,136) (304)
-------------- -------------- --------------
Profit on ordinary activities after taxation 3,199 2,414 1,810
Preference dividend on non-equity shares (8) --- --- (55)
Ordinary dividend on equity shares (8) (876) (808) (109)
Additional finance cost of non equity shares (8) --- --- (364)
============== ============== ==============
Profit retained for the year (21) 2,323 1,606 1,282
============== ============== ==============
Earnings per share (9) 14.6p 11.1p 9.5p
============== ============== ==============
Diluted earnings per share (9) 14.6p 11.0p 9.5p
============== ============== ==============
</TABLE>
(i) A summary of the significant adjustments to net income that would be
required had US generally accepted accounting principles been applied
instead of those generally accepted in the United Kingdom is set forth in
Note 26 of Notes to the Financial Statements.
Group statement of total recognised gains and losses
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Profit for the financial year attributable to members of Brands Hatch 3,199 2,414 1,391
Surplus on revaluation of freehold land and properties 13,436 --- ---
-------------- -------------- --------------
Total recognised gains relating to the year(i) 16,635 2,414 1,391
============== ============== ==============
</TABLE>
(i) The statement of comprehensive income required under US generally accepted
accounting principles is set out in Note 26 of Notes to the Financial
Statements.
III-15
<PAGE>
Consolidated balance sheet
<TABLE>
<CAPTION>
31 December
1998 1997
Notes L'000 L'000
Fixed assets
Tangible assets (10) 43,553 27,438
-------------- --------------
<S> <C> <C> <C>
Current assets
Stocks (11) 463 250
Debtors (12) 2,409 1,574
Cash at bank and in hand (16) 55 552
-------------- --------------
2,927 2,376
Creditors: amounts falling due within one year (13) (3,392) (3,314)
-------------- --------------
Net current assets/(liabilities) (465) (938)
-------------- --------------
Total assets less current liabilities 43,088 26,500
Creditors: Amounts falling due after more than one year (14) (5,312) (4,871)
Provisions for liabilities and charges (17) (591) (618)
Accruals and deferred income (18) (3,228) (2,832)
-------------- --------------
Net assets 33,957 18,179
============== ==============
Capital and reserves
Called up share capital (19) 5,477 5,458
Share premium (20) 18,394 18,394
Revaluation reserve (20) 13,436 ---
Profit and loss account (20) (3,350) (5,673)
-------------- --------------
Equity shareholders' funds (1) 33,957 18,179
============== ==============
</TABLE>
(1) A summary of the significant adjustments to equity shareholders' funds
that would be required had US generally accepted accounting principles
been applied instead of those generally accepted in the United Kingdom is
set forth in Note 26 of Notes to the Financial Statements.
III-16
<PAGE>
Consolidated cash flow statement (i)
<TABLE>
<CAPTION>
Year ended 31 December
1998 1997 1996
Notes L'000 L'000 L'000
----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash inflow from operating activities (4(b)) 5,028 4,300 4,280
Returns on investments and servicing of finance
Interest received 73 103 87
Interest paid (571) (483) (1,201)
Preference dividend paid --- --- (117)
----------- ----------- -----------
(498) (380) (1,231)
----------- ----------- -----------
Taxation
Corporation tax paid (692) (338) (1,516)
----------- ----------- -----------
Capital expenditure
Purchase of tangible fixed assets (3,554) (3,855) (16,671)
Sales of tangible fixed assets 508 286 110
----------- ----------- -----------
(3,046) (3,569) (16,561)
----------- ----------- -----------
Acquisition and disposals
Adjustment to consideration for purchase of subsidiary undertaking --- --- 1,600
----------- ----------- -----------
Equity dividends paid (808) (109) ---
----------- ----------- -----------
Cash outflow before financing (16) (96) (13,428)
----------- ----------- -----------
Financing
Issue of shares 19 --- 20,190
Share issue costs --- (8) (932)
Repayment of long term loans (500) --- (8,300)
New long term loans --- --- 10,500
Issue costs of new long term loans --- --- (208)
Redemption of preference shares --- --- (8,190)
----------- ----------- -----------
(481) (8) 13,060
----------- ----------- -----------
(Decrease)/increase in cash in the year (16) (497) (104) (368)
=========== =========== ===========
</TABLE>
(i) A summary of the categories of cashflow activities that would be required
had US generally accepted accounting principles been applied instead of
those generally accepted in the United Kingdom is set forth in Note 26 of
Notes to the Financial Statements.
III-17
<PAGE>
<TABLE>
<CAPTION>
Year ended 31 December
1998 1997 1996
Notes L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C> <C>
Reconciliation of net cash flow to movement in
net debt
(Decrease)/increase in cash (497) (104) (368)
Cash inflow from increase in loans --- --- (10,292)
Repayment of long term loans 500 --- 8,300
-------------- -------------- --------------
Change in net debt resulting from cash flows 3 (104) (2,360)
Conversion of loan notes --- --- 4,413
Other 21 (76) (238)
-------------- -------------- --------------
Movement in net debt 24 (180) 1,815
Net debt at 1 January (5,281) (5,101) (6,916)
-------------- -------------- --------------
Net debt at 31 December (16) (5,257) (5,281) (5,101)
============== ============== ==============
</TABLE>
Notes to the financial statements
1. Accounting policies
Basis of preparation
The accounts have been prepared under the historical cost accounting convention
to include the revaluation of freehold properties. The accounts are prepared in
accordance with applicable UK accounting standards.
Basis of consolidation
The Group accounts consolidate the accounts of Brands Hatch and its subsidiary
undertakings. The acquisition method of accounting is adopted. Under this
method, the results of subsidiary undertakings acquired or disposed of in the
period are included in the consolidated profit and loss account from the date
of acquisition or up to the date of disposal. Goodwill arising on acquisitions
prior to 31 December 1997 (representing the excess of the fair value of the
consideration given over the fair value of the separable net assets acquired)
was written off against reserves on acquisition. Goodwill previously eliminated
against reserves has not been reinstated on implementation of FRS 10.
Depreciation
Fixed assets, other than freehold land, are depreciated so as to write off
their cost evenly over the anticipated useful lives as follows:
Freehold properties --- over 50 years
Plant and equipment --- on a straight line basis at annual rates
ranging between 4 to 15 years
The directors have reviewed the useful life and residual value in relation to
freehold leisure properties and have determined that the useful life and
residual value of certain of these properties are such that depreciation is not
material. It is group policy to maintain these assets to such a standard that
the estimated residual values are not materially different to their book
values. Had this policy been applied in the financial year ended 31 December
1997, the depreciation charge would have been reduced by L98,000, the
adjustment to the depreciation charge in this financial year is also a
reduction of L98,000. In accordance with FRS 15, Tangible Fixed Assets, these
properties will be subject to an annual impairment review.
Operating lease commitments
Rentals receivable and payable under operating leases are included in profit on
a straight line basis over the lease term.
III-18
<PAGE>
Stocks
Stocks are stated at the lower of cost and net realisable value.
Deferred taxation
The revaluation of fixed assets, as shown in note 10, potentially give rise to
a timing difference that, in the absence of roll-over relief, tax on a
chargeable gain may be payable when the assets are disposed of at the revalued
amount. However, it is not intended that these assets will be disposed of in
the foreseeable future, and therefore no provision for deferred tax is deemed
necessary.
Deferred taxation is provided using the liability method on all timing
differences to the extent they are expected to reverse in the future without
being replaced, calculated at the rate at which it is anticipated the timing
differences will reverse. Advance corporation tax which is expected to be
recoverable in the future is deducted from the deferred taxation balance.
2. Turnover
Turnover represents the amounts derived from the provision of goods and
services which fall within the group's ordinary activities, and is stated net
of value added tax.
All turnover arises in the United Kingdom from the continuing activities of the
promotion of motorsport events and the operation of leisure venues.
3. Other operating income
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Rents receivable 212 236 232
Other income 304 252 58
-------------- -------------- --------------
516 488 290
============== ============== ==============
</TABLE>
4. Operating profit
(a) Operating profit is stated after charging/(crediting)
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Depreciation 703 687 785
Operating lease rentals
- --- plant and equipment 335 277 363
- --- other leases 248 217 170
Auditors' remuneration
- --- audit 48 45 42
- --- other services 8 18 66
Release of provisions in respect of Nigel Mansell Racing School (494) (84) ---
Reserve for professional fees 436 --- ---
-------------- -------------- --------------
</TABLE>
The release of the provision with respect to the Nigel Mansell Racing School
has resulted in an increase in the deferred tax provision of L150,000,
therefore, the net effect on profit after tax of the release is L344,000.
III-19
<PAGE>
(b) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Operating profit 5,063 4,006 3,036
Depreciation charges 703 687 785
(Increase)/decrease in stocks (213) (85) 99
(Increase)/decrease in debtors (934) (234) 8
Increase/(decrease) in creditors 630 (153) 68
Increase in accruals and deferred income 396 415 400
Decrease in provisions (281) (84) (89)
Profit on sale of fixed assets (336) (252) (27)
-------------- -------------- --------------
Net cash inflow from operating activities 5,028 4,300 4,280
============== ============== ==============
</TABLE>
5. Interest payable and similar charges
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Payable to shareholders
Loan note interest --- --- 209
Additional finance costs on loan notes --- --- 146
-------------- -------------- --------------
--- --- 355
-------------- -------------- --------------
Bank loans and overdrafts 550 559 635
Other --- --- 19
Interest capitalised --- --- ---
-------------- -------------- --------------
550 559 654
-------------- -------------- --------------
550 559 1,009
============== ============== ==============
</TABLE>
Interest rate risk
Interest rate risks are managed by fixing or capping portions of debt for
varying periods by the use of interest rate derivatives or cash instruments.
The Group's policy is that at least 50 per cent of the Group's borrowings are
capped. The borrowings capped amount to L2,750,000 at a cap strike rate of 8 per
cent pa and are due to mature on 30 June 1999.
During the year the Group maintained stable interest rates, as reflected by the
interest cost for the year of 7.7 per cent (1997 6.6 per cent), when measured
against average net borrowings.
Interest is covered 10.6 times by profit before interest (1997 8.8 times, 1996
3.3 times). A one percentage point rise in interest rates would affect profits
before tax by 1 per cent.
All borrowings are floating and comprise bank borrowing bearing interest rates
based on LIBOR plus a margin. The new facilities were agreed in November 1998
and specified that the margins are based upon PBIT ratio shown in the
management accounts and are as follows:
5:1 or more 0.75%
4:1 to less than 5:1 0.85%
3:1 to less than 4:1 0.95%
3:1 or less 1.125%
III-20
<PAGE>
6. Staff costs
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
No. No. No.
-------------- -------------- --------------
<S> <C> <C> <C>
The average number of persons employed in the Group
(including Directors) during the year was as follows:
Operations 255 198 144
Administration 77 76 66
-------------- -------------- --------------
332 274 210
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
L000's L000's L000's
-------------- -------------- --------------
<S> <C> <C> <C>
Staff costs (including Directors) comprise the following:
Wages and salaries 4,098 3,039 2,668
Social security costs 347 264 233
Pension costs 60 57 39
-------------- -------------- --------------
4,505 3,360 2,940
============== ============== ==============
</TABLE>
7. Tax on profit on ordinary activities
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Corporation tax based on taxable profits for the year 1,369 1,063 776
Adjustments in respect of previous year --- corporation tax (133) --- (587)
Adjustments in respect of previous year --- deferred tax --- (31) 19
Deferred taxation for the year 151 104 96
-------------- -------------- --------------
1,387 1,136 304
============== ============== ==============
</TABLE>
The adjustments in respect of previous years in 1996 relate to the resolution
of outstanding tax matters during that year.
8. Dividends and other appropriations
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997 1996
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Non-equity dividends accrued on preference shares --- --- 55
Equity dividends on ordinary shares:
Proposed-final dividend of 4.00p net per share (1997 3.7p; 1996 0.5p) 876 808 109
-------------- -------------- --------------
876 808 164
============== ============== ==============
Other appropriations:
Non-equity: Amortisation of redemption premium on preference shares --- --- 364
============== ============== ==============
</TABLE>
9. Earnings per share
The calculation of earnings per ordinary share is based on earnings of
L3,199,000 (1997 -- L2,414,000, 1996 -- L1,391,000) and on 21,870,500 (1997 --
21,832,500, 1996 -- 14,581,000) ordinary shares being the weighted average
number of ordinary shares in issue during the year.
III-21
<PAGE>
The diluted earnings per share is based on earnings of L3,199,000 (1997 --
L2,414,000, 1996 -- L1,810,000) and on 21,901,429 (1997 -- 21,928,886, 1996 --
14,627,579) ordinary shares, allowing for the full exercise of outstanding
share options. (Note 19).
10. Tangible fixed assets
<TABLE>
<CAPTION>
Freehold land Plant and
and properties equipment Total
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
Cost or valuation:
At 1 January 1997 23,701 1,854 25,555
Additions 2,424 1,431 3,855
Disposals --- (141) (141)
-------------- -------------- --------------
At 31 December 1997 26,125 3,144 29,269
Additions 2,670 884 3,554
Surplus on revaluation 13,436 --- 13,436
Disposals --- (277) (277)
-------------- -------------- --------------
At 31 December 1998 42,231 3,751 45,982
============== ============== ==============
Depreciation:
At 1 January 1997 822 429 1,251
Charge for the year 233 454 687
Disposals --- (107) (107)
-------------- -------------- --------------
At 31 December 1997 1,055 776 1,831
Charge for the year 176 527 703
Disposals --- (105) (105)
-------------- -------------- --------------
At 31 December 1998 1,231 1,198 2,429
============== ============== ==============
Net book value:
At 1 January 1997 22,879 1,425 24,304
============== ============== ==============
At 31 December 1997 25,070 2,368 27,438
============== ============== ==============
At 31 December 1998 41,000 2,553 43,553
============== ============== ==============
</TABLE>
The value of the freehold interests at all venues has been valued by Mr D E
Butters, BSc FRICS of Gerald Eve Chartered Surveyors at 31 December 1998, at a
total value of L41,000,000 the basis of the valuation being the Existing Use
Value Per Practice Statement 4 of the Appraisal and Valuation Manual of the
Royal Institution of Chartered Surveyors.
III-22
<PAGE>
11. Stocks
<TABLE>
<CAPTION>
31 December 1998 1997
L'000 L'000
-------------- --------------
<S> <C> <C>
Consumables 333 141
Goods for resale 130 109
-------------- --------------
463 250
============== ==============
</TABLE>
12. Debtors
<TABLE>
<CAPTION>
31 December 1998 1997
L'000 L'000
-------------- --------------
<S> <C> <C>
Trade debtors 1,316 630
Prepayments and accrued income 1,093 845
Advance corporation tax --- 99
-------------- --------------
2,409 1,574
============== ==============
</TABLE>
13. Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
31 December 1998 1997
L'000 L'000
---------------- ----------------
<S> <C> <C>
Current instalments on bank loan --- 962
Trade creditors 1,469 920
Corporation tax 943 601
Other taxes and social security 104 23
Proposed dividend 876 808
---------------- ----------------
3,392 3,314
================ ================
</TABLE>
14. Creditors: amounts falling due after more than one year
<TABLE>
<CAPTION>
31 December 1998 1997
L'000 L'000
---------------- ----------------
<S> <C> <C>
Bank loans (see note 15) 5,312 4,871
================ ================
</TABLE>
III-23
<PAGE>
15. Bank loans
The bank loans and overdrafts due at 31 December 1997 and 31 December 1998 are
analysed as follows:
<TABLE>
<CAPTION>
31 December 1998 1997
L'000 L'000
---------------- ----------------
<S> <C> <C>
Wholly repayable within five years --- 5,833
Not wholly repayable within five years 5,312 ---
Less: Amount due within one year --- (962)
---------------- ----------------
Amount due after more than one year 5,312 4,871
================ ================
Amount falling due:
In one year or less or on demand --- 962
Between one and two years --- 1,156
Between two and five years 3,062 3,715
In more than five years 2,250 ---
---------------- ----------------
5,312 5,833
================ ================
</TABLE>
The bank loans are secured by a fixed and floating charge over the assets of
the Group. The repayment of the bank borrowings was re-scheduled during the
year. The fair values of the bank borrowings are not considered to be
materially different from the amounts stated above.
Details of the interest rates applicable in the borrowings are provided in Note
5.
16. Analysis of net debt
<TABLE>
<CAPTION>
Non cash
1 January 1997 Cash flows movements 31 December 1997
L'000 L'000 L'000 L'000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash at bank and in hand 656 (104) --- 552
Loans (5,757) --- (76) (5,833)
-------------- -------------- -------------- --------------
(5,101) (104) (76) (5,281)
============== ============== ============== ==============
Non cash
1 January 1998 Cash flows movements 31 December 1998
L'000 L'000 L'000 L'000
Cash at bank and in hand 552 (497) --- 55
Loans (5,833) 500 21 (5,312)
-------------- -------------- -------------- --------------
(5,281) 3 21 (5,257)
============== ============== ============== ==============
</TABLE>
III-24
<PAGE>
17. Provisions for liabilities and charges
<TABLE>
<CAPTION>
Provision in Provision for
respect of professional
Deferred onerous fees Total
taxation L'000 contracts L'000 L'000 L'000
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
At 1 January 1997 34 645 --- 679
Charged/(released) to profit and loss account 73 (84) --- (11)
Advance corporation tax (50) --- --- (50)
--------------- --------------- --------------- ---------------
At 31 December 1997 57 561 --- 618
Charged/(released) to profit and loss account 151 (494) 213 (130)
Advance corporation tax 103 --- --- 103
--------------- --------------- --------------- ---------------
At 31 December 1998 311 67 213 591
=============== =============== =============== ===============
</TABLE>
Deferred taxation provided in the accounts is made up as follows:
<TABLE>
<CAPTION>
1998 1997
L'000 L'000
--------------- ---------------
<S> <C> <C>
Capital allowances
in advance of
depreciation 332 334
Other timing
differences (21) (174)
Less: advance
corporation tax --- (103)
--------------- ---------------
311 57
=============== ===============
</TABLE>
The continued success of the Nigel Mansell brand used in the Racing School has
led the Directors to review the provision for onerous contracts made for the
Racing School and decide that only a L67,000 provision is required. The Group
has therefore written back the majority of the provision in the year.
A potential liability of L3.9 million in respect of deferred taxation could
arise if the revalued properties were disposed of. It is not the directors'
intention to dispose of these assets. Consequently the likelihood of any
deferred tax liability crystallising is remote and no provision has been made.
18. Accruals and deferred income
<TABLE>
<CAPTION>
At 31 December 1998 1997
L'000 L'000
--------------- ---------------
<S> <C> <C>
Gift vouchers and
advance customer
bookings 2,360 1,831
Accruals 868 1,001
--------------- ---------------
3,228 2,832
=============== ===============
</TABLE>
III-25
<PAGE>
19. Called up share capital
<TABLE>
<CAPTION>
31 December 1998 1997
No. 000 L'000 No. 000 L'000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Authorised:
Ordinary shares of 25 pence 29,950 7,487 29,950 7,487
============== ============== ============== ==============
Allotted and fully paid:
Ordinary shares of 25 pence each 21,908 5,477 21,832 5,458
============== ============== ============== ==============
</TABLE>
The company operates two share option schemes, an Approved and an Unapproved
Executive Share Option Scheme, under which options to subscribe for the
company's shares have been granted to Executive Directors and other Senior
Executives.
At 1 January 1998 options under the schemes were outstanding as follows:
(a) 76,000 ordinary shares at L0.25 each, exercisable between 1 November 1997
and 1 November 2001
(b) 191,082 ordinary shares at L1.57 each, exercisable between 31 October
1999 and 31 October 2003
(c) 210,188 ordinary shares at L1.57 each, exercisable between 31 October
1999 and 31 October 2006
On 26 June 1998, 76,000 ordinary shares of L0.25 were issued at par value as a
result of the exercise of options.
During the year options were granted as follows:
(d) 94,783 ordinary shares at L1.56 per share exercisable from 3 April 2001
to 2 April 2005
(e) 19,230 ordinary shares at L1.56 per share exercisable from 24 June 2001
to 23 June 2008
(f) 30,226 ordinary shares at L1.99 per share exercisable from 24 June 2001
to 23 June 2008
(g) 407,354 ordinary shares at L1.99 per share exercisable from 24 June 2001
to 23 June 2005
III-26
<PAGE>
20. Reconciliation of movement in shareholders' funds and reserves
<TABLE>
<CAPTION>
Revaluation
Share capital Share premium reserve
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
At 1 January 1996 392 3,697 ---
Transfer of goodwill --- --- ---
Retained profit for the year --- --- ---
Cash inflow from share issues 1,705 18,485 ---
Shares issued for non cash consideration 40 4,373 ---
Share issue costs --- (932) ---
Redemption of preference shares (390) --- ---
Transfer on redemption of preference shares --- (3,510) ---
Transfer in respect of dividends and other appropriations on preference shares --- --- ---
Issue of bonus shares 3,711 (3,711) ---
Preference dividends paid --- --- ---
Adjustments to goodwill arising on acquisition --- --- ---
-------------- -------------- --------------
At 31 December 1996 5,458 18,402 ---
Retained profit for the year --- --- ---
Share issue costs --- (8) ---
-------------- -------------- --------------
At 31 December 1997 5,458 18,394 ---
Retained profit for the year --- --- ---
Revaluation of freehold land and properties --- --- 13,436
Shares issued 19 --- ---
-------------- -------------- --------------
At 31 December 1998 5,477 18,394 13,436
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Profit Total
and loss shareholders'
Goodwill account funds
L'000 L'000 L'000
-------------- -------------- --------------
<S> <C> <C> <C>
At 1 January 1996 (5,744) 1,229 (426)
Transfer of goodwill 5,802 (5,802) ---
Retained profit for the year --- 1,282 1,282
Cash inflow from share issues --- --- 20,190
Shares issued for non cash consideration --- --- 4,413
Share issue costs --- --- (932)
Redemption of preference shares --- (7,800) (8,190)
Transfer on redemption of preference shares --- 3,510 ---
Transfer in respect of dividends and other appropriations on preference shares --- 419 419
Issue of bonus shares --- --- ---
Preference dividends paid --- (117) (117)
Adjustments to goodwill arising on acquisition (58) --- (58)
-------------- -------------- --------------
At 31 December 1996 --- (7,279) 16,581
Retained profit for the year --- 1,606 1,606
Share issue costs --- --- (8)
-------------- -------------- --------------
At 31 December 1997 --- (5,673) 18,179
Retained profit for the year --- 2,323 2,323
Revaluation of freehold land and properties --- --- 13,436
Shares issued --- --- 19
-------------- -------------- --------------
At 31 December 1998 --- (3,350) 33,957
============== ============== ==============
</TABLE>
In accordance with the requirement of FRS 10 goodwill has been transferred to
the profit and loss account, and the comparative amounts have been restated
accordingly.
III-27
<PAGE>
21. Operating lease commitments
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997
L'000 L'000
-------------- --------------
<S> <C> <C>
Annual commitments for future rental
payments under leasing agreements expiring:
In one year or less 84 84
Between two and five years 132 132
============== ==============
</TABLE>
22. Capital commitments
Amounts contracted for but not provided in the accounts amounted to L2,363,000
relating to future capital expenditure (1997 -- L667,000 ).
23. Pension arrangements
The group makes contributions to personal pension schemes for certain
employees. Contributions are charged to the profit and loss account as they
become due.
24. Contingent liabilities
The group had no contingent liabilities at 31 December 1997 or 1998.
25. Post balance sheet event
On 8 February 1999 the group announced its first acquisition since flotation,
namely The Rebel Group Limited, which is being acquired for a consideration of
L3 million in cash, and contingent deferred loan notes of L2.5 million. The
Rebel Group Limited operates an outdoor karting venue at Milton Keynes and
indoor kart venue at Wood Lane in West London.
26. Differences between United Kingdom and United States generally accepted
accounting principles
The Group's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United Kingdom ("UK GAAP")
which differ from those generally accepted in the United States ("US GAAP").
The significant differences as they apply to the Brands Hatch Group are
summarised below.
Intangible fixed assets
Prior to the issue of FRS 10 in 1998, goodwill arising on the acquisition of
subsidiaries and associates was immediately eliminated against reserves. Whilst
current accounting treatment no longer allows for this there was no requirement
to reinstate goodwill previously written off. Under US GAAP, such goodwill
would have been capitalized and amortized to the income statement over the
estimated useful lives of the assets, not exceeding 40 years. The reconciling
adjustments to net income in respect of amortization and to shareholders'
equity in respect of intangible fixed assets relate entirely to Brands Hatch.
Under US GAAP, if any impairment indicators were present, the Brands Hatch
Group would evaluate the recoverability of goodwill and other intangible fixed
assets, based on undiscounted cash flows.
Tangible fixed assets
The Brands Hatch Group's properties are revalued from time to time by
professionally qualified external valuers. Book values are adjusted to accord
with the valuations, depreciation, where applicable, is based on the revalued
amounts. Depreciation in respect of certain of the Group's freehold properties,
is not charged to income as such a charge would, based upon a review of
expected useful life and residual value as at 31 December 1998, not be
material. Under US GAAP, revaluations would not be permitted and all fixed
assets, other than land, would be depreciated over their estimated economic
lives.
In accordance with FAS 121, the Brands Hatch Group reviews the carrying value
of its tangible fixed assets if any impairment indicators suggest a diminution
in value.
Deferred taxation
The Brands Hatch Group provides for deferred taxation using the liability
method only where, in the opinion of the directors, it is probable that the tax
liability will crystallize within the foreseeable future. Under US GAAP,
III-28
<PAGE>
deferred taxation would be computed on all differences between the tax bases
and book values of assets and liabilities which will result in taxable or tax
deductible amounts arising in future years. Deferred taxation assets under US
GAAP would be reorganised only to the extent that it is more likely than not
that they will be realised.
Prepayments
Included in prepayments are amounts in respect of advertising that are carried
forward to match against future income. Under US GAAP these amounts should be
written off as the adverts are released.
Proposed dividends
Final ordinary dividends and the related ACT are provided for in the year in
respect of which they are proposed by the Board for approval by the
shareholders. Under US GAAP, dividends and the related ACT would not be
provided for until the year in which they are declared.
The following statements provide a reconciliation between earnings available
for shareholders under UK GAAP and net income under US GAAP and between
shareholders' funds under UK GAAP and shareholders' equity under US GAAP.
Income
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997
L'000 L'000
-------------- --------------
<S> <C> <C>
Net income as reported in the consolidated
P&L account 3,199 2,414
Adjustments:
Amortization of intangible fixed assets (290) (290)
Depreciation of tangible fixed assets (98) (98)
Prepayments (62) (282)
Deferred taxation on above adjustments 19 90
-------------- --------------
Net income in accordance with US GAAP 2,768 1,834
============== ==============
Basic net income per ordinary share 12.6p 8.4p
============== ==============
Diluted net income per ordinary share 12.7p 8.4p
============== ==============
</TABLE>
There are no other items of comprehensive income
III-29
<PAGE>
Shareholders' equity
<TABLE>
<CAPTION>
31 December 1998 1997
L'000 L'000
-------------- --------------
<S> <C> <C>
Shareholders' equity as reported in the
consolidated balance sheet 33,957 18,179
Adjustments:
Intangible fixed assets:
Goodwill: cost 5,802 5,802
Accumulated amortisation (1,088) (798)
-------------- --------------
Total intangible fixed assets 4,714 5,004
Tangible fixed assets:
Cost (13,436) ---
Accumulated depreciation (196) (98)
-------------- --------------
Total tangible fixed assets 13,632 (98)
Prepaid advertising (344) (282)
Creditors: amounts falling due within one
year:
Proposed dividends 876 808
Deferred taxation on above adjustments 109 90
-------------- --------------
Shareholders' equity in accordance with US
GAAP 25,680 23,701
============== ==============
</TABLE>
The consolidated statement of cash flows prepared under UK GAAP presents
substantially the same information as that required under US GAAP but may
differ, however, with regard to classification of items within the statements
and as regards the definition of cash under UK GAAP and cash and cash
equivalents under US GAAP.
Under US GAAP, cash and cash equivalents include short-term highly liquid
investments but do not include bank overdrafts. Under UK GAAP, cash flows are
presented separately for operating activities, dividends received from
associates, returns on investments and servicing of finance, taxation, capital
expenditure and financial investment, acquisitions, equity dividends and
management of liquid resources and investing and financing. US GAAP, however,
require only three categories of cash flow activity to be reported: operating,
investing and financing. Cash flows from taxation and returns on investments
and servicing of finance shown under UK GAAP would, with the exception of
dividends paid to minority shareholders, be included as operating activities
under US GAAP. The payment of dividends would be included as a financing
activity under US GAAP. Under US GAAP, capitalized interest is treated as part
of the cost of the asset to which it relates and is thus included as part of
investing cash flows. Under UK GAAP all interest is treated as part of returns
on investments and servicing of finance. Under US GAAP capital expenditure and
financial investment and acquisitions are reported within investing activities.
The categories of cash flow activity under US GAAP can be summarised as
follows:
<TABLE>
<CAPTION>
Year ended 31 December 1998 1997
L'000 L'000
-------------- --------------
<S> <C> <C>
Cash inflow from operating activities 3,838 3,582
Cash outflow on investing activities (3,046) (3,569)
Cash outflow from financing activities (1,289) (117)
-------------- --------------
Decrease in cash and cash equivalents (497) (104)
Cash and cash equivalents
At 1 January 552 656
-------------- --------------
At 31 December 55 552
============== ==============
</TABLE>
III-30
<PAGE>
6. Unaudited results for the six months ended 30 June 1999
The following is the text of the unaudited results for the six months ended 30
June 1999:
"CHAIRMAN'S STATEMENT
Introduction
The first six months of the year have seen a transformation in the prospects of
the Group with strategic initiatives in UK motorsport rights, new international
events, consolidation of the UK motor sports market and first steps towards
international expansion. Earnings growth remains strong with earnings per share
(before goodwill amortisation) growing by 24%.
Financial Review
In the period ended 30 June 1999 the Group has performed well in all areas. The
Group has consistently delivered double-digit earnings growth and enjoys strong
cash generation underpinned by substantial asset backing, and benefits from a
flexible cost structure, high operational gearing and a low level of
indebtedness. In the six month period turnover grew by 25% to L10.409m (1998:
L8.321m), operating profit by 18% to L2.359m (1998: L2.004m), profit after tax
by 20% to L1.445m (from L1.208m) and earnings per share (before goodwill) was
up 24% to 6.8p (from 5.5p).
Strategic Review
Key achievements so far this year include:
* the acquisition of the rights to host the Formula One Grand Prix at
Brands Hatch in 2002 for six years with a five year renewal option;
* the acquisition of the rights to the second round of the World Superbike
in 2000 for three years;
* securing a share in the rights to the British Superbike from 2000 through
a newly created company British Motorsport Promoters, in which Brands
Hatch has a significant stake; and
* the acquisition of the Daytona Karting circuits.
Operations Review
New Developments
The first half of 1999 saw the successful introduction of our new Supercar
Experience at Snetterton, and the opening of the new `Jackie Stewart Business
Centre' at Oulton Park, which enjoys the patronage of Jackie Stewart.
Our capital investment programme continues, with a total of L6.4m being
invested (including L3m on the acquisition of the Rebel Group) in the first six
months. Key organic expenditure was on the Jackie Stewart Business Centre at
Oulton Park, the new Supercar experience and the development of a new Karting
venue in London.
Trading performance
<TABLE>
<CAPTION>
30 June 1999 30 June 1998 Growth
-------------- -------------- --------------
L'000 L'000
<S> <C> <C> <C>
Events 2,828 2,741 3%
Testing and track hire 1,622 1,440 13%
Activities 2,635 2,029 30%
Corporate, conference and catering 2,158 2,111 2%
Daytona -- Karting 1,166 --- N/A
-------------- -------------- --------------
Total turnover 10,409 8,321 25%
============== ============== ==============
</TABLE>
III-31
<PAGE>
Events turnover remains strong and the second half of the year will benefit
from the spectacular attendance at the FIM Superbike World Championship on 1st
August 1999, at Brands Hatch which again attracted the biggest bike audience of
the Championship world-wide.
Testing and track hire continues to grow, benefiting from the capital
investment in our infrastructure, particularly at Snetterton and Oulton Park.
Activities enjoyed the strongest growth in the period -- and benefited from the
introduction of the new Supercar experience at Snetterton, increased popularity
of our Rally schools and continued growth in the Brands Hatch Club.
Turnover growth in corporate, conference and catering turnover is skewed
strongly toward the second half of the year with good performance from the new
Jackie Stewart Business Centre at Oulton Park, which opened in mid April 1999.
Turnover from the newly acquired Karting enterprises added significantly to our
top line turnover, however the real benefits from this acquisition are still
yet to be achieved through the integration of their overhead and roll-out of
new venues -- we expect to start realising such benefits during 2000.
Outlook
Strong organic growth underpinned by our capital investment programme and
continued investment in and training of our management team, coupled with many
exciting strategic developments demonstrate the Board's continued optimism
about the future.
Once again it is right that I pay tribute to Nicky Foulston and her highly
motivated young Executive team, together with all our team members who
contribute so much to the company's success.
Sir Rodney Walker 27th September 1999
Chairman
III-32
<PAGE>
Group Profit and Loss Account for the six months ended 30 June 1999
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30 1999 June 30 1998
Unaudited Unaudited
L'000 L'000
-------------- --------------
<S> <C> <C>
Turnover:
Existing 9,243 8,321
Acquisition 1,166 ---
-------------- --------------
10,409 8,321
-------------- --------------
Cost of Sales (3,906) (3,222)
-------------- --------------
Gross profit 6,503 5,099
Administrative costs (4,203) (3,338)
Goodwill (47) ---
Other operating income 106 243
Operating profit comprises:
Existing 2,212 2,004
Acquisition 147 ---
-------------- --------------
2,359 2,004
-------------- --------------
Operating profit 2,359 2,004
Interest receivable 1 40
Interest payable and similar charges (354) (293)
-------------- --------------
Profit on ordinary activities before
taxation 2,006 1,751
Tax on profit on ordinary activities (561) (543)
-------------- --------------
Profit on ordinary activities after taxation 1,445 1,208
Dividends -- Ordinary dividend on equity
shares --- ---
-------------- --------------
Profit retained for the period 1,445 1,208
-------------- --------------
Adjusted Earnings per share (before
Goodwill) 6.8 5.5
Earnings per share 6.6 5.5
Fully Diluted Earnings per share 6.5 5.5
</TABLE>
III-33
<PAGE>
Summarised Group Statement of Total Recognised Gains and Losses for the six
months ended 30 June 1999
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30 1999 June 30 1998
Unaudited Unaudited
L'000 L'000
-------------- --------------
<S> <C> <C>
Profit for the financial period attributable
to members of the Company 1,445 1,208
Surplus on revaluation of freehold land and
properties --- ---
-------------- --------------
Total recognised gains relating to the year 1,445 1,208
============== ==============
</TABLE>
III-34
<PAGE>
Group Balance Sheet as at 30 June 1999
<TABLE>
<CAPTION>
June 30 1999 June 30 1998
Unaudited Unaudited
L'000 L'000
-------------- --------------
<S> <C> <C>
Fixed Assets
Goodwill 3,158 ---
Tangible assets 47,985 28,840
Current assets
Stocks 524 394
Debtors: Trade debtors 1,639 1,892
Other Debtors 173 263
Prepayments and accrued income 1,635 1,112
Cash at bank and in hand --- 1,187
-------------- --------------
3,971 4,848
-------------- --------------
Creditors: amounts falling due within one
year:
Trade creditors (2,522) (3,329)
Bank overdraft (1,140) ---
Corporation tax (929) (572)
Other taxes and social security (577) (606)
Finance leases (144) ---
Proposed dividends (876) ---
-------------- --------------
(6,188) (4,507)
-------------- --------------
Net current (liabilities)/assets (2,217) 341
-------------- --------------
Total assets less current liabilities 48,926 29,181
Creditors: amounts falling due after more
than one year:
Bank loans (8,372) (5,846)
Corporation tax (561) (560)
Finance leases (560) ---
-------------- --------------
(9,493) (6,406)
-------------- --------------
Provision for liabilities and charges (378) (679)
Accruals (1,033) (663)
Deferred income (2,621) (2,045)
-------------- --------------
Net assets 35,401 19,388
-------------- --------------
Capital and reserves
Called up share capital 5,477 5,459
Share premium account 18,394 18,394
Revaluation Reserve 13,436 ---
Profit and loss account (1,906) (4,465)
-------------- --------------
Equity shareholders' funds 35,401 19,388
-------------- --------------
</TABLE>
III-35
<PAGE>
Summarised Group Statement of Cash Flows for the six months ended 30 June 1999
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30 1999 June 30 1998
Unaudited Unaudited
L'000 L'000
-------------- --------------
<S> <C> <C>
Net cash flow from operating activities 2,600 2,735
Returns on investments and servicing of
finance (354) (253)
Taxation (14) ---
Capital expenditure and financial investment (6,441) (1,830)
-------------- --------------
Net cash flow before financing (4,209) 652
Financing 3,014 ---
-------------- --------------
Increase/(decrease) in cash in the period (1,195) 652
Reconciliation of Net Cash Flow to movement
in Net Debt
Increase/(decrease) in cash in the period (1,195) 652
Non cash movement in net debt (3,060) (30)
Net debt at 1 January 1999 (5,257) (5,281)
-------------- --------------
Net debt at 30 June 1999/31 December 1998 (9,512) (4,659)
-------------- --------------
</TABLE>
III-36
<PAGE>
Notes to the Financial Information for the six months to 30 June 1999
(Unaudited)
1. Preparation of Interim Financial Information
The interim financial information has been prepared on a basis consistent with
accounting policies disclosed in the statutory accounts of the Group for the
year ended 31 December 1998. In the opinion of Brands Hatch Leisure Plc all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the six
months ended 30 June 1999 are not indicative of the results that may be
expected for the year ending 31 December 1999.
Notes to the interim financial statements
Differences between United Kingdom and United States generally accepted
accounting principles
The Group's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United Kingdom ("UK GAAP")
which differ from those generally accepted in the United States ("US GAAP").
The significant differences as they apply to the Group are summarised in Note
26 to the full financial statements.
The following statements provide a reconciliation between earnings available
for shareholders under UK GAAP and net income under US GAAP and between
shareholders' funds under UK GAAP and shareholders' equity under US GAAP.
Income
<TABLE>
<CAPTION>
Six months Six months
ended 30 June ended 30 June
1999 1998
L'000 L'000
-------------- --------------
<S> <C> <C>
Net income as reported in the consolidated
P&L account 1,445 1,208
Adjustments:
Amortization of intangible fixed assets (145) (45)
Depreciation of tangible fixed assets (49) (49)
Prepayments 108 100
Deferred taxation on above adjustments (33) (31)
-------------- --------------
Net income in accordance with US GAAP 1,326 1,183
============== ==============
Basic net income per ordinary share 6.1p 5.4p
============== ==============
Diluted net income per ordinary share 6.0p 5.4p
============== ==============
</TABLE>
III-37
<PAGE>
Shareholders' equity
<TABLE>
<CAPTION>
30 June 1999
L'000
--------------
<S> <C>
Shareholders' equity as reported in the consolidated balance
sheet 35,401
Adjustments:
Intangible fixed assets:
Goodwill: cost 5,802
Accumulated amortisation (1,163)
--------------
Total intangible fixed assets 4,639
Tangible fixed assets:
Cost (13,436)
Accumulated depreciation (245)
--------------
Total tangible fixed assets (13,681)
Prepaid advertising (236)
Deferred taxation on above adjustments 73
--------------
Shareholders' equity in accordance with US GAAP 26,196
==============
</TABLE>
The categories of cash flow activity under US GAAP can be summarised as
follows:
<TABLE>
<CAPTION>
Six months Six months
ended 30 June ended 30 June
1999 1998
L'000 L'000
-------------- --------------
<S> <C> <C>
Cash inflow from operating activities 2,232 2,482
Cash outflow on investing activities (6,441) (1,830)
Cash inflow from financing activities 3,014 (0)
-------------- --------------
Decrease/increase in cash and cash
equivalents (1,195) 652
Cash and cash equivalents
At 31 December 55 552
-------------- --------------
At 30 June (1,140) 1,187"
============== ==============
III-38
</TABLE>
Appendix IV --- Additional information
1. Responsibility
(a) The directors of Interpublic, whose names are set out in paragraph 1(e)
below, accept responsibility for the information contained in this offer
document other than that relating to the Brands Hatch Group, the
directors of Brands Hatch and members of their immediate families. To the
best of the knowledge and belief of the directors of Interpublic (who
have taken all reasonable care to ensure that such is the case), the
information contained herein for which they take responsibility is in
accordance with the facts and does not omit anything likely to affect the
import of such information.
(b) The directors of Brands Hatch whose names are set out in paragraph 1(d)
below, accept responsibility for the information contained in this offer
document relating to the Brands Hatch Group, the directors of Brands
Hatch and members of their immediate families. To the best of the
knowledge and belief of the directors of Brands Hatch (who have taken all
reasonable care to ensure that such is the case), the information
contained herein for which they take responsibility is in accordance with
the facts and does not omit anything likely to affect the import of such
information.
(c) The statements set out in paragraphs (a) and (b) above are included
solely to comply with the requirements of Rule 19.2 of the City Code and
shall not be deemed to establish or expand any liability under the
Securities Act.
(d) The directors of Brands Hatch, whose offices are at Brands Hatch Circuit,
Fawkham, Longfield, Kent, DA3 8NG, are:
Sir Rodney M. Walker, Non-Executive Chairman
Nicola M. Foulston, Chief Executive
Robert S. Bain BA ACA, Group Finance Director
Roger R.G. North FCCA, Non-Executive Director
(e) The directors of Interpublic, whose offices are at 1271 Avenue of the
Americas, New York, New York 10020, USA, are:
Philip H. Geier, Jr., Chairman of the Board, President and Chief
Executive Officer
Eugene P. Beard, Vice-Chairman, Finance and Operations
John J. Dooner, Jr., Chairman and Chief Executive Officer of McCann-
Erickson WorldGroup
Frank B. Lowe, Chairman of the Board and Chief Executive Officer of The
Lowe Group and Octagon
Frank J. Borelli, Non-Executive Director
Reginald K. Brack, Non-Executive Director
Jill M. Considine, Non-Executive Director
Leif H. Olsen, Non-Executive Director
Allen Questrom, Non-Executive Director
J. Phillip Samper, Non-Executive Director
2. Disclosure of interests and dealings in shares
For the purpose of this paragraph 2, "disclosure period" means the period which
began on 22 October 1998 (being the date 12 months prior to the commencement of
the Offer Period) and ended on 5 November 1999 (being the latest practicable
date prior to the posting of this offer document).
IV-1
<PAGE>
(a) Interests and dealings in Brands Hatch Shares
(i) At the close of business on 5 November 1999 (being the latest practicable
date prior to the posting of this offer document), the interests of the
directors of Brands Hatch, their immediate families and connected persons
in Brands Hatch Shares as shown in the register of directors' interests
maintained under the provisions of Sections 324 to 328 of the Companies
Act were as follows:
<TABLE>
<CAPTION>
Name Number of Brands Hatch Shares
<S> <C>
Sir Rodney M. Walker 10,235
Roger R.G. North 15,000
Nicola M. Foulston 29,554
Awak Limited(1) 6,519,015
</TABLE>
Note:
(1) The J.G. Foulston Children's Settlement Trust is a trust settled by
the late John Foulston for the benefit of his children. This trust is
segregated into funds of which the "Nicola Fund" is for the benefit
of Nicola M. Foulston. The trustees of the "Nicola Fund" own the
entire issued share capital of Awak Limited.
(ii) At the close of business on 5 November 1999 (being the latest practicable
date prior to the posting of this offer document), the interests of the
directors of Brands Hatch in Options were as follows:
<TABLE>
<CAPTION>
Number of Brands Hatch Exercise Earliest date Latest date
Name Shares under Option price (L) for exercise for exercise
<S> <C> <C> <C> <C>
Robert S. Bain 19,230 (approved) 1.560 3 April 2001 2 April 2008
94,783 (unapproved) 1.560 3 April 2001 2 April 2005
85,987 (unapproved) 1.985 24 June 2001 23 June 2005
</TABLE>
(iii) No dealings for value in Brands Hatch Shares or Options have been carried
out by the directors of Brands Hatch, members of their immediate families
and connected persons during the disclosure period.
(b) Interests and dealings in Interpublic Common Stock
(i) At the close of business on 5 November 1999 (being the latest practicable
date prior to the posting of this offer document) the interests of the
directors of Interpublic, members of their immediate families and
connected persons in Interpublic Common Stock were as follows:
<TABLE>
<CAPTION>
Number of shares of
Name Interpublic Common Stock
<S> <C>
Philip H. Geier, Jr. 1,344,077
Eugene P. Beard 1,168,822
John J. Dooner, Jr. 810,276
Frank B. Lowe 960,838
Frank J. Borelli 7,500
Reginald K. Brack 9,550(1)
Jill M. Considine 6,000
Leif H. Olsen 7,200
Allen Questrom 6,000
J. Phillip Samper 10,200
</TABLE>
Note:
(1) Includes 3,550 shares of Interpublic Common Stock held through a
managed account.
IV-2
<PAGE>
(ii) At the close of business on 5 November 1999 (being the latest practicable
date prior to the posting of this offer document), the interests of the
directors of Interpublic in options over Interpublic Common Stock were as
follows:
<TABLE>
<CAPTION>
Number of shares of Earliest date for Latest date for
Interpublic Common Exercise price exercise exercise
Name Stock under option (US$) (MM/DD/YY) (MM/DD/YY)
<S> <C> <C> <C> <C>
Philip H. Geier, Jr 119,000 7.4375 1/1/95 10/10/01
291,600 9.8542 1/1/97 10/20/02
324,000 10.6875 1/1/99 1/3/05
324,000 15.9792 1/1/01 5/20/06
108,000 19.7084 1/1/01 5/19/07
200,000 34.5938 1/1/03 12/17/08
Eugene P. Beard 270,000 15.9792 1/1/01 5/20/06
300,000 26.1250 1/1/00 9/10/08
140,000 34.5938 1/1/03 12/17/08
John J. Dooner, Jr 64,800 9.8542 1/1/97 10/20/02
165,240 10.6875 1/1/99 1/3/05
180,000 15.9792 1/1/01 5/20/06
150,000 19.7084 5/19/02 5/19/07
120,000 34.5938 1/1/03 12/17/08
Frank B. Lowe 90,000 10.6875 1/1/99 1/3/05
180,000 15.9792 1/1/01 5/20/06
120,000 19.7084 5/19/02 5/19/07
120,000 34.5938 1/1/03 12/17/08
Frank J. Borelli 2,498 12.00 6/2/98 6/2/05
1,926 15.5834 6/7/99 6/7/06
1,500 20.00 6/6/00 6/6/07
1,010 29.75 6/5/01 6/5/08
4,000 39.3282 6/4/02 6/4/09
Reginald K. Brack 1,500 20.00 6/6/00 6/6/07
1,010 29.75 6/5/01 6/5/08
4,000 39.3282 6/4/02 6/4/09
Jill M. Considine 1,500 20.00 6/6/00 6/6/07
1,010 29.75 6/5/01 6/5/08
4,000 39.3282 6/4/02 6/4/09
Leif H. Olsen 2,822 10.6250 6/3/97 6/3/04
2,498 12.00 6/2/98 6/2/05
1,926 15.5834 6/7/99 6/7/06
1,500 20.00 6/6/00 6/6/07
1,010 29.75 6/5/01 6/5/08
4,000 39.3282 6/4/02 6/4/09
Allen Questrom 1,926 15.5834 6/7/99 6/7/06
1,500 20.00 6/6/00 6/6/07
1,010 29.75 6/5/01 6/5/08
4,000 39.3282 6/4/02 6/4/09
J. Phillip Samper 2,822 10.6250 6/3/97 6/3/04
2,498 12.00 6/2/98 6/2/05
1,926 15.5834 6/7/99 6/7/06
1,500 20.00 6/6/00 6/6/07
1,010 29.75 6/5/01 6/5/08
4,000 39.3282 6/4/02 6/4/09
</TABLE>
IV-3
<PAGE>
(iii) The following dealings for value in Interpublic Common Stock have been
carried out by the directors of Interpublic, members of their immediate
families and connected persons during the disclosure period:
<TABLE>
<CAPTION>
Date Price per share of Interpublic
Name (MM/DD/YY) Transaction Common Stock (US$)
<S> <C> <C> <C>
Philip H. Geier, Jr 1/31/98 Purchase of 396 shares 20.945
2/28/98 Purchase of 358 shares 23.27
3/31/98 Purchase of 316 shares 26.35
4/30/98 Purchase of 150 shares 26.67
8/24/99 Sale of 203,974 shares 38.50
8/26/99 Sale of 200,000 shares 38.70317
8/27/99 Sale of 36,367 shares 39.0625
8/30/99 Sale of 5,000 shares 39.50
8/30/99 Sale of 5,000 shares 39.90625
8/30/99 Sale of 5,000 shares 39.875
Eugene P. Beard 1/31/98 Purchase of 60 shares 20.945
2/28/98 Purchase of 54 shares 23.27
3/31/98 Purchase of 46 shares 26.35
4/30/98 Purchase of 48 shares 26.67
5/31/98 Purchase of 50 shares 25.01
6/30/98 Purchase of 48 shares 25.82
7/31/98 Purchase of 48 shares 25.54
8/31/98 Purchase of 50 shares 24.92
9/31/98 Purchase of 56 shares 23.02
10/31/98 Purchase of 50 shares 24.60
11/31/98 Purchase of 42 shares 29.555
12/31/98 Purchase of 38 shares 33.605
12/14/98 Sale of 10,000 shares 31.6875
12/15/98 Sale of 10,000 shares 33.25
12/16/98 Sale of 5,000 shares 33.25
12/17/98 Sale of 15,000 shares 34.70835
12/18/98 Sale of 10,000 shares 36.0975
3/24/99 Sale of 268,820 shares 35.5625
John J. Dooner, Jr 1/31/98 Purchase of 338 shares 20.945
2/28/98 Purchase of 304 shares 23.27
3/31/98 Purchase of 268 shares 26.35
4/30/98 Purchase of 266 shares 26.67
5/31/98 Purchase of 44 shares 25.01
Frank B. Lowe 11/6/98 Sale of 180,000 shares 31.095
</TABLE>
IV-4
<PAGE>
(iv) The following dealings for value in options over Interpublic Common Stock
have been carried out by the directors of Interpublic during the
disclosure period:
<TABLE>
<CAPTION>
Date Exercise Option money paid
Name (MM/DD/YY) Transaction price (US$) or received
<S> <C> <C> <C> <C>
Philip H. Geier, Jr 8/24/99 Exercise of options in
respect of 390,000
shares of Interpublic
Common Stock 20.135 $7,852,999.00
Eugene P. Beard 3/24/99 Exercise of options in
respect of 402,300
shares of Interpublic
Common Stock 23.763 $9,559,911.25
</TABLE>
(c) General
(i) Save as set out above, neither Brands Hatch nor any:
(A) director of Brands Hatch, member of his/her immediate family or
(so far as the directors are aware having made due and careful
enquiry) any connected person;
(B) subsidiary of Brands Hatch;
(C) pension fund of Brands Hatch or any of its subsidiaries;
(D) bank, stockbroker, financial or other professional adviser (other
than exempt market makers and exempt fund managers) to Brands
Hatch or any person controlling, controlled by or under the same
control as such bank, stockbroker, financial or other professional
adviser; or
(E) person who has an agreement of a kind referred to in Note 6(b) on
Rule 8 of the City Code with Brands Hatch or with any person who
is an associate of Brands Hatch;
owns, controls or (in the case of the directors, their immediate families
and connected persons) is interested in any Brands Hatch Shares nor any
securities convertible into, rights to subscribe for or options
(including traded options) in respect of, nor any derivatives referenced
to, Brands Hatch Shares nor any Interpublic Common Stock nor any
securities convertible into, rights to subscribe for options (including
traded options) in respect of, nor any derivatives referenced to,
Interpublic Common Stock, nor has any such person dealt for value
therein, in the case of Brands Hatch and any Brands Hatch director, in
the disclosure period and, in any other case, between 22 October 1999 and
5 November 1999 (being the latest practicable date prior to the posting
of this offer document).
(ii) Save as set out above, neither Interpublic nor any director of
Interpublic nor any member of his/her immediate family nor (so far as the
directors are aware having made due and careful enquiry) any connected
person nor any person acting in concert with Interpublic nor any person
who has an arrangement of a kind referred to in Note 6(b) on Rule 8 of
the City Code with Interpublic or with any person acting in concert with
Interpublic owns, controls or (in the case of the directors, their
immediate families and connected persons) is interested in any Brands
Hatch Shares nor any securities convertible into, rights to subscribe for
or options (including traded options) in respect of, nor derivatives
referenced to, Brands Hatch Shares nor any Interpublic Common Stock nor
any securities convertible into, rights to subscribe for or options
(including traded options) in respect of, nor derivatives referenced to,
Interpublic Common Stock nor has any such person dealt for value therein
during the disclosure period.
(iii) Save for the Affiliate Agreements, neither Brands Hatch nor any associate
of Brands Hatch nor Interpublic nor any person acting in concert with
Interpublic has any arrangement of the kind referred to in Note 6(b) on
Rule 8 of the City Code with any person.
(iv) References in this paragraph 2(c) to:
(A) an "associate" are to:
(aa) subsidiaries and associated companies of Brands Hatch or
Interpublic, as the case may be, and companies of which any
such subsidiaries or associated companies are associated
companies;
IV-5
<PAGE>
(bb) banks, financial and other professional advisers (including
stockbrokers) to Brands Hatch or Interpublic, as the case
may be, or a company covered in subparagraph (aa) above,
including persons controlling, controlled by or under the
same control as such banks or financial or other
professional advisers;
(cc) the directors of Brands Hatch or Interpublic, as the case
may be, and the directors of any company covered in sub-
paragraph (aa) (together in each case with any member of
their immediate families or related trusts);
(dd) the pension funds of Brands Hatch or Interpublic, as the
case may be, or a company covered in sub-paragraph (aa);
(ee) an investment company, unit trust or other person whose
investments an associate (as otherwise defined in this
paragraph 2(c)(iv)) manages on a discretionary basis, in
respect of the relevant investment accounts;
(ff) a person who owns or controls five per cent or more of any
class of relevant securities (as defined in paragraphs (a)
to (d) in Note 2 on Rule 8 of the City Code) issued by
Brands Hatch or Interpublic, as the case may be, including
a person who as a result of any transaction owns five per
cent or more; and
(gg) a company having a material trading arrangement with Brands
Hatch or Interpublic, as the case may be; and
(B) a "bank" does not include a bank whose sole relationship with
Interpublic or Brands Hatch or a company covered in sub-paragraph
(A)(aa) is the provision of normal commercial banking services or
such activities in connection with the Offer as registration work.
(v) For the purposes of this paragraph 2(c), ownership or control of 20 per
cent or more of the equity share capital of a company is regarded as the
test of associated company status and "control" means a holding, or
aggregate holdings, of shares carrying 30 per cent or more of the voting
rights attributable to the share capital of the company which are
currently exercisable at a general meeting, irrespective of whether the
holding gives de facto control.
3. Market quotations
The following table shows the middle-market quotations for Brands Hatch Shares
as derived from the Official List and the last reported New York Stock Exchange
closing prices per share of Interpublic Common Stock on the first business day
in each of the six months from May 1999 to November 1999 (inclusive), on 21
October 1999 (being the last business day prior to the commencement of the
Offer Period) and on 8 November 1999 (being the latest practicable date prior
to the posting of this offer document):
<TABLE>
<CAPTION>
Brands Hatch Interpublic
Share price Common Stock
Date (pence) price (US$)
<S> <C> <C>
3 May 1999 --- 38 5/8
4 May 1999 332.5 ---
1 June 1999 332.5 39 11/16
1 July 1999 356.0 42 7/8
2 August 1999 351.5 40 3/4
1 September 1999 375.0 39 15/16
1 October 1999 390.0 40 9/16
21 October 1999 478.0 38 11/16
1 November 1999 487.0 39 3/8
8 November 1999 493.5 39 1/8
</TABLE>
4. Material contracts
Interpublic
The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by Interpublic within the two years
immediately prior to the Offer Period, and are or may be material:
IV-6
<PAGE>
(a) pursuant to an indenture dated as of 1 June 1999 between Interpublic and
The Bank of New York, Interpublic issued the 2006 Notes in a private
placement. The issue price of the 2006 Notes was 83.018% of the principal
amount at maturity. The 2006 Notes are convertible into Interpublic
Common Stock at any time after the latest date of original issuance
thereof through maturity, unless previously redeemed or otherwise
purchased by Interpublic. The current conversion rate is 17.616 shares of
Interpublic Common Stock per $1,000 principal amount at maturity of the
2006 Notes, subject to adjustment in certain events. The 2006 Note
holders have the right to require Interpublic to redeem the 2006 Notes
upon the occurrence of a Fundamental Change, as defined in the 2006
Notes, as a whole or in part, at a price initially equal to $830.18 per
$1,000 principal amount and increasing thereafter in increments to
$896.20 per $1,000 on 1 June 2002 and thereafter at the redemption price
at which Interpublic may redeem the 2006 Notes. Interpublic may redeem
the 2006 Notes, in whole or in part, at any time after 5 June 2002
initially at $896.67 per $1,000 principal amount and at increasing prices
thereafter to $1,000 per $1,000 principal amount on 1 June 2006. Unless
the 2006 Notes are redeemed, repaid or converted prior thereto, the 2006
Notes will mature on 1 June 2006 at their principal amount. The proceeds
of this issuance are being used for general corporate purposes, which may
include the retirement of indebtedness; and
(b) the Affiliate Agreements.
Save as disclosed above, no contracts (not being contracts entered into in the
ordinary course of business) have been entered into by any member of the
Interpublic Group within the two years immediately prior to the Offer Period
which are or may be material.
Brands Hatch
The following contract (not being a contract entered into in the ordinary
course of business) has been entered into by Brands Hatch within the two years
immediately prior to the Offer Period, and is or may be material:
On 18 March 1999, Brands Hatch Leisure Group Limited ("BHLG") completed
the acquisition of the entire issued share capital of Rebel, being the
holding company of two subsidiaries, Rebel Enterprises Limited and
Daytona Raceways Limited. The terms of the acquisition are set out in a
Share Purchase Agreement (the "Share Purchase Agreement") dated 5
February 1999 entered into between (1) Charles Graham and James Graham
(the "Vendors") and (2) BHLG. The initial consideration paid by BHLG on
completion was L2,850,000 in cash and, following the agreement of the
completion accounts, a further retained sum of L150,000 was also paid to
the Vendors. As a term of the Share Purchase Agreement, the Vendors are
entitled to deferred consideration in the maximum sum of L2,500,000 in
relation to an earn-out over the period from completion to 31 December
2003 upon the achievement by Rebel of certain financial targets. Any such
deferred consideration will be satisfied by the issue of unsecured
redeemable loan stock by BHLG to be guaranteed by a major clearing bank.
Save as disclosed above, no contracts (not being contracts entered into in the
ordinary course of business) have been entered into by any member of the Brands
Hatch Group within the two years immediately prior to the Offer Period which
are or may be material.
5. Brands Hatch directors' employment arrangements
The following are details of the service agreements of the directors of Brands
Hatch which have more than twelve months to run from the date of this offer
document:
Nicola M. Foulston and Robert S. Bain have service agreements with Brands
Hatch, dated 31 October 1996 (as varied pursuant to a letter of variation
dated 26 April 1998) and 26 March 1998 (as varied pursuant to a letter of
variation dated 26 April 1998), respectively, which include the following
terms:
* both service agreements are terminable by either party on 12
months' notice;
* each executive director is entitled to the benefit of a company
car, a pension contribution of 12 per cent of his/her gross
salary, private medical insurance for himself/herself, spouse and
children and an annual discretionary bonus payment as determined
by Brands Hatch's remuneration committee;
* each executive director is subject to a 12 month restrictive
covenant in relation to any business concerned in the operation of
motor circuits in the United Kingdom and/or the organisation of
motor racing events; and
IV-7
<PAGE>
* each executive director is entitled to remuneration (per annum),
excluding pension contributions and discretionary bonuses, as set
out in the table below:
L
Nicola M. Foulston 186,000
Robert S. Bain 100,000
Sir Rodney M. Walker receives an annual fee of L50,000 in return for his
services. Roger R.G. North receives an annual fee of L17,500 in return
for his services. Sir Rodney M. Walker's letter of appointment with
Brands Hatch is for a three year period (renewed on the same terms on 1
September 1999) terminable by either party on six months' notice to
expire at any time. Roger R.G. North's appointment expires on 30 November
1999.
There is no arrangement under which any director has agreed to waive future
emoluments nor has there been any waiver of emoluments during the financial
year immediately preceding the date of this offer document. There are no
outstanding loans granted by any member of the Brands Hatch Group to any
director of Brands Hatch, nor has any guarantee been provided by any member of
the Brands Hatch Group for the benefit of the directors.
Save as disclosed in this paragraph 5, no service agreement exists between any
director or proposed director of Brands Hatch and Brands Hatch or any of its
subsidiaries which has more than 12 months to run and no agreement of this kind
has been entered into or amended within the six months preceding the date of
this offer document.
6. Rights attaching to the New Interpublic Common Stock to be issued as
consideration under the Offer
Interpublic Stockholders are entitled to receive such dividends as the board of
Interpublic from time to time may declare out of funds legally available for
that purpose. For the avoidance of doubt, Brands Hatch Shareholders will not be
entitled to Interpublic's quarterly dividend of 8 1/2 cents per share payable
to Interpublic Stockholders of record on 29 November 1999. Each Interpublic
Stockholder is entitled to one vote for each share of Interpublic Common Stock
held on all matters voted upon by the Interpublic Stockholders, including the
election of directors.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Interpublic, Interpublic Stockholders are entitled to share
equally and rateably in the balance of assets, if any, remaining after payment
of all debts and liabilities.
Interpublic Common Stock has no conversion or pre-emptive rights or redemption
or sinking fund provisions.
7. Indirect interests in Brands Hatch Shares following completion of the Offer
Save as disclosed below, there is no person whose pre-existing interest in
Interpublic is such that he/she will have a potential direct or indirect
interest of 5% or more in any part of the equity capital of Brands Hatch
following completion of the Offer:
<TABLE>
<CAPTION>
Number of shares of Percentage of
Interpublic Common outstanding Interpublic
Name and address Stock Common Stock
<S> <C> <C>
Putnam Investments, Inc.
and subsidiaries 7,763,009 5.6
One Post Office Square,
Boston, Massachusetts
02109, USA
</TABLE>
8. Compulsory acquisition
If, on or before the expiration of four months from the date of posting of this
offer document, Interpublic has as a result of acceptances of the Offer, or,
subject to certain conditions, acquired or contracted to acquire, at least
90 per cent in value of the Brands Hatch Shares to which the Offer relates then
(i) Interpublic will be entitled, and intends, to acquire compulsorily the
remainder of the outstanding Brands Hatch Shares in accordance with Sections
428 to 430F of the Companies Act and (ii) in such circumstances a Brands Hatch
Shareholder may require Interpublic to purchase his Brands Hatch Shares in
accordance with the procedures and time limits described in Section 430A of the
Companies Act. A copy of Sections 428 to 430F of the Companies Act is set out
in Appendix VI to this offer document.
IV-8
<PAGE>
9. Legal matters
Certain legal matters with respect to UK law will be passed upon for
Interpublic by Lovell White Durrant, London. Certain legal matters with respect
to US law will be passed upon for Interpublic by Cleary, Gottlieb, Steen &
Hamilton, London. The validity of the New Interpublic Common Stock offered
hereby will be passed upon for Interpublic by Nicholas J. Camera, General
Counsel of Interpublic.
10. Experts
The financial statements as of 31 December 1998 and 31 December 1997 and for
each of the three years ended 31 December 1998 included in Appendix II to this
offer document have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
PricewaterhouseCoopers, an affiliate of PricewaterhouseCoopers LLP, is acting
as financial adviser to Interpublic for the purposes of the City Code and for
the purposes of approving this offer document as an investment advertisement in
accordance with Section 57 of the UK Financial Services Act 1986.
The consolidated financial statements of Brands Hatch as of and for each of the
three years ended 31 December 1998 included in Appendix III to this offer
document have been audited by Ernst & Young, independent auditors, as set forth
in their report thereon. Such consolidated financial statements are included
herein in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
Pannell Kerr Forster is providing independent financial advice to the board of
Brands Hatch for the purposes of Rule 3.1 of the City Code.
11. Other information
(a) Interpublic has its principal place of business at 1271 Avenue of the
Americas, New York, New York 10020, USA.
(b) The expenses of, and incidental to, the preparation and circulation of
the Offer will be paid by Interpublic. If the Offer does not become
unconditional or is withdrawn each of Brands Hatch and Interpublic will
pay its own business and legal expenses incurred relating to the Offer.
(c) Save as disclosed herein, no agreement, arrangement or understanding
(including any compensation arrangement) exists between Interpublic or
any person acting in concert with Interpublic for the purpose of the
Offer and any of the directors, recent directors, shareholders or recent
shareholders of Brands Hatch having any connection with or dependence on,
or which is conditional on the outcome of, the Offer.
(d) Save as disclosed in paragraph 6 of the letter from Interpublic on page
12 and in the unaudited results for the six months to 30 June 1999 and
for the quarter to 30 September 1999 set out in Appendix II, the
directors of Interpublic are not aware of any material change in the
financial or trading position of the Interpublic Group since 31 December
1998, the date to which the latest published audited financial statements
were made up.
(e) Save as disclosed in paragraph 6 of the letter from the Chairman of
Brands Hatch on page 8 and in the unaudited interim statement for the
half year to 30 June 1999 set out in Appendix III, the directors of
Brands Hatch are not aware of any material change in the financial or
trading position of the Brands Hatch Group since 31 December 1998, the
date to which the latest published audited financial statements were made
up.
(f) Unless otherwise stated, financial information concerning Interpublic and
the Interpublic Group has been derived from the annual report and
accounts and quarterly statements of Interpublic for the relevant periods
and financial information concerning Brands Hatch and the Brands Hatch
Group has been derived from the annual report and accounts and interim
report of Brands Hatch for the relevant periods.
(g) There is no agreement, arrangement or understanding whereby the
beneficial ownership of any of the Brands Hatch Shares to be acquired by
Interpublic pursuant to the Offer will be transferred to any other person
except that Interpublic reserves the right to transfer any Brands Hatch
Shares acquired to any other member of the Interpublic Group.
(h) The emoluments of the current directors of Interpublic will not be
affected by the acquisition of Brands Hatch or by any other associated
transaction.
IV-9
<PAGE>
(i) Each of PricewaterhouseCoopers, PricewaterhouseCoopers LLP, Pannell Kerr
Forster and Ernst & Young has given and has not withdrawn its written
consent to the issue of this offer document with the inclusion herein of
the references to its name in the form and context in which they appear.
12. Documents available for inspection
Copies of the documents referred to below will be available for inspection at
the offices of Lovell White Durrant, 65 Holborn Viaduct, London EC1A 2DY during
normal business hours on any weekday (Saturdays and public holidays excepted)
throughout the period during which the Offer remains open for acceptance:
(a) the certificate of incorporation and by-laws of Interpublic and the
memorandum and articles of association of Brands Hatch;
(b) the published consolidated audited financial statements of Interpublic
for each of the two financial years ended 31 December 1998 and the
unaudited results for the six months to 30 June 1999 and for the quarter
to 30 September 1999;
(c) the published consolidated audited financial statements of Brands Hatch
for each of the two financial years ended 31 December 1998 and the
unaudited interim statement for the six months to 30 June 1999;
(d) the material contracts referred to in paragraph 4 of this Appendix IV;
(e) the service contracts of the directors of Brands Hatch referred to in
paragraph 5 of this Appendix IV;
(f) the written consents referred to in paragraph 11(i) of this Appendix IV;
and
(g) the irrevocable undertakings referred to in paragraph 5 of the letter
from Interpublic.
IV-10
<PAGE>
Appendix V --- Description of Interpublic capital stock and changes in the
rights of Brands Hatch Shareholders
1. Description of Interpublic capital stock
(a) Interpublic Common Stock
As of 31 July 1999, 282,011,856 shares of Interpublic Common Stock were
outstanding, out of a total authorised share capital of 550 million
shares of Interpublic Common Stock. All outstanding shares of Interpublic
Common Stock are fully paid and non-assessable.
(b) Authorised but unissued preferred stock
The board of directors of Interpublic has the authority, without further
action by the Interpublic Stockholders, to issue up to 20 million shares
of preferred stock, without par value, in one or more series and to fix
the rights, preferences, privileges and restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences, and the number of shares constituting any series
or the designation of such series. Issuance of Interpublic preferred
stock while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes could make it more difficult
for a third party to acquire a majority of the outstanding voting stock
of Interpublic. There are currently no shares of preferred stock issued
or outstanding.
2. Description of Interpublic Common Stock
The following is a brief description of certain rights of holders of
Interpublic Common Stock. For a complete understanding of these rights, Brands
Hatch Shareholders are referred to the laws and applicable regulations of the
State of Delaware, United States, the listing requirements of the New York
Stock Exchange and the constitutional documents of Interpublic.
(a) General
Interpublic is incorporated in the State of Delaware, United States and
operates in accordance with the DGCL. The rights of Interpublic
Stockholders are determined by the DGCL, the securities and other
legislation of the United States, Interpublic's certificate of
incorporation and Interpublic's by-laws. Interpublic Common Stock is
traded on the New York Stock Exchange.
(b) Certificates
Interpublic Common Stock is issued in registered form. Every holder of
Interpublic Common Stock is entitled to a share certificate.
(c) Dividends
Subject to preferences applicable to any outstanding Interpublic
preferred stock, holders of Interpublic Common Stock are entitled to
receive rateably such dividends as may be declared by the board of
directors of Interpublic out of funds legally available for this purpose.
(d) Meetings
Annual meetings of the Interpublic Stockholders are held on the date
designated by the by-laws of Interpublic. Written notice must be mailed
to each stockholder entitled to vote not less than ten nor more than 60
days before the date of the meeting. The presence in person or by proxy
of the holders of record of a majority of the issued and outstanding
shares of Interpublic entitled to vote at such meeting constitutes a
quorum for the transaction of business at meetings of the stockholders.
Special meetings of the stockholders may be called for any purpose by the
board of directors and shall be called by the chairman of the board or
the secretary upon the written request, stating the purpose of such
meeting, of the holders of a majority of the outstanding shares of all
classes of capital stock entitled to vote at the meeting.
(e) Voting rights
The holders of Interpublic Common Stock are entitled to one vote for each
share held on record. Holders of Interpublic Common Stock may vote by
proxy.
V-1
<PAGE>
(f) Liquidation, dissolution or winding-up
In the event of a liquidation, dissolution or winding-up of Interpublic,
after payment shall have been made to holders of preferred stock of the
full amounts to which they shall be entitled, the holders of Interpublic
Common Stock are entitled, to the exclusion of the holders of preferred
stock, to share rateably according to the number of shares held by them
in all remaining assets available for distribution to the holders of
Interpublic Common Stock.
(g) Transfers
The Interpublic by-laws do not allow the board of directors to refuse to
register transfers of shares.
(h) Other rights
Holders of Interpublic Common Stock have no pre-emption, redemption,
conversion or other subscription rights.
3. Differences between Interpublic Common Stock and Brands Hatch Shares
The following is a summary comparison of material differences between the
rights of an Interpublic Stockholder and a Brands Hatch Shareholder arising
from the differences between the corporate laws of Delaware and of England and
Wales, the governing instruments of the two companies, and the securities laws
and regulations governing the two companies. However, it is not intended to be
a complete description of the laws of Delaware or of England and Wales, nor of
the other rules or laws referred to in this summary. For information as to
where the governing instruments of Interpublic and Brands Hatch may be
obtained, see paragraph 12 of Appendix IV. You are encouraged to obtain and
read these documents.
Provisions currently applicable to
Interpublic Stockholders
Voting rights
Under Delaware law, each stockholder is entitled to one vote for each share of
capital stock held by the stockholder unless the certificate of incorporation
provides otherwise.
The certificate of incorporation of Interpublic does not alter the voting
rights as provided under Delaware law.
Under Delaware law, a certificate of incorporation may provide that in
elections of directors and other specified circumstances, stockholders are
entitled to cumulate votes.
The certificate of incorporation of Interpublic does not provide for cumulative
voting.
Provisions currently applicable to
Brands Hatch Shareholders
Voting rights
Under English law, a shareholder entitled to vote at a shareholders' meeting is
entitled to one vote on a show of hands regardless of the number of shares he
or she holds; provided, however, that any group of five ordinary shareholders
(or a lesser number if provided in the articles of association) and any
shareholder representing at least ten per cent of the total voting rights (or a
lower percentage if provided in the articles of association) has the statutory
right to demand a vote by a poll, which means that each ordinary shareholder
would be entitled to one vote for each ordinary share held by the shareholder.
The articles of association of Brands Hatch provide that three shareholders
present and entitled to vote may demand a poll.
Under English law, ordinary resolutions are decided on a show of hands and must
be approved by at least a majority of the shareholders present in person, or by
proxy if the memorandum and articles of association so permit, and voting at a
meeting. If a poll is demanded, the resolution conducted on a poll must be
approved by holders of at least a majority of the votes cast at the meeting.
Both special and extraordinary resolutions require the affirmative vote of at
least 75 per cent of the votes cast at the meeting.
V-2
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Provisions currently applicable to
Brands Hatch Shareholders
Under English law, two shareholders present in person constitute a quorum for
purposes of a general meeting, unless the company's articles of association
specify otherwise. The articles of association of Brands Hatch also specify a
quorum of two shareholders.
Under English law, the voting rights of shareholders are regulated by a
company's articles of association. Brands Hatch's articles of association do
not provide for cumulative voting rights in the election of directors, but
instead a separate resolution must be proposed for the appointment of each
director. (see below.)
Provisions currently applicable to
Interpublic Stockholders
Action by written consent
Under Delaware law, unless otherwise provided in the certificate of
incorporation, stockholders may take any action required or permitted to be
taken at a stockholders' meeting without a meeting if consented to in writing
by the same number of votes that would be required if the action were to be
taken at a meeting.
The Interpublic certificate of incorporation does not prevent action by written
consent.
Provisions currently applicable to
Brands Hatch Shareholders
Action by written consent
Under English law, unless the company's articles of association provide
otherwise, the consent in writing of all shareholders is required in order to
approve, without a meeting, a matter requiring shareholder approval. Brands
Hatch's articles of association do not provide otherwise.
Provisions currently applicable to
Interpublic Stockholders
Shareholder proposals and shareholder nominations of directors
See "Special meetings of shareholders". See also "Removal of directors".
Provisions currently applicable to
Brands Hatch Shareholders
Shareholder proposals and shareholder nominations of directors
Under English law, shareholders may demand that a resolution be voted on at a
general meeting if the demand is made:
(1) by shareholders holding at least five per cent of the total voting rights
at the meeting to which the requisition relates; or
(2) by at least 100 shareholders holding shares on which there has been paid
an average sum per shareholder of at least L100.
The shareholders must deposit the demand at the company's registered office at
least six weeks before the general meeting to which it relates.
In general, resolutions to appoint directors must be put to shareholders on the
basis of one resolution for each nominated director. A resolution including
more than one director may be presented to be voted upon at a general meeting
only if the shareholders have first unanimously approved so doing.
V-3
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Sources and payment of dividends
Under Delaware law, the board of directors, subject to any restrictions in the
corporation's certificate of incorporation, may declare and pay dividends out
of:
(1) surplus of the corporation, which is defined as net assets less statutory
capital; or
(2) if no surplus exists, out of the net profits of the corporation for the
year in which the dividend is declared and/or the preceding year;
provided, however, that if the capital of the corporation has been diminished
to an amount less than the aggregate amount of capital represented by the
issued and outstanding stock of all classes having preference upon the
distribution of assets, the board may not declare and pay dividends out of the
corporation's net profits until the deficiency in the capital has been
repaired.
Provisions currently applicable to
Brands Hatch Shareholders
Sources and payment of dividends
Subject to the prior rights of holders of preferred shares, an English company
may pay dividends on its ordinary shares only out of its distributable profits,
defined as accumulated, realized profits less accumulated, realized losses, and
not out of share capital, which includes share premiums, which are equal to the
excess of the consideration for the issue of shares over the aggregate nominal
amount of such shares. Amounts credited to the share premium account, however,
may be used to pay up unissued shares which may then be distributed to
shareholders in proportion to their holdings.
In addition, under English law, Brands Hatch will not be permitted to make a
distribution if, at the time, the amount of its net assets is less than the
aggregate of its issued and paid-up share capital and undistributable reserves.
V-4
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Rights of purchase and redemption
Under Delaware law, any corporation may purchase, redeem and dispose of its own
shares, except that it may not purchase or redeem these shares if the capital
of the corporation is impaired at the time or would become impaired as a result
of the redemption.
However, at any time, a corporation may purchase or redeem any of its shares
which are entitled upon any distribution of assets to a preference over another
class of its stock if these shares will be retired upon acquisition or
redemption, thereby reducing the capital of the corporation.
The New York Stock Exchange ("NYSE") requires that prompt publicity be given
and prompt notice be sent to the NYSE of action which will result in, or which
looks toward, either the partial or full call for redemption of a listed
security. NYSE rules provide that when a listed security is fully redeemed,
trading is suspended as soon as the redemption funds become available to the
holders of the security. When only a part of the listed securities are
redeemed, the amount authorised to be listed is reduced by the amount redeemed
as soon as the redemption funds become available to holders of the redeemed
securities.
Provisions currently applicable to
Brands Hatch Shareholders
Rights of purchase and redemption
Under English law, a company may issue redeemable shares if authorised by its
memorandum and articles of association, subject to any conditions stated
therein.
A company may purchase its own shares, including any redeemable shares, if the
purchase:
(1) is authorised by its memorandum and articles of association; and
(2) (a) in the case of an open-market purchase, authority to make the market
purchase has been given by any ordinary resolution of its
shareholders; or
(b) in all other cases, has been approved by a special resolution.
A company may redeem or repurchase shares only if the shares are fully paid
and, in the case of public companies, only out of:
(1) distributable profits; or
(2) the proceeds of a new issue of shares, made for the purpose of the
repurchase or redemption.
The London Stock Exchange requires that where a company has issued shares which
are listed on the London Stock Exchange and are convertible into a class of
shares to be repurchased, the holders of the convertible shares must first pass
an extraordinary resolution approving any repurchase at a separate class
meeting.
The London Stock Exchange requires that purchases within a 12-month period of
15 per cent or more of a company's share capital must be made through either a
tender or partial offer to all shareholders, at a stated maximum or fixed
price.
Purchases within a 12-month period below the 15 per cent threshold may be made
through:
(1) the open market, provided that the price is not more than five per cent
above the average of the middle-market quotations taken from the Official
List for the five trading days before the purchase date; or
(2) an off-market transaction negotiated with one or more shareholders subject
to prior approval of the transaction by special resolution.
Brands Hatch's articles of association authorise the issue of redeemable shares
and the purchase of its own shares, subject to and in accordance with the
Companies Act and the Listing Rules.
V-5
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
General meetings of shareholders
The by-laws of Interpublic provide that the annual meeting of stockholders
shall be held at 11 o'clock in the morning on the third Tuesday of May each
year. If any such day is a legal holiday, the annual meeting shall be held on
the next succeeding business day. If the annual meeting is not held on the date
designated therefor, the board of directors shall cause the meeting to be held
as soon as feasible thereafter, and any elections held or other business
transacted at such meeting shall be valid as if held or transacted on the date
designated for the annual meeting.
Provisions currently applicable to
Brands Hatch Shareholders
General meetings of shareholders
Brands Hatch's articles of association provide that annual general meetings
shall be held at such time and place as the board of directors may determine,
subject to the provisions of the Companies Act which require an annual general
meeting to be held in each year and that not more than 15 months shall elapse
between the date of one annual general meeting of a company and that of the
next.
Provisions currently applicable to
Interpublic Stockholders
Special meetings of shareholders
Delaware law provides that special meetings of stockholders may be called by:
(1) the board of directors; or
(2) any person or persons authorised by the corporation's certificate of
incorporation or by-laws.
The by-laws of Interpublic provide that special meetings of the holders of any
class or of all classes of Interpublic's capital stock may be called at any
time by the board of directors, and shall be called by the chairman of the
board or the secretary upon the written request, stating the purposes of any
such meeting, of a majority of the board of directors. Special meetings of the
holders of all classes of Interpublic's capital stock entitled to vote thereat
shall also be called by the chairman of the board or the secretary upon the
written request, stating the purpose or purposes of any such meeting, of the
holders of a majority of the outstanding shares of all classes of capital stock
entitled to vote thereat.
The Interpublic by-laws provide that written notice of each meeting of the
stockholders, stating the date, hour, place and purpose or purposes thereof,
shall be given, personally or by mail, to each stockholder entitled to vote at
the meeting not less than ten or more than 60 days before the date of the
meeting. If mailed, such notice shall be deposited in the US mail, postage
prepaid, directed to the stockholder at his/her address as it appears on the
records of Interpublic.
Provisions currently applicable to
Brands Hatch Shareholders
Special meetings of shareholders
Under English law, an extraordinary general meeting of shareholders may be
called by:
(1) the board of directors; or
(2) shareholders holding at least one-tenth of the paid-up capital of the
company carrying voting rights at general meetings.
The notice requirements for an ordinary resolution, an extraordinary
resolution and a special resolution are as follows:
(1) ordinary resolution -- 14 clear days' notice;
(2) extraordinary resolution -- 14 clear days' notice; and
(3) special resolution -- 21 clear days' notice.
Notwithstanding the foregoing notice requirements, 21 clear days' notice must
be given for an annual general meeting and any resolutions to be proposed
thereat.
In addition, general meetings may be called upon shorter notice if:
(1) in the case of an annual general meeting, all the shareholders who are
permitted to attend and vote agree to the shorter notice; or
(2) in the case of an extraordinary general meeting, a majority of the
shareholders holding at least 95 per cent by nominal value of the shares
which can be voted at the meeting so agree.
V-6
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Provisions currently applicable to
Brands Hatch Shareholders
"Clear days' notice" means calendar days and excludes:
(1) the date of receipt of the notice or the date when the notice is deemed to
be received; and
(2) the date of the meeting itself.
"Extraordinary resolutions" are relatively unusual and are confined to matters
out of the ordinary course of business, such as a proposal to wind up the
affairs of the company.
"Special resolutions" generally involve proposals to:
(1) change the name of the company;
(2) alter its capital structure;
(3) change or amend the rights of shareholders;
(4) permit the company to issue new shares for cash without applying the
shareholders' preemptive rights;
(5) amend the company's objects, or purpose, clause in its memorandum of
association;
(6) amend the company's articles of association; or
(7) carry out other matters for which the company's articles of association or
the Companies Act prescribe that a "special resolution" is required.
All other proposals relating to the ordinary course of the company's business,
such as the election of directors and transactions, such as mergers,
acquisitions and dispositions, are the subject of an "ordinary resolution".
V-7
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Appraisal rights
Delaware law provides stockholders of a corporation involved in a merger the
right to demand and receive payment of the fair value of their stock in certain
mergers. However, appraisal rights are not available to holders of shares:
(1) listed on a national securities exchange;
(2) designated as a national market system security on an interdealer
quotation system operated by the National Association of Securities
Dealers, Inc.; or
(3) held of record by more than 2,000 stockholders;
unless holders of stock are required to accept in the merger anything other
than any combination of:
(A) shares of stock or depositary receipts of the surviving corporation
in the merger;
(B) shares of stock or depositary receipts of another corporation that,
at the effective date of the merger, will be either:
(a) listed on a national securities exchange;
(b) designated as a national market system security on an
interdealer quotation system operated by the National
Association of Securities Dealers, Inc.; or
(c) held of record by more than 2,000 holders; or
(C) cash in lieu of fractional shares of the stock or depositary receipts
received.
In addition, appraisal rights are not available to the holders of shares of the
surviving corporation in the merger, if the merger does not require the
approval of the stockholders of that corporation.
Provisions currently applicable to
Brands Hatch Shareholders
Appraisal rights
Under English law, shareholders do not generally have appraisal rights, as the
concept is understood under Delaware law, and Brands Hatch's articles of
association do not contain any appraisal rights.
Certain limited rights exist where an offeror who, pursuant to a takeover offer
for a company, has acquired or contracted to acquire not less than 90 per cent
in value of the shares to which the offer relates, seeks to acquire outstanding
minority shareholdings pursuant to the compulsory acquisition provisions under
the Companies Act.
Similarly, under a scheme of reconstruction under Section 110 of the UK
Insolvency Act 1986, a shareholder can require the liquidator to abstain from
carrying the resolution into effect or to purchase his/her interest at a price
agreed or determined by arbitration.
Additionally, any shareholder who complains that the affairs of the company are
being conducted or that the directors' powers are being exercised in a manner
unfairly prejudicial to him/her or some part of the shareholders (including
himself/herself), or in disregard of his/her proper interests as a shareholder,
may apply to the High Court in England for relief. If the High Court finds the
complaint to be justified, it may exercise its discretion and order the
purchase of the shares on such terms including as to price as the High Court
may determine.
Provisions currently applicable to
Interpublic Stockholders
Preemptive rights
Under Delaware law, a stockholder is not entitled to preemptive rights to
subscribe for additional issues of stock or any security convertible into stock
unless they are specifically granted in the certificate of incorporation. Such
rights are not provided in the Interpublic certificate of incorporation.
Provisions currently applicable to
Brands Hatch Shareholders
Preemptive rights
Under English law, the issue for cash of:
(1) equity securities, being those which, with respect to dividends or
capital, carry a right to participate beyond a specified amount; or
(2) rights to subscribe for or convert into equity securities;
must be offered first to the existing equity shareholders in proportion to the
respective nominal value of their holdings, unless a special resolution to the
contrary has been passed by shareholders in a general meeting or the articles
of association provide otherwise.
It is a custom of many English companies listed on the London Stock Exchange
that a resolution be passed on an annual basis to authorise the board of
directors to disapply pre-emption rights in respect of a specified amount of
share capital, generally five per cent of issued share capital, without pre-
emption rights.
V-8
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Amendment of governing instruments
Under Delaware law, unless the certificate of incorporation requires a greater
vote, an amendment to the certificate of incorporation requires:
(1) the recommendation of the board of directors;
(2) the affirmative vote of a majority of the outstanding stock entitled to
vote thereon; and
(3) the affirmative vote of a majority of the outstanding stock of each class
entitled to vote thereon as a class.
The certificate of incorporation of Interpublic provides that Interpublic
reserves the right to amend, alter, change or repeal any provision contained in
the certificate of incorporation, in the manner prescribed by statute. All
rights conferred upon stockholders in the certificate of incorporation are
granted subject to this reservation.
Under Delaware law, stockholders have the power to adopt, amend or repeal by-
laws unless the certificate of incorporation gives those powers to the
directors of the corporation.
The by-laws of Interpublic provide that any provision of the by-laws may be
altered or repealed at any regular or special meeting of the stockholders or
the board of directors if notice of the proposed alteration or repeal is set
forth in the notice of such meeting, whether or not notice of such meeting is
otherwise required.
Provisions currently applicable to
Brands Hatch Shareholders
Amendment of governing instruments
Under English law, shareholders have the power to amend:
(1) the objects, or purpose, clause in a company's memorandum of association;
and
(2) any provisions of the company's articles of association;
by special resolution, subject to, in the case of amendments to the objects
clause of the memorandum of association, the right of dissenting shareholders
to apply to the courts to cancel the amendments within 21 days of the passing
of the resolution.
Under English law, the board of directors is not authorised to change the
memorandum or articles of association.
Amendments affecting the rights of the holders of any class of shares may,
depending on the rights attached to the class and the nature of the amendments,
also require approval by extraordinary resolution of the classes affected in
separate class meetings.
Brands Hatch's articles of association provide for the variation of class
rights if sanctioned either by holders of not less than 75 per cent in nominal
value of the issued shares in the class in writing, or an extraordinary
resolution of the class affected in a separate class meeting.
Provisions currently applicable to
Interpublic Stockholders
Stock class rights
Under Delaware law, any change to the rights of holders of the Interpublic
Common Stock or any series of preferred stock would require an amendment to the
Interpublic certificate of incorporation.
Delaware law provides that the holders of shares of a class or series shall be
entitled to vote as a class upon a proposed amendment if the amendment will:
(1) increase or decrease the authorised shares of the class or series:
(2) increase or decrease the par value of the shares of the class or series;
or
Provisions currently applicable to
Brands Hatch Shareholders
Stock class rights
See "Amendment of governing instruments".
V-9
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
(3) alter or change the powers, preferences or special rights of the shares of
the class or series so as to affect them adversely.
Under its certificate of incorporation Interpublic has the right to issue
shares of common plan as well as shares of preferred plan.
The shares of authorised common plan shall be identical in all respects and
have equal rights and privileges. Without action by the stockholders, such
shares of common plan may be issued by Interpublic from time to time for such
consideration as may be fixed by the board of directors; provided, however,
that such consideration shall not be less than par value. Any and all shares so
issued, the full consideration for which has been paid or delivered shall be
deemed fully paid stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not be liable for any
further payment thereon. No holder of shares of common plan shall be entitled
as a matter of right, preemptive or otherwise, to subscribe for, purchase or
receive any shares of the stock of Interpublic of any class, now or hereafter
authorised, or any options or warrants for such stock or securities convertible
into or exchangeable for such stock, or any shares held in the treasury of
Interpublic.
The board of directors shall have the authority to issue the shares of the
preferred plan from time to time on such terms and conditions as it may
determine, and to divide the preferred plan into one or more classes or series
and in connection with the creation of any such class or series to fix by the
resolution or resolutions providing for the issue of shares thereof the
designations, powers, preferences and relative participating, optional or other
special rights of such class or series, and the qualifications, limitations, or
restrictions thereof, to the full extent now or hereafter permitted by law. The
number of authorised shares of preferred plan may be increased or decreased
(but not below the number then outstanding) by the affirmative vote of the
holders of a majority of the common plan, without a vote of the holders of the
preferred plan, unless a vote of any such holders is required pursuant to the
certificate or certificates establishing the series of preferred plan.
As of date, no shares of the preferred plan have been issued.
Provisions currently applicable to
Brands Hatch Shareholders
V-10
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Shareholders' votes on certain transactions
Generally, under Delaware law, unless the certificate of incorporation provides
for the vote of a larger portion of the stock, completion of a merger,
consolidation, sale, lease or exchange of all or substantially all of a
corporation's assets or dissolution requires:
(1) the approval of the board of directors; and
(2) approval by the vote of the holders of a majority of the outstanding stock
or, if the certificate of incorporation provides for more or less than one
vote per share, a majority of the votes of the outstanding stock of a
corporation entitled to vote on the matter.
The Interpublic certificate of incorporation does not provide for the vote of a
larger portion of stock than is provided under Delaware law.
Under the rules of the New York Stock Exchange, acquisitions involving:
(1) substantial security holders; or
(2) the issuance of additional shares of common stock of a listed company
totalling 20 per cent or more of the outstanding shares of common stock
require the approval of the holders of a majority of the shares voting on
the acquisition. Other transactions do not require stockholder approval
under the New York Stock Exchange rules.
Provisions currently applicable to
Brands Hatch Shareholders
Shareholders' votes on certain transactions
The Companies Act provides for schemes of arrangement, which are arrangements
or compromises between a company and any class of shareholders or creditors and
used in certain types of reconstructions, amalgamations, capital
reorganisations or takeovers. These arrangements require the approval at a
special meeting convened by order of the court of:
(1) shareholders or creditors representing 75 per cent in value of the capital
held by or debt owed to the class of shareholders or creditors or class
thereof present and voting, either in person or by proxy; and
(2) the court.
Once approved and sanctioned, all shareholders and creditors of the relevant
class are bound by the terms of the scheme. A scheme of reconstruction under
Section 110 of the UK Insolvency Act 1986 may be made when a company is being
wound-up voluntarily. Under the terms of such a scheme and with the sanction of
a special resolution of the shareholders, the whole or part of the company's
business or property is transferred to a second company. Any dissenting
shareholder can require the liquidator to abstain from carrying the resolution
into effect or to purchase his/her interest at a price agreed or determined by
arbitration.
V-11
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Provisions currently applicable to
Brands Hatch Shareholders
The Companies Act also provides:
(1) that where a takeover offer is made for the shares of an English company;
and
(2) within four months of the date of the offer, the offeror has acquired or
contracted to acquire at least nine-tenths in value of the shares of any
class to which the offer relates;
the offeror may, within two months of reaching the nine-tenths level, require
shareholders who do not accept the offer to transfer their shares on the terms
of the offer. A dissenting shareholder may object to the transfer or its
proposed terms by applying to the court within six weeks of the date on which
notice of the transfer was given. In the absence of fraud or oppression, the
court is unlikely to order that the acquisition not take effect, but it may
specify terms of the transfer that it finds appropriate. A minority shareholder
is also entitled in these circumstances, in the alternative, to require the
offeror to acquire his/her shares on the terms of the offer.
Under the rules of the London Stock Exchange, shareholder approval:
(1) is required for an acquisition or disposal by a listed company if,
generally, the size of the company or business to be acquired or disposed
of represents 25 per cent or more of the size of the listed company; and
(2) may also be required for an acquisition or disposal of assets between a
listed company and related parties, including:
(a) directors of the company or its subsidiaries;
(b) holders of ten per cent of the nominal value of any class of the
company's or any holding company's or its subsidiary's shares having
the right to vote; or
(c) any of their affiliates.
Provisions currently applicable to
Interpublic Stockholders
Rights of inspection
Delaware law allows any stockholder:
(1) to inspect:
(a) the corporation' stock ledger;
(b) a list of its stockholders; and
(c) its other books and records; and
(2) to make copies or extracts of those materials during normal business
hours; provided, however, that:
(a) the stockholder makes a written request under oath stating the
purpose of his/her inspection; and
(b) the inspection is for a purpose reasonably related to the person's
interest as a stockholder.
Provisions currently applicable to
Brands Hatch Shareholders
Rights of inspection
Except when closed under the provisions of the Companies Act, the register and
index of names of shareholders of an English company may be inspected during
business hours:
(1) without payment, by its shareholders; or
(2) for a fee by any other person.
In both cases, the documents may be copied for a fee.
The shareholders of an English public company may also inspect, without charge,
during business hours:
(1) minutes of meetings of the shareholders and obtain copies of the minutes
for a fee; and
(2) service contracts of the company's directors, if the contracts have more
than 12 months to run or require more than 12 months' notice to terminate.
V-12
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
The by-laws of Interpublic provide that the board of directors shall determine
from time to time whether, when and under what conditions and regulations the
accounts and books of Interpublic (except such as may by statute be
specifically open to inspection) or any of them shall be open to the inspection
of the stockholders and the stockholders' rights in this respect are and shall
be restricted and limited accordingly.
Provisions currently applicable to
Brands Hatch Shareholders
In addition, the published annual accounts of a public company are required to
be available for shareholders at a general meeting and a shareholder is
entitled to a copy of these accounts.
Provisions currently applicable to
Interpublic Stockholders
Standard of conduct for directors
The DGCL does not contain specific provisions setting forth the standard of
conduct of a director. The scope of the fiduciary duties of directors is
generally determined by the courts of the State of Delaware. In general,
directors have a duty to act without self-interest, on a well-informed basis
and in a manner they reasonably believe to be in the best interest of the
shareholders.
Provisions currently applicable to
Brands Hatch Shareholders
Standard of conduct for directors
Under English law, a director has a fiduciary duty to act in a company's best
interest. This duty includes obligations:
(1) not to create an actual or potential conflict between his/her duty to the
company and duties to any other person or his/her personal interests; and
(2) to exercise his/her powers only in accordance with the memorandum and
articles of association of the company.
In addition, a director must exercise reasonable care and skill. The precise
scope of this duty is unclear, but the test appears to be both subjective
(i.e., was the director's conduct that of a reasonably diligent person who has
the knowledge and experience of the director) and objective (i.e., was the
director's conduct that of a reasonably diligent person having the knowledge
and experience that a director should have).
The Companies Act contains restrictions on a company's power to make loans and
confer other benefits to directors and persons connected with them.
Provisions currently applicable to
Interpublic Stockholders
Classification of the board of directors
Delaware law permits the certificate of incorporation or a stockholder-adopted
by-law to provide that directors be divided into one, two or three classes,
with the term of office of one class of directors to expire each year.
The Interpublic certificate of incorporation does not provide for
classification of the board of directors.
Provisions currently applicable to
Brands Hatch Shareholders
Classification of the board of directors
There are no provisions under English law which govern the term of office of
directors, although shareholder approval is required if a director's contract
of employment is for a period of more than five years.
The Combined Code, which contains principles of good governance and a code of
best practice and is appended to the Listing Rules, recommends that the notice
period under directors' service contracts should ideally be set at one year or
less.
V-13
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Removal of directors
Delaware law provides that a director may be removed with or without cause by
the holders of a majority in voting power of the shares entitled to vote at an
election of directors, except that:
(1) members of a classified board of directors may be removed only for cause,
unless the certificate of incorporation provides otherwise; and
(2) directors may not be removed in certain situations in the case of a
corporation having cumulative voting.
The by-laws of Interpublic provide that any director may be removed at any
time, either for or without cause, by action of the holders of record of a
majority of the outstanding shares of voting capital stock of Interpublic. For
proper cause, a director may also be removed at any time by the affirmative
vote of at least two-thirds of the whole board of directors.
Provisions currently applicable to
Brands Hatch Shareholders
Removal of directors
Under the Companies Act, shareholders may remove a director without cause by
ordinary resolution, irrespective of any provisions of the company's articles
of association or service contract the director has with the company; provided,
however, that 28 clear days' notice of the resolution is given to the company.
Provisions currently applicable to
Interpublic Stockholders
Vacancies on the board of directors
Under Delaware law, unless otherwise provided in the certificate of
incorporation or the by-laws:
(1) vacancies on a board of directors; and
(2) newly created directorships resulting from an increase in the number of
directors may be filled by a majority of the directors in office.
However, if the holders of any specific class of stock are entitled to elect
directors, vacancies and newly created directorships of the class may only be
filled by a majority of the directors elected by the class. In the case of a
classified board, directors elected to fill vacancies or newly created
directorships will hold office until the next election of the class for which
the directors have been chosen.
The by-laws of Interpublic provide that vacancies created by death,
resignation, removal or disqualification and newly created directorships
resulting from any increase in the authorised number of directors may be filled
by the affirmative vote of a majority of the directors remaining in office,
although less than a quorum, or by a sole remaining director, or by the
affirmative vote of the holders of a majority of the stock of Interpublic
entitled to vote and present and voting at any meeting of the stockholders at
which a quorum is present. Each director so chosen shall hold office until the
next annual meeting of stockholders and until his/her successor is elected and
qualified or until his/her earlier resignation or removal. If one or more
directors shall resign from the Board, effective at a future date, a majority
of the directors then in office, including those who have so resigned, shall
have power to fill such vacancy or vacancies, the vote thereon to take effect
when such resignation or resignations shall become effective and each director
so chosen shall hold office as provided in this section in the filling of other
vacancies.
Provisions currently applicable to
Brands Hatch Shareholders
Vacancies on the board of directors
Under English law, shareholders may by ordinary resolution, at a meeting at
which any director retires, appoint a person to be a director:
(1) to fill a vacancy; or
(2) to become an additional director, subject to any maximum provided in the
company's articles of association.
The board of directors has the power to appoint a director to serve until the
next general meeting of the company, whereupon the director concerned is
required to retire but will be eligible for election but the total number of
directors shall not exceed any maximum number fixed in accordance with the
company's articles of association.
Brands Hatch's articles of association provide that the maximum number of
directors shall be 12 unless and until otherwise determined by the company by
ordinary resolution.
V-14
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Liability of directors and officers
Delaware law permits a corporation's certificate of incorporation to include a
provision eliminating or limiting the personal liability of a director to the
corporation and its stockholders for damages arising from a breach of fiduciary
duty as a director. However, no provision can limit the liability of a director
for:
(1) any breach of his/her duty of loyalty to the corporation or its
stockholders;
(2) acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
(3) intentional or negligent payment of unlawful dividends or stock purchases
or redemptions; or
(4) any transaction from which he/she derives an improper personal benefit.
The Interpublic certificate of incorporation provides that no person shall be
liable to Interpublic for any loss or damage suffered by it on account of any
action taken or omitted to be taken by him/her as a director or officer of
Interpublic in good faith, if such person (i) exercised or used the same degree
of diligence, care and skill as an ordinary prudent man would have exercised or
used under the circumstances in the conduct of his/her own affairs or (ii)
took, or omitted to take, such action in reliance in good faith upon advice of
counsel for Interpublic, or upon the books of account or other records of
Interpublic, or upon reports made to Interpublic by any of its officers or by
an independent certified public accountant or by an appraiser selected with
reasonable care by the board of directors or by any committee designated by the
board of directors.
Provisions currently applicable to
Brands Hatch Shareholders
Liability of directors and officers
English law does not permit a company to exempt any director or officer of the
company or any person employed by the company as an auditor from any liability
arising from negligence, default, breach of duty or breach of trust against the
company.
V-15
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
The Interpublic certificate of incorporation provides that a director of
Interpublic shall not be personally liable to Interpublic or its shareholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Interpublic
and its shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (unlawful payment of dividend or unlawful stock
purchase or redemption) or (iv) for any transaction from which the director
derived any improper personal benefit. If the DGCL is amended after approval by
the stockholders of this provision in the certificate of incorporation to
authorise corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended. The certificate of incorporation also provide that any repeal or
modification of this provision in the certificate of incorporation shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification.
Provisions currently applicable to
Brands Hatch Shareholders
Provisions currently applicable to
Interpublic Stockholders
Indemnification of directors and officers
Delaware law provides that a corporation may indemnify any officer or director
who is made a party to any third party suit or proceeding on account of being a
director, officer or employee of the corporation against expenses, including
attorney's fees, judgments, fines and amounts paid in settlement reasonably
incurred by him/her in connection with the action, through, among other things,
a majority vote of a quorum consisting of directors who were not parties to the
suit or proceeding if the officer or director:
(1) acted in good faith and in a manner he/she reasonably believed to be in
the best interests of the corporation; and
(2) in a criminal proceeding, had no reasonable cause to believe his/her
conduct was unlawful.
The by-laws of Interpublic contain specific authority for indemnification by
the corporation of current and former directors, officers, employees or agents
of the corporation.
Interpublic maintains policies of insurance under which Interpublic and its
directors and officers are insured subject to specified exclusions and
deductibles and maximum amounts against loss arising from any claim which may
be made against Interpublic or any director or officer of Interpublic by reason
of any breach of duty, neglect, error, misstatement, omission or act done or
alleged to have been done while acting in their respective capabilities.
See also "Liability of directors and officers".
Provisions currently applicable to
Brands Hatch Shareholders
Indemnification of directors and officers
English law does not permit a company to indemnify:
(1) a director or officer of the company; or
(2) any person employed by the company as an auditor;
against any liability arising from negligence, default, breach of duty or
breach of trust against the company, except that indemnification is allowed for
liabilities incurred in proceedings in which:
(1) judgment is entered in favour of the director or officer or the director
or officer is acquitted; or
(2) the director or officer is held liable, but the court finds that he/she
acted honestly and reasonably and that relief should be granted.
The Companies Act enables companies to purchase and maintain insurance for
directors, officers and auditors against liabilities arising from negligence,
default, breach of duty or breach of trust against the company.
Brands Hatch's memorandum of association authorises the company to purchase and
maintain such insurance for any directors, officers or auditors of the company.
V-16
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Shareholders' suits
Under Delaware law, a stockholder may initiate a derivative action to enforce a
right of a corporation if the corporation fails to enforce the right itself.
The complaint must:
(1) state that the plaintiff was a stockholder at the time of the transaction
of which the plaintiff complains or that the plaintiff's shares thereafter
devolved on the plaintiff by operation of law; and
(2) (a) allege with particularity the efforts made by the plaintiff to obtain
the action the plaintiff desires from the directors; or
(b) state the reasons for the plaintiff's failure to obtain the action or
for not making the effort.
Additionally, the plaintiff must remain a stockholder through the duration of
the derivative suit. The action will not be dismissed or compromised without
the approval of the Delaware Court of Chancery.
Provisions currently applicable to
Brands Hatch Shareholders
Shareholders' suits
While English law only permits a shareholder to initiate a lawsuit on behalf of
the company in limited circumstances, the Companies Act permits a shareholder
whose name is on the register of shareholders of the company to apply for a
court order:
(1) when the company's affairs are being or have been conducted in a manner
unfairly prejudicial to the interests of all or some shareholders,
including the shareholder making the claim; or
(2) when any act or omission of the company is or would be so prejudicial.
A court has wide discretion in granting relief, and may authorize civil
proceedings to be brought in the name of the company by a shareholder on terms
that the court directs. Except in these limited circumstances, English law does
not generally permit class action lawsuits by shareholders on behalf of the
company or on behalf of other shareholders.
V-17
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Certain provisions relating to share acquisitions
Section 203 of the DGCL prohibits "business combinations", including mergers,
sales and leases of assets, issuances of securities and similar transactions by
a corporation or a subsidiary with an "interested stockholder" who beneficially
owns 15 per cent or more of a corporation's voting stock, within three years
after the person or entity becomes an interested stockholder, unless:
(1) the transaction that will cause the person to become an interested
stockholder is approved by the board of directors of the target prior to
the transaction;
(2) after completion of the transaction in which the person becomes an
interested stockholder, the interested stockholder holds at least 85 per
cent of the voting stock of the corporation not including (i) shares held
by officers and directors of interested stockholders and (ii) shares held
by specified employee benefit plans; or
(3) after the person becomes an interested stockholder, the business
combination is approved by the board and holders of at least 66 2/3 per
cent of the outstanding voting stock, excluding shares held by the
interested stockholder.
Provisions currently applicable to
Brands Hatch Shareholders
Certain provisions relating to share acquisitions
In the case of a company listed on the London Stock Exchange, shareholder
approval must be obtained for certain acquisitions or disposals of assets
involving directors or substantial shareholders or their associates. In
addition, takeovers of public companies, whether or not listed on the London
Stock Exchange, are regulated by the City Code, which is:
(1) comprised of non-statutory rules unenforceable at law; and
(2) administered by the Panel, a body consisting of representatives of City of
London financial and professional institutions which oversees the conduct
of takeovers.
The City Code provides that when:
(1) any person acquires, whether by a series of transactions over a period of
time or not, shares which, together with shares held or acquired by
persons acting in concert with him/her, represent 30 per cent or more of
the voting rights of a public company; or
(2) any person, together with persons acting in concert with him/her, holds at
least 30 per cent but not more than 50 per cent of the voting rights and
that person, or any person acting in concert with him/her, acquires any
additional shares;
the person must generally make an offer for all of the equity shares of the
company, whether voting or non-voting, and any class of voting non-equity
shares of the company held by that person or any person acting in concert with
him/her, for cash, or accompanied by a cash alternative, at not less than the
highest price paid by the person or these persons for the relevant shares
during the 12 months preceding the date of the offer.
Provisions currently applicable to
Interpublic Stockholders
Anti-takeover measures
Under Delaware law, directors generally have a duty to act without self-
interest, on a well-informed basis and in a manner they reasonably believe to
be in the best interests of the stockholders.
Nevertheless, a Delaware court will generally apply a policy of judicial
deference to board of director decisions to adopt anti-takeover measures in the
face of a potential takeover where the directors are able to show that:
(1) they had reasonable grounds for believing that there was a danger to
corporate policy and effectiveness from an acquisition proposal; and
(2) the board action taken was reasonable in relation to the threat posed.
Provisions currently applicable to
Brands Hatch Shareholders
Anti-takeover measures
Under English law, directors of a company have a fiduciary duty to take only
those actions which are in the interests of the company. Generally, anti-
takeover measures are not actions which fall within this category.
Under the City Code, a company is prohibited from taking any action without the
approval of its shareholders at a general meeting after:
(1) a bona fide offer has been communicated to its board of directors; or
(2) its board of directors has reason to believe that a bona fide offer might
be imminent;
if that action could effectively result in the offer being frustrated or in the
shareholders being denied an opportunity to decide on its merits.
V-18
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Disclosure of interests
Acquirors of common stock are subject to disclosure requirements under Section
13(d)(1) of the Exchange Act and Rule 13d-1 thereunder, which provide that any
person who becomes the beneficial owner of more than five per cent of the
outstanding common stock of Interpublic must, within ten days after such
acquisition:
(1) file a Schedule 13D with the SEC disclosing specified information; and
(2) send a copy of the Schedule 13D to Interpublic and to each securities
exchange on which the security is traded.
Provisions currently applicable to
Brands Hatch Shareholders
Disclosure of interests
The Companies Act provides that anyone who acquires a material interest or
becomes aware that he/she has acquired a material interest in three per cent or
more of any class of shares of a public company's issued share capital carrying
rights to vote at general shareholder meetings must notify that company in
writing of his/her interest within two days. Thereafter, any increase or
decrease of a whole percentage or decrease which reduces the interest to below
three per cent must be notified in writing to the company.
In addition, the Companies Act provides that a public company may, by notice in
writing, require a person whom the company knows or reasonably believes to be
or to have been within the three preceding years, interested in the company's
issued voting share capital to:
(1) confirm whether this is or is not the case; and
(2) if this is the case, to give further information that the company requires
relating to his/her interest and any other interest in the company's
shares of which he/she is aware.
The disclosure must be made within a reasonable period as specified in the
relevant notice which may be as short as one or two days.
When the notice is served by a company on a person who is or was interested in
shares of the company and that person fails to give the company any information
required by the notice within the time specified in the notice, the company may
apply to the court for an order directing that the shares in question be
subject to restrictions prohibiting, among other things:
(1) any transfer of the shares;
(2) the exercise of voting rights;
(3) the issue of further shares; and
(4) other than a liquidation, dividends and other payments.
These restrictions may also void any agreement to transfer the shares.
V-19
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Limitations on enforceability of civil liabilities under US federal securities
laws
Ability to bring suits, enforce judgments and enforce US law
Interpublic is a US company incorporated under the laws of Delaware. All but
one of its directors and officers are residents of the United States, and
Interpublic has substantial assets located in the United States. As a result,
US investors generally can initiate lawsuits in the United States against
Interpublic and its directors and officers and can enforce lawsuits based on US
federal securities laws in US courts.
Provisions currently applicable to
Brands Hatch Shareholders
Limitations on enforceability of civil liabilities under US federal securities
laws
Ability to bring suits, enforce judgments and enforce US law
Brands Hatch is an English company located in the United Kingdom. Many of the
directors and officers of Brands Hatch are residents of the United Kingdom and
not the United States. A large portion of the assets of Brands Hatch and its
directors and officers are located outside of the United States. As a result,
US investors may find it difficult in a lawsuit based on the civil liability
provisions of the US federal securities laws:
(1) to effect service within the United States upon Brands Hatch and the
directors and officers of Brands Hatch located outside the United States;
(2) to enforce in US courts or outside the United States judgments obtained
against those persons in US courts;
(3) to enforce in US courts judgments obtained against those persons in courts
in jurisdictions outside the United States; and
(4) to enforce against those persons in the United Kingdom, whether in
original actions or in actions for the enforcement of judgments of US
courts, civil liabilities based solely upon the US federal securities
laws.
Provisions currently applicable to
Interpublic Stockholders
Limitations on enforceability of civil liabilities under US federal securities
laws
"Short swing" profits
Directors and officers of Interpublic are governed by rules under the Exchange
Act that may require directors and officers to forfeit to Interpublic any
"short swing" profits realized from purchases and sales, as determined under
the Exchange Act and the rules thereunder, of Interpublic equity securities.
Provisions currently applicable to
Brands Hatch Shareholders
Limitations on enforceability of civil liabilities under US federal securities
laws
"Short swing" profits
Directors and officers of Brands Hatch are not subject to the Exchange Act's
"short swing" profit rules because Brands Hatch is currently a foreign private
issuer under the Exchange Act which is not subject to these rules.
However, directors of Brands Hatch are currently subject to applicable UK
legislation prohibiting insider dealing. In addition, the directors have to
comply with the Model Code of the London Stock Exchange, which provides that
the considerations taken into account by directors when deciding whether or not
to deal in shares of the company of which they are a director must not be of a
short-term nature. The Model Code also places additional restrictions on
trading during periods prior to announcement of a company's results.
V-20
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Proxy statements and reports
Under the Exchange Act proxy rules, Interpublic must comply with notice and
disclosure requirements relating to the solicitation of proxies for stockholder
meetings.
Provisions currently applicable to
Brands Hatch Shareholders
Proxy statements and reports
As a foreign private issuer, Brands Hatch is not currently governed by the
Exchange Act proxy rules. However, Brands Hatch is governed by the Companies
Act and the Listing Rules regulating notices of shareholder meetings, which
provide that notice of a shareholder meeting must be accompanied by:
(1) a shareholder circular containing an explanation of the purpose of the
meeting; and
(2) the recommendations of the board with respect to actions to be taken.
In addition, Brands Hatch sends Brands Hatch ordinary shareholders a copy of
its annual report and accounts or a summary thereof.
In addition, under the London Stock Exchange listing rules, Brands Hatch is
required to send to shareholders details relating to certain acquisitions,
dispositions, takeovers, mergers and offers either made by or in respect of the
company, depending on their size and importance.
V-21
<PAGE>
Provisions currently applicable to
Interpublic Stockholders
Reporting requirements
As a US public company, Interpublic must file with the SEC, among other reports
and notices:
(1) an annual report on Form 10-K within 90 days after the end of each fiscal
year;
(2) quarterly reports on Form 10-Q within 45 days after the end of each fiscal
quarter; and
(3) current reports on Form 8-K upon the occurrence of important corporate
events.
Provisions currently applicable to
Brands Hatch Shareholders
Reporting requirements
Under English law, Brands Hatch must file the following documents, inter alia,
with Companies House:
(1) annual accounts and reports, seven months after the end of the relevant
accounting period (this period is reduced to six months under the Listing
Rules);
(2) annual return, within 28 days after the date to which it is made up;
(3) forms 288 noting the resignation and appointment of directors and
secretary, within 14 days of the date of the change;
(4) auditors' notice of resignation, within 14 days of the company's receipt
of such notice; and
(5) copies of all special and extraordinary resolutions passed by the company,
within 15 days of the date the resolution was passed.
Brands Hatch is also required to notify the London Stock Exchange of:
(1) any major new developments relating to its business which are not public
knowledge and may lead to a substantial movement in its stock price;
(2) notifications received by it from persons holding an interest in three per
cent or more of any class of the company's share capital;
(3) any changes in its board of directors;
(4) any purchase or redemption by it of its own equity securities;
(5) interests of directors in its shares or debentures; and
(6) changes in its capital structure.
The Listing Rules also require Brands Hatch to publish an interim report within
four months of the end of each half year.
V-22
Appendix VI --- Certain Provisions of the Companies Act
Set out below is an extract from the Companies Act:
"PART XIIIA
TAKEOVER OFFERS
428 TAKEOVER OFFERS
(1) In this Part of this Act "takeover offer" means an offer to acquire all
the shares, or all the shares of any class or classes, in a company
(other than shares which at the date of the offer are already held by the
offeror), being an offer on terms which are the same in relation to all
the shares to which the offer relates or, where those shares include
shares of difference classes, in relation to all the shares of each
class.
(2) In subsection (1) "shares" means shares which have been allotted on the
date of the offer but a takeover offer may include among the shares to
which it relates all or any shares that are subsequently allotted before
a date specified in or determined in accordance with the terms of the
offer.
(3) The terms offered in relation to any shares shall for the purpose of this
section be treated as being the same in relation to all the shares or, as
the case may be, all the shares of a class to which the offer relates
notwithstanding any variation permitted by subsection (4).
(4) A variation is permitted by this subsection where --
(a) the law of a country or territory outside the United Kingdom
precludes an offer of consideration in the form or any of the
forms specified in the terms in question or precludes it except
after compliance by the offeror with conditions with which he is
unable to comply or which he regards as unduly onerous; and
(b) the variation is such that the persons to whom an offer of
consideration in that form is precluded are able to receive
consideration otherwise than in that form but of substantially
equivalent value.
(5) The reference in subsection (1) to shares already held by the offeror
includes a reference to shares which he has contracted to acquire but
that shall not be construed as including shares which are the subject of
a contract binding the holder to accept the offer when it is made, being
a contract entered into by the holder either for no consideration and
under seal or for no consideration other than a promise by the offeror to
make the offer.
(6) In the application of subsection (5) to Scotland the words "and under
seal" shall be omitted.
(7) Where the terms of an offer make provision for their revision and for
acceptances on the previous terms to be treated as acceptances on the
revised terms, the revision shall not be regarded for the purposes of
this Part of this Act as the making of a fresh offer and references in
this Part of this Act to the date of the offer shall accordingly be
construed as references to the date on which the original offer was made.
(8) In this Part of this Act the "offeror" means, subject to section 430D,
the person making a takeover offer and the "company" means the company
whose shares are the subject of the offer.
429 RIGHT OF OFFEROR TO BUY OUT MINORITY SHAREHOLDERS
(1) If, in a case in which a takeover offer does not relate to shares of
different classes, the offeror has by virtue of acceptance of the offer
acquired or contracted to acquire not less than nine-tenths in value of
the shares to which the offer relates he may give notice to the holder of
any shares to which the offer relates which the offeror has not acquired
or contracted to acquire that he desires to acquire those shares.
(2) If, in a case in which a takeover offer relates to shares of different
classes, the offeror has by virtue of acceptances of the offer acquired
or contracted to acquire not less than nine-tenths in value of the shares
of any class to which the offer relates, he may give notice to the holder
of any shares of that class which the offeror has not acquired or
contracted to acquire that he desires to acquire those shares.
(3) No notice shall be given under subsection (1) or (2) unless the offeror
has acquired or contracted to acquire the shares necessary to satisfy the
minimum specified in that subsection before the end of the period of four
months beginning with the date of the offer and no such notice shall be
given after the end
VI-1
<PAGE>
of the period of two months beginning with the date on which he has
acquired or contracted to acquire shares which satisfy that minimum.
(4) Any notice under this section shall be given in the prescribed manner;
and when the offeror gives the first notice in relation to an offer he
shall send a copy of it to the company together with a statutory
declaration by him in the prescribed form stating that the conditions for
the giving of the notice are satisfied.
(5) Where the offeror is a company (whether or not a company within the
meaning of this Act) the statutory declaration shall be signed by a
director.
(6) Any person who fails to send a copy of a notice or statutory declaration
as required by subsection (4) or makes such a declaration for the
purposes of that subsection knowing it to be false or without having
reasonable grounds for believing it to be true shall be liable to
imprisonment or a fine, or both, and for continued failure to send the
copy or declaration, to a daily default fine.
(7) If any person is charged with an offence for failing to send a copy of a
notice as required by subsection (4) it is a defence for him to prove
that he took reasonable steps for securing compliance with that
subsection.
(8) When during the period within which a takeover offer can be accepted the
offeror acquires or contracts to acquire any of the shares to which the
offer relates but otherwise than by virtue of acceptances of the offer,
then, if --
(a) the value of the consideration for which they are acquired or
contracted to be acquired ("the acquisition consideration") does
not at that time exceed the value of the consideration specified
in the terms of the offer; or
(b) those terms are subsequently revised so that when the revision is
announced the value of the acquisition consideration, at the time
mentioned in paragraph (a) above, no longer exceeds the value of
the consideration specified in those terms,
the offeror shall be treated for the purposes of this section as having
acquired or contracted to acquire those shares by virtue of acceptances
of the offer; but in any other case those shares shall be treated as
excluded from those to which the offer relates.
430 EFFECT OF NOTICE UNDER SECTION 429
(1) The following provisions shall, subject to section 430C, have effect
where a notice is given in respect of any shares under section 429.
(2) The offeror shall be entitled and bound to acquire those shares on the
terms of the offer.
(3) Where the terms of an offer are such as to give the holder of any shares
a choice of consideration the notice shall give particulars of the choice
and state --
(a) that the holder of the shares may within six weeks from the date
of the notice indicate his choice by a written communication sent
to the offeror at an address specified in the notice; and
(b) which consideration specified in the offer is to be taken as
applying in default of his indicating a choice as aforesaid;
and the terms of the offer mentioned in subsection (2) shall be
determined accordingly.
(4) Subsection (3) applies whether or not any time-limit or the other
conditions applicable to the choice under the terms of the offer can
still be complied with; and if the consideration chosen by the holders of
the shares --
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound
or able to provide it,
the consideration shall be taken to consist of an amount of cash payable
by the offeror which at the date of the notice is equivalent to the
chosen consideration.
(5) At the end of six weeks from the date of the notice the offeror shall
forthwith --
VI-2
<PAGE>
(a) send a copy of the notice to the company; and
(b) pay or transfer to the company the consideration for the shares to
which the notice relates.
(6) If the shares to which the notice relates are registered the copy of the
notice sent to the company under subsection (5)(a) shall be accompanied
by an instrument of transfer executed on behalf of the shareholder by a
person appointed by the offeror; and on receipt of that instrument the
company shall register the offeror as the holder of those shares.
(7) If the shares to which the notice relates are transferable by the
delivery of warrants or other instruments the copy of the notice sent to
the company under subsection (5)(a) shall be accompanied by a statement
to that effect; and the company shall on receipt of the statement issue
the offeror with warrants or other instruments in respect of the shares
and those already in issue in respect of the shares shall become void.
(8) Where the consideration referred to in paragraph (b) of subsection (5)
consists of shares or securities to be allotted by the offeror the
reference in that paragraph to the transfer of the consideration shall be
construed as a reference to the allotment of the shares or securities to
the company.
(9) Any sum received by a company under paragraph (b) of subsection (5) and
any other consideration received under that paragraph shall be held by
the company on trust for the person entitled to the shares in respect of
which the sum or other consideration was received.
(10) Any sum received by a company under paragraph (e) of subsection (5), and
any dividend or other sum accruing from any other consideration received
by a company under that paragraph, shall be paid into a separate bank
account, being an account the balance on which bears interest at an
appropriate rate and can be withdrawn by such notice (if any) as is
appropriate.
(11) Where after reasonable enquiry made at such intervals as are reasonable
the person entitled to any consideration held on trust by virtue of
subsection (9) cannot be found and twelve years have elapsed since the
consideration was received or the company is wound up the consideration
(together with any interest, dividend or other benefit that has accrued
from it) shall be paid into court.
(12) In relation to a company registered in Scotland, subsections (13) and
(14) shall apply in place of subsection (11).
(13) Where after reasonable enquiry made at such intervals as are reasonable
the person entitled to any consideration held on trust by virtue of
subsection (9) cannot be found and twelve years have elapsed since the
consideration was received or the company is wound up --
(a) the trust shall terminate;
(b) the company or, as the case may be, the liquidator shall sell any
consideration other than cash and any benefit other than cash that
has accrued from the consideration; and
(c) a sum representing --
(i) the consideration so far as it is cash;
(ii) the proceeds of any sale under paragraph (b) above; and
(iii) any interest, dividend or other benefit that has accrued
from the consideration,
shall be deposited in the name of the Accountant of Court in a bank
account such as is referred to in subsection (10) and the receipt for the
deposit shall be transmitted to the Account of Court.
(14) Section 58 of the Bankruptcy (Scotland) Act 1985 (so far as consistent
with this Act) shall apply with any necessary modifications to sums
deposited under subsection (13) as that section applies to sums deposited
under section 57(1)(a) of that Act.
(15) The expenses of any such enquiry as is mentioned in subsection (11) or
(13) may be defrayed out of the money or other property held on trust for
the person or persons to whom the enquiry relates.
VI-3
<PAGE>
430A RIGHT OF MINORITY SHAREHOLDER TO BE BOUGHT OUT BY OFFEROR
(1) If a takeover offer relates to all the shares in a company and at any
time before the end of the period within which the offer can be accepted
--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares to which
the offer relates; and
(b) those shares, with or without any other shares in the company
which he has acquired or contracted to acquire, amount to not less
than nine-tenths in value of all the shares in the company, the
holder of any shares to which the offer relates who has not
accepted the offer may by a written communication addressed to the
offeror require him to acquire those shares.
(2) If a takeover offer relates to shares of any class or classes and at any
time before the end of the period within which the offer can be accepted
--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares of any
class to which the offer relates; and
(b) those shares, with or without any other shares of that class which
he has acquired or contracted to acquire, amount to not less than
nine-tenths in value of all the shares of that class,
the holder of any shares of that class who has not accepted the offer may
by a written communication addressed to the offeror require him to
acquire those shares.
(3) Within one month of the time specified in subsection (1) or, as the case
may be, subsection (2) the offeror shall give any shareholder who has not
accepted the offer notice in the prescribed manner of the rights that are
exercisable by him under that subsection; and if the notice is given
before the end of the period mentioned in that subsection it shall state
that the offer is still open for acceptance.
(4) A notice under subsection (3) may specify a period for the exercise of
the rights conferred by this section and in that event the rights shall
not be exercisable after the end of that period; but no such period shall
end less than three months after the end of the period within which the
offer can be accepted.
(5) Subsection (3) does not apply if the offeror has given the shareholder a
notice in respect of the shares in question under section 429.
(6) If the offeror fails to comply with subsection (3) he and, if the offeror
is a company, every officer of the company who is in default or to whose
neglect the failure is attributable, shall be liable to a fine and for
continued contravention, to a daily default fine.
(7) If an offeror other than a company is charged with an offence for failing
to comply with subsection (3) it is a defence for him to prove that he
took all reasonable steps for securing compliance with that subsection.
430B EFFECT OF REQUIREMENT UNDER SECTION 430A
(1) The following provision shall, subject to section 430C, have effect where
a shareholder exercises his rights in respect of any shares under section
430A.
(2) The offeror shall be entitled and bound to acquire those shares on the
terms of the offer or on such other terms as may be agreed.
(3) Where the terms of an offer are such as to give the holder of shares a
choice of consideration the holder of the shares may indicate his choice
when requiring the offeror to acquire them and the notice given to the
holder under section 430A(3) --
(a) shall give particulars of the choice and of the rights conferred
by this subsection; and
(b) may state which consideration specified in the offer is to be
taken as applying in default of his indicating a choice;
and the terms of the offer mentioned in subsection (2) shall be
determined accordingly.
VI-4
<PAGE>
(4) Subsection (3) applies whether or not any time-limit or other conditions
applicable to the choice under the terms of the offer can still be
complied with; and if the consideration chosen by the holder of the
shares --
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound
or able to provide it,
the consideration shall be taken to consist of an amount of cash payable
by the offeror which at the date when the holder of the shares requires
the offeror to acquire them is equivalent to the chosen consideration.
430C APPLICATIONS TO THE COURT
(1) Where a notice is given under section 429 to the holder of any shares the
court may, on an application made by him within six weeks from the date
on which the notice was given --
(a) order that the offeror shall not be entitled and bound to acquire
the shares; or
(b) specify terms of acquisition different from those of the offer.
(2) If an application to the court under subsection (1) is pending at the end
of the period mentioned in subsection (5) of section 430 that subsection
shall not have effect until the application has been disposed of.
(3) Where the holder of any shares exercises his rights under section 430A
the court may, on an application made by him or the offeror, order that
the terms on which the offeror is entitled and bound to acquire the
shares shall be such as the court thinks fit.
(4) No order for costs or expenses shall be made against a shareholder making
an application under subsection (1) or (3) unless the court considers --
(a) that the application was unnecessary, improper or vexations; or
(b) that there has been unreasonable delay in making the application
or unreasonable conduct on his part in conducting the proceedings
on the application.
(5) Where a takeover offer has not been accepted to the extent necessary for
entitling the offeror to give notices under subsection (1) or (2) of
section 429 the court may, on the application of the offeror, make an
order authorising him to give notices under that subsection if satisfied
--
(a) that the offeror has after reasonable enquiry been unable to trace
one or more of the persons holding shares to which the offer
relates;
(b) that the shares which the offeror has acquired or contracted to
acquire by virtue of acceptances of the offer, together with the
shares held by the person or persons mentioned in paragraph (a),
amount to not less than the minimum specified in that subsection;
and
(c) that the consideration offered is fair and reasonable;
but the court shall not make an order under this subsection unless it
considers that it is just and equitable to do so having regard, in
particular, to the number of shareholders who have been traced but who
have not accepted the offer.
430D JOINT OFFERS
(1) A takeover offer may be made by two or more persons jointly and in that
event this Part of this Act has effect with the following modifications.
(2) The conditions for the exercise of the rights conferred by sections 429
and 430A shall be satisfied by the joint offerors acquiring or
contracting to acquire the necessary shares jointly (as respects
acquisitions by virtue of acceptances of the offer) and either jointly or
separately (in other cases); and, subject to the following provisions,
the rights and obligations of the offeror under those sections and
sections 430 and 430B shall be respectively joint rights and joint and
several obligations of the joint offerors.
VI-5
<PAGE>
(3) It shall be a sufficient compliance with any provision of those sections
requiring or authorising a notice or other document to be given or sent
by or to the joint offerors that it is given or sent by or to any of
them; but the statutory declaration required by section 429(4) shall be
made by all of them and, in the case of a joint offeror being a company,
signed by a director of that company.
(4) In sections 428, 430(8) and 430E references to the offeror shall be
construed as references to the joint offerors or any of them.
(5) In sections 430(6) and (7) references to the offeror shall be construed
as references to the joint offerors or such of them as they may
determine.
(6) In sections 430(4)(a) and 430B(4)(a) references to the offeror being no
longer able to provide the relevant consideration shall be construed as
references to none of the joint offerors being able to do so.
(7) In section 430C references to the offeror shall be construed as
references to the joint offerors except that any application under
subsection (3) or (5) may be made by any of them and the reference in
subsection (5)(a) to the offeror having been unable to trace one or more
of the persons holding shares shall be construed as a reference to none
of the offerors having been able to do so.
430E ASSOCIATES
(1) The requirement in section 428(1) that a takeover offer must extend to
all the shares, or all the shares of any class or classes, in a company
shall be regarded as satisfied notwithstanding that the offer does not
extend to shares which associates of the offeror hold or have contracted
to acquire; but, subject to subsection (2), shares which any such
associate holds or has contracted to acquire, whether at the time when
the offer is made or subsequently, shall be disregarded for the purposes
of any reference in this Part of this Act to the shares to which a
takeover offer relates.
(2) Where during the period within which a takeover offer can be accepted any
associate of the offeror acquires or contracts to acquire any of the
shares to which the offer relates, then, if the condition specified in
subsection 8(a) or (b) of section 429 is satisfied as respects those
shares they shall be treated for the purposes of that section as shares
to which the offer relates.
(3) In section 430(A)(1)(b) and (2)(b) the reference to shares which the
offeror has acquired or contracted to acquire shall include a reference
to shares which any associate of his has acquired or contract to acquire.
(4) In this clause "associate", in relation to an offeror, means --
(a) a nominee of the offeror;
(b) a holding company, subsidiary or fellow subsidiary of the offeror
or a nominee of such a holding company, subsidiary or fellow
subsidiary;
(c) a body corporate in which the offeror is substantially interested;
or
(d) any person who is, or is a nominee of, a party to an agreement
with the offeror for the acquisition of, or of an interest in, the
shares which are the subject of the takeover offer, being an
agreement which includes provisions imposing obligations or
restrictions such as are mentioned in section 204(2)(a).
(5) For the purposes of subsection (4)(b) a company is a fellow subsidiary of
another body corporate if both are subsidiaries of the same body
corporate but neither is a subsidiary of the other.
(6) For the purposes of subsection (4)(c) an offeror has a substantial
interest in a body corporate if --
(a) that body or its directors are accustomed to act in accordance
with his directions or instructions; or
(b) he is entitled to exercise or control the exercise of one-third or
more of the voting power at general meetings of that body.
(7) Subsections (5) and (6) of section 204 shall apply to subsection (4)(d)
above as they apply to that section and subsections (3) and (4) of
section 203 shall apply for the purposes of subsection (6) above as they
apply for the purposes of subsection (2)(b) of that section.
VI-6
<PAGE>
(8) Where the offeror is an individual his associates shall also include his
spouse and any minor child or step-child of his.
430F CONVERTIBLE SECURITIES
(1) For the purposes of this Part of this Act securities of a company shall
be treated as shares in the company if they are convertible into or
entitle the holder to subscribe for such shares; and references to the
holder of shares or a shareholder shall be construed accordingly.
(2) Subsection (1) shall not be construed as requiring any securities to be
treated --
(a) as shares of the same class as those into which they are
convertible or for which the holder is entitled to subscribe; or
(b) as shares of the same class as other securities by reason only
that the shares into which they are convertible or for which the
holder is entitled to subscribe are of the same class."
VI-7
<PAGE>
Appendix VII Definitions
The following definitions apply throughout this offer document, unless the
context requires otherwise:
"Acceptance Condition" means the Condition set out in
paragraph (a) of Part A of
Appendix I;
"Affiliate" means each of Awak Limited,
Nicola M. Foulston, Sir Rodney M.
Walker, Roger R.G. North and
Robert S. Bain;
"Affiliate Agreements" means the agreements between
Interpublic and the Affiliates,
inter alia, restricting the
ability of the Affiliates to deal
in Brands Hatch Shares and New
Interpublic Common Stock;
"Annual Report and Accounts means the annual report and
of Brands Hatch" audited accounts of the Brands
Hatch Group for the year ended 31
December 1998;
"Brands Hatch" means Brands Hatch Leisure PLC;
"Brands Hatch Group" means Brands Hatch and its
subsidiary undertakings;
"Brands Hatch Share Option Schemes" means the Brands Hatch Approved
Executive Share Option Scheme and
the Brands Hatch Unapproved
Executive Share Option Scheme;
"Brands Hatch Shareholders", "you" means holders of Brands Hatch
or "your" Shares;
"Brands Hatch Shares" means ordinary shares of 25p each
in the capital of Brands Hatch;
"certificated" or "in certificated form" in relation to a share or other
security, means a share or other
security, title to which is
recorded in the relevant register
of the share or other security
concerned as being held in
certificated form;
"City Code" means the City Code on Takeovers
and Mergers;
"Companies Act" means the Companies Act 1985 of
Great Britain;
"Compulsory Acquisition means the compulsory acquisition
Procedures" procedures set out in Sections
428 to 430F of the Companies Act;
"Conditions" means the conditions of the Offer
set out in Part A of Appendix I
and "Condition" means any one of
them;
"Council Regulation" means Council Regulation (EEC)
4064/89;
"CREST" means the relevant system (as
defined in the Regulations) in
respect of which CRESTCo is the
Operator (as defined in the
Regulations);
"CRESTCo" means CRESTCo Limited;
"CREST member" means a person who has been
admitted by CRESTCo as a system-
member (as defined in the
Regulations);
"CREST participant" means a person who is, in
relation to CREST, a system-
participant (as defined in the
Regulations);
"CREST sponsor" means a person who is, in
relation to CREST, a sponsoring
system-participant (as defined in
the Regulations);
"CREST sponsored member" means a CREST member admitted to
CREST as a sponsored member under
the sponsorship of a CREST
sponsor;
VII-1
<PAGE>
"DGCL" means the General Corporation Law
of the State of Delaware;
"Enlarged Interpublic Group" means the Interpublic Group
following the acquisition of
Brands Hatch pursuant to the
Offer;
"Escrow Agent" means Lloyds TSB Registrars in
its capacity as a CREST
participant under participant ID
6RA73;
"Exchange Act" means the United States
Securities Exchange Act of 1934;
"Form of Acceptance" means the form of acceptance and
authority accompanying this offer
document;
"Illustrative Exchange Rate" means $1.6239: L1.00, being the
mid-point of the closing spread
of the dollar to sterling spot
rate, as shown in the Financial
Times (UK edition) on 8 November
1999 (being the latest
practicable date prior to the
posting of this offer document);
"Initial Closing Date" means 3.00 pm (London time) on 30
November 1999, unless and until
Interpublic in its discretion
extends the Offer, in which case
the term "Initial Closing Date"
means the latest time and date at
which the Offer, as so extended
by Interpublic, will expire;
"Initial Offer Period" means the period from the date of
this offer document to and
including the Initial Closing
Date;
"Inland Revenue" means the UK Inland Revenue;
"Interpublic", "we", "us" or "our" means The Interpublic Group of
Companies, Inc.;
"Interpublic Common Stock" means common stock of $0.10 each
in the share capital of
Interpublic;
"Interpublic Group" means Interpublic and its
subsidiary undertakings;
"Interpublic Stockholders" means holders of Interpublic
Common Stock;
"IRC" means the United States Internal
Revenue Code of 1986;
"IRS" means the United States Internal
Revenue Service;
"Listing Rules" means rules made by the London
Stock Exchange under the
authority of the UK Financial
Services Act 1986 relating to the
admission of securities to the
Official List and the continuing
obligations of listed companies;
"London Stock Exchange" means London Stock Exchange
Limited;
"member account ID" means the identification code or
number attached to any member
account in CREST;
"New Interpublic Common means Interpublic Common Stock to
Stock" be delivered pursuant to the
Offer;
"Octagon" means the sports marketing and
entertainment division of
Interpublic;
"Offer" means the recommended offer made
by Interpublic to acquire all the
issued and to be issued Brands
Hatch Shares on the terms and
subject to the Conditions set out
in this offer document including,
where thecontext so requires, any
VII-2
<PAGE>
subsequent revision, variation,
extension or renewal of that
offer;
"Offer Document" means this offer document and any
other document containing the
Offer;
"Offer Period" means, in relation to the Offer,
the period commencing on
22 October 1999 until the end of
the Initial Offer Period;
"Official List" means the Daily Official List of
the London Stock Exchange;
"Optionholders" means holders of Options;
"Options" means options granted pursuant to
the terms of the Brands Hatch
Share Option Schemes;
"Panel" means the Panel on Takeovers and
Mergers;
"Pannell Kerr Forster" means Pannell Kerr Forster, a
firm which has provided
independent financial advice to
the board of Brands Hatch for the
purposes of Rule 3.1 of the City
Code;
"participant ID" means the identification code or
membership number used in CREST
to identify a particular CREST
member or other CREST
participant;
"PricewaterhouseCoopers" means PricewaterhouseCoopers, the
financial adviser to Interpublic
for the purposes of the City Code
and for the purposes of approving
this offer document as an
investment advertisement in
accordance with Section 57 of the
UK Financial Services Act 1986;
"PricewaterhouseCoopers LLP" means PricewaterhouseCoopers LLP,
independent public accountants to
Interpublic;
"Rebel" means the Rebel Group Limited, a
company acquired by the Brands
Hatch Group in February 1999
which operates karting venues in
the United Kingdom;
"Receiving Agent" means Lloyds TSB Registrars, The
Causeway, Worthing, West Sussex
BN99 6DA;
"Registration Statement" means the Registration Statement
on Form S-4 relating to the Offer
and filed by Interpublic with the
SEC under the Securities Act;
"Regulations" means the UK Uncertificated
Securities Regulations 1995 (SI
1995 No. 95/3272);
"SEC" means the United States
Securities and Exchange
Commission;
"Securities Act" means the United States
Securities Act of 1933 and the
rules thereunder;
"Subsequent Offer Period" means the period following the
Initial Closing Date during which
the Offer remains open for
acceptance;
"TFE instruction" means a Transfer from Escrow
instruction (as defined by the
CREST Manual issued by CRESTCo);
"Treasury" means the United States
Department of the Treasury;
"TTE instruction" means a Transfer to Escrow
instruction (as defined by the
CREST Manual issued by CRESTCo);
"2006 Notes" means the $361 million aggregate
principal amount at maturity of
1.87% convertible subordinated
notes due 2006 of Interpublic;
VII-3
<PAGE>
"UK" or "United Kingdom" means the United Kingdom of Great
Britain and Northern Ireland;
"UK GAAP" means accounting principles
generally accepted in the United
Kingdom;
"UK Resident" means a person who is resident in
the United Kingdom for tax
purposes and, in the case of UK
taxation of capital gains, a
person who is ordinarily resident
in the United Kingdom for tax
purposes;
"uncertificated"or "in in relation to a share, means a
uncertificated form" share, title to which is recorded
in the relevant register of the
share or security concerned as
being held in uncertificated form
in CREST and title to which, by
virtue of the Regulations, may be
transferred by means of CREST;
"US", "USA" or "United States" means the United States of
America, its territories and
possessions, any State of the
United States of America and the
District of Columbia;
"US GAAP" means accounting principles
generally accepted in the United
States;
"US Resident" means a person who is subject to
US federal income taxation
regardless of source;
"Wider Brands Hatch Group" means the Brands Hatch Group and
associated undertakings and any
other body corporate,
partnership, joint venture or
person in which Brands Hatch and
those undertakings (aggregating
their interests) have an interest
of more than 20 per cent of the
voting or equity capital or the
equivalent;
"Wider Interpublic Group" means the Interpublic Group and
associated undertakings and any
other body corporate,
partnership, joint venture or
person in which Interpublic and
those undertakings (aggregating
their interests) have an interest
of more than 20 per cent of the
voting or equity capital or the
equivalent; and
"Year 2000 Compliant" means complying with the year
2000 conformity requirements
promulgated by the British
Standards Institute whose
definition is as follows:
"Year 2000 conformity shall mean
that neither performance nor
functionality is affected by
dates before, during and after
the year 2000. In particular:
Rule 1 no value for current date
will cause any
interruption in operation;
Rule 2 date-based functionality
must behave consistently
for dates before, during
and after the year 2000;
Rule 3 in all interfaces and data
storage, the century in
any date is specified
either explicitly or by
unambiguous algorithms or
inferencing rules; and
Rule 4 the year 2000 must be
recognised as a leap
year".
VII-4
<PAGE>
For the purposes of this offer document, unless the context otherwise requires:
(1) "subsidiary", "subsidiary undertaking", "associated undertaking" and
"undertaking" have the respective meanings given by the Companies Act
(but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of the
Companies Act);
(2) terms defined in the CREST Manual issued by CRESTCo bear the same
meanings where used in this offer document;
(3) references to the singular include the plural and vice versa;
(4) references to any appendix, paragraph and subdivisions of them are
references to the appendices and paragraphs of this offer document and
any subdivisions of them respectively; and
(5) references to any statute, regulation, code, treaty, certificate of
incorporation, by-laws or provision thereof include a statute,
regulation, code, treaty, certificate of incorporation, by-laws or
provision thereof which amends, consolidates or replaces it or them
whether before or after the date of this offer document.
VII-5
<PAGE>
The Offer is being made by
THE INTERPUBLIC GROUP OF COMPANIES, INC.
1271 Avenue of the Americas
New York, New York 10020
USA
Telephone number: +1 212 399 8000
The Offer is being made for all issued and to be issued shares of
BRANDS HATCH LEISURE PLC
Brands Hatch Circuit
Fawkham
Longfield
Kent DA3 8NG
Telephone number: 01474 872331
The Form of Acceptance should be delivered to the Receiving Agent below so as
to be received no later than 3.00 pm (London time) on 30 November 1999 at the
following address:
LLOYDS TSB REGISTRARS
The Causeway
Worthing
West Sussex
BN99 6DA
For information call: 01903 702767
Financial advisers to Interpublic
PricewaterhouseCoopers
No. 1 Embankment Place
London WC2N 6NN
Telephone number: 0171 583 5000
Financial advisers to Brands Hatch
Pannell Kerr Forster
New Garden House
78 Hatton Garden
London EC1N 8JA
Telephone number: 0171 831 7393
Certain legal matters as to UK law (see Appendix IV) will be passed upon by
Lovell White Durrant
65 Holborn Viaduct
London EC1A 2DY
Telephone number: 0171 236 0066
Certain legal matters as to US law (see Appendix IV) will be passed upon by
Cleary, Gottlieb, Steen & Hamilton
City Place House
55 Basinghall Street
London EC2V 5EH
Telephone number: 0171 614 2200
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
doubt about the Offer you should consult an independent financial adviser
authorised under the Financial Services Act 1986.
Terms used in this Form of Acceptance (the "Form") shall bear the same meaning
as in the accompanying Offer Document dated 9 November 1999 (the "Offer
Document"). This Form should be read in conjunction with the Offer Document. The
provisions of Parts B and C of Appendix I to the Offer Document are deemed to be
incorporated in and form part of this Form and should be read carefully by each
holder of Brands Hatch Shares. If you are a CREST sponsored member, you should
refer to your CREST sponsor before completing this Form.
If you have sold or transferred all your Brands Hatch Shares, please pass this
Form and the accompanying Offer Document as soon as possible to the purchaser or
transferee, or to the stockbroker, bank or other agent through whom the sale or
transfer was effected, for delivery to the purchaser or transferee. However, the
Offer is not being made directly or indirectly in Canada, Australia or Japan and
such documents should not be distributed, forwarded or transmitted into or from
Canada, Australia or Japan by any means whatsoever including without limitation
mail, facsimile, transmission, telex or telephone. No Form which is received in
any envelope postmarked, or which appears to Interpublic or its agents to have
been sent from Canada, Australia or Japan will be treated as valid.
PricewaterhouseCoopers, which is authorised to carry on investment business by
The Institute of Chartered Accountants in England and Wales, is acting
exclusively for Interpublic and no one else in connection with the Offer and
will not be responsible to anyone other than Interpublic for providing the
protections afforded to clients of PricewaterhouseCoopers in relation to the
Offer nor for giving advice in relation to the Offer.
Interpublic Common Stock is traded on the New York Stock Exchange under the
symbol "IPG". It is expected that dealings for normal settlement will commence
on the New York Stock Exchange in the New Interpublic Common Stock on the second
trading day following the day on which the Offer becomes or is declared
unconditional in all respects.
- --------------------------------------------------------------------------------
FORM OF ACCEPTANCE AND AUTHORITY
in respect of the recommended offer
by
THE INTERPUBLIC GROUP OF COMPANIES, INC.
for all of the issued and to be issued share capital of
BRANDS HATCH LEISURE PLC
Procedure for Acceptance
* To accept the Offer, you must complete and sign this Form on page 3 by
following the instructions set out on pages 2 and 4.
* All holders of Brands Hatch Shares who are individuals must sign in the
presence of a witness, who must also sign where indicated. If you hold
Brands Hatch Shares jointly with others, you must arrange for all joint
holders to sign this Form.
* The duly completed and signed Form, accompanied by your share certificate(s)
and/or other document(s) of title for Brands Hatch Shares if your Brands
Hatch Shares are in certificated form, should be sent by hand (during normal
business hours) or by post to Lloyds TSB Registrars, The Causeway, Worthing,
West Sussex BN99 6DA or by hand only to Lloyds TSB Registrars, Antholin
House, 71 Queen Street, London EC4N 1SL but in any event so as to be
received not later than 3.00 p.m. (London time), on 30 November 1999. A
first class reply-paid envelope is enclosed for documents lodged by post.
* If your Brands Hatch Shares are in uncertificated form (i.e. in CREST), you
should return this Form and take the action set out in paragraph 15(d) of
the letter from Interpublic contained in the Offer Document to transfer your
Brands Hatch Shares to an escrow balance. For this purpose, the participant
ID of Lloyds TSB Registrars, which will act as the Escrow Agent for the
purposes of the Offer, is 6RA73, the member account ID of the Escrow Agent
is RA157701 and the Form of Acceptance Reference Number of this Form (for
insertion in the first eight characters of the shared note field on this
transfer to escrow ("TTE ") instruction) is shown on page 3 next to Box 4 of
this Form. You should ensure that the TTE settles not later than 3.00 p.m.
on 30 November 1999.
* If you hold Brands Hatch Shares in both certificated and uncertificated
form, you should complete a separate Form for each holding. Similarly, you
should complete separate Forms for Brands Hatch Shares held in
uncertificated form but under a different member account ID, and separate
Forms for Brands Hatch Shares held in certificated form but under a
different designation. You can obtain further Forms by contacting Lloyds TSB
Registrars on 01903 702767.
* If your Brands Hatch Shares are in certificated form and your share
certificate(s) and/or other document(s) of title is/are not readily
available (but is/are held by your bank, stockbroker or other agent) or
is/are lost, this Form should nevertheless be completed, signed and returned
as stated above so as to be received not later than 3.00 p.m (London time)
on 30 November 1999, together with any share certificate(s) and/or other
document(s) of title that you may have available, accompanied by a letter
stating that the balance will follow, or that you will obtain a letter of
indemnity in respect of the lost share certificates and/or other documents
of title, and the share certificate(s), letter of indemnity and/or other
document(s) of title should be lodged as soon as possible thereafter with
Lloyds TSB Registrars at the address, and in the manner, set out above.
* Your acceptance of the Offer is on the terms and subject to the conditions
contained in the Offer Document and in this Form.
* If you have any questions as to how to complete this Form, please contact
Lloyds TSB Registrars on 01903 702767.
<PAGE>
Page 2
Please complete this Form
The provisions of Parts B and C of Appendix I to the Offer Document are
incorporated into and form part of this Form.
1 The Offer
To accept the Offer, insert in Box 1 the total number of Brands Hatch Shares for
which you wish to accept the Offer. You must also sign Box 2 in accordance with
the instructions set out below, which will constitute your acceptance of the
Offer, and complete Box 3 and, if appropriate, Box 4, Box 5 and/or Box 6.
If no number, or a number greater than your registered holding of Brands Hatch
Shares, is written in Box 1 and you have signed Box 2, you will be deemed to
have accepted the Offer in respect of your entire registered holding of Brands
Hatch Shares.
2 Signatures
To accept the Offer you must complete Box 2 and, in the case of a joint holding,
arrange for ALL joint holders to do likewise.
All registered holders, including joint holders, who are individuals must sign
Box 2 in the presence of a witness who must also sign Box 2 where indicated. If
these instructions are not followed, the Form will be invalid. The witness must
be over 18 years of age and should not be another joint holder signing the Form.
The same witness may witness the signature of each joint holder. The witness
should also print his/her name where indicated.
A company may execute this Form under its common seal, the seal being affixed
and witnessed in accordance with its articles of association or other
regulations. Alternatively, a company to which s.36A of the Companies Act
applies may execute this Form as a deed by a director and the company secretary
or by two directors of the company signing the Form and inserting the name of
the company above their signatures. If the company is incorporated outside Great
Britain it may execute the Form as a deed in any manner permitted by the laws of
the territory in which it is incorporated in accordance with the Foreign
Companies (Execution of Documents) Regulations 1997.
Each person signing the Form for a company should state the office which he/she
holds. If the Form is not signed by the registered holder(s), insert the name(s)
and capacity (e.g. attorney or executor(s)) of the person(s) signing the Form.
You should also deliver evidence of your authority in accordance with the notes
on page 4.
Please note that if you sign Box 2 but do not put "Yes" in Box 5, you will be
deemed to have given the representations and warranties set out in paragraph (b)
of Part C of Appendix I to the Offer Document.
3 Name(s) and address
Complete Box 3 with the full name and address of the sole or first-named
registered holder together with the names of all other joint holders (if any) in
BLOCK CAPITALS. Unless you complete Box 6, this is the address to which your
consideration and/or other documents will be sent provided the address inserted
in Box 3 is not in Canada, Australia or Japan.
4 Participant ID and Member Account ID
If your Brands Hatch Shares are in CREST, you must insert in Box 4 the
participant ID and the member account ID under which such Shares are held by you
in CREST.
You must also transfer (or procure the transfer of) the Brands Hatch Shares
concerned to an escrow balance, specifying in the TTE instruction, the
participant ID and member account ID inserted in Box 4 and the Form of
Acceptance Reference Number of this Form together with the other information
specified in paragraph 15(d) of the letter from Interpublic contained in the
Offer Document. The Form of Acceptance Reference Number appears on page 3 next
to Box 4 of this Form.
5 Overseas persons
If you are unable to give the representations and warranties set out in
paragraph (b) of Part C of Appendix I to the Offer Document, you must put "Yes"
in Box 5. If you do not put "Yes" in Box 5 you will be deemed to have given such
representations and warranties.
6 Alternative address
If you wish the documents of title relating to your New Interpublic Common Stock
and/or other documents to be sent to someone (who must be outside Canada,
Australia and Japan) other than the sole or first-named registered holder at the
address set out in Box 3 (e.g. your bank manager or stockbroker) you should
complete Box 6.
Box 6 must be completed with an address outside Canada, Australia and Japan by
holders with registered addresses in Canada, Australia or Japan who have
completed Box 3 with an address in Canada, Australia or Japan.
<PAGE>
Page 3
1 TO ACCEPT THE OFFER
Complete Box 1 and Box 3 (and, if appropriate, Box 4, Box 5
and/or Box 6) and sign Box 2 in the presence of a witness
BOX 1
No. of Brands Hatch Shares in respect of which you are accepting the Offer
2 SIGN HERE TO ACCEPT THE OFFER
EXECUTION BY INDIVIDUALS
Signed and delivered as a deed by:
1
- --------------------------------------------
2
- --------------------------------------------
3
- --------------------------------------------
4
- --------------------------------------------
BOX 2
Witnessed by:
1 Name
-----------------------------------
Address
-----------------------------------
Signature
-----------------------------------
2 Name
-----------------------------------
Address
-----------------------------------
Signature
-----------------------------------
3 Name
-----------------------------------
Address
-----------------------------------
Signature
-----------------------------------
4 Name
-----------------------------------
Address
-----------------------------------
Signature
-----------------------------------
NOTE: THE SIGNATURE OF EACH REGISTERED HOLDER SHOULD BE WITNESSED. IN THE CASE
OF JOINT HOLDERS, ALL MUST SIGN.
EXECUTION BY A COMPANY
Executed and delivered as a deed under the seal of the company named below OR
executed and delivered as a deed by the company named below.
Name of Company in the presence of/acting by
- -----------------------------------
Name of Director
- -----------------------------------
Name of Director/Company Secretary
Signature
- -----------------------------------
Signature
- -----------------------------------
(Affix Company Seal if appropriate)
3 FULL NAME(S) AND ADDRESS(ES)
BOX 3
(To be completed in BLOCK CAPITALS)
First-named registered holder
1 Forename(s)
---------------------------------
Surname (Mr/Mrs/Miss/Title)
---------------------------------
Address
---------------------------------
Postcode
---------------------------------
Second-named registered holder
2 Forename(s)
---------------------------------
Surname (Mr/Mrs/Miss/Title)
---------------------------------
Address
---------------------------------
Postcode
---------------------------------
Third-named registered holder
3 Forename(s)
---------------------------------
Surname (Mr/Mrs/Miss/Title)
---------------------------------
Address
---------------------------------
Postcode
---------------------------------
Fourth-named registered holder
4 Forename(s)
---------------------------------
Surname (Mr/Mrs/Miss/Title)
---------------------------------
Address
---------------------------------
Postcode
---------------------------------
In case of query, please state your daytime telephone numbers:
4 PARTICIPANT ID AND MEMBER ACCOUNT ID
Complete this box only if your Brands Hatch Shares are in CREST
THE FORM OF ACCEPTANCE REFERENCE NUMBER OF THIS FORM IS:
BOX 4
Participant ID
- -----------------------------------
Member account ID
- -----------------------------------
5 OVERSEAS SHAREHOLDERS
Please put "YES" in Box 5 if you are unable to give the representations and
warranties relating to overseas shareholders in paragraph (b) of Part C of
Appendix I to the Offer Document.
BOX 5
6
Address outside Canada, Australia and Japan to which consideration and/or
other document(s) is/are to be sent if not that set out under "First-named
registered holder" in Box 3 above.
BOX 6
Name
- -----------------------------------
Address
- -----------------------------------
Postcode
- -----------------------------------
(To be completed in BLOCK CAPITALS)
<PAGE>
Page 4
FURTHER NOTES REGARDING THE COMPLETION AND LODGING OF THIS FORM
In order to be effective, this Form must, except as mentioned below, be signed
personally (or under a power of attorney, the original or certified copy of
which must be lodged with this Form) as a deed by the registered holder or, in
the case of a joint holder, by ALL the joint holders and each individual
signature must be independently witnessed. A company may execute this Form under
its common seal, the seal being affixed and witnessed in accordance with its
articles of association or other regulations. Alternatively, a company to which
section 36A of the Companies Act 1985 applies may execute this Form as a deed,
by a director and a company secretary or by two directors signing the Form and
inserting the name of the company above their signatures. For a company
incorporated outside of Great Britain, the company may execute the Form as a
deed in any manner permitted by the laws of the territory in which it is
incorporated, in accordance with the Foreign Companies (Execution of Documents)
Regulations 1994. Each person signing this Form for a company should state the
office he/she holds.
In order to avoid inconvenience to yourself and delay in
the processing of your Form, the following points may assist you:
1. If the sole holder has died:
If grant of probate or letters of administration has/have been registered
with Brands Hatch (or its registrars, Lloyds TSB Registrars), this Form must
be signed by the personal representative(s) of the deceased and returned with
the share certificate(s) and/or other document(s) of title either by post or
by hand (during normal business hours) to Lloyds TSB Registrars, The
Causeway, Worthing, West Sussex BN99 6DA or by hand only to Lloyds TSB
Registrars, Antholin House, 71 Queen Street, London EC4N 1SL. If grant of
probate or letters of administration has not/have not been registered with
Brands Hatch (or its registrars, Lloyds TSB Registrars), the personal
representatives or the prospective personal representatives or executors
should sign this Form and forward it with the share certificate(s) and/or
other document(s) of title to Lloyds TSB Registrars at the above address.
However, grant of probate or letters of administration must be lodged with
Lloyds TSB Registrars at the address set out above before the consideration
due can be forwarded to the personal representatives or executors. All
signatures must be witnessed.
2. If one of the joint-registered holders has died:
This Form must be signed by all surviving holders in the presence of a
witness and lodged with Lloyds TSB Registrars in the manner set out above
with the share certificate(s) (and/or other document(s) of title) and
accompanied by the death certificate. Grant of probate or letters of
administration in respect of the deceased holder must also be lodged with
Lloyds TSB Registrars in the manner set out above before the consideration
due can be despatched.
3. If your Brands Hatch Shares are in certificated form and the share
certificate(s) is/are held by your bank, stockbroker or some other agent:
If your share certificate(s) and/or other document(s) of title is/are not
readily available (but is/are held by your bank, stockbroker or other agent),
the completed Form should be lodged with Lloyds TSB Registrars in the manner
set out above together with a note saying e.g. "share certificates to follow"
and you should arrange for the share certificate(s) and/or other document(s)
of title to be forwarded to Lloyds TSB Registrars by your bank, stockbroker
or other agent as soon as possible thereafter.
4. If your Brands Hatch Shares are in certificated form and the
share certificate(s) and/or other document(s) of title have been lost:
The completed Form, and any share certificate(s) which you may have
available, should be lodged with Lloyds TSB Registrars in the manner set out
above accompanied by a letter stating that you have lost one or more of your
share certificates. At the same time, you should write to Lloyds TSB
Registrars, requesting that a letter of indemnity for the lost share
certificates be sent to you which, when completed in accordance with the
instructions given, should be returned by post or by hand (during normal
hours) to Lloyds TSB Registrars.
5. If your Brands Hatch Shares are in CREST:
You should take the action set out in paragraph 15(d) of the letter from
Interpublic contained in the Offer Document to transfer your Brands Hatch
Shares to an escrow balance. You are reminded to keep a record of the Form of
Acceptance Reference Number (which appears on page 3 next to Box 4 of this
Form) so that such number can be inserted in the TTE instruction.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before completing this Form, as only your CREST sponsor will be able to send
the necessary TTE instruction to CRESTCo.
6. If this Form has been signed under power of attorney:
The completed Form together with the share certificate(s) and/or other
document(s) of title should be lodged with Lloyds TSB Registrars in the
manner set out above accompanied by the original power of attorney (or a copy
thereof duly certified in accordance with the Powers of Attorney Act 1971).
The power of attorney will be noted by Lloyds TSB Registrars and returned as
directed.
7. If your name or other particulars are shown incorrectly on the share
certificate e.g.:
Name on the share certificate(s)..................Richard Allen
Correct name......................................Richard Allan
The Form should be completed in your correct name and lodged with Lloyds TSB
Registrars in the manner set out above with the share certificate(s) and
accompanied by a letter from your bank, stockbroker or solicitor confirming
that the person in whose name Brands Hatch Shares are registered is one and
the same as the person who has signed the Form. If an incorrect address is
shown, the correct address should be written on this Form. If you have
changed your name, lodge your marriage certificate or deed poll or, in the
case of a company, a copy of the certificate of incorporation or change of
name with this Form for noting.
8. If a holder is away from home (e.g. abroad or on holiday):
Send this Form by the quickest means (e.g. air mail) to the holder for
execution (provided that such documents may not be forwarded or transmitted,
by any means, in or into Canada, Australia or Japan) or, if he/she has
executed a power of attorney, the attorney should sign the Form and the
original power of attorney (or a copy thereof duly certified in accordance
with the Powers of Attorney Act 1971) must be lodged with this Form for
noting (see 6 above). No other signatures are acceptable.
9. If you have sold all, or wish to sell part of, your holding of Brands Hatch
Shares:
You should at once hand this Form together with the accompanying Offer
Document to the bank, stockbroker or other agent through whom you made the
sale for onward transmission to the purchaser or transferee. However, such
documents may not be forwarded or transmitted, by any means, in or into
Canada, Australia or Japan. If your Brands Hatch Shares are in certificated
form and you wish to sell part of your holding of Brands Hatch Shares and
also wish to accept the Offer in respect of the balance and are unable to
obtain the balance certificate, you should ensure that the stockbroker, bank
or other agent through whom you make the sale obtains the appropriate
endorsement or certification stamped on behalf of Lloyds TSB Registrars, in
respect of the balance of your holding of Brands Hatch Shares.
10. If you are not resident in the United Kingdom:
The attention of Brands Hatch Shareholders not resident in the United Kingdom
is drawn to paragraph 7 of Part B and paragraph (b) of Part C of Appendix I
to the Offer Document.
11. Payment of consideration:
The documents of title relating to the New Interpublic Common Stock due to
you under the Offer cannot be sent to you until all relevant documents have
been properly completed and lodged with Lloyds TSB Registrars and in the
manner set out above as soon as possible and in any event so as to be
received no later than 3.00 p.m. on 30 November 1999. Notwithstanding that no
share certificate(s) and/or other document(s) of title is/are delivered with
this Form, the Form, if otherwise valid, accompanied by an appropriate
endorsement of certification to the effect that the Brands Hatch Shares
referred to therein are available for acceptance and signed on behalf of
Brands Hatch by Lloyds TSB Registrars, will be treated as valid for all
purposes.
