<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
ARIELY ADVERTISING LIMITED
(Name of Issuer)
Ordinary Shares, Nominal Value 1.00 NIS (New Israeli Shekels) Per Share
(Title of Class of Securities)
000M149501
(CUSIP Number)
Thomas J. Kuhn, Esq.
Howard, Darby & Levin
1330 Avenue of the Americas
New York, N.Y. 10019
212-841-1000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 17, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a Statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this Schedule because of Rule 13d-1(b)(3) or (4), check the following box / /
Page 1 of 8 Pages
<PAGE> 2
- ----------------------- ------------------
CUSIP No. 000M149501 13D Page 2 of 8 Pages
- ----------------------- ------------------
- -------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Publicis S.A.
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions) (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Sources of Funds (See Instructions)
WC, OO
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant
to Item 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization
France
- -------------------------------------------------------------------------------
Number of 7 Sole Voting Power
Shares 1,526,660
----------------------------------------------------------------
Beneficially 8 Shared Voting Power
Owned by 0
----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 1,526,660
----------------------------------------------------------------
Person With 10 Shared Dispositive Power
0
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,526,660
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
50.82%
- -------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
- -------------------------------------------------------------------------------
<PAGE> 3
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CUSIP No. 000M149501 13D Page 3 of 8 Pages
- ----------------------- ------------------
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Publicis Worldwide, B.V.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions) (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Sources of Funds (See Instructions)
WC, OO
- --------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant
to Item 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
The Netherlands
- --------------------------------------------------------------------------------
Number of 7 Sole Voting Power
Shares 1,526,660
----------------------------------------------------------------
Beneficially 8 Shared Voting Power
Owned by 0
----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 1,526,660
----------------------------------------------------------------
Person With 10 Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,526,660
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) / /
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
50.82%
- --------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
- --------------------------------------------------------------------------------
<PAGE> 4
ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this Statement relates is
the Ordinary Shares, nominal value NIS 1.00 per share (the "Shares"), of Ariely
Advertising Limited, a public company incorporated under the laws of the State
of Israel (the "Issuer"), with its principal executive offices located at 140
Rothschild Boulevard, Tel-Aviv, Israel.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c), (f) This Statement is filed by Publicis S.A., a societe
anonyme organized and existing under the laws of France (the "Parent Company"),
and Publicis Worldwide B.V., a company organized and existing under the laws of
The Netherlands ("Worldwide") (the Parent Company and Worldwide being
hereinafter jointly referred to as "Publicis"). Publicis is a worldwide
advertising network representing numerous international clients. The principal
executive offices of the Parent Company are located at 133, avenue des Champs
Elysees, 75008 Paris, France. Worldwide's address is Beethovenstraat 198,
Amsterdam, Netherlands.
The name, business address and present principal occupation or
employment of each of the directors and executive officers of the Parent Company
and of Worldwide, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, are set
forth in Appendix I, which is attached hereto and incorporated herein by
reference. Each such person is a citizen of France. The business address of each
such person is 133, avenue des Champs Elysees, 75008 Paris, France.
(d) and (e) Neither Publicis nor, to the knowledge of Publicis, any
of the other persons specified in Item 2 above has during the last five years
(i) been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On September 17, 1997, pursuant to the Agreement among Publicis, the
Issuer, and Uri Ariely, Amos Tal-Shir, Tamar Ariely, Rubin Zimmerman, Mivtach
Shamir Investments (93) Ltd., Benny Bergman, Avi Tiomkin and El Bustani Ltd.
(the "Shareholders"), a copy of which is attached as Exhibit 1 to this Statement
(the "Agreement"), the Shareholders sold and delivered to Publicis, and Publicis
purchased, in a private placement 1,526,660 Ordinary Shares, nominal value NIS
1.00 per share. Publicis paid US$6,297,472.50 for such shares. As part of the
transaction, Publicis was also granted options to purchase an additional 500,000
Ordinary Shares of the Issuer, nominal value NIS 1.00 per share, at an exercise
price of US$4.125 per share. These options were divided into four groups
according to their maturity dates, as detailed below:
Page 4 of 8 Pages
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<TABLE>
<CAPTION>
Number of Options Maturity Date
----------------- -------------
<S> <C>
50,000 January 10, 1998
120,000 January 10, 1999
230,000 January 10, 2000
100,000 January 2, 2001
</TABLE>
The information set forth in this Item 3 is qualified in its
entirety by reference to the Agreement, which is incorporated herein by
reference.
ITEM 4. PURPOSE OF TRANSACTION.
Publicis purchased a majority interest in the Issuer for the purpose
of making a controlling investment in the Issuer. Publicis is a worldwide
advertising network. The Issuer is one of the three largest advertising agencies
in Israel. Upon the closing of this transaction, the name of the Issuer was
changed to Publicis-Ariely, and Publicis believes that the Issuer will continue
to operate under its existing management. Publicis will continue to evaluate its
investment in the Issuer on the basis of various factors, including the Issuer's
financial condition, results of operations and prospects, general economic and
industry conditions, Publicis' own financial condition, other investment
opportunities and other future developments. Based upon such evaluation,
Publicis will take such actions in the future as Publicis may deem appropriate
in light of the circumstances existing from time to time. Depending on market
and other factors, Publicis may determine to exercise all or a portion of its
options to purchase an additional 500,000 shares of the Issuer. Publicis may
also from time to time purchase additional shares on the open market or in
privately negotiated transactions.
Except as set forth in this Item 4, Publicis has no plans or
proposals with respect to any of the actions specified in clauses (a) through
(j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of the close of business on September 17, 1997, Publicis
beneficially owned (i) 1,526,660 Ordinary Shares of the Issuer and (ii) options
to purchase an additional 500,000 shares. Such 1,526,660 Ordinary Shares
represent approximately 50.82% of the outstanding shares of the Issuer, based on
the 3,004,000 shares outstanding as of July 28, 1997. Such options to purchase
an additional 500,000 shares represent approximately 16.64% of the outstanding
shares of the Issuer.
Publicis acquired beneficial ownership of the 1,526,660 shares and
of options to purchase an additional 500,000 shares pursuant to the Agreement
among Publicis, the Issuer and the Shareholders.
To the knowledge of Publicis, none of Publicis's directors,
executive officers, affiliates or associates beneficially owns any equity
securities, or rights to acquire any equity securities, of the Issuer.
Page 5 of 8 Pages
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(b) Publicis has the sole power to vote or to direct the vote, and
to dispose or to direct the disposition of, the 1,526,660 shares.
(c) To the knowledge of Publicis, neither Publicis nor any of its
directors, executive officers, affiliates or associates has effected any
transaction involving shares of the Issuer within the past 60 days.
(d) No other person has the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, any of the
1,526,660 shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
On September 17, 1997, pursuant to the Agreement, the Shareholders
sold and delivered to Publicis, and Publicis purchased, in a private placement
1,526,660 shares of Ordinary Stock, nominal value NIS 1.00 per share. Publicis
paid US$6,297,472.50 for the shares. As part of the transaction, Publicis was
also granted options to purchase an additional 500,000 shares of the Issuer,
nominal value NIS 1.00 per share, at an exercise price of US$4.125 per share.
These options were divided into four groups according to their maturity dates,
as detailed below:
<TABLE>
<CAPTION>
Number of Options Maturity Date
----------------- -------------
<S> <C>
50,000 January 10, 1998
120,000 January 10, 1999
230,000 January 10, 2000
100,000 January 2, 2001
</TABLE>
The Agreement also provided that if Uri Ariely or Amos Tal-Shir, who
each remain the owner of approximately 6% of the issued shares of the Issuer,
decide to sell some or all of their shares while they are employed by the Issuer
or render management services to the Issuer, they shall give Publicis a right to
purchase such shares and Publicis shall undertake to purchase such shares. If
and when shareholders Ariely and/or Tal-Shir cease to be employed by the Issuer
or render services to the Issuer, such shareholder shall sell all of his shares
to Publicis and Publicis shall undertake to purchase such shares. If Publicis
decides to sell any of its shares in the Issuer, shareholders Ariely and
Tal-Shir shall be given the option to participate in such sale pro rata, as
specified in the Agreement. Finally, the shares held by Messrs. Ariely and
Tal-Shir may not be sold, transferred, pledged or otherwise encumbered without
the consent of Publicis.
The information set forth above in this Item 6 is qualified in its
entirety by reference to the Agreement, which is incorporated herein by
reference.
Except as described in this Statement, to the knowledge of Publicis,
there are no contracts, arrangements, understandings or relationships (legal or
otherwise) among the persons named in Item 2 hereof and between such persons and
any other person with respect to any securities of the Issuer, including, but
not limited to, transfer or voting of any of such securities,
Page 6 of 8 Pages
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finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Agreement, dated September 17, 1997, among Publicis, the Issuer
and the Shareholders.
Page 7 of 8 Pages
<PAGE> 8
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this Statement is
true, complete and correct.
Dated: September 26, 1997 PUBLICIS S.A.
By: /s/ Maurice Levy
---------------------------------
Maurice Levy
President of Directoire and
Chief Executive Officer
PUBLICIS WORLDWIDE B.V.
By: /s/ Jean-Paul Morin
----------------------------------
Jean-Paul Morin
Director
Page 8 of 8 Pages
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APPENDIX I
Directors and Officers of Publicis S.A.
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Elisabeth Badinter President du Conseil de Surveillance
Maurice Levy President of Directoire and Chief Executive Officer
Bruno Desbarats-Bollet Member of Directoire
Gerard Pedraglio Member of Directoire
Jean-Paul Morin Secretaire General and Chief Financial Officer
</TABLE>
Directors and Officers of Publicis Worldwide B.V.
<TABLE>
<S> <C>
Jean-Paul Morin Director
Gerard Pedraglio Director
</TABLE>
<PAGE> 10
EXHIBIT INDEX
Exhibit 1 Agreement, dated September 17, 1997, among Publicis, the Issuer
and the Shareholders.
<PAGE> 1
Exhibit A
AGREEMENT
MADE AND ENTERED INTO THIS 28 DAY OF JULY, 1997
BY AND BETWEEN
PUBLICIS WORLDWIDE B.V.
company incorporated under the laws of The Netherlands, of 198
Beethovenstraat, Amsterdam, The Netherlands (hereinafter referred to as
("PUBLICIS")
ON THE ONE PART
AND
ARIELY ADVERTISING LIMITED
a public company incorporated under the laws of the State of Israel whose
registration number with the Registrar of Companies is 52-004241-7, quoted
on the NASDAQ National Market, whose offices are located at 140 Rothschild
Boulevard, Tel-Aviv, Israel, (hereinafter referred to as ("the COMPANY")
ON THE SECOND PART
AND
1. URI ARIELY I.D. No. 0517367
2. AMOS TAL-SHIR I.D. No. 0207308
3. TAMAR ARIELY I.D. No. 054183074
4. RUBIN ZIMMERMAN Canadian Passport No. fv 141799
5. MIVTACH SHAMIR INVESTMENTS (93) LTD. Registration No. 51-184181-9
6. BENNY BERGMAN I.D. No. 05274505
7. AVI TIOMKIN I.D. No. 060477718
<PAGE> 2
8. EL BUSTANI LTD, registration number 51-106261-4 each one of them severally
(hereinafter jointly referred to as "the SHAREHOLDERS")
ON THE THIRD PART
WHEREAS the COMPANY is one of the leading advertising agencies in Israel
serving, among others, major Israeli corporate clients; and
WHEREAS PUBLICIS is the number one advertising network in Europe,
representing, among others, a large number of blue chip
international clients; and
WHEREAS in view of the opening of the Israeli market following the peace
process in the Middle East and the pronounced activity of the major
international advertising agencies in Israel, the COMPANY decided,
already some time ago, to affiliate with an international
advertising agency; and
WHEREAS on December 20, 1995, the COMPANY entered into an Affiliation
Agreement with LOWE INTERNATIONAL LIMITED (hereinafter "LOWE"); and
WHEREAS the results of the affiliation with LOWE were not up to the
expectations of the COMPANY and the COMPANY decided to bring to an
end its agreement with LOWE and to establish contact and join forces
with a larger advertising group as a means of preserving, and
hopefully expending, its share of the Israel advertising market; and
WHEREAS the COMPANY approached PUBLICIS through the services of Prof. Chaim
Ben Shachar with an offer to establish a Strategic Alliance; and
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<PAGE> 3
WHEREAS PUBLICIS responded positively and expressed its interest in forging
a Strategic Alliance with the COMPANY after it terminates its
relations with LOWE and subject to PUBLICIS acquiring approximately
50.82% of the outstanding share capital of the COMPANY and being
granted by the COMPANY OPTION to acquire additional 500,000 shares
of the COMPANY; and
WHEREAS the SHAREHOLDERS have agreed to sell to PUBLICIS their shares in the
COMPANY as provided herein; and the COMPANY agreed to grant to
PUBLICIS option to purchase 500,000 shares of the COMPANY.
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<PAGE> 4
NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS:
1. PREAMBLE AND APPENDICES
The preamble and appendices to this Agreement are an integral part
thereof and shall be binding upon the parties as the Agreement
itself.
2. TERMINATION OF THE AGREEMENT WITH LOWE
2.1. The COMPANY hereby declares that it has already informed LOWE of its
intention to bring the Affiliation Agreement to an end and that
there was no objection raised on the part of LOWE.
2.2. For the avoidance of any doubt the COMPANY hereby confirms and
declares that the decision of the COMPANY to bring to an end its
relations with LOWE was nude well before the first contact was made
with PUBLICIS, that PUBLICIS never asked for nor implied that it
wishes or recommends that the COMPANY terminate its relations with
LOWE and that the negotiations with PUBLICIS did not prompt or in
any other way affected the COMPANY'S prior decision to discontinue
its affiliation with LOWE.
2.3. The COMPANY hereby declares and undertakes that it will terminate,
in an amicable way, prior to the Closing Date, the Affiliation
Agreement between the COMPANY and LOWE, and will obtain from LOWE a
written Waiver of Claims.
3. REPRESENTATIONS AND WARRANTIES
The COMPANY, Uri Ariely, Amos Tal-Shir and Mivtach Shamir Investments
(93) Ltd. hereby represent and warrant, jointly and severally, to
PUBLICIS and acknowledge that PUBLICIS is entering into this
Agreement in reliance thereon, as follows:
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3.1 INCORPORATION, REGISTERED CAPITAL, SHAREHOLDINGS, OFFICERS AND
DIRECTORS
3.1.1 The COMPANY is a duly incorporated and validly existing public
limited Company, Registration No. 52-004241-7, under the laws
of the State of Israel, quoted on the NASDAQ National Market,
has all requisite corporate power and authority, and has
obtained all necessary licenses, authorizations and approvals
to carry on its business as now conducted and as proposed to
be conducted. The COMPANY is duly qualified to transact
business and is in good standing in each jurisdiction in which
the failure so to qualify would have a material adverse effect
on its business or properties.
Copies of the COMPANY's Memorandum and Articles of
Association, both updated to the date of this Agreement, are
herewith attached as Schedule 3. 1. 1. A and B.
3.1.2 Except as described in Schedule 3.1.2, the COMPANY does not
presently own or control, directly or indirectly, any interest
in any corporation, association, or other business entity.
3.1.3 As of the date hereof, the registered capital of the COMPANY
consists of NIS 10,000,000 (ten Million New Israel Shekels)
divided into 10,000,000 (ten million) Ordinary Shares having a
nominal value of NIS 1.00 each, out of which 3,004,000
Ordinary Shares were issued.
3.1.4 The main shareholders, and their respective shareholdings in
the COMPANY as of the date hereof are as listed in Schedule
3.1.4 attached hereto.
3.1.5 The list of all the Options and Warrants issued by the COMPANY
as of June 30, 1997, is attached hereto as Schedule 3.1.5.
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<PAGE> 6
3.1.6 The COMPANY's current Officers and Directors are the
individuals listed in Schedule 3.1.6 hereto.
3.1.7 The eleven largest customers of the Company are listed in
Schedule 3.1.7 attached hereto. The COMPANY, Uri Ariely and
Amos Tal-Shir have no indication whatsoever nor any reason to
believe that any of the above eleven major customers has any
plans or contemplates to discontinue its working relation with
the COMPANY. However, it is emphasized that in accordance with
the common practice in Israel and/or the agreements with such
customers each one of the customers may discontinue the
relationship with the COMPANY subject to a short notice, if at
all.
3.1.8 By the Closing Date the Affiliation Agreement between the
COMPANY and LOWE will be terminated in an amicable way and the
COMPANY shall obtain from LOWE a waiver of claims against the
COMPANY.
3.2 AUTHORIZATION
3.2.1 The execution, delivery and performance of this Agreement and
the consummation of the transactions provided for herein, and
the authorization for the issuance and delivery of the OPTIONS
and OPTION SHARES to PUBLICIS shall have been by the CLOSING
DATE, duly authorized by all necessary corporate actions of
the COMPANY. This Agreement constitutes a valid and legally
binding obligation of the COMPANY and of the SHAREHOLDERS and
is enforceable in accordance with its terms. The execution and
delivery by the COMPANY and by the SHAREHOLDERS of this
Agreement, and the consummation by it of the transactions
contemplated hereby, does not and shall not as of the CLOSING
DATE contravene or conflict with (or constitute a violation of
or breach of or default under or give to others any
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rights, including rights of termination, cancellation or
acceleration); (i) the Articles of Association or other
incorporating documents of the COMPANY; (ii) and provision of
any law, regulation, judgment, injunction, order or decree
binding upon or applicable to the COMPANY or to the
SHAREHOLDERS; or (iii) As of the Closing Date any material
agreement to which the COMPANY or the SHAREHOLDERS is/are a
party.
3.3 FINANCIAL
3.3.1 Attached hereto as Schedules 3.3.1 A-D are copies of the
COMPANY's audited Financial Statements as of, and for the
years ended December 31, 1994, 1995 and 1996 and as of March
31, 1997, ("the FINANCIAL STATEMENTS"). The FINANCIAL
STATEMENTS are true and correct in all material respects, are
in accordance with the books and records of the COMPANY and
have been prepared in accordance with Israeli generally
accepted accounting principles consistently applied, and
fairly and accurately present in all material respects the
financial position of the COMPANY as of such dates and the
results of its operations for the periods then ended. The
COMPANY has no liabilities, debts or obligations, whether
accrued, absolute or contingent, other than those liabilities
reflected or reserved against in the FINANCIAL STATEMENTS and
liabilities incurred since March 31, 1997, in the ordinary and
usual course of business. Since March 31, 1997, the COMPANY
has been operated in the ordinary and usual course of
business, and there has not been:
(1) any material change in any of the assets, liabilities,
conditions (financial or otherwise) or lines of business
of the COMPANY from that reflected in the FINANCIAL
STATEMENTS; or
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(2) any other event or condition of any character that would
adversely affect the assets, properties, conditions
(financial or otherwise), operating results, prospects
or business of the COMPANY as such business is presently
conducted and as it is proposed to be conducted.
3.3.2 The COMPANY has filed all income and value added tax returns
and reports required to be filed under law up to the date of
this Agreement and is, to the best knowledge of the COMPANY,
Uri Ariely, Amos Tal-Shir and Mivtach Shamir Investments (93)
Ltd., not delinquent in the payment of any tax, charge or
levy. The returns filed by the COMPANY are true and correct in
all material respects.
3.3.3 Except as described in Schedule 3.3.3., the COMPANY has not
given any guarantees for the obligations of any other party,
and there are no charges, pledges or other impediments on its
unissued share capital and/or assets, of whatever kind.
3.3.4 The Company has granted to certain employees loans in amounts
and terms as described in Schedule 3.3.4.
3.3.5 The COMPANY has third party liability, fire, casualty, key-man
and such other insurance policies and coverage as detailed in
Schedule 3.3.5.
3.4 LITIGATION; COMPLIANCE
3.4.1 Except as Described in Schedule 3.4., no action, claim,
proceeding or governmental inquiry or investigation
(collectively, "ACTION") is pending or threatened against the
COMPANY or any of its officers, or any of the COMPANY's
properties before any court, arbitration board or tribunal or
administrative or other governmental authority (collectively,
"AUTHORITY"), nor is the
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<PAGE> 9
COMPANY aware that there is any basis for any such ACTION. The
COMPANY is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any AUTHORITY
nor any of them is aware of any pending threatened ACTION (or
of any basis for same) against any of them by any AUTHORITY.
There is no ACTION by the COMPANY currently pending or that
the COMPANY intends to initiate.
3.4.2 The Company might be liable to pay income tax and to waive its
right to be repaid a loan extended by the Company to its
ex-employee Mr. Mordi Amar, due to circumstances as described
in Schedule 3.4.2. The total exposure / loss of the Company as
a result of the above is not expected to exceed US$ 80,000.
3.5 INTELLECTUAL PROPERTY
3.5.1 To the best knowledge of the COMPANY, Uri Ariely, Amos
Tal-Shir and Mivtach Shamir Investments (93) Ltd., the COMPANY
has not received any communications alleging that it has
violated or, by conducting the business of the COMPANY as
proposed, would violate any of the copyrights, trade secrets
or other proprietary rights of any other person or entity and
they are unaware of any rights of others that would interfere
or conflict with the COMPANY's use of the Intellectual
Property or with the conduct of its business as now conducted
and as proposed to be conducted. None of the COMPANY or Uri
Ariely or Amos Tal-Shir is obligated under any contract
(including licenses, covenants or commitments of any nature)
or other agreement, or is subject to any judgment, decree or
order of any court or administrative agency, that would
interfere with the use of their respective best efforts to
promote the interests of the COMPANY or that would conflict
with the COMPANY's use of the Intellectual Property or
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<PAGE> 10
with the conduct of its business as now conducted and as
proposed to be conducted. The COMPANY has taken reasonable
security measures, including measures against unauthorized
disclosure, to protect the secrecy, confidentiality, and value
of its Intellectual Property.
LABOR UNIONS
3.5.2 The COMPANY is not bound by or subject to any written or oral,
express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or has
sought to represent any of the employees, representatives or
agents of the COMPANY. There is no strike or other labor
dispute in the COMPANY pending, or to the best knowledge of
the COMPANY threatened, nor are they aware of any labor
organization activity involving its employees.
3.6 MATERIAL CONTRACTS
3.6.1 Schedule 3.6.1 contains a true and complete list of all the
relevant material contracts, agreements and understandings to
which the COMPANY is a party or by which its property is
bound.
3.7 FULL DISCLOSURE
3.7.1 The COMPANY has fully provided PUBLICIS with all information
which the COMPANY, Uri Ariely and Amos Tal-Shir believe is
reasonably necessary to enable a reasonable investor to make a
decision to invest in the COMPANY. Neither this Agreement nor
any document provided in connection therewith contain any
untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or
therein not misleading, in view of the circumstances in which
they were made.
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<PAGE> 11
3.7.2.PUBLICIS acknowledges that its has (i) examined and made
itself fully aware and informed of the U.S. federal securities
laws as applicable to the SHARES and (ii) has been fully
informed of the rules and regulations applicable to the resale
of the SHARES under the applicable US federal securities laws.
3.8 SEC REPORTS
3.8.1 Since September 20, 1995, the COMPANY has filed all form
reports, statements and other documents required to be filed
by it with the United States Securities and Exchange
Commission (the "COMPANY SEC REPORTS"). The COMPANY SEC
REPORTS were prepared in accordance with the requirements of
United States federal securities laws and did not, as of their
respective dates, contain any untrue statement of a material
fact or omit to state a material fact required to be stated in
order to make the statements therein, in light of the
circumstances in which they were made, not misleading.
4. SALE OF SHARES AND GRANT OF OPTIONS
4.1 The Shareholders shall, at the Closing, sell to PUBLICIS their
shares in COMPANY, free of any liens, encumbrances or third party's
rights, as detailed below:
<TABLE>
<S> <C>
URI ARIELY 471,237 shares
AMOS TAL-SHIR 156,298 shares
TAMAR ARIELY 90,639 shares
RUBIN ZIMMERMAN 308,079 shares
MIVTACH SHAMIR INVESTMENTS (93) LTD. 297,969 shares
BENNY BERGMAN 92,894 shares
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C>
AVI TIOMKIN 92,894 shares
EL BUSTANI LTD. 16,660 shares
</TABLE>
Altogether, the Shareholders shall sell to PUBLICIS at the Closing
1,526,660 shares of the COMPANY having nominal value of NIS 1 each,
representing approximately 50.82% of the total Issued Share Capital
of the COMPANY. All the above mentioned 1,526,660 shares shall be
herein jointly referred to as "the SHARES."
Each Shareholder is severally and not jointly obligated to sell the
number of shares set forth next to his/its name above. If for any
reason one or more of the SHAREHOLDERS will not sell his/its shares,
PUBLICIS shall not be obliged to buy the SHARES nor will PUBLICIS
have any claim against those shareholders who are willing to sell
their shares.
4 2 PUBLICIS shall pay the Shareholders for the SHARES in the manner
described in Section 12.3.2 below, a total consideration in the
amount of US$ 6,297,472.50 (six million two hundred and ninety seven
thousand four hundred seventy two United States Dollars and fifty
Cents).
4.3 At the Closing the COMPANY shall grant PUBLICIS, options ("the
OPTIONS") to purchase 500,000 (five hundred and fifty thousand)
Ordinary Shares of the COMPANY having a nominal value of NIS 1. - at
the price of US$ 4.125 per share (four U.S. dollars and twelve and a
half cents) (hereinafter "OPTION SHARES"). The OPTIONS shall be
divided into four groups according to their maturity date, as
detailed below:
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<PAGE> 13
<TABLE>
<CAPTION>
NUMBER OF OPTIONS MATURITY DATE
----------------- -------------
<S> <C>
50,000 1.10.1998
120,000 1.10.1999
230,000 1.10.2000
100,000 1.02.2001
Total: 500,000
</TABLE>
At any time and from time to time during the period commencing on the Closing
and until the relevant maturity dates as indicated above ("OPTION PERIOD")
PUBLICIS may exercise the OPTION by submitting to the COMPANY a written notice
("NOTICE of EXERCISE") that it elects to exercise all or part of the OPTION,
which NOTICE of EXERCISE shall specify the amount of money to be invested by
PUBLICIS.
The purchase and sale of the OPTION SHARES shall take effect at a time and place
as the COMPANY and PUBLICIS shall mutually agree, but in no event later than the
expiration of the OPTION PERIOD (which time and place are designated as ("OPTION
CLOSING"). At the OPTION CLOSING, PUBLICIS shall deliver the payment in the
amount specified in the NOTICE of EXERCISE and the COMPANY shall deliver a
certificate representing the OPTION SHARES which PUBLICIS is purchasing.
5. TERMINATION OF MANAGEMENT AGREEMENTS
Part of the Shareholders i.e. Rubin Zimmerman, Mivtach Shamir Investments
Ltd., as well as B.T.A. Investment Co. Ltd. have Management Agreements
with the COMPANY in accordance with which the COMPANY pays them, in return
for certain services rendered, certain Management Fees. The COMPANY shall
terminate, forthwith, the above Management Agreements effective as of
September 1, 1997, so that there will be no liability on the part of the
COMPANY to pay any Management Fee to the above Shareholders/Companies
after the abovementioned date. It is also agreed that the agreements
between the COMPANY and Ariely
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<PAGE> 14
Communications Group Ltd. shall be amended in the manner described in
Schedule 5.
6. EMPLOYMENT AGREEMENTS
6.1 Prior to the Closing date the COMPANY shall execute Employment
Agreements with Mr. Amos Tal-Shir and Mr. Raviv Itzhaki. The
Employment Agreements, which should be worded to the satisfaction of
PUBLICIS and its attorney in Israel, shall be for a period of at
least five (5) years renewable by the COMPANY and shall contain a
strict non-competition clause which shall apply for a period of at
least three (3) years after the termination of employment of any of
the above members of key personnel, and will forbid the grant of any
services, directly and indirectly, to any of the customers of the
COMPANY.
7. URI ARIELY, AMOS TAL-SHIR
Whereas after the sale of the SHARES to PUBLICIS as provided for herein,
Messrs. Uri Ariely and Amos Tal-Shir shall each remain the owner of shares
of the COMPANY representing approximately 6% of the Issued Share Capital
of the COMPANY, it is agreed that should any of the above two (2)
Shareholders decide to sell part or all of his/their shares in the COMPANY
during the term of his/their employment by the COMPANY or rending of
management services to the COMPANY, he/they undertake to sell the shares
to PUBLICIS, who in turn undertakes to purchase the above shares of the
COMPANY.
If and when Uri Ariely and/or Amos Tal-Shir cease to be employed by the
COMPANY or to render services to the COMPANY for whatever reason, such
leaving employee / services provider shall be obliged to sell all his
shares of the COMPANY to PUBLICIS and PUBLICIS in turn undertakes to buy
from him/them all such shares of the COMPANY.
The fair value at which the shares shall be acquired by PUBLICIS from Uri
Ariely and/or from Amos Tal-Shir shall be established by an expert
mutually appointed by
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<PAGE> 15
both parties. In the event the parties shall not be able to reach a
consent as to the identity of such an expert, the expert shall be
appointed, upon the written request of one of the parties by the President
of the Israel Association of Certified Public Accountants.
8. MANAGEMENT OF THE COMPANY
8.l It is hereby agreed that each of the parties hereto who shall be a
shareholder of the COMPANY after the Closing Date shall be entitled
to appoint a number of members to the Board of Directors of the
COMPANY proportionate to his share holding.
As pursuant to Section 76 of the Articles of Association of the
COMPANY, the Shareholders having the majority of Ordinary Shares are
entitled to appoint all the directors of the COMPANY, it is hereby
agreed that as long as Uri Ariely and Amos Tal-Shir shall be
employed by the COMPANY or to render management services, and
provided PUBLICIS has the power to appoint all of the directors of
the COMPANY, PUBLICIS shall appoint them as members of the Board of
Directors of the Company.
8.2 PUBLICIS shall have the right to appoint, at all times, the external
auditors (Certified Public Accountants) of the COMPANY. Uri Ariely
and Amos Tal-Shir hereby undertake to cast their vote at the
Shareholders' Meetings in favor of appointing as the COMPANY's
auditors the firm of auditors chosen by PUBLICIS.
8.3 A. In the event that PUBLICIS intends to sell, in one or a series of
transactions, their Shares in the Company, PUBLICIS shall so notify
Messrs. Ariely and Tal-Shir, describing in such notification the
material terms of such proposed sale. Upon receipt of such notice,
each of Messrs.
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<PAGE> 16
Ariely and Tal-Shir shall have the right to exercise the option
contained in Section 8.3B.
B. Messrs. Ariely and Tal-Shir shall have the option, to require
PUBLICIS to provide as part of its proposed sale that each of them
be given the right to participate in such sale pro rata in
proportion to the respective numbers of shares owned at such time by
PUBLICIS and Messrs. Ariely and Tal-Shir (or one of them, if the
other decides not to participate in the proposed sale), on the same
terms and conditions as PUBLICIS.
9. AFFILIATION WITH PUBLICIS
9.1 The COMPANY shall execute an Affiliation Contract with PUBLICIS in a
form to be agreed upon by the parties and shall become a part of the
PUBLICIS group of companies. As such the COMPANY will receive from
PUBLICIS certain services for which it will pay PUBLICIS, by the end
of each calendar quarter, like other companies in the PUBLICIS
group, a Management and Service Fee at the rate of 4% (four percent)
of the total cost of the personnel of the COMPANY during the
relevant quarter which cost shall include, for that matter,
salaries, social benefits, bonuses etc. It is hereby agreed that the
above mentioned Management and Service Fee shall be paid also in
respect of the cost of the personnel of the subsidiaries of the
COMPANY which are active in the Arab sector.
9.2 PUBLICIS will use its best endeavors to expand the COMPANY and to
increase its profitability, by means of developing the relationship
between the COMPANY and PUBLICIS's international clients doing
business in Israel.
9.3 In accordance with the rules applying to the members of the PUBLICIS
group, the COMPANY shall pay Co-ordination and Creative Fees to the
lead agency(ies) for the international clients who shall be referred
to the COMPANY by such lead agency(ies) and who shall provide the
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<PAGE> 17
COMPANY in respect thereof with professional services. The amount of
such fees shall be dependent on the amount and nature of the work
done and the services provided to the COMPANY by other members of
the PUBLICIS group.
9.4 The name of the COMPANY shall be amended to PUBLICIS-ARIELY and the
COMPANY will be part of the international PUBLICIS network,
9.5 The COMPANY will be managed in accordance with the ethical
principles, practices and procedures of the PUBLICIS group and shall
adopt the financial reporting as well as the budgeting systems in
use in the PUBLICIS group.
10. INDEMNITY
10.1 In the event that any of the representations and warranties of the
COMPANY contained in this Agreement are found to be false, then Uri
Ariely, Amos Tal-Shir and Mivtach Shamir Holding Ltd., registration
number 52-003412-5 (hereinafter "the GUARANTORS") shall jointly and
severally indemnify PUBLICIS for 50.82% of any decline in the value
of the COMPANY resulting from a deed or misdeed in respect of which
the COMPANY gave herein a misrepresentation or inaccurate warranty.
10.2 The COMPANY hereby declares and guarantees that the NET EQUITY of
the COMPANY as shall be reflected in the audited FINANCIAL REPORTS
of the COMPANY dated June 30, 1997, shall be not less than NIS
19,474,000 (Nineteen Million and four hundred seventy four thousand
New Israeli Shekels).
10.3 Should it be revealed, at any point of time in the future, that the
net assets of the COMPANY as of June 30, 1997, be lower than NIS
19,474,000 as a result of a misrepresentation, a claim by a third
party or any authority or for any other reason, then the GUARANTORS
shall jointly and severally indemnify PUBLICIS for 50.82% of any
such deficiency exceeding US$
17
<PAGE> 18
200,000 (two hundred thousand United States Dollars). The GUARANTORS
shall not be liable to indemnify PUBLICIS if the net equity of the
COMPANY as of June 30, 1997, taking into account all relevant
considerations, including taxation, shall not be lower than NIS
18,774,000 (Eighteen Million seven hundred and seventy four thousand
New Israeli Shekels).
10.4 In addition and without derogation of the above the COMPANY, the
GUARANTORS shall jointly and severally indemnify PUBLICIS for any
damage or expenditure that maybe cause to PUBLICIS as a result of a
claim by LOWE against PUBLICIS due to the termination of the
Affiliation Agreement between the COMPANY and LOWE.
10.5 The provisions of Sections 10.1 through 10.4 shall apply only to
claims filed by PUBLICIS against the GUARANTORS within three years
from the date of the Closing. Notwithstanding the above, with
respect to demand by Tax Authorities, the provisions of Sections
10.1 through 10.4 shall apply for five years from the date of the
Closing.
10.6 Notwithstanding the provisions of this Section 10, the
indemnification granted by the GUARANTORS to PUBLICIS shall be
limited in the following manner:
10.6.1 The indemnification granted by the GUARANTORS shall be
limited to an amount of 1 Million US Dollar.
10.6.2 In addition, and without derogating from the above, Uri
Ariely and Amos Tal-Shir shall be obligated, jointly and
severally, to indemnify PUBLICIS up to an additional
amount of no more than 300,000 US Dollar.
10.6.3 In addition, and without derogating from the above, Uri
Ariely shall be obligated to indemnify PUBLICIS for all
amounts due to PUBLICIS over and above 1,300,000 US
Dollar, provided that
18
<PAGE> 19
PUBLICIS makes a demand for indemnification with Uri
Ariely within one year after the CLOSING date.
It is hereby agreed that PUBLICIS shall endeavor to
collect an indemnification that might be due as provided
hereinabove, first in accordance with sub-Section 10.6.
1, then in accordance with sub-Section 10.6.2 and only
as last resort in accordance with sub-Section 10.6.3.
10.7 Should the net assets of the COMPANY as of June 30, 1997, be higher
than NIS 19,474,000, any such amount being in excess of NIS
19,474,000 shall be offset against any amount for which the
GUARANTORS shall be liable to indemnify PUBLICIS as provided in this
Section 10.
11. BROKERS AND FINDERS
11.1 Each of the COMPANY, PUBLICIS and the SHAREHOLDERS represents, as to
itself, its subsidiaries and its affiliates, that no agent, broker,
investment banker or other firm or person other than Prof. Ben
Shachar, who shall be remunerated by the COMPANY, is or shall be
entitled to any broker's or finder's fee or any other commission or
similar fee in connection with this Agreement or with any of the
transactions contemplated by this Agreement. The COMPANY agrees to
indemnify and hold harmless PUBLICIS and PUBLICIS agrees to
indemnify and hold harmless the COMPANY, from and against all
claims, liabilities or obligations with respect to any such fees,
commissions or expenses asserted or claimed by any person on the
basis of any act or statement alleged to have been made by such
party or its affiliate.
12. CLOSING
12.1 The closing of the purchase and sale of the SHARES hereunder as well
as all the other transactions contemplated herein ("the CLOSING")
shall be held at the offices of the legal counsels of PUBLICIS,
Shugol & Co., at 14
19
<PAGE> 20
Abba Hillel Street, Ramat Gan, on September 17, 1997, at 10 a.m.
("the CLOSING DATE").
12.2 Negative Covenants: Pre-Closing. From and after the signing of this
Agreement and until the CLOSING, the COMPANY covenants and agrees
with PUBLICIS that the COMPANY shall not, without the prior written
consent of PUBLICIS carry out any of the following:
(a) issue or sell any shares, stock, options or other securities;
(b) pursue any other investment, direct or indirect, in the equity
of the COMPANY; or
(c) enter into any transaction outside of the ordinary course of
business; or
(d) amend the Memorandum of Association and Articles of
Association of the COMPANY.
12.3 TRANSACTION AT CLOSING: At the CLOSING, the following transactions
shall occur, which transactions shall be deemed to take place
simultaneously and no transaction shall be deemed to have been
completed or any document delivered until all such transactions have
been completed and all required documents delivered.
12.3.1 The COMPANY shall deliver to PUBLICIS the following
documents:
(a) Resolutions of the COMPANY's Board of Directors,
Shareholders Meetings and the Audit Committee approving
the affiliation of the COMPANY with the PUBLICIS group
and adopting the Affiliation Contract with PUBLICIS.
(b) The Affiliation Contract with PUBLICIS duly executed by
the COMPANY.
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<PAGE> 21
(c) The resignation from their positions as directors of the
COMPANY of Messrs. Bergman, Zimmerman, Shamir and Stav.
(d) A resolution by the Board of Directors of the COMPANY
approved by its Audit Committee and the Shareholders'
Meeting to grant PUBLICIS OPTION to acquire the OPTION
SHARES.
(e) A certificate acknowledging the OPTION granted to
PUBLICIS.
(f) The Employment Agreements with Amos Tal-Shir and Raviv
Itzhaki, in a form approved in advance by the legal
counsel of PUBLICIS and an amendment to the management,
agreement between the COMPANY and Ariely Communications
Group Ltd. in the form attached to this Agreement as
Schedule 5.
(g) A document duly executed by LOWE confirming that the
Affiliation Agreement between the COMPANY and LOWE has
been terminated and that LOWE waives any claims against
the COMPANY.
(h) Share Transfer Deeds in respect of all the SHARES in the
form specified in Section 22 of the Articles of
Association of the Company, each duly executed by the
relevant Shareholder.
(i) An Opinion of Adv. Eran Ilan, of Yigal Arnon & Co.
counsels to the COMPANY, in the form attached hereto as
Schedule 12.3.1(i) dated as of the date of the CLOSING.
12.3.2. At CLOSING, PUBLICIS shall hand over to the
COMPANY's counsel a bank draft, dated as of the date of
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<PAGE> 22
CLOSING, in the amount of US$ 6,297,472.50 being the
total consideration for all the SHARES. The bank draft
which will be in the name of Yigal Arnon & Co., shall be
deposited by the COMPANY's counsel in an Escrow Account
of Yigal Arnon & Co.
The COMPANY's counsel shall distribute the above consideration
among the SHAREHOLDERS in accordance with the instructions
received by him from the SHAREHOLDERS, only after PUBLICIS
receives share certificate in respect of the SHARES in the
name of PUBLICIS duly issued by the Transfer Agent of the
Company. The parties acknowledge that the share certificate to
be issued to PUBLICIS will not be issued until several weeks
after the CLOSING, and the distribution of the consideration
among the SHAREHOLDERS will be delayed accordingly.
12.4 It is hereby declared and agreed that should any of the
pre-conditions to this Agreement indicated in Sections 2, 3, 5, 6, 9
and 10 hereinabove are not met, this Agreement shall be null and
void and no party shall have any claim against the other.
13. CORPORATE MATTERS
Before and after the CLOSING, the parties hereto agree to do their best
efforts (including, without limitation, voting their Shares in the
COMPANY) as may be required from time to time to ensure the application of
the relevant provisions of this Agreement.
14. RESTRICTIONS ON SALES
Uri Ariely and Amos Tal-Shir hereby undertake not to sell, assign,
transfer, pledge, hypothecate, mortgage or dispose of, by gift or
otherwise, or in any way encumber any of their shares in the COMPANY other
than with the consent of PUBLICIS. Notwithstanding the above Amos
Tal-Shir is entitled to pledge its shares in the
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<PAGE> 23
COMPANY to the benefit of Mivtach Shamir in connection with the guarantee
granted to PUBLICIS.
15. TRANSFER OF OPTIONS
PUBLICIS hereby agrees that Messrs. Ariely and Tal-Shir shall acquire from
BTA Investments Ltd. options to purchase 72,000 Ordinary Shares of the
Company.
16. LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with the
laws of the State of Israel and the competent Courts in Tel Aviv Jaffa
shall have the exclusive jurisdiction in any dispute arising hereunder.
17. NOTICES
17.1 All notices hereunder shall be in writing mailed registered or
certified mail, postage pre-paid, addressed to the parties at their
respective addresses as set out in this Agreement, or transmitted by
courier, cable, telex or facsimile or other reliable method of
transmissions.
17.2 Notices shall be deemed received by the receiving party within seven
(7) days of mailing, if mailed, within five (5) days of sending if
sent by courier, when actually delivered by hand, if so delivered,
and on the first business day (at the receiving end) following
transmission if transmitted by cable, telex or facsimile.
18. COUNTERPARTS
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signature thereto and
hereto were upon the same instrument.
19. HEADINGS
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<PAGE> 24
Section headings herein are for convenience and ease of reference only,
and shall in no way affect or be deemed to affect the construction or
interpretation of any provision hereof.
20. SURVIVAL
The warranties, representations and covenants of the COMPANY, the
SHAREHOLDERS and PUBLICIS contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the CLOSING
and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of PUBLICIS, the SHAREHOLDERS, or the
COMPANY.
21. ENTIRE AGREEMENT AND AMENDMENT
21.1 This Agreement and the Schedules, constitutes the entire agreement
between the parties with respect to the subject matter hereof and
contains all of the promises, undertakings, and other
representations made by the parties to each other prior to its
execution, all of which are merged herein.
21.2 This Agreement and the Schedules shall prevail over any prior
agreement, understanding, promise or undertaking of the parties with
respect to the subject matter hereof, all of which are merged
herein. No subsequent amendment to this Agreement shall be of any
effect unless executed in writing and signed by the parties hereto.
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<PAGE> 25
NOW THERFORE the parties have set their hand on the date first
hereinabove written.
/s/ Uri Ariely /s/ Publicis Worldwide B.V.
- ----------------------------------- ------------------------------------
URI ARIELY PUBLICIS WORLDWIDE B.V.
/s/ Amos Tal-Shir /s/ Avi Tiomkin
- ----------------------------------- ------------------------------------
AMOS TAL-SHIR AVI TIOMKIN
/s/ Tamar Ariely /s/ Ariely Advertising Ltd.
- ------------------------------------ -----------------------------------
TAMAR ARIELY ARIELY ADVERTISING LTD.
/s/ Rubin Zimmerman /s/ Benny Bergman
- ----------------------------------- ------------------------------------
RUBIN ZIMMERMAN BENNY BERGMAN
/s/ Mivtach Shamir Investments (93) Ltd.
- -----------------------------------------
MIVTACH SHAMIR INVESTMENTS (93)
LTD.
/s/ Mivtach Shamir Holding Ltd.
- -----------------------------------
MIVTACH SHAMIR HOLDING LTD.
/s/ El Bustani Ltd.
- -----------------------------------
EL BUSTANI LTD.
25
