-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LhXPB821RsI847NH+397sPNwckickjLYOay66fha8mOBH51wOtjpyW++r+YnHUTY 17Ev9E541p/lmMjNWAIKxw== 0000891092-95-000090.txt : 19950613 0000891092-95-000090.hdr.sgml : 19950613 ACCESSION NUMBER: 0000891092-95-000090 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19950612 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNICOM GROUP INC CENTRAL INDEX KEY: 0000029989 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 131514814 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 033-60167 FILM NUMBER: 95546495 BUSINESS ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124153600 MAIL ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH GROUP INC DATE OF NAME CHANGE: 19861117 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INTERNATIONAL INC DATE OF NAME CHANGE: 19850604 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INC DATE OF NAME CHANGE: 19781226 S-4 1 REGISTRATION STATEMENT Registration No. 33- ================================================================================ U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------- OMNICOM GROUP INC. (Exact Name of Registrant as Specified in Charter)
New York 7311 13-1514814 (State or other jurisdiction of (Primary Standard (IRS Employer Ident. No.) incorporation or organization) Industrial Classification Code Number)
437 Madison Avenue New York, New York 10022 (212) 415-3600 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) BARRY J. WAGNER, ESQ. Secretary Omnicom Group Inc. 437 Madison Avenue New York, New York 10022 (212) 415-3600 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------- Copies to: MICHAEL D. DITZIAN, ESQ. JAMES M. COTTER, ESQ. Davis & Gilbert Simpson Thacher & Bartlett 1740 Broadway 425 Lexington Avenue New York, New York 10019 New York, New York 10017 (212) 468-4800 (212) 455-2000 ------------------------- Approximate date of commencement of proposed sale to public: From time to time after this Registration Statement becomes effective and all other conditions to the purchase of assets pursuant to the Acquisition Agreement described in the enclosed Prospectus/ Information Statement have been satisfied or waived. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box: [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box: [X] --------------------------------
CALCULATION OF REGISTRATION FEE =============================================================================================================== Proposed Proposed Amount maximum maximum Amount of Title of securities to be offering price aggregate registration being registered registered (1) per share (2) offering price (2) fee (2) - --------------------------------------------------------------------------------------------------------------- Common Stock, $ .50 par value ........ 600,000 $57.875 $34,725,000 $11,974.14 ===============================================================================================================
(1) Estimated maximum number of shares which may be issued by Omnicom Group Inc. under the Acquisition Agreement described in this Registration Statement. (2) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(c), based on the average of the high and low prices of the Common Stock of Omnicom on Tuesday, June 6, 1995, as reported by the New York Stock Exchange. ------------------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ OMNICOM GROUP INC. Cross Reference Sheet Pursuant to Rule 404(a) of the Securities Act of 1933 and Item 501(b) of Regulation S-K, Showing the Location or Heading in the Prospectus/Information Statement of the Information required by Part I of Form S-4. Location or Heading in S-4 Item Number and Caption Prospectus/information Statement - --------------------------- -------------------------------- A. Information about the Transaction Forepart of Registration Statement and Outside Front Cover Page of Outside Front Cover Page of Prospectus Prospectus/Information Statement Inside Front and Outside Back Cover Inside Front Cover Page of Pages of Prospectus Prospectus/Information Statement; Available Information Risk Factors, Ratio of Earnings to Fixed Summary; Comparative Per Share Data; Charges and Other Information Market Price Data Terms of the Transaction The Transactions; The Acquisition Agreement; The Advertising Stock Sale Agreement; Proposed Amendment of theHoldings Certificate; the Plan of Liquidation; Federal Income Tax Consequences of the Sales of Assets and Dissolution and Liquidation; Comparison of Shareholder Rights; Description of Omnicom Capital Stock Pro Forma Financial Information * Material Contacts with the Company Being The Transactions Acquired Additional Information Required for * Reoffering by Persons and Parties Deemed to Be Underwriters Interests of Named Experts and Counsel * Disclosure of Commission Position on * Indemnification for Securities Act Liabilities B. Information about the Registrant Information with Respect to Incorporation of Certain Documents S-3 Registrants by Reference; Business Information Concerning Omnicom; Selected Financial Data of Omnicom; Description of Omnicom Capital Stock Incorporation of Certain Information by Incorporation of Certain Information Reference by Reference Information with Respect to S-2 or S-3 * Registrants Incorporation of Certain Information by * Reference Location or Heading in S-4 Item Number and Caption Prospectus/information Statement - --------------------------- -------------------------------- Information with Respect to Registrants * Other Than S-3 or S-2 Registrants C. Information about the Company Being Acquired Information with Respect to S-3 Companies * Information with Respect to S-2 or S-3 * Companies Information with Respect to Companies Business Information Concerning Other Than S-3 or S-2 Companies Holdings; Selected Financial Data of Holdings; Management's Discussion and Analysis of Financial Condition and Results of Operations of Holdings; Description of Holdings Capital Stock; Index to Holdings Financial Statements D. Voting and Management Information Information if Proxies, Consents or * Authorizations are to be Solicited Information if Proxies, Consents or Incorporation of Certain Documents Authorizations are not to be Solicited by Reference; The Special Meeting; or in an Exchange Offer The Transactions; Description of Holdings Capital Stock - ------------------ * Not applicable [Letterhead] CHIAT/DAY HOLDINGS, INC. [ ], 1995 Dear Shareholder: You are cordially invited to attend a special meeting of stockholders of Chiat/Day Holdings, Inc., a Delaware corporation ("Holdings"), on [ ], 1995, at [ ] a.m. at 180 Maiden Lane, New York, New York 10038 (the "Special Meeting") to consider and vote upon the following proposals (collectively, the "Holdings Vote Matters"): (a) the sale by Holdings and Chiat/Day inc. Advertising, a Delaware corporation and a wholly-owned subsidiary of Holdings ("Advertising"), of their assets and businesses, (i) to TBWA International Inc., a Delaware corporation ("TBWA"), in exchange for shares of Common Stock of Omnicom Group Inc., a New York corporation ("Omnicom"), and TBWA's assumption of liabilities pursuant to an Asset Purchase Agreement (the "Acquisition Agreement") dated May 11, 1995 among Omnicom, TBWA, Holdings and Advertising and (ii) pursuant to a certain stock purchase agreement dated as of May 11, 1995 between Holdings and Adelaide Horton (the "Advertising Stock Sale Agreement"); (b) following the Closing under the Acquisition Agreement, the amendment of the Certificate of Incorporation of Holdings (the "Holdings Certificate"), to change the corporate name of Holdings to CDH Corporation; (c) the approval and adoption of a Plan of Liquidation pursuant to which Holdings will, among other things, (i) dissolve, (ii) establish a liquidating trust pursuant to a liquidating trust agreement, with Thomas Patty and David C. Wiener as trustees for the benefit of its stockholders, and (iii) distribute to its stockholders and/or the liquidating trust all its remaining assets; and (d) such other matters as may come before the Meeting. Holders of record of Class A Common Stock and Class B Common Stock of Holdings at the close of business on [ ,] 1995, will be entitled to vote at the Special Meeting or any postponement or adjournment thereof. The affirmative vote of the holders of a majority of the voting power represented by the outstanding shares of Class A Common Stock and Class B Common Stock (the "Holdings Common Stock"), voting together as a single class, is necessary to approve the transactions contemplated by the Acquisition Agreement and the Advertising Stock Sale Agreement, to approve the amendment to the Holdings Certificate, and to approve and adopt the Plan of Liquidation. Directors, officers and affiliates of Holdings as a group owning as of [May 4, 1995] approximately [75.82%] of the Holdings Common Stock have expressed an intention to vote in favor of the transactions contemplated herein. None of the Holdings Vote Matters shall become effective unless all of the proposals are adopted by the requisite vote of the Holdings Stockholders. The Holdings Board of Directors believes that the foregoing transactions are fair to, and in the best interests of, Holdings and the Holdings stockholders and recommends that the Holdings stockholders vote FOR the approval of the transactions contemplated by the Acquisition Agreement and the Advertising Stock Sale Agreement, FOR the approval of the amendment of the Holdings Certificate, and FOR the approval of the Plan of Liquidation. The attached Prospectus/Information Statement describes the proposed transactions more fully. Please give this information careful attention. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. Very truly yours, JAY CHIAT Chief Executive Officer CHIAT/DAY HOLDINGS, INC. ------------------- NOTICE OF SPECIAL MEETING OF STOCKHOLDERS ------------------- To be Held on [ ], 1995 NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of stockholders of Chiat/Day Holdings, Inc., a Delaware corporation ("Holdings"), will be held on ___________ 1995, at 180 Maiden Lane, New York, New York 10038, commencing at [_____] a.m., to consider and vote upon the following matters described in the accompanying Prospectus/Information Statement: 1. To consider and vote upon the transfer by Holdings and Chiat/Day inc. Advertising, a Delaware corporation and a wholly-owned subsidiary of Holdings ("Advertising"), of their assets and businesses (i) to TBWA International Inc., a Delaware corporation ("TBWA"), in exchange for shares of Common Stock, par value $.50 per share, of Omnicom Group Inc., a New York corporation ("Omnicom"), and TBWA's assumption of liabilities pursuant to an Asset Purchase Agreement (the "Acquisition Agreement") dated May 11, 1995, among Omnicom, TBWA, Holdings and Advertising and (ii) pursuant to a certain stock purchase agreement dated as of May 11, 1995 between Holdings and Adelaide Horton. 2. To consider and vote upon an amendment to the Certificate of Incorporation of Holdings (the "Holdings Certificate") to change the name of Holdings, following the Closing under the Acquisition Agreement, to CDH Corporation. 3. To consider and vote upon the approval and adoption of a plan of complete liquidation (the "Plan of Liquidation") pursuant to which Holdings would (i) dissolve, (ii) establish a liquidating trust (the "Liquidating Trust") pursuant to a liquidating trust agreement, with Thomas Patty and David C. Wiener as trustees, for the benefit of its stockholders, and (iii) distribute to its stockholders and/or the Liquidating Trust all its remaining assets. Approval of the Plan of Liquidation requires the acceptance by the Holdings stockholders of such trustees as their collective agent under the terms of the Liquidating Trust, with such trustees (a) to receive on their behalf certain liquidating distributions from Holdings, (b) to act as their agent in connection with the administration of an escrow agreement established in connection with the Acquisition Agreement and more fully described herein (the "Escrow Agreement"), (c) to respond to the assertion of any and all claims for indemnification by TBWA, or to assert claims on behalf of the stockholders, pursuant to the terms of the Acquisition Agreement and the Escrow Agreement, and (d) to complete the winding up of the affairs of Holdings and payment of its liabilities not assumed by TBWA pursuant to the Acquisition Agreement from the assets of the Liquidating Trust. 4. To transact such other business as may properly come before the Special Meeting or any adjournment thereof. Only holders of record of Class A Common Stock, par value $.01 per share ("Class A Common Stock"), and Class B Common Stock, par value $.01 per share ("Class B Common Stock"), of Holdings at the close of business on [ ], 1995 will be entitled to vote at the Special Meeting and any adjournment or postponement thereof. The affirmative vote of the holders of a majority of the voting power represented by the outstanding shares of Class A Common Stock and Class B Common Stock (the "Holdings Common Stock"), voting together as a single class, is necessary to approve the transactions contemplated by the Acquisition Agreement and the Advertising Stock Sale Agreement, to approve the amendment to the Holdings Certificate, and to approve and adopt the Plan of Liquidation. Directors, officers and affiliates of Holdings as a group owning as of [May 4, 1995] approximately [75.82%] of Holdings Common Stock have expressed a present intention to vote in favor of the transactions contemplated herein. None of such matters shall become effective unless all of the proposals are adopted by the requisite vote of the Holdings Stockholders. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. By Order of the Holdings Board of Directors ------------------- SUBJECT TO COMPLETION DATED JUNE 12, 1995 CHIAT/DAY HOLDINGS, INC. INFORMATION STATEMENT ------------------- OMNICOM GROUP INC. PROSPECTUS ------------------- This Prospectus/Information Statement is being furnished to holders of Class A Common Stock, par value $.01 per share ("Class A Common Stock"), and holders of Class B Common Stock, par value $.01 per share ("Class B Common Stock"), (collectively, "Holdings Common Stock") of Chiat/Day Holdings, Inc., a Delaware corporation ("Holdings"), in connection with the special meeting of the stockholders of Holdings to be held on [ ], 1995 at 180 Maiden Lane, New York, New York 10038, commencing at [ ] a.m., local time, and at any adjournment or postponement thereof (the "Special Meeting"). The purpose of the Special Meeting is to consider and vote upon the following proposals (a) the sale by Holdings and Chiat/Day inc. Advertising, a Delaware corporation and a wholly-owned subsidiary of Holdings ("Advertising") of their assets and businesses (i) to TBWA International Inc., a Delaware corporation ("TBWA"), in exchange for shares of voting Common Stock, par value $.50 per share, of Omnicom Group Inc., a New York corporation ("Omnicom") (such shares of Common Stock, "Omnicom Common Stock") and TBWA's assumption of liabilities pursuant to an Asset Purchase Agreement (the "Acquisition Agreement") dated May 11, 1995, among Omnicom, TBWA, Holdings and Advertising (the transactions contemplated by the Acquisition Agreement are herein called the "Acquisition") and (ii) pursuant to a certain stock purchase agreement dated as of May 11, 1995 between Holdings and Adelaide Horton (the "Advertising Stock Sale Agreement" and the sale thereunder the "Advertising Stock Sale"), (b) following the Closing under the Acquisition Agreement (the "Closing"), the amendment of the Certificate of Incorporation of Holdings (the "Holdings Certificate") to change the name of Holdings to CDH Corporation, and (c) the approval and adoption of a plan of complete liquidation (the "Plan of Liquidation") pursuant to which Holdings will (i) dissolve, (ii) establish a liquidating trust (the "Liquidating Trust") pursuant to a liquidating trust agreement (the "Liquidating Trust Agreement"), between Holdings and Thomas Patty and David C. Wiener, as trustees (the "Liquidating Trustees"), for the benefit of its stockholders, and (iii) distribute to its stockholders and/or the Liquidating Trust all its remaining assets (the "Liquidation" and, together with the Acquisition, the Advertising Stock Sale and the amendment to the Holdings Certificate, the "Transactions"). This Prospectus/Information Statement is also being furnished to holders of Equity Appreciation Rights ("EARs") issued under the 1993 Equity Appreciation Rights Plan of Holdings (the "EAR Plan") and of Equity Participation Units ("EPUs") issued under the 1988 Amended and Restated Equity Participation Plan of Holdings (the "EPU Plan") (collectively, the "Rightsholders") who will receive shares of Omnicom Common Stock as payment under such Plans subject to the same terms and conditions as other stockholders of Holdings. This Prospectus/Information Statement constitutes both an information statement of Holdings with respect to the Meeting and a prospectus of Omnicom with respect to up to 600,000 shares of Omnicom Common Stock, which may be issued to Holdings and Advertising in connection with the Acquisition and distributed to the holders of Holdings Common Stock and to the Rightsholders. THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROSPECTUS/INFORMATION STATEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. ------------------- The date of this Prospectus/Information Statement is [ ], 1995. ------------------- All information contained in this Prospectus/Information Statement relating to Holdings and the Special Meeting (including, without limitation, financial statements and other financial information regarding Holdings, background of and Holdings' reasons for the transactions, descriptions of the businesses, properties, assets, and the liabilities of holdings and advertising, description of the federal income tax consequences of the sale of assets and dissolution and liquidation, and descriptions of the Liquidating Trust, the Plan of Liquidation, and the Liquidating Trust Escrow Fund have been supplied by Holdings and are the sole responsibility of Holdings and Omnicom assumes no responsibility therefor. All information contained in this Prospectus/Information Statement relating to Omnicom (including, without limitation, financial information regarding Omnicom, Omnicom's reasons for the acquisition, and the description of the business of Omnicom) has been supplied by Omnicom and is the sole responsibility of Omnicom and Holdings assumes no responsibility therefor. No person has been authorized to give any information or to make any representation other than those contained in this Prospectus/Information Statement in connection with the Special Meeting or the offering of securities made hereby and, if given or made, such information or representation must not be relied upon as having been authorized by Omnicom, Holdings or any other person. This Prospectus/Information Statement does not constitute an offer to sell, or a solicitation of any offer to buy, any securities in any jurisdiction to or from any person to whom it is not lawful to make any such offer or solicitation. Neither the delivery of this Prospectus/Information Statement, nor any distribution of securities made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of Omnicom or Holdings since the date hereof or that the information contained herein is correct as of any time subsequent to the date hereof. ------------------- AVAILABLE INFORMATION Omnicom is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). The reports, proxy statements and other information filed by Omnicom with the SEC can be inspected and copied at the public reference facilities maintained by the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the SEC at 7 World Trade Center, 13th Floor, New York, New York 10048-1102 and Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material also can be obtained from the Public Reference Section of the SEC, Washington, D.C. 20549 at prescribed rates. In addition, material filed by Omnicom can be inspected at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005, on which the Omnicom Common Stock is listed. Omnicom has filed with the SEC a Registration Statement on Form S-4 (together with all amendments, exhibits, annexes and schedules thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Omnicom Common Stock to be issued pursuant to the Acquisition. This Prospectus/Information Statement does not contain all the information set forth in the Registration Statement, certain portions of which have been omitted as permitted by the rules and regulations of the SEC. Such additional information may be obtained from the SEC's principal office in Washington, D.C. Statements contained in this Prospectus/Information Statement or in any document incorporated in this Prospectus/Information Statement by reference as to the contents of any contract or other document referred to herein or therein are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or such other document, each such statement being qualified in all respects by such reference. 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the SEC by Omnicom (File No. 1-10551) pursuant to the Exchange Act are incorporated by reference in this Prospectus/Information Statement: 1. Omnicom's Annual Report on Form 10-K for the fiscal year ended December 31, 1994; 2. Omnicom's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; 3. Omnicom's Proxy Statement dated April 7, 1995, for the Annual Meeting of Shareholders held on May 22, 1995; and 4. The description of Omnicom's Common Stock contained in Omnicom's Registration Statement pursuant to the Exchange Act, together with all amendments or reports filed for the purpose of updating such description. All documents and reports subsequently filed by Omnicom pursuant to Sections 13(a), 13(c), l4 or 15(d) of the Exchange Act after the date of this Prospectus/Information Statement shall be deemed to be incorporated by reference in this Prospectus/Information Statement and to be a part hereof from the date of filing of such documents or reports. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus/Information Statement to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus/Information Statement. This Prospectus/Information Statement incorporates documents relating to Omnicom by reference that are not presented herein or delivered herewith. Such documents (other than exhibits to such documents, unless such exhibits are specifically incorporated herein by reference) are available to any person, including any beneficial owner, to whom this Prospectus/Information Statement is delivered, without charge, on written or oral request directed to Omnicom Group Inc., 437 Madison Avenue, New York, New York 10022, Attention: Secretary (telephone number (212) 415-3600). in order to ensure timely delivery of the documents, any requests should be made by [ ], 1995. This Prospectus/Information Statement incorporates documents relating to Holdings by reference that are not presented herein or delivered herewith. Such documents (other than exhibits to such documents, unless such exhibits are specifically incorporated herein by reference) are available to any person, including any beneficial owner, to whom this Prospectus/Information Statement is delivered, without charge, on written or oral request directed to Chiat/Day Holdings, Inc., 180 Maiden Lane, New York, New York 10038, Attention: _____________ (telephone number (212) 804-1000). in order to ensure timely delivery of the documents, any requests should be made by [ ], 1995. 3 TABLE OF CONTENTS AVAILABLE INFORMATION................................................... 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 3 SUMMARY................................................................. 6 COMPARATIVE PER SHARE DATA ............................................. 18 MARKET PRICE DATA ...................................................... 19 THE SPECIAL MEETING .................................................... 20 Date, Time and Place of Special Meeting ............................ 20 Business to Be Transacted at the Special Meeting ................... 20 Record Date, Voting Rights ......................................... 20 Voting Requirements ................................................ 20 Approval Under Holdings Certificate ................................ 20 Affiliate Ownership ................................................ 21 THE TRANSACTIONS ........................................................ 21 Background of and Holdings' Reasons for the Transaction; Recommendation of the Holdings Board of Directors ................. 21 Omnicom's Reasons for the Acquisition ............................... 22 Interests of Certain Persons in the Transaction ..................... 23 Accounting Treatment ................................................ 24 Regulatory Approvals ................................................ 24 Resales of Omnicom Common Stock ..................................... 25 Resale Restrictions ................................................. 25 Stock Exchange Listing .............................................. 25 No Dissenters' Rights ............................................... 25 THE ACQUISITION AGREEMENT ............................................... 26 The Acquisition ..................................................... 26 Other Terms and Conditions of the Acquisition Agreement ............. 30 THE ADVERTISING STOCK SALE AGREEMENT .................................... 34 PROPOSED AMENDMENT OF THE HOLDINGS CERTIFICATE .......................... 34 THE PLAN OF LIQUIDATION ................................................. 35 General ............................................................. 35 Liquidating Distribution to Holdings Stockholders ................... 35 Liquidating Distribution to Rightsholders ........................... 36 Fractional Shares ................................................... 36 Operation of the Liquidating Trust .................................. 36 The Liquidating Trust Escrow ........................................ 37 FEDERAL INCOME TAX CONSEQUENCES OF THE SALES OF ASSETS AND DISSOLUTION AND LIQUIDATION ............................................. 38 Corporate Tax ....................................................... 38 Holder Tax .......................................................... 38 Withholding Taxes ................................................... 41 BUSINESS INFORMATION CONCERNING OMNICOM ................................. 42 4 SELECTED FINANCIAL DATA OF OMNICOM ...................................... 43 BUSINESS INFORMATION CONCERNING HOLDINGS ................................ 44 SELECTED FINANCIAL DATA OF HOLDINGS ..................................... 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOLDINGS ....................................... 47 Results of Operations ............................................... 47 Liquidity and Capital Resources ..................................... 48 DESCRIPTION OF OMNICOM CAPITAL STOCK .................................... 48 DESCRIPTION OF HOLDINGS CAPITAL STOCK ................................... 49 COMPARISON OF SHAREHOLDER RIGHTS ........................................ 52 LEGAL MATTERS ........................................................... 57 EXPERTS ................................................................. 58 5 - -------------------------------------------------------------------------------- SUMMARY (The following is a summary of certain information contained elsewhere in this Prospectus/Information Statement and does not purport to be complete. This summary is qualified in all respects by the remainder of this Prospectus/Information Statement, which should be read in its entirety.) The Companies Omnicom Group Inc. .......... Omnicom, though its wholly and partially owned companies, operates advertising agencies which plan, create, produce and place advertising in various media such as television, radio, newspaper and magazines; and offers clients such additional services as marketing consultation, consumer market research, design and production of merchandising and sales promotion programs and materials, direct mail advertising, corporate identification, and public relations. According to the unaudited industry-wide figures published in the trade journal, ADVERTISING AGE, in 1994 Omnicom was ranked as the third largest advertising agency group worldwide. Omnicom operates three separate, independent agency networks: the BBDO Worldwide Network, the DDB Needham Worldwide Network and the TBWA International Network. Omnicom also operates independent agencies, Altschiller & Company and Goodby, Silverstein & Partners, and certain marketing service and specialty advertising companies through Diversified Agency Services. The principal executive offices of Omnicom are located at 437 Madison Avenue, New York, New York 10022, telephone number (212) 415-3600. TBWA International Inc. ...... TBWA International Inc., is the holding company for that portion of the TBWA International Network operating in the United States. Chiat/Day Holdings, Inc. and Chiat/Day inc. Advertising ... Holdings, primarily through its wholly owned subsidiary Chiat/Day inc. Advertising, is engaged in the business of planning and creating advertising campaigns for clients, purchasing various media spots (television, radio, newspapers and magazines), and providing marketing consultation, market research and production services. In 1994, Holdings was the 16th largest advertising agency in the U.S. and 27th largest in the world according to the unaudited industry-wide figures published in Advertising Age. The principal executive offices of Holdings are located at 180 Maiden Lane, New York, New York 10038, telephone number (212) 804-1000. THE SPECIAL MEETING Meeting Time, Date and Place .................... The Special Meeting will be held at [ ] am., local time, on [ ] 1995, at 180 Maiden Lane, New York, New York 10038, and at any adjournment or postponement thereof. - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- Record Date; Shares Entitled To Vote ............. Holders of record of shares of Class A Common Stock and Class B Common Stock of Holdings (collectively, "Holdings Stockholders") at the close of business on [ ] 1995 (the "Record Date"), are entitled to notice of and to vote at the Special Meeting. At such date there were outstanding [ ] shares of Class A Common Stock, each of which will be entitled to one vote at the Special Meeting, and [ ] shares of Class B Common Stock, each of which will be entitled to one vote at the Special Meeting. Purpose of the Special Meeting ...................... The purpose of the Special Meeting is to consider and vote upon the following matters: (a) a proposal to approve the sale by Holdings and Advertising of their assets and businesses pursuant to (i) the Acquisition Agreement, by and among Omnicom, TBWA, Holdings and Advertising, and (ii) the Advertising Stock Sale Agreement between Holdings and Adelaide Horton; (b) a proposal to amend the Holdings Certificate effective as of the Closing under, and as defined in, the Acquisition Agreement to change its corporate name to CDH Corporation; (c) the approval and adoption of the Plan of Liquidation, including the dissolution of Holdings, the creation of the Liquidating Trust pursuant to the Liquidating Trust Agreement and the appointment of the Liquidating Trustees; and (d) such other proposals as may properly be brought before the Special Meeting. Votes Required ............. The approval of the various proposals by Holdings Stockholders will require the affirmative vote of the holders of a majority of the voting power represented by the outstanding shares of Class A Common Stock and of Class B Common Stock, voting together as a single class. Directors, officers and affiliates of Holdings as a group owning as of [May 4, 1995] approximately [75.82%] of the Holdings Common Stock have expressed an intention to vote in favor of the various proposals. The Acquisition The Acquisition .............. Pursuant to the Acquisition Agreement, TBWA will acquire assets of Holdings and Advertising relating to their advertising businesses (the "Businesses") for consideration payable by the issuance to Holdings and Advertising of shares of Omnicom Common Stock for distribution to the Holdings Stockholders and the Rightsholders, and the assumption by TBWA of liabilities of Holdings and Advertising relating to the Businesses. The shares of Omnicom Common Stock to be issued to Holdings and Advertising shall be valued at the "Market Value" (which shall be determined by the average of the closing prices per share of - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- Omnicom Common Stock reported on the New York Stock Exchange for the 20 consecutive trading days ending three business days immediately prior to the Closing Date under, and as defined in, the Acquisition Agreement). The number of shares of Omnicom Common Stock to be issued shall be calculated and applied as follows: (a) TBWA will pay Holdings shares of Omnicom Common Stock having an aggregate Market Value of (x) if the Closing is held on or prior to October 31, 1995, (i) $11,180,563 PLUs (ii) an amount equal to $2,418 multiplied by the number of days in the period commencing on the Closing Date and ending on October 31, 1995, or (y) if the Closing is held after October 31, 1995 and on or prior to December 31, 1995, (iii) $11,930,880 PLUS (iv) an amount equal to $2,418 multiplied by the number of days in the period commencing on the Closing Date and ending on December 31, 1995. Of this Omnicom Common Stock, shares having such Market Value as may be necessary to insure the satisfaction of obligations of Holdings and Advertising to the Rightsholders, will be contributed to Advertising (the "Contributed Stock"). (b) TBWA will pay Advertising shares of Omnicom Common Stock having an aggregate Market Value of $14,000,000. Notwithstanding the foregoing, the Acquisition Agreement provides that prior to the Closing the parties will negotiate in good faith an upwards adjustment to the acquisition price if the "Annualized Revenues" of Holdings and its subsidiaries, being the commissions and fees expected to be earned by Holdings and its subsidiaries from clients who are such at the time of the calculation for the fiscal year ending October 31, 1995 (the "1995 Fiscal Year") exceed $100,000,000 and the profits before taxes (as adjusted to exclude net interest expense and certain other items agreed between the parties) ("EBIT") of Holdings and its subsidiaries for the 1995 Fiscal Year is reasonably expected to exceed $17,200,000. If an upwards adjustment is not agreed, Holdings has the right to either terminate the Acquisition Agreement or proceed with the Closing at the original price. Any additional consideration payable will be made in shares of Omnicom Common Stock valued at the Market Value. On the Distribution Date (as defined herein), the shares of Omnicom Common Stock paid to Holdings and to Advertising will be distributed as follows: (a) Ten percent of the Omnicom Common Stock paid to Holdings (after deducting the Contributed Stock) and to Advertising (including ten percent of the Contributed Stock) will be placed into an escrow account (the "General Escrow Fund") under the terms of an escrow agreement (the "Escrow Agreement") among TBWA, Holdings, Advertising and The Chase Manhattan Bank, N.A., as escrow - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- agent (the "Escrow Agent"), to provide for payment of indemnification obligations to Omnicom and TBWA arising out of the Acquisition Agreement. (b) Shares of Omnicom Common Stock having a Market Value of $1,700,000, contributed by Holdings and Advertising on a pro rata basis, will be placed into an additional escrow account (the "Special Escrow Fund") under the Escrow Agreement to provide for the payment of indemnification obligations to Omnicom and TBWA relating to an asset whose collectibility could not reasonably be assured at the signing of the Acquisition Agreement (the "Indemnified Receivable"). (c) Five percent of the Omnicom Common Stock paid to Holdings (after deducting the Contributed Stock) will be delivered to the Liquidating Trust to fund the payment and satisfaction of obligations and liabilities of Holdings and Advertising as shall not have been assumed by TBWA under the Acquisition Agreement; and five percent of the Omnicom Common Stock paid to Advertising (including five percent of the Contributed Stock) will be delivered to a separate escrow fund (the "Liquidating Trust Escrow Fund") to fund (together on a pro rata basis with the Holdings Stockholders) the payment and satisfaction of Liabilities of Holdings and Advertising as shall not have been assumed by TBWA under the Acquisition Agreement. (d) The remainder of the Omnicom Common Stock held by Holdings will be delivered to the holders of the Holdings Common Stock pro rata in accordance with their respective shareholdings; and the remainder of the Omnicom Common Stock held by Advertising will be delivered to the Rightsholders pro rata in accordance with their respective interests. (e) After the distribution by Advertising to the Rightsholders, Holdings shall consummate the sale of the capital stock of Advertising pursuant to the Advertising Stock Sale Agreement. See "The Acquisition Agreement--The Acquisition-- Determination of Acquisition Price", "--Renegotiation of Acquisition Price", "--Payment of Obligations to Rightsholders" and "--The Escrow Agreement" and "The Advertising Stock Sale Agreement". Distribution Date ............ The distributions of the shares of Omnicom Common Stock by Holdings and Advertising will not occur until the "Distribution Date". The Distribution Date will be the date of publication by Omnicom of financial results covering at least 30 days of combined operations for Omnicom and the Businesses after the Closing Date, provided that if the Closing occurs on or prior to August 31, 1995, the Distribution Date will be the earlier of the date of such publication and October 30, 1995 (whether or not such financial results are published). Assuming - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- the Closing occurs on or before August 31, 1995, the earliest that such financial results would be published is October 26, 1995. During the period from the Closing Date through the Distribution Date, Holdings Stockholders and Rightsholders will bear the risk of fluctuations in the market price of the Omnicom Common Stock. Payment of Obligations to Rightsholders ............. In 1993 and 1988, Holdings adopted the EAR Plan and EPU Plan, respectively, and has issued awards under such Plans. If the employment of a participant is terminated for any reason, then under the terms of the EAR Plan, such participant shall have the right, but not the obligation, to cause Holdings or Advertising to, and under the EPU Plan Holdings or Advertising shall, redeem vested units for cash in each case at their book value as at the end of the most recent fiscal quarter. At March 31, 1995, such book value was less than zero. However, in the event of a liquidation, with respect to their priority, each EAR and EPU shall be deemed equivalent in value to one share of Holdings Common Stock and shall be treated in the same manner as Holdings Common Stock. Therefore, Rightsholders will receive shares of Omnicom Common Stock as payment under such Plans, subject to the same terms and conditions as if they were Holdings Stockholders, including without limitation the escrow and indemnification provisions more fully described herein. Per Share and Per Right Consideration ................ The total value of Omnicom Common Stock to be paid by TBWA to Holdings and Advertising pursuant to the Acquisition Agreement will be dependent on when the Closing Date occurs (as described above and as more fully described under "The Acquisition Agreement--The Acquisition--Determination of Acquisition Price"). In order to make certain estimates relating to the consideration to be paid to the Holdings Stockholders and the Rightsholders which are included in this Prospectus/Information Statement, it has been assumed that the Closing Date will occur on August 15, 1995 and the Market Value of the Omnicom Common Stock will be $563/8. Based on an estimated total acquisition price of $25,366,749, after deposits are made on behalf of the Holdings Stockholders and Rightsholders into the General Escrow Fund, the Special Escrow Fund, the Liquidating Trust and the Liquidating Trust Escrow Fund (as applicable), each holder of Class A Common Stock, Class B Common Stock, EPUs and EARs will be entitled to receive in a liquidating distribution, per share of Holdings Common Stock or per EPU or EAR, shares of Omnicom Common Stock with a value (determined in accordance with the terms of the Acquisition Agreement) equal to $________. If none of such Omnicom Common Stock were used to fund such escrows and such trust, the value of the per share or per unit distribution would be $________. Since the amounts held in such escrows and such trust are subject to claims in respect of contingent liabilities, there can be no assurances that amounts held therein will in fact be distributed to Holdings Stockholders and Rightholders. See "The Plan of Liquidation--Liquidating Distribution to Holdings Stockholders" and "--Liquidating Distribution to Rightsholders". - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- Escrow Agreement and Indemnification Obligations .. The obligation of Holdings to indemnify Omnicom and TBWA against losses and damages may arise in one of two ways: pursuant to the general indemnification obligations under the Acquisition Agreement, or as a result of inaccurate or misleading information supplied by Holdings for use in this Prospectus/Information Statement. The indemnification obligations of Holdings under the Acquisition Agreement will be limited to and satisfied solely from, the General Escrow Fund and the Special Escrow Fund (individually sometimes referred to as an "Escrow Fund" and collectively as the "Escrow Funds") under the Escrow Agreement (such that neither Omnicom nor TBWA nor any of their affiliates will have any recourse for the payment of any losses or other damages of any kind against Holdings or Advertising or their respective affiliates or past, present or future directors, officers or employees or the Holdings Stockholders or Rightsholders, nor shall any of such persons be personally liable for any such losses or damages). The General Escrow Fund will be separated into two sub-accounts: the "Stockholders General Escrow Fund" and the "Rightsholders General Escrow Fund". Indemnification obligations to be satisfied out of the General Escrow Fund will terminate on the earlier of the first independent audit report, if any, of TBWA and the Businesses following the Closing Date or one year from the Closing Date (except that claims asserted in writing on or prior to such date will survive until they are decided and are final and binding on the parties). The Special Escrow Fund will also be separated into two sub-accounts: the "Stockholders Special Escrow Fund" and the "Rightsholders Special Escrow Fund". Indemnification obligations to be satisfied out of the Special Escrow Fund will terminate no later than the second anniversary of the Closing under the Acquisition Agreement (except that claims asserted in writing on or prior to such date will survive until they are decided and are final and binding on the parties). Following the termination of the Escrow Agreement, shares then remaining on deposit in the Stockholders General and Special Escrow Funds and the Rightsholders General and Special Escrow Funds, respectively, will be distributed to the Liquidating Trust and the Liquidating Trust Escrow Fund in each case to satisfy contingent liabilities of Holdings in accordance with the Liquidating Trust Agreement and the Liquidating Trust Escrow Agreement, respectively. Each sub-account of an Escrow Fund will satisfy its pro rata share of the applicable category of losses based on the number of shares of Omnicom Common Stock then on deposit in such account. For purposes of satisfying any claims, each share of Omnicom Common Stock deposited in any Escrow Fund will be valued at the Market Value, regardless of actual fluctuations in the market value of the Omnicom Common Stock after the Closing Date. The indemnification obligations of Holdings which may arise to the extent it furnishes inaccurate or incomplete information for inclusion in the Prospectus/Information Statement are not limited to amounts on deposit in the Escrow Funds nor to the limited periods of survival. - -------------------------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- Deposit and Pledge Agreement .................... The applicable shares of Omnicom Common Stock will be deposited into the Escrow Funds on the Distribution Date. Prior to such time, the applicable shares of Omnicom Common Stock will be delivered by Holdings and Advertising to The Chase Manhattan Bank, N.A., as deposit agent (the "Deposit Agent"), pursuant to the terms of a deposit and pledge agreement among Omnicom, TBWA, Holdings, Advertising and the Deposit Agent (the "Deposit and Pledge Agreement"), to be held as security for the fulfillment of the obligation of Holdings and Advertising to deliver the said shares into such Escrow Funds. Arrangement with Respect to Holdings Preferred Stock ..... On or about July 1, 1995, but no later than July 10, 1995, the Trustee of the Chiat/Day Profit Sharing and 401(k) Plan (the "Profit Sharing Plan"), the sole record owner of the preferred stock, cumulative, $.01 par value per share, of Holdings (the "Holdings Preferred Stock"), pursuant to an Agreement dated as of May 9, 1995 between Holdings and the Trustee of the Profit Sharing Plan (the "Profit Sharing Plan Purchase Agreement"), will sell to Holdings for a cash payment of $14,081,773.93 all the shares of Holdings Preferred Stock it owns, which shares shall then be retired by Holdings. Holdings shall pay for such shares by obtaining a loan which will be guaranteed by Omnicom or one of its affiliates. Other Terms and Conditions of the Acquisition Agreement Financial Actions ............ Between the date of the Acquisition Agreement and the Closing Date, certain financial arrangements are required to occur: (i) TBWA shall lend Holdings $55,000,000 and lend Advertising $1,000,000 on reasonable commercial terms and pursuant to financing documents reasonably acceptable to the parties thereto and in substantially the form of the Amended and Restated Credit Agreement between Holdings and Omnicom, among others, more fully described below, and the documents ancillary thereto; (ii) Holdings shall make a capital contribution of not less than $55,000,000 to Advertising; and (iii) Advertising shall repay in full all outstanding principal, together with accrued interest, of its 8.17% Junior Subordinated Installment Notes, its 13.25% Junior Subordinated Notes, its 13.25% Senior Subordinated Notes, and the notes issued under the Amended and Restated Credit Agreement (as defined below). Conditions to the Acquisition .................. The obligations of Omnicom, TBWA, Holdings and Advertising to consummate the Acquisition are subject to the satisfaction of certain mutual conditions, including, without limitation: obtaining the requisite approval of the Holdings Stockholders; the absence of any pending litigation, proceeding, investigation or claim by governmental authorities seeking to restrain or invalidate the consummation of the Acquisition; the Registration Statement having been declared effective by the SEC and not subject to a stop order or threatened stop order and the Omnicom Common Stock being registered thereunder having been approved for listing on the New York Stock Exchange. - -------------------------------------------------------------------------------- 12 - -------------------------------------------------------------------------------- The obligations of Omnicom and TBWA to consummate the Acquisition are also subject to the satisfaction of certain additional conditions including, without limitation: the SEC not having objected to Omnicom's treatment of the acquisition of the Businesses as a pooling-of-interests for accounting purposes; Advertising continuing to be the advertising agency of record for certain key clients, or, with respect to some of these clients, Advertising having replaced a loss of any such client with an account of similar size (measured by revenues); the receipt by Holdings of letters from Rightsholders who own in the aggregate at least 83% of the outstanding EARs and EPUs on the Closing Date, which group must include all Rightsholders who are also Holdings Stockholders, to the effect that they will not raise any objection to the payment of their outstanding awards being made in shares of Omnicom Stock and their corresponding participation in the indemnification obligations of Holdings (each, a "Consent Letter"); the execution of employment agreements with TBWA or one of its affiliates by each of Robert Kuperman, Thomas Patty, Adelaide Horton, Ira Matathia, Steven Hancock and Robert Wolf, and the execution of non-competition agreements by each of such individuals; there not having been a material and adverse change in the Businesses (which shall include TBWA not having received reasonable assurances and financial data that (a) if the Closing is on or prior to August 31, 1995, EBIT for the nine months ended July 31, 1995 is at least $7,500,000 and EBIT for the 1995 Fiscal Year is reasonably expected to exceed $13,500,000; and (b) if the Closing is on or after November 1, 1995, EBIT for the 1995 Fiscal Year is at least $13,500,000). The obligations of Holdings and Advertising to effect the Acquisition are also subject to the satisfaction of certain additional conditions including, without limitation: that the Annualized Revenues of Holdings and its subsidiaries for the 1995 Fiscal Year, shall not be greater than $100,000,000 and EBIT of Holdings and its subsidiaries for the 1995 Fiscal Year is not reasonably expected to exceed $17,200,000; TBWA or one of its affiliates having entered into each of the employment agreements described above; and TBWA having assumed the employment agreement between Holdings and Leland Clow and the employment and consulting agreement between Holdings and Jay Chiat (and TBWA having validly assigned Mr. Chiat's contract to Omnicom). See "The Acquisition Agreement--Other Terms and Conditions of the Acquisition Agreement", "The Acquisition Agreement--The Acquisition --Renegotiation of Acquisition Price" and "The Transactions--Interests of Certain Persons in the Transactions-Employment and Consulting Agreements; Non-Competition Agreements". Termination of the Acquisition Agreement ........ The Acquisition Agreement may be terminated under certain circumstances, notwithstanding approval of the Acquisition by the Holdings Stockholders, (i) by mutual consent of the Boards of Directors of Omnicom, TBWA, Holdings and Advertising or (ii) by either Omnicom and TBWA or by Holdings and Advertising (a) if there has been a breach of any representation, warranty or covenant by the other party and such - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- breach is not cured within 30 days after notice of such breach, unless such breach does not materially adversely affect the business or assets of the breaching party or the ability of any or all parties, to consummate the transactions contemplated by the Acquisition Agreement, (b) if a final, nonappealable order or judgment is issued enjoining the transactions contemplated by the Acquisition Agreement, or (c) if the Acquisition is not consummated by December 31, 1995 or at any time after October 31, 1995 if the conditions to such parties' obligation to close shall have become incapable of being satisfied by December 31, 1995. See "The Acquisition Agreement--Other Terms and Conditions of the Acquisition Agreement". Operation of the Businesses ................... After the Closing under the Acquisition Agreement After the Closing under the Acquisition Agreement, the Businesses will be combined with the TBWA International network of companies to form a combined full service operating network operating as one integrated unit. The integrated unit will operate under the name "TBWA Chiat/Day" in North America. See "The Transactions--Interests of Certain Persons in the Transactions." The Amendment Change of Holdings' Corporate Name ............... The Holdings Certificate sets forth Holdings' corporate name as "Chiat/Day Holdings Inc." Following the Closing under the Acquisition Agreement, TBWA will own all rights of Holdings in and to the "Chiat/Day" name, and Holdings has agreed that immediately following the Closing thereunder it would change its corporate name to a name not including the "Chiat/Day" designation or any variation thereof. Under the proposed amendment, Holdings name will be changed to "CDH Corporation". See "Proposed Amendment of the Holdings Certificate." The Liquidation Dissolution .................. Following the Closing under the Acquisition Agreement, Holdings will be dissolved in accordance with the procedures prescribed under the Delaware General Corporation Law (the "DGCL"). Upon dissolution, Holdings will establish the Liquidating Trust, the trustees of which will have the authority to wind up Holdings' affairs. Establishment and Operation of Liquidating Trust ........ The Liquidating Trust will hold all of the assets of Holdings remaining after the initial distributions of Omnicom Common Stock described above under "--The Acquisition". Pursuant to the terms of the Liquidating Trust Agreement governing the operation of the Liquidating Trust, each share of Holdings Common Stock, regardless of class, shall have an equal interest in the Liquidating Trust. The Liquidating Trust will be funded, on behalf of the Holdings Stockholders, with five percent of the Omnicom Common Stock paid by TBWA to Holdings as part of the acquisition price under the Acquisition Agreement (after deducting the Contributed Stock). The Liquidating Trust may also receive from time to time, on behalf of the - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- Holdings Stockholders, distributions of Omnicom Common Stock pursuant to the terms of the Escrow Agreement. The Liquidating Trustees will distribute the assets in the Liquidating Trust to the Holdings Stockholders, pro rata in accordance with their interests, as expeditiously as possible, provided that adequate reserves shall be taken for Trust Liabilities (as defined below), expenses of the Liquidating Trustees (which shall include ordinary and customary expenses) and to make distributions to any missing beneficiaries. Payments made from the Liquidating Trust to satisfy such liabilities will be reimbursed in part from the Liquidating Trust Escrow Fund. See "The Plan of Liquidation--General" and "--Operation of the Liquidating Trust". The Liquidating Trust Escrow Fund ............ The Liquidating Trust Escrow Fund will be funded, on behalf of the Rightsholders, with five percent of the Omnicom Common Stock paid by TBWA to Advertising as part of the acquisition price under the Acquisition Agreement (including five percent of the Contributed Stock). The Liquidating Trust Escrow Fund may also receive from time to time, on behalf of the Rightsholders, distributions of Omnicom Common Stock pursuant to the terms of the Escrow Agreement. The Liquidating Trust Escrow Fund will be used to satisfy the Rightsholders' share of Trust Liabilities. Whenever the Liquidating Trustee makes a distribution of trust property to the Holdings Stockholders, a proportionate amount of the Liquidating Trust Escrow Fund will be distributed to the Rightsholders, pro rata in accordance with their interests. See "The Plan of Liquidation--The Liquidating Trust Escrow". Other Considerations Recommendation of the Board of Directors of Holdings .... The Board of Directors of Holdings, by unanimous vote, approved each of the matters constituting part of the Transactions, and recommends the approval of each of such matters by the Holdings Stockholders. Interests of Certain Persons in the Transactions ......... As of [May 4, 1995,] directors and executive officers of Holdings, and their affiliates, owned of record an aggregate of [75.82%] of the outstanding shares of Holdings Common Stock. Accordingly, the Transactions can be approved without the affirmative vote of any other Holdings Stockholders. Each of such directors and executive officers has expressed an intention to vote the shares of Holdings Common Stock owned by him or her in favor of the Transactions. As of [May 4, 1995,] directors and executive officers of Holdings, and their affiliates, owned of record an aggregate of [97.3%] of the outstanding awards under the EAR and EPU Plans. Each of such directors and executive officers have executed and delivered to Holdings his or her Consent Letter as described above. - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- For a description of certain interests of certain directors and executive officers of Holdings in the Transactions that are in addition to the interests of Holdings Stockholders generally, see "The Transactions--Interests of Certain Persons in the Transactions". Accounting Treatment ........ The Acquisition will be accounted for by Omnicom as a pooling-of-interests. See "The Transactions--Accounting Treatment". Certain Federal Income Tax Consequences ............ The Acquisition will be a taxable transaction to Holdings and Advertising; and the distributions pursuant to the Plan of Liquidation will be a taxable transaction to Holdings Stockholders and Rightsholders. Holders of Class A Common Stock and of Class B Common Stock issued in July, 1989 pursuant to a certain stock purchase agreement between Holdings and certain management and other investors ("Mojo B Common Stock") will recognize gain or loss as a result of the Transactions equal to the difference between the sum of (i) the fair market value of all Omnicom Common Stock received (whether distributed or placed in the Liquidating Trust or the Stockholders General or Special Escrow Funds) plus (ii) the cash received in respect of any fractional shares, and their adjusted basis in the Class A Common Stock or Mojo B Common Stock. Holders of Class B Common Stock other than the Mojo B Common Stock will recognize compensation income equal to the excess of the sum of (a) the fair market value of the Omnicom Common Stock received (whether distributed or placed in the Liquidating Trust or the Stockholders General or Special Escrow Funds) plus (b) the cash received in respect of any fractional shares, over the sum of (x) the amount paid for their Class B Common Stock, and (y) the amount, if any, of ordinary income which they have previously recognized in respect of their Class B Common Stock. Each Holdings Stockholder's share of the income (including dividends on the Omnicom Common Stock), gain or loss realized by the Liquidating Trust or the Stockholders General or Special Escrow Funds will be recognized by such Holdings Stockholder (whether or not distributed) in computing his or her federal income tax. Rightsholders will recognize compensation income equal to the fair market value of the Omnicom Common Stock received (whether distributed or placed in the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds) plus the cash received in respect of any fractional shares. Each Rightsholder's share of the income (including dividends on the Omnicom Common Stock), gain or loss realized by the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds will be recognized by such Rightsholder (whether or not distributed) in computing his or her federal income tax. EACH HOLDINGS STOCKHOLDER AND RIGHTSHOLDER SHOULD CAREFULLY REVIEW THE MATTERS DISCUSSED UNDER THE CAPTION "FEDERAL INCOME TAX CONSEQUENCES OF THE SALES OF ASSETS AND DISSOLUTION AND LIQUIDATION" AND SHOULD CONSULT - -------------------------------------------------------------------------------- 16 - -------------------------------------------------------------------------------- HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE TRANSACTIONS TO HIM OR HER. Regulatory Approvals ......... Omnicom and Holdings each filed notification and report forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act") with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Justice Department (the "Antitrust Division") on _________, 1995, and each was advised that there was early termination of the applicable waiting period on _____________, 1995. See "The Transactions--Regulatory Approvals". Resales of Omnicom Common Stock; Resale Restrictions ... This Prospectus also covers resales of Omnicom Common Stock by the Liquidating Trustees and the Liquidating Trust Escrow Agent upon deposit of Omnicom Common Stock into the Liquidating Trust and Liquidating Trust Escrow Fund, respectively. All such resales shall be made on the New York Stock Exchange at then-prevailing market prices or in negotiated transactions. Such resales are expected to be completed within 60 days after the Distribution Date. See "The Transactions--Resales of Omnicom Common Stock". Resales of Omnicom Common Stock by Holdings Stockholders or Rightsholders who are deemed to be "affiliates" (as such term is understood under the Securities Act) of Holdings prior to the Acquisition may be subject to certain restrictions. See "The Transactions-- Resale Restrictions". No Dissenters' Rights ....... Holders of Holdings Common Stock are not entitled to dissenters' rights under the DGCL in connection with the Transactions. See "The Transactions--No Dissenters' Rights". - -------------------------------------------------------------------------------- 17 COMPARATIVE PER SHARE DATA Set forth below are unaudited income from continuing operations, cash dividends declared and book value per common share data of Omnicom and Holdings on both historical and pro forma combined bases. Pro forma combined income from continuing operations per share is calculated under the pooling-of-interests accounting method and assumes that the Acquisition had occurred immediately prior to the period being reported upon. Since Omnicom is on a calendar year for financial reporting purposes, while Holdings' fiscal year ends on October 31, the combined results for the three months ended March 31, 1995 and for each year in the three years ended December 31, 1994, respectively, reflect Omnicom's results for those periods and Holdings' results for the three months ended January 31, 1995, and for each year in the three years ended October 31, 1994. Pro forma combined cash dividends declared per share reflects Omnicom cash dividends declared in the periods indicated. The per share equivalent pro forma combined data has been calculated based upon the material assumptions that the aggregate acquisition price will be $25,366,749, and the Market Value of the Omnicom Common Stock will be $563/8. The information set forth below should be read in conjunction with the respective audited and unaudited financial statements of Omnicom incorporated by reference in this Prospectus/Information Statement and of Holdings included in this Prospectus/Information Statement.
As of March 31 , 1995 As of December 31, 1994 ---------------------- ----------------------- Book Value per Share: Omnicom ......................... $15.86 $14.96 Holdings ........................ $(1.62) $(1.60) Pro forma ....................... $13.29 $12.45 Three Months ended Year Ended December 31, March 31, 1995 ---------------------------------- ------------------- 1992 1993 1994 ----- ----- ----- Cash Dividends Declared per Share: Omnicom ......................... $ 0.31 $1.21 $1.24 $1.24 Holdings ........................ -- -- -- -- Pro forma ....................... $ 0.31 $1.21 $1.24 $1.24 Net Income per Share: Omnicom: Primary ....................... $ 0.68 $2.31 $2.79 $3.15 Fully Diluted ................. $ 0.68 $2.20 $2.62 $3.07 Holdings: Primary ....................... $(0.03) $0.03 $(0.39) $0.11 Primary (including EPUs and EARs) .............. $(0.03) $0.02 $(0.39) $0.05 Pro forma: Primary ........................ $ 0.65 $2.35 $2.14 $3.23 Fully Diluted .................. $ 0.65 $2.24 $2.09 $3.14
18 MARKET PRICE DATA There is no public market for Holdings Common Stock. Holdings has not declared or paid any cash dividends on any shares of Holdings Common Stock in the current fiscal year, or in any of the periods presented in "Selected Financial Data of Holdings". In the event that the Acquisition is not consummated, it is not expected that any cash dividends would be paid on any shares of Holdings Common Stock in the foreseeable future. Omnicom Common Stock is listed on the NYSE. The table below sets forth, for the calendar quarters indicated, the reported high and low sale prices of Omnicom Common Stock as reported on the NYSE Composite Tape, in each case based on published financial sources, and the dividends paid per share on the Omnicom Common Stock for such periods. Omnicom Common Stock ------------------------------------- High Low Dividends ------ ------ --------- 1993 First Quarter ...................... 47 1/2 38 3/8 .310 Second Quarter ..................... 47 1/4 38 1/4 .310 Third Quarter ...................... 46 1/4 37 .310 Fourth Quarter ..................... 46 1/2 41 1/2 .310 1994 First Quarter ...................... 49 7/8 43 3/4 .310 Second Quarter ..................... 49 1/2 44 7/8 .310 Third Quarter ...................... 51 1/2 48 .310 Fourth Quarter ..................... 53 3/4 49 .310 1995 First Quarter ...................... 56 7/8 50 .310 Second Quarter (through _____, 1995) On May 10, 1995, the last full trading day prior to the execution and delivery of the Acquisition Agreement, the closing price of Omnicom Common Stock on the NYSE Composite Tape was $56 3/8 per share. On [ ], 1995, the most recent practicable date prior to the printing of this Prospectus/Information Statement, the closing price of Omnicom Common Stock on the NYSE Composite Tape was $[ ] per share. 19 THE SPECIAL MEETING Date, Time and Place of Special Meeting This Prospectus/Information Statement is being furnished to the holders of Class A Common Stock and the holders of Class B Common Stock in connection with the Special Meeting of Holdings Stockholders to be held on , 1995, at the offices of Holdings, 180 Maiden Lane, New York, New York 10038, at ____ A.M., local time, and at any adjournment or postponement thereof. This Prospectus/Information Statement is first being mailed to the Holdings Stockholders on or about , 1995. Business to Be Transacted at the Special Meeting At the Special Meeting, Holdings Stockholders will consider and vote upon the following matters (collectively, the "Holdings Vote Matters"): (i) a proposal to approve the sale by Holdings and Advertising of their assets and businesses pursuant to (i) the Acquisition Agreement and (ii) the Advertising Stock Sale Agreement; (ii) a proposal to amend the Holdings Certificate effective as of the Closing under the Acquisition Agreement to change its corporate name to CDH Corporation; (iii) the approval and adoption of the Plan of Liquidation, including the dissolution of Holdings, the creation of the Liquidating Trust pursuant to the Liquidating Trust Agreement and the appointment of the Liquidating Trustees; and (iv) such other proposals as may properly be brought before this meeting or any adjournment thereof. None of the Holdings Vote Matters shall become effective unless all of the proposals are adopted by the requisite vote of the Holdings Stockholders. Each of the directors and executive officers of Holdings has expressed an intention to vote in favor of the Transactions. Record Date, Voting Rights Only stockholders of record of Class A Common Stock and Class B Common Stock at the close of business on _________, 1995 will be entitled to vote at the Special Meeting. On that date, there were issued and outstanding ________ shares of Class A Common Stock and ______ shares of Class B Common Stock. Each share of each class of Holdings Common Stock is entitled to one vote per share on the Holdings Vote Matters at the Special Meeting or any adjournment or postponement thereof. Voting Requirements The presence of the holders of a majority of the voting power of all shares of Class A Common Stock and Class B Common Stock entitled to vote outstanding on the record date is necessary to constitute a quorum for the transaction of business at the Special Meeting. Under the DGCL and the Holdings Certificate, the affirmative vote of the holders of the majority of the outstanding shares of Class A Common Stock and Class B Common Stock voting together as a class, will be required to approve the Holdings Vote Matters. Abstentions have the effect of negative votes. Approval Under Holdings Certificate Under the Holdings Certificate, the approval of a majority of the holders of Class A Common Stock, excluding certain shares that were originally issued to Morgan Capital Corporation, is required for the sale of the assets pursuant to the Acquisition Agreement as well as certain transactions provided for herein with affiliated parties. See "The Transactions--Interests of Certain Persons in the Transaction". The holders of a majority of such Class A Common Stock have consented to such matters as provided in the Holdings Certificate and in the manner provided for in Holdings' by-laws and Section 228 of the DGCL. 20 Affiliate Ownership As of the Record Date, directors, officers and affiliates of Holdings as a group owned approximately __________ shares of Class A Common Stock and _________ shares of Class B Common Stock, representing approximately _____% of the aggregate outstanding shares of Holdings Common Stock. Accordingly the Transactions can be approved by the affirmative vote of such persons even if all other Holdings Stockholders vote against the proposals. These persons have expressed an intention to vote in favor of the Transactions. THE TRANSACTIONS (The information contained in this Registration Statement of which this Prospectus/Information Statement forms a part is qualified in its entirety by reference to the complete texts of the Acquisition Agreement, the Advertising Stock Sale Agreement, the Escrow Agreement, the Plan of Liquidation, the Liquidating Trust Agreement and the Liquidating Trust Escrow Agreement, which are filed as Exhibits thereto and are incorporated herein by reference.) Background of and Holdings' Reasons for the Transactions; Recommendation of the Holdings Board of Directors Overview After the Closing, the Businesses will be combined with the TBWA International network of companies to form a combined advertising network operating as one integrated unit. In furtherance of this, the members of the TBWA International group operating under the TBWA name in North America will change their corporate names to include the designation "TBWA Chiat/Day". See "Interests of Certain Persons in the Transactions" for a description of the positions within this integrated network that will be held by certain executive officers of Holdings and its subsidiaries. The terms of the Acquisition, including the terms of the Escrow Agreement, are the result of arm's-length negotiation between representatives of Omnicom and TBWA and representatives of Holdings and Advertising. Background of the Transactions In early 1993, Holdings commenced exploring strategic alternatives in order to expand internationally and reduce the debt on its balance sheet. These alternatives included possible strategic combinations with other advertising agencies and groups, including Omnicom. Preliminary discussions were held with parties other than Omnicom but such discussions did not lead to serious negotiations. Holdings and Omnicom began informally discussing possible combinations in 1993 shortly after Omnicom acquired TBWA, but at such time these discussions did not advance to substantive negotiations and ceased. Since 1993, however, TBWA and Holdings frequently consulted with respect to their joint representation of Nissan. In late 1994 and January 1995, Holdings was engaged in discussions with potential lenders regarding the refinancing of its bank credit facility (the "Bank Credit Agreement") which was to mature in May 1995 and $11 million of Holding's 13.25% Senior Subordinated Notes which mature[d and were paid in full] on August 1, 1995. The terms proposed by prospective institutional lenders included substantial penalties for early repayment and the equivalent of an equity participation in Holdings in the event that it were sold while such financing was outstanding. During the period Holdings was considering whether to accept such terms of refinancing, discussions with Omnicom were renewed and began to assume the characteristics of negotiations in January of 1995. Holdings realized that to proceed with the proposed refinancing would create significant obstacles to consummating any acquisition transaction. Instead, Omnicom agreed to assume the liabilities of the banks under the Bank Credit Agreement and extended the maturity until December 10, 1995 (as assumed and amended, the "Amended and Restated Credit Agreement"). The negotiations with Omnicom concerning a possible combination with TBWA and Holdings continued through January and on February 1, the parties reached preliminary agreement in principle and a public announcement was made. The negotiations continued through March and April 1995 and culminated on May 11, 1995 in the execution of the definitive Acquisition Agreement and related documents following approval by the Board of Directors of each company. 21 Holding's Reasons for the Transactions The decision of the Board of Directors of Holdings to enter into the Acquisition was largely influenced by the Board's assessment of the perceived benefits of a strategic combination with TBWA in the United States and Europe as well as the limited growth opportunities of an independent Holdings in light of its highly leveraged balance sheet. The Board also took into consideration that the shareholders of Holdings, including the Profit Sharing Plan, had been holding for a significant period of time an illiquid investment in Holdings. The Board of Directors believes that the Acquisition offers a fair price for the assets of Holdings and Advertising, provides the Holdings Stockholders a liquid investment and that the combination with TBWA contemplated by the Acquisition provides an excellent strategic fit and the increased liquidity needed to capitalize on growth opportunities for the combined organization. The Holdings Board of Directors made its determination without the assistance of a financial advisor and without a "fairness opinion". Instead, the Holdings Board of Directors has relied upon its own experience and the knowledge of its management in assessing the advantages and disadvantages of the Transactions. Recommendation of the Holdings Board of Directors For the reasons set forth above, the Holdings Board of Directors believes that the Transactions are fair to, and in the best interests of, Holdings and the Holdings Stockholders and recommends that the Holdings Stockholders vote FOR the approval of the sale of the assets and businesses of Holdings and Advertising pursuant to the Acquisition Agreement and the Advertising Stock Sale Agreement, FOR the approval of the amendment of the Holdings Certificate, and FOR the approval of the Plan of Liquidation. Omnicom's Reasons for the Acquisition Omnicom's and TBWA's respective Board of Directors each believes that the Acquisition represents an opportunity for TBWA to strengthen its position as a major global advertising agency network without diminishing its overall financial strength. TBWA's international strength is concentrated outside of the United States, while Holdings and Advertising have a strong North American presence; the Acquisition is therefore a natural geographic fit which will expand TBWA's worldwide capabilities. The fit is also strategic from a client servicing perspective. Advertising is the advertising agency of record in the United States and Canada for the Nissan and Infiniti divisions of the Nissan Motor Corp.; while TBWA handles the Nissan business on a Pan European basis as well as the local business in 9 European countries. The Acquisition represents an opportunity to strengthen the Nissan relationship by being in a position to service this client throughout the world. The Boards of Directors of Omnicom and TBWA believe that the corporate cultures of the two networks will combine well, as both networks have historically placed their major emphasis on creative output. The Boards of Directors of TBWA and Omnicom also considered the potential synergies which would result in lower costs as a result of the combining of the operations. Omnicom has not retained an outside party to evaluate the proposed Acquisition but has instead relied upon the knowledge of its management in considering the financial aspects of the Acquisition. In reaching its conclusion, the Board of Directors of Omnicom and TBWA considered, among other things: (i) information concerning the financial performance, condition, business operations and prospects of each of Holdings and Advertising; and (ii) the proposed terms and structure of the Acquisition. It is anticipated that the Acquisition will be non-dilutive to Omnicom's results of operations. Accordingly, the Board of Directors of Omnicom has unanimously approved the Acquisition Agreement and the transactions contemplated thereby. 22 Interests of Certain Persons in the Transaction (The following describes certain interests of the directors and executive officers of holdings in the transactions that are in addition to the interests of Holdings Stockholders generally.) Employment and Consulting Agreements; Non-Competition Agreements Pursuant to the Acquisition Agreement, the employment and consulting agreement dated May ___, 1995 between Jay Chiat and Holdings will be assumed by TBWA and then assigned to Omnicom. Upon the completion of the Acquisition, Mr. Chiat will serve as a consultant under the employment and consulting agreement and will serve as such until May __, 2002, and the agreement automatically extends until the earlier of May __, 2005 or such earlier date on which Holdings no longer maintains certain key client relationships. Mr. Chiat's compensation in Omnicom's opinion is reasonable for the services he is to render and in any event is significantly less than he was earning immediately prior to the Acquisition. Mr. Chiat will not be provided with any employee benefits. In addition, pursuant to the terms of the Acquisition Agreement, Mr. Chiat will enter into a non-competition agreement with Omnicom which will have a term of 10 years commencing on the Closing Date of the Acquisition. No additional consideration is being paid with respect to such non-competition agreement. Pursuant to the Acquisition Agreement, the employment agreement dated May __, 1995 between Leland Clow and Holdings will be assumed by TBWA. Such employment agreement extends to December 31, 1998 and provides for annual salary compensation at the same levels as the predecessor employment agreement. Following the consummation of the Acquisition, Mr. Clow's salary level will be subject to increases in connection with the salary review procedures of TBWA and Mr. Clow will participate in TBWA bonus plans. Benefits substantially equivalent to those Mr. Clow was receiving under his predecessor employment agreement will also be provided. In addition, pursuant to the terms of the Acquisition Agreement, Mr. Clow will enter into a non-competition agreement with Omnicom which will have a term commencing on the Closing Date of the Acquisition and ending on the later of December 31, 1998 or two years after the termination of Mr. Clow's employment. No additional consideration is being paid with respect to such non-competition agreement. Pursuant to the Acquisition Agreement, TBWA or one of its affiliates will enter into employment agreements with Steve Hancock, the President/CEO of the Toronto office of Advertising, and each of the following key executive officers who are also directors of Holdings: Adelaide Horton; Robert Kuperman; Ira Matathia; and Tom Patty. It is anticipated that the employment agreements will have a term commencing on the Closing Date of the Acquisition and ending on December 31, 1998 and provide for annual salary compensation and fringe benefits substantially equivalent to those such persons were receiving immediately prior to the Acquisition. Such persons will also be eligible to participate in TBWA bonus plans. In addition, the Acquisition Agreement provides that Robert Wolf, also a director of Holdings, will enter into an employment agreement with Omnicom with a term ending on December 31, 1996. Mr. Wolf's employment agreement provides for the same annual salary he was receiving immediately prior to the Acquisition and benefits customarily provided by Omnicom to its employees. Pursuant to the terms of the Acquisition Agreement, the executives and directors listed in the first sentence of the immediately preceding paragraph and Mr. Wolf will enter into non-competition agreements with Omnicom which will have a term commencing on the closing date of the Acquisition and ending on the later of December 31, 1998 or two years after termination of the applicable party's employment. There is no additional consideration being paid in connection with these non-competition agreements. In connection with the Transactions, a 1987 deferred compensation arrangement between Advertising and Robert Kuperman will be canceled by the payment of the present value of the vested benefits thereunder. The liability for such vested benefits has already been recorded on the books of Advertising. The terms of the Acquisition Agreement permit Holdings and Advertising to pay to their directors and employees bonuses accrued for fiscal year 1994, and permit Advertising to accrue for bonuses for the 1995 Fiscal Year an amount up to 10% of profit from normal advertising operations before all federal, state, local and foreign income taxes and adjusted to exclude interest income and interest expense, with such accrual to be reviewed and adjusted upward or downward after completion of the 1995 Fiscal Year consistent with past practice (provided that for the period from the Closing Date through October 31, 1995, the accrual shall be based on the financial results of the Businesses as conducted by TBWA). Holdings has established a bonus pool of approximately 23 $2,500,000 with respect to fiscal year 1994, 40% of which will be allocated to its senior officers, all of whom are directors. Bonuses with respect to Fiscal Year 1995 have not yet been determined, but it is expected that all or a substantial portion of such bonuses will be paid to the same individuals. In addition, if such profits exceed budgeted amounts for the 1995 Fiscal Year, additional bonus payments will be made. Pursuant to the Acquisition Agreement, all other employees of Holdings or Advertising (many of whom are stockholders of Holdings) will be offered employment by TBWA or its affiliates on substantially equivalent terms as their employment prior to the Acquisition. Other Agreements Prior to the Closing Date, Holdings will redeem its 8.17% Junior Subordinated Installment Notes due 2005 and its 13.25% Junior Subordinated Notes due 2005 (collectively, the "Junior Notes") at their face value plus accrued interest to the date of redemption. Jay Chiat, a director of Holdings, beneficially owns $[3,000,000] in principal amount of the Junior Notes and will receive $________ as a result of this redemption. Pursuant to the Acquisition Agreement, certain works of art owned by Mr. Chiat will be leased to TBWA on the same basis as the art is currently leased for a nominal sum commencing on the consummation of the Acquisition. In connection with such lease, TBWA will pay for the costs of insuring such works of art against theft, loss and damage. The lease will be terminable upon one month's notice by either party thereto. Following the Distribution Date, Ms. Horton [ADD ASSIGNEES, IF ANY] will purchase from Holdings for $250,000 in cash, all of the issued and outstanding common stock of Advertising pursuant to the Advertising Stock Sale Agreement. At the time of such purchase, the only asset which Advertising will own will be its rights, through its ownership of all of the capital stock of Chiat/Day Direct Marketing, Inc., under the litigation entitled Chiat/Day Direct Marketing, Inc. f/k/a/ Perkins/Butler Direct Marketing Inc. v. National Car Rental Systems, Inc., No. 93 civ. 2717 (S.D.N.Y.)(the "National Car Suit"). Pursuant to the Advertising Stock Sale Agreement, Holdings has agreed to indemnify Ms. Horton and Advertising for any losses incurred in respect of liabilities of Advertising not assumed by TBWA under the Acquisition Agreement. To the extent that Holdings were unable to fully indemnify Ms. Horton and Advertising, any recovery from the National Car Suit received by Advertising would be at risk. The Board of Directors of Holdings believes that the sale of Advertising to Ms. Horton is on terms no less favorable to Holdings than would result from an arms-length negotiation conducted with unrelated parties. See "The Advertising Stock Sale Agreement". David C. Wiener and Company, P.C., of which David C. Wiener is a principal, will receive fees for services rendered to Holdings and Advertising in connection with the Acquisition in an aggregate amount estimated to be approximately $350,000. Mr. Wiener is a member of the Board of Directors of Holdings. Prior to the consummation of the Acquisition, pursuant to the Profit Sharing Plan Purchase Agreement the shares of Preferred Stock held in the Profit Sharing Plan are being acquired by Holdings for $14,081,773.93 in cash. All of the directors and senior executive officers of Holdings (together with approximately 600 other employees), other than Mr. Wiener, are participants in such plan. See also "Description of Holdings Capital Stock" for a description of the security ownership of management of Holdings. Accounting Treatment The Acquisition will be accounted for by Omnicom as a pooling-of-interests for financial reporting purposes in accordance with generally accepted accounting principles. Accordingly, upon consummation of the Acquisition, the assets and liabilities of Holdings and Advertising will be included in the consolidated balance sheet of Omnicom and its subsidiaries in the amounts which were included in the books of Holdings immediately before the Acquisition, subject to adjustments required to conform the accounting policies of Holdings to those utilized by Omnicom, and such other adjustments as may be necessary to comply with pooling-of-interests accounting rules and regulations. Regulatory Approvals Under the Hart-Scott-Rodino Act and the rules promulgated therewith by the FTC, the Acquisition may not be consummated until notifications have been given and certain information has been furnished to the FTC and the Antitrust Division and specified waiting period requirements have been satisfied. Omnicom and Holdings each filed notification and report forms under the Hart-Scott-Rodino Act with the FTC and the Antitrust Division on ____________, 1995. The required 24 waiting period under the Hart-Scott-Rodino Act was terminated early on _______________, 1995. At any time before or after consummation of the Acquisition, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Acquisition or seeking divestiture of assets of Omnicom. At any time before or after the Closing Date, and notwithstanding that the Hart-Scott-Rodino Act waiting period has expired, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the consummation of the Acquisition or seeking divestiture of assets of Omnicom. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. Based on information available to them, Omnicom and Holdings believe that the Acquisition can be effected in compliance with Federal and state antitrust laws. However, there can be no assurance that a challenge to the consummation of the Acquisition on antitrust grounds will not be made or that, if such a challenge were made, Omnicom and Holdings would prevail or would not be required to accept certain conditions, possibly including certain divestitures of assets of Omnicom, in order to consummate the Acquisition. Resales of Omnicom Common Stock This Prospectus also covers resales of Omnicom Common Stock by the Liquidating Trustees and the Liquidating Trust Escrow Agent upon deposit of Omnicom Common Stock into the Liquidating Trust and the Liquidating Trust Escrow Fund, respectively. All such resales shall be made on the New York Stock Exchange at then-prevailing market prices or in negotiated transactions. Such resales are expected to be completed within 60 days after the Distribution Date. See "The Plan of Liquidation". Resale Restrictions All shares of Omnicom Common Stock received by Holdings Stockholders and Rightsholders as a result of the Acquisition will be freely transferable, except that shares of Omnicom Common Stock received by persons who are deemed to be "affiliates" (as such term is understood under the Securities Act) of Holdings prior to the Acquisition ("Holdings Affiliates") shall be subject to certain restrictions, as more fully described below. Persons who may be deemed to be affiliates of Holdings or Omnicom generally include individuals or entities that control, are controlled by, or are under common control with, such party and may include certain officers and directors of such party as well as principal stockholders of such party. The Acquisition Agreement provides that Holdings will furnish Omnicom with a list identifying all persons who may be considered to be Holdings Affiliates, and gives Omnicom the right to review such list and require changes. Holdings is required to use its best efforts to cause each of the Holdings Affiliates to execute a written agreement to comply fully with the restrictions described below. Federal Securities Laws. Shares of Omnicom Common Stock received by Holdings Affiliates may be resold by such Holdings Affiliates only in transactions permitted by the resale provisions of Rule 145 promulgated under the Securities Act or as otherwise permitted under the Securities Act. Pooling-of-Interests Rules. In order to satisfy a condition of the pooling-of-interests rules as the accounting treatment to be accorded the Acquisition, Holdings Affiliates may not sell, assign, transfer, convey, encumber or dispose of, directly or indirectly, or otherwise reduce their risk relative to, any shares of Omnicom Common Stock until the publication by Omnicom of its financial results covering a period of at least thirty days of combined operations of Omnicom and the Businesses after the Closing Date (except that this restriction will lapse no later than October 30, 1995 as long as the Closing of the Acquisition has occurred on or prior to August 31, 1995). This prohibition precludes the use of "hedging" techniques during this period. Stock Exchange Listing It is a condition to the Acquisition that the shares of Omnicom Common Stock required to be issued in connection with the Acquisition be authorized for listing on the NYSE, subject to official notice of issuance. An application has been filed for listing such Omnicom Common Stock on the NYSE. No Dissenters' Rights Holders of Holdings Common Stock are not entitled to any rights of dissenting shareholders under Delaware law in connection with the Transactions. 25 THE ACQUISITION AGREEMENT (The following is a brief summary of the Acquisition Agreement and the related Escrow Agreement. Copies of the Acquisition Agreement and the Escrow Agreement are filed as Exhibits to the Registration Statement of which this Prospectus/Information Statement forms a part and are incorporated herein by reference. This summary is qualified in its entirety by reference to the Acquisition Agreement and the Escrow Agreement.) The Acquisition General Omnicom, TBWA, Holdings and Advertising entered into the Acquisition Agreement on May 11, 1995. It provides for TBWA to acquire the assets of Holdings and Advertising other than (a) their respective corporate seals and minute books, (b) the issued and outstanding capital stock of Advertising and Chiat/Day Direct Marketing, Inc. and any other subsidiary which is inactive, has no assets or is in the process of liquidation, (c) the rights of Holdings arising under the Advertising Stock Sale Agreement, other than the right to the cash acquisition price thereunder to the extent reflected in the books and records of Holdings, and (d) the rights of Advertising in and to the National Car Suit (the value of which will be obtained by TBWA through the right to receive the cash acquisition price receivable under the Advertising Stock Sale Agreement), in exchange for the payment of the acquisition price as more fully described below and the assumption by TBWA of liabilities of Holdings and Advertising relating to the Businesses (certain non-operating liabilities of Holdings and Advertising are not to be assumed by TBWA pursuant to the terms of the Acquisition Agreement). Determination of Acquisition Price Subject to the potential adjustment described below in "The Acquisition Agreement--The Acquisition--Renegotiation of Acquisition Price", the consideration payable by TBWA for the Businesses will be determined as follows: (a) TBWA will pay Holdings shares of Omnicom Common Stock having an aggregate Market Value of (x) if the Closing is held on or prior to October 31, 1995, (i) $11,180,563 plus (ii) an amount equal to $2,418 multiplied by the number of days in the period commencing on the Closing Date and ending on October 31, 1995, or (y) if the Closing Date is held after October 31, 1995 and on or prior to December 31, 1995, (iii) $11,930,880 plus (iv) an amount equal to $2,418 multiplied by the number of days in the period commencing on the Closing Date and ending on December 31, 1995. Of this Omnicom Common Stock, the Contributed Stock (being shares having such Market Value as may be necessary to insure the satisfaction of obligations of Holdings and Advertising to the Rightsholders) will be contributed to Advertising for the benefit of the Rightsholders. (b) TBWA will pay Advertising shares of Omnicom Common Stock having an aggregate Market Value of $14,000,000. The "Market Value" of the shares of Omnicom Common Stock will be determined by the average of the closing prices per share of Omnicom Common Stock reported on the New York Stock Exchange for the 20 consecutive trading days ending three business days immediately prior to the Closing Date. Omnicom has agreed that it will not, and will not permit TBWA or any of its other subsidiaries to, purchase any Omnicom Common Stock (whether pursuant to open-market purchases or otherwise) during the period during which the Market Value is calculated. The shares of Omnicom Common Stock received as acquisition price will be allocated on a pro rata basis to the Holdings Stockholders after allocating sufficient shares to satisfy Holdings' and Advertising's obligations under the EPU and EAR Plans. Accordingly, such shares of Omnicom Common Stock will be distributed to the Holdings Stockholders and the Rightsholders as described in "The Acquisition Agreement--The Acquisition --Payment of Obligations to Rightsholders" and "The Plan of Liquidation--Liquidating Distributions to Holdings Stockholders" and "--Liquidating Distributions to Rightsholders". 26 Renegotiation of Acquisition Price In the event that on the scheduled Closing Date the "Annualized Revenues" of Holdings and its subsidiaries exceeds $100,000,000, and the EBIT of Holdings for its 1995 Fiscal Year exceeds or is reasonably expected to exceed $17,200,000, then Omnicom, TBWA, Holdings and Advertising have agreed that each would negotiate in good faith whether or not there should be an upwards adjustment to the acquisition price. If agreement is reached to so increase the acquisition price, the Acquisition Agreement and related documents would be amended to the extent necessary to reflect this adjustment. If the parties do not agree on such an increase, Holdings would have the option to either terminate the Acquisition Agreement or proceed with the Closing at the original acquisition price. "Annualized Revenues" has been defined in the Acquisition Agreement to mean the commissions and fees of Holdings and its subsidiaries for the fiscal year commencing November 1, 1994 and ending October 31, 1995 (forecasted, to the extent necessary) from those clients that were such on October 31, 1994 and from new clients won since November 1, 1994, annualized as if those clients had been clients during the entire year. The calculation excludes commissions and fees earned from clients lost since November 1, 1994 or expected to be lost in the near future. Holdings does not currently anticipate, based on its existing clients and their specified budgets, that Annualized Revenues or EBIT will exceed the renegotiation thresholds. Closing Date The Acquisition Agreement provides that the Closing Date shall be determined by Omnicom by notice given to Holdings within five days after the date of the Special Meeting. The Closing Date chosen by Omnicom must not be later than thirty days after its giving of the notice; and each party is required to use its best efforts to close on or prior to August 31, 1995, except that if the Closing has not occurred by August 31, 1995, then each party is required to use its best efforts to close as soon as is practicable after October 31, 1995. Notwithstanding these requirements, the Closing Date will be delayed in the event of a dispute as to whether Annualized Revenues exceed $100,000,000 and/or EBIT exceeds $17,200,000, or during the pendency of any renegotiation of the acquisition price, pending final determination of such matters. Arrangements With Respect to Holdings Preferred Stock On or about July 1, 1995 but no later than July 10, 1995 (the "Preferred Stock Purchase Date"), the Trustee of the Profit Sharing Plan, the sole record owner of the Holdings Preferred Stock, will sell to Holdings for a cash payment of $14,081,773.93 (representing the aggregate liquidation preference of such Holdings Preferred Stock) all the shares of Holdings Preferred Stock it owns, pursuant to the terms of the Profit Sharing Plan Purchase Agreement, which shares will then be retired by Holdings. Certain financial arrangements have been made in order to finance this purchase of Holdings Preferred Stock. On the Preferred Stock Purchase Date, Omnicom shall guarantee or cause one of its affiliates to guarantee a loan to Holdings in the principal amount of $14,081,773.93 from a bank acceptable to Omnicom and on terms acceptable to Omnicom (the "Preferred Stock Purchase Loan"), the proceeds of which will be applied by Holdings to purchase the Holdings Preferred Stock pursuant to the Profit Sharing Plan Purchase Agreement. On the day prior to the Closing Date, TBWA shall lend Holdings an amount equal to the outstanding balance of the Preferred Stock Purchase Loan (the "TBWA Loan"), the proceeds of which will be applied by Holdings to repay the Preferred Stock Purchase Loan. Holdings is in the process of obtaining all governmental approvals (including approval by the Internal Revenue Service) and of taking all other action necessary to terminate the Profit Sharing Plan effective on or about the Closing Date under the Acquisition Agreement, even though such approvals may be obtained and such action taken on or after the Closing Date. Amounts on deposit in the Profit Sharing Plan will then be distributed to participants in accordance with their respective interests in the Profit Sharing Plan. 27 Payment of Obligations to Rightsholders In 1993 and 1988, Holdings adopted the EAR Plan and EPU Plan, respectively, and has issued awards under such Plans; recipients of such awards are sometimes referred to herein as "Rightsholders". If the employment of a participant is terminated for any reason, then under the terms of the EAR Plan such participant shall have the right, but not the obligation within ninety days of such termination to cause Holdings or Advertising to, and under the EPU Plan Holdings or Advertising shall, redeem vested units for cash in each case at the net book value of the phantom shares which are the subject of the awards as at the end of the most recent fiscal quarter. However, in the event of a liquidation, with respect to their priority, each EAR and EPU shall be deemed equivalent in value to one share of Holdings Common Stock and shall be treated in the same manner as Holdings Common Stock. Therefore, as is the case with Holdings Stockholders, obligations of Holdings and Advertising to the Rightsholders will be settled by the distribution to the Rightsholders of shares of Omnicom Common Stock. To ensure that Advertising will be able to satisfy such obligations, Holdings shall contribute to Advertising the Contributed Stock, which is expected to have an aggregate Market Value of approximately $_____________. This Prospectus/Information Statement is being furnished to Rightsholders because the Rightsholders will receive shares of Omnicom Common Stock as payment under such Plans, subject to the same terms and conditions as if they were Holdings Stockholders. Accordingly, on the Distribution Date (a) shares of Omnicom Common Stock paid to Advertising under the Acquisition Agreement (including the Contributed Stock) will be subject to the indemnification obligations of Holdings, such that (i) ten percent of such shares will be placed in the General Escrow Fund under the Escrow Agreement and (ii) shares of Omnicom Common Stock having an aggregate Market Value equal to the Rightsholders' pro rata share of $1,700,000 will be placed in the Special Escrow Fund under the Escrow Agreement, and (b) five percent of the shares of Omnicom Common Stock paid to Advertising under the Acquisition Agreement (including the Contributed Stock) will be transferred to the Liquidating Trust Escrow Fund to fund (together on a pro rata basis with the Holdings Stockholders) the payment and satisfaction of any obligations and liabilities of Holdings and Advertising as shall not have been assumed by TBWA under the Acquisition Agreement. The remainder of the shares of Omnicom Common Stock paid to Advertising under the Acquisition Agreement (including the Contributed Stock) will be distributed to the Rightsholders. See "The Plan of Liquidation--The Liquidating Trust Escrow". It is a condition of Closing of the Acquisition Agreement that Rightsholders that hold in the aggregate at least 83% of the outstanding EARs and EPUs on the Closing Date, which group must include all Rightsholders that are also Holdings Stockholders, shall have delivered to Holdings their written Consent Letters to the effect that they will not raise any objection to this treatment and consenting to the appointment of Holdings as their collective agent in connection with the administration of the Escrow Agreement. As of [May 4, 1995,] directors and executive officers of Holdings, and their affiliates, held an aggregate of [97.3%] of the outstanding awards under the EAR and EPU Plans as of such date. Each of such directors, executive officers and affiliates have executed and delivered to Holdings his or her Consent Letter in respect of such awards. Accordingly, the above described condition of Closing has been satisfied. The Escrow Agreement Holdings on behalf of itself and the Holdings Stockholders, and Advertising, on behalf of itself and the Rightsholders shall establish, pursuant to the Escrow Agreement, the General Escrow Fund by the deposit with the Escrow Agent of certificates in negotiable form duly endorsed in blank representing shares of Omnicom Common Stock equal to ten percent of the shares of Omnicom Common Stock issued and delivered as part of the acquisition price. The General Escrow Fund will be segregated into two funds: the Stockholders General Escrow Fund and the Rightsholders General Escrow Fund, based on the respective number of shares of Omnicom Common Stock contributed by Holdings and Advertising, and each Fund will satisfy its pro rata share of any indemnification payment based on the number of shares of Omnicom Common Stock then on deposit in such Fund. 28 Holdings and Advertising will also establish, pursuant to the Escrow Agreement, the Special Escrow Fund, by the deposit with the Escrow Agent of shares of Omnicom Common Stock having an aggregate Market Value of $1,700,000, of which approximately $________ will be contributed by Holdings, on behalf of the Holdings Stockholders, and approximately $______ will be contributed by Advertising, on behalf of the Rightsholders. The Special Escrow Fund will also be segregated into two funds: the Stockholders Special Escrow Fund and the Rightsholders Special Escrow Fund, each of which will satisfy its pro rata share of any indemnification payment based on the number of shares of Omnicom Common Stock on deposit in such Fund. (For a description of the indemnification obligations of Holdings and the Holdings Stockholders and the Rightsholders to Omnicom, see "The Acquisition Agreement--Other Terms and Conditions of the Acquisition Agreement--Indemnification".) Pursuant to the Escrow Agreement, Holdings, on behalf of itself and the Holdings Stockholders, and Advertising, on behalf of itself and the Rightsholders, shall grant to Omnicom a security interest in the Escrow Funds to secure the performance of the indemnification obligations of Holdings under the Acquisition Agreement and the performance of its obligations to Omnicom under the Escrow Agreement. Pursuant to the Escrow Agreement, Omnicom and Holdings have agreed to indemnify and hold the Escrow Agent and its directors, officers and employees harmless from and against any and all costs, charges, damages and attorney's fees which the Escrow Agent in good faith may incur or suffer in connection with or arising out of the Escrow Agreement. The fees and charges of the Escrow Agent with respect to the Escrow Agreement shall be shared between Omnicom and Holdings in accordance with the Escrow Agent's customary fees as charged from time to time. The Escrow Agent may deduct any unpaid fees from the Escrow Funds prior to the Escrow Agent's distributing any assets in connection with the termination of the Escrow Funds. The Liquidating Trustees shall replace Holdings as a party to the Escrow Agreement following the creation and funding of the Liquidating Trust. The Escrow Agreement shall automatically terminate if and when all the shares of Omnicom Common Stock held in any Escrow Fund shall have been distributed by the Escrow Agent in accordance with the terms of the Escrow Agreement. General Escrow Fund. The Escrow Agreement provides that wherever there shall be delivered to the Escrow Agent either (i) a certificate signed by Omnicom and Holdings, or (ii) a certified copy of an arbitration award rendered pursuant to the arbitration proceedings specified in the Escrow Agreement determining, that an indemnification payment is due from the General Escrow Funds to Omnicom, the Escrow Agent shall, to the extent that the shares of Omnicom Common Stock then on deposit in the General Escrow Fund shall be sufficient for the purpose, deliver to Omnicom the number of shares of Omnicom Common Stock, valued at the original Market Value, equal to the indemnification payment. On the next business day following the earlier of (x) the first independent audit report, if any, of TBWA and the Businesses following the Closing Date, or (y) one year from the Closing Date, the Escrow Agent shall deliver to the Liquidating Trust (on behalf of the Holdings Stockholders) the remaining shares of Omnicom Common Stock then on deposit in the Stockholders General Escrow Fund, and to the Liquidating Trust Escrow Fund (on behalf of the Rightsholders) the remaining shares of Omnicom Common Stock then on deposit in the Rightsholders General Escrow Fund; as reduced in each case by any amounts necessary to cover outstanding claims for indemnification. All dividends, interest and other amounts received with respect to shares of Omnicom Common Stock held in the General Escrow Fund shall be income for tax purposes to Holdings (or the Holdings Stockholders following the dissolution of Holdings) and the Rightsholders, shall be paid directly to the Liquidating Trustees (on behalf of the Holdings Stockholders) or the Liquidating Trust Escrow Agent (on behalf of the Rightsholders), as the case may be, and shall not constitute part of the General Escrow Fund. Special Escrow Fund. The Escrow Agreement provides that whenever there shall be delivered to the Escrow Agent either (i) a certificate signed by Omnicom and Holdings, or (ii) a certified copy of a final nonappealable judgment of an arbitration award rendered pursuant to the arbitration proceedings specified in the Escrow Agreement determining, that a payment is due from the Special Escrow Fund to Holdings or Omnicom, the Escrow Agent shall, to the extent that the shares of Omnicom Common Stock then on deposit in the Special Escrow Fund shall be sufficient for the purpose, deliver to such party the number of shares of Omnicom Common Stock, valued at the original Market Value, equal to the payment. 29 Amounts will be due from the Special Escrow Fund when the collectibility of the Indemnified Receivable becomes determined or, if earlier, on the second anniversary of the Closing Date under the Acquisition Agreement. Therefore, at such time, if any, as TBWA recovers the payments in respect of said asset ("Asset Proceeds"), it shall give notice to such effect to Holdings and to the Escrow Agent, together with an accounting of the costs and expenses incurred in connection with recovering any such payments at any time after the Execution Date of the Acquisition Agreement ("Asset Costs"). TBWA shall be entitled to receive payment from the Stockholders Special Escrow Fund and the Rightsholders Special Escrow Fund, pro rata in accordance with the number of shares of Omnicom Common Stock then on deposit in each such Fund, in the amount of the Asset Costs; the Liquidating Trustees (on behalf of the Holdings Stockholders) and the Liquidating Trust Escrow Agent (on behalf of the Rightsholders) shall be entitled to receive payment from the Stockholders Special Escrow Fund and the Rightsholders Special Escrow Fund, pro rata in accordance with the number of shares of Omnicom Common Stock then on deposit in each such Fund, in an aggregate amount equal to (i) the amount of the Asset Proceeds, less (ii) the Asset Costs, less (iii) $250,000 if the final determination of the matter occurs within one year from the Closing Date, or $300,000 if the matter is determined thereafter; TBWA shall then be entitled to receive the balance, if any, remaining in the Special Escrow Fund. All dividends, interest and other amounts received with respect to shares of Omnicom Common Stock held in the Special Escrow Fund shall be income for tax purposes to Holdings (or the Holdings Stockholders following the dissolution of Holdings) and the Rightsholders, shall be paid directly to the Liquidating Trustees (on behalf of the Holdings Stockholders) or the Liquidating Trust Escrow Agent (on behalf of the Rightsholders), as the case may be, and shall not constitute part of the Special Escrow Fund. The Deposit and Pledge Agreement Pursuant to the Deposit and Pledge Agreement, Holdings and Advertising will deliver to the Deposit Agent all the shares of Omnicom Common Stock received by them on the Closing Date. On the Distribution Date, the Deposit Agent will make the distributions of such shares of Omnicom Common Stock described under "Summary--The Acquisition--The Acquisition" to the Liquidating Trust, the Liquidating Trust Escrow Fund, the Holdings Stockholders and the Rightsholders. On the Distribution Date, the Deposit Agent will also deposit the applicable shares of Omnicom Common Stock into the Escrow Funds. Prior to such time, the applicable shares of Omnicom Common Stock will be held by the Escrow Agent as security for the fulfillment of the obligation of Holdings and Advertising to deliver such shares into the Escrow Funds. Employment Arrangements The Acquisition Agreement provides that TBWA or one of the other companies operating within the TBWA International network will offer employment to substantially all employees of Holdings and its subsidiaries following the Closing of the Acquisition; and that such personnel who accept such employment will be employed on substantially equivalent terms and conditions as such personnel were employed by Holdings or a subsidiary immediately prior to the Closing Date. The Acquisition Agreement also provides for specific employment arrangements with certain key executives; see "The Transactions--Interests of Certain Persons in the Transactions". Other Terms and Conditions of the Acquisition Agreement Representations and Warranties The Acquisition Agreement contains various customary representations and warranties of Holdings and Advertising relating to, among other things: (a) the organization and similar corporate matters of Holdings and each of the subsidiaries; (b) the capital structure of Holdings and each of its subsidiaries; (c) authorization, execution, delivery, performance and enforceability of the Acquisition Agreement and related matters; (d) absence of conflicts under charters or by-laws, required consents or approvals and violations of any instruments or laws; (e) financial statements provided to Omnicom by Holdings; (f) absence of certain material adverse events, changes or effects; (f) certain accounting matters; (g) certain contracts, including, but not limited to, certain employment, consulting and benefit matters; (h) 30 litigation; (i) certain tax matters; (j) undisclosed liabilities; (k) insurance; (l) compliance with law and licenses, authorizations and permits held by Holdings necessary to conduct its business; (m) client relations; (n) employment relations; (o) retirement and other employee plans and matters relating to the Employee Retirement Income Security Act of 1974, as amended; (p) the shareholder votes required; (q) change in capital structure; and (r) trademarks, trade names, assumed or fictitious names, copyrights, logos, service marks and slogans. The Acquisition Agreement also contains various customary representations and warranties of Omnicom and TBWA relating to, among other things; (a) organization and similar corporate matters of Omnicom and TBWA; (b) authorization, execution and delivery of the Acquisition Agreement and related matters; (c) absence of any conflicts under charters or by-laws, required consents or approvals and no violations of any instruments or laws; (d) the shares of Omnicom Common Stock to be issued in the transaction; (e) financial statements provided to Holdings by Omnicom; (f) absence of certain adverse events, changes or effects; and (g) litigation. Certain Covenants Pursuant to the Acquisition Agreement, Holdings has agreed that, during the period from the date of the Acquisition Agreement until the Closing Date, Holdings and each of its subsidiaries will, among other things: (a) obtain all government approvals and other action necessary to terminate the Profit Sharing Plan of Holdings; (b) not solicit, initiate or encourage any other offer or inquiry concerning the acquisition of the Businesses; (c) give timely notice of a meeting to its shareholders to approve the Acquisition, the amendment of the Holdings Certificate and the Plan of Liquidation and recommend approval of the transactions contemplated by the Acquisition Agreement; (d) inform Omnicom's management as to the operation, management and business of the Businesses to be acquired; (e) permit Omnicom and TBWA to make such reasonable investigation of the assets, properties and businesses of Holdings and Advertising as they deem necessary or advisable; and (f) except (i) as permitted by the Acquisition Agreement and (ii) as otherwise consented to in writing by Omnicom (on behalf of itself and TBWA), operate its businesses in the ordinary course and, to the extent consistent with past practice, and use reasonable commercial efforts to preserve existing business organization, existing business relationships, and goodwill intact. Pursuant to the Acquisition Agreement, Holdings and Advertising and Omnicom and TBWA have covenanted with one another to take certain additional actions, including without limitation; (a) Holdings and Omnicom each shall take all corporate and other action, make all filings with courts or governmental authorities and use its reasonable efforts to obtain in writing all approvals and consents required to be taken, made or obtained by it in order to effectuate the Acquisition; (b) to prepare this Prospectus/Information Statement and the Registration Statement of which it is a part, with each party representing and warranting to the other as to the accuracy of the information supplied by it for inclusion herein; (c) to each use its reasonable efforts to consummate the Acquisition and the other transactions contemplated by the Acquisition Agreement; (d) to obtain all necessary sales tax exemptions and take all such other action as may be necessary or advisable to cause the transfer of the Assets to TBWA pursuant to the Acquisition not to be subject to sales tax; and (e) to take the actions more fully described in "Financial Actions" below. Financial Actions Between the date of the Acquisition Agreement and the Closing Date, certain financial arrangements are required to occur: (i) TBWA shall lend Holdings $55,000,000 and lend Advertising $1,000,000 on reasonable commercial terms and pursuant to financing documents reasonably acceptable to the parties thereto and in substantially the form of the Amended and Restated Credit Agreement and the documents ancillary thereto; (ii) Holdings shall make a capital contribution of not less than $55,000,000 to Advertising; and (iii) Advertising shall repay in full all outstanding principal, together with accrued interest, of the 8.17% Junior Subordinated Installment Notes, the 13.25% Junior Subordinated Notes, the 13.25% Senior Subordinated Notes, and the notes issued under the Amended and Restated Credit Agreement. Upon the payment in full of amounts outstanding under the Amended and Restated Credit Agreement in accordance with clause (iii) and prior to the Closing, Omnicom agrees to release or cause to be released (by, among other things, filing UCC termination statements in all appropriate jurisdictions) all liens and other security interests granted to secure the obligations of Holdings and Advertising thereunder. 31 Indemnification The Acquisition Agreement provides that Holdings shall indemnify and hold harmless, and shall reimburse TBWA and its affiliates, directors, officers, and employees for all losses, claims, damages and liabilities (to the extent not covered by insurance), and all fees, costs and expenses (including reasonable attorneys' fees) related thereto (together referred to herein as "Loss" or "Losses"), arising out of, based upon, or resulting from (i) the inaccuracy or breach of any representation or warranty (other than that referred to in clause (iv) below) of Holdings or Advertising or any covenant of Holdings or Advertising contained in or made pursuant to the Acquisition Agreement, (ii) the breach of or failure by Holdings or Advertising to perform or discharge its obligations under the Acquisition Agreement or under the transactions contemplated thereby, (iii) a claim or cause of action by a third party relating to any liability of Holdings or Advertising not assumed by TBWA, or (iv) any inaccuracy in or breach of a specified representation and warranty relating to the Indemnified Receivable. Pursuant to the Acquisition Agreement, no Losses arising out of a matter referred to in (i), (ii) or (iii) above shall be reimbursed to TBWA until such time as all Losses arising out of a matter referred to in (i) through (iii) above shall exceed $300,000, in which case Holdings shall be liable for all Losses in excess of $300,000 (Losses arising out of the matter referred to in clause (iv) above shall be reimbursable without regard to the $300,000 "cushion"). Losses arising out of matters referred to in clauses (i) through (iii) above shall be satisfied only out of the General Escrow Fund and Losses arising out of the matter referred to in clause (iv) above shall be satisfied only out of the Special Escrow Fund. The aggregate indemnity obligation of Holdings as so determined shall be satisfied from the Escrow Funds as provided in the Escrow Agreement, and neither Omnicom nor TBWA nor any of their affiliates will have any recourse for the payment of any such indemnity obligations against Holdings or Advertising (or the Holdings Stockholders or Rightsholders), nor will any of such persons be personally liable for any such indemnity obligations. See "The Acquisition Agreement--The Acquisition--Escrows". Indemnity obligations shall be paid by returning to Omnicom out of the relevant Escrow Fund the number of whole shares of Omnicom Common Stock, valued at the original Market Value, equal to the Losses (subject to the $300,000 "cushion," where applicable). The obligation of Holdings to indemnify shall terminate and be of no further force and effect on the earlier to occur of (x) the date of first independent audit report, if any, of the consolidated financial results of TBWA and the Businesses following the Closing Date, and (y) one year from the Closing Date (the "Indemnity Period"). Upon the expiration of the Indemnity Period, all such representations, warranties, covenants and agreements shall expire, terminate, and be of no further force or effect, except that claims asserted in writing against Holdings on or prior to such expiration shall survive until they are decided and are final and binding upon TBWA and Holdings. However, in that the collectibility of the Indemnified Receivable cannot reasonably be assured at the present time, these limitations will not apply to the matter as to which TBWA is entitled to be indemnified under that clause. Instead, this indemnification obligation will terminate on the earlier of (i) the second anniversary of the Closing Date, the date by which the parties expect such collectibility to have been finally determined and (ii) the date on which such collectibility shall in fact have been finally determined, provided that claims asserted in writing prior to such expiration shall survive until they are final and binding. See "The Acquisition Agreement--The Acquisition--The Escrow Agreement--General Escrow Fund" and "--Special Escrow Fund." Pursuant to the Acquisition Agreement, Omnicom and Holdings have also agreed to indemnify the other, including its directors, officers, agents, "controlling persons" as defined by the Securities Act, and attorneys (and, with respect to Holdings, the Holdings Stockholders and Rightsholders) against any liability, damage, cost, loss, or expense arising out of any untrue statement of a material fact furnished by it for inclusion in the Registration Statement, or caused by any omission to furnish a material fact concerning it that is required to be stated therein or that is necessary to make the statements furnished by it not misleading. This indemnification obligation is separate from the indemnification obligation of Holdings to TBWA discussed above, and is not limited to amounts on deposit in the Escrow Funds under the Escrow Agreement, nor to the limited periods of survival. Conditions In addition to approval of the Acquisition Agreement, the Advertising Stock Sale Agreement, the amendment of the Holdings Certificate and the Plan of Liquidation by Holdings Stockholders at the Special Meeting, and to the required 32 regulatory approvals, the respective obligations of Omnicom, TBWA, Holdings and Advertising to consummate the Acquisition are subject to the satisfaction of certain conditions, including without limitation: (i) the accuracy in all material respects of the representations and warranties made by the parties in the Acquisition Agreement; (ii) the performance by the parties of their respective obligations under the Acquisition Agreement prior to the Closing Date; (iii) the absence of any material adverse changes in the condition of the businesses of Holdings or Advertising on the one hand or Omnicom, on the other hand; (iv) the effectiveness of the Registration Statement under the Securities Act with respect to the shares of Omnicom Common Stock to be issued pursuant to the Acquisition Agreement and the approval of the listing of such Omnicom Common Stock on the New York Stock Exchange; (v) the execution and delivery of the Escrow Agreement; (vi) the absence of any action or proceeding enjoining the transactions contemplated by the Acquisition Agreement; (vii) the absence of any action or proceeding by any governmental agency that might result in enjoining the consummation of said transactions; and (viii) the consummation of the transactions contemplated by the Profit Sharing Plan Purchase Agreement. The obligations of Omnicom to effect the Acquisition are subject to satisfaction of certain additional conditions including, without limitation: (i) the SEC not having objected to Omnicom's treatment of the Acquisition as a pooling-of-interests for accounting purposes; (ii) Advertising continuing to be the advertising agency of record for certain key clients or, with respect to some of these clients, Advertising's having replaced a loss of any such client with an account of similar size (measured by revenues); (iii) the receipt by Holdings of Consent Letters from Rightsholders holding in the aggregate at least 83% of the outstanding EARs and EPUs on the Closing Date, including all Rightsholders who are also Holdings Stockholders; (iv) the execution of employment agreements with TBWA or one of its affiliates by each of Robert Kuperman, Thomas Patty, Adelaide Horton, Ira Matathia, Steven Hancock and Robert Wolf and the execution and delivery of non-competition agreements by each of such individuals; and (v) there not having been a material and adverse change in the Businesses (which shall include TBWA not having received reasonable assurances and financial data that (a) if the Closing is on or prior to August 31, 1995, EBIT for the nine months ended July 31, 1995 is at least $7,500,000 and EBIT for the 1995 Fiscal Year is reasonably expected to exceed $13,500,000; and (b) if the Closing is on or after November 1, 1995, EBIT for the 1995 Fiscal Year is at least $13,500,000). The obligations of Holdings and Advertising to effect the Acquisition are subject to the satisfaction of certain additional conditions including, without limitation: (i) that Annualized Revenues of Holdings and its subsidiaries during the 1995 Fiscal Year shall not be in excess of $100,000,000 and EBIT for the 1995 Fiscal Year shall not exceed (or shall not reasonably be expected to exceed) $17,200,000; (ii) TBWA or one of its affiliates having entered into the employment agreements described above; and (iii) TBWA having assumed the existing employment agreement between Holdings and Leland Clow and the existing employment and consulting agreement between Holdings and Jay Chiat (and TBWA having validly assigned such contract to Omnicom). SEE "The Acquisition Agreement--The Acquisition--Renegotiation of Acquisition Price" and "The Transactions--Interests of Certain Persons in the Transactions". Pursuant to the terms of the Acquisition Agreement, each of Omnicom and Holdings is entitled to waive any of its conditions to consummation of the Acquisition to the extent that any such condition is not satisfied in full by the other party, other than conditions relating to the absence of any objection by the SEC to Omnicom's treatment of the Acquisition as a pooling-of-interests for accounting purposes and the approval of the Transactions by the Holdings Stockholders. Additional Agreements Pursuant to the Acquisition Agreement, Omnicom, TBWA, Holdings and Advertising have made certain additional agreements with respect to periods following the Closing Date, including without limitation the following: (a) each of Holdings and Advertising shall change its corporate name to a name not including the "Chiat/Day" designation or any variation thereof and will cause each inactive subsidiary which is not being acquired by TBWA under the Acquisition Agreement to similarly change its corporate name; (b) TBWA shall change its corporate name, and shall cause those members of the TBWA international group operating under the TBWA name in North America to change their corporate names, in each case to include the designation "TBWA Chiat/Day"; (c) Holdings shall provide Omnicom with copies of all appropriate tax returns and certificates, all of which shall be made consistent with the allocation of acquisition price agreed to between the parties; and (d) Holdings and Advertising will, if requested by Omnicom, make certain tax elections under U.S. and Canadian laws. 33 Termination The Acquisition Agreement may be terminated and the contemplated Acquisition may be abandoned at any time prior to the Closing, whether before or after approval by the Holdings Stockholders, (a) by mutual consent of the Boards of Directors of Omnicom, TBWA, Holdings and Advertising; (b) by either Omnicom and TBWA, on the one hand, or Holdings and Advertising, on the other hand, if there has been a breach of any representation, warranty or covenant on the part of the other party set forth in the Acquisition Agreement which breach has not been cured within 30 days following receipt by the breaching party of notice of such breach, unless the breach of any such representation, warranty, or covenant does not materially adversely affect the business or assets of the breaching party or the ability of either party or parties to consummate the Acquisition; (c) by the Board of Directors of Omnicom, TBWA, Holdings or Advertising if a final and nonappealable order, decree or judgment of any court or other governmental authority is issued which would enjoin the Acquisition; or (d) by either Omnicom and TBWA or Holdings and Advertising if the Closing Date shall not have occurred prior to the close of business on December 31, 1995 or at any time after October 31, 1995 if the conditions to such parties' obligation to close shall have become incapable of being satisfied by December 31, 1995. In the event of any termination of the Acquisition Agreement by either Omnicom and TBWA or by Holdings and Advertising as provided above, the Acquisition Agreement shall become void and there will be no liability or obligation on the part of any party or its respective officers or directors except that such termination does not preclude any action or claim for damages to which any party is otherwise entitled as a result of a breach by the other party. Amendment The Acquisition Agreement and the exhibits and schedules thereto may be amended, supplemented or qualified by the parties only by an agreement in writing signed by all parties with due authorization. THE ADVERTISING STOCK SALE AGREEMENT (A copy of the Advertising Stock Sale Agreement is filed as an Exhibit to the Registration Statement of which this Prospectus/Information Statement forms a part and is incorporated herein by reference. This summary of the Advertising Stock Sale Agreement is qualified in its entirety by reference to such agreement.) Pursuant to the Advertising Stock Sale Agreement, as soon as practicable after the Distribution Date, Adelaide Horton [ADD ASSIGNEES, IF ANY] will purchase from Holdings all of the issued and outstanding common stock of Advertising. At such time, the only asset which Advertising will own will be its rights, through its ownership of all of the capital stock of Chiat/Day Direct Marketing, Inc., under the National Car Suit. Pursuant to the Advertising Stock Sale Agreement, Holdings has agreed to indemnify Ms. Horton and Advertising for any losses incurred in respect of liabilities of Advertising not assumed by TBWA under the Acquisition Agreement. To the extent that Holdings were unable to fully indemnify Ms. Horton and Advertising, any recovery from the National Car Suit received by Advertising would be at risk. PROPOSED AMENDMENT OF THE HOLDINGS CERTIFICATE The Holdings Certificate sets forth the corporate name of Holdings as "Chiat/Day Holdings, Inc." Following the Closing under the Acquisition Agreement, TBWA will own all rights in and to the "Chiat/Day" name, and Holdings has agreed that immediately following the Closing thereunder it would change its corporate name to a name not including the "Chiat/Day" designation or any variation thereof. Under the proposed amendment Holdings' name will be changed to "CDH Corporation". Pursuant to the Acquisition Agreement, Advertising will also change its corporate name to a name not including the "Chiat/Day" designation or any variation thereof, and each of Holdings and Advertising will cause its inactive subsidiaries which are not being acquired by TBWA under the Acquisition Agreement, to effect a similar change to its corporate name. Advertising intends to change its name to "CDAD Corporation" . Approval by the Holdings Stockholders of this amendment to the Holdings Certificate is a condition of Omnicom's and TBWA's obligation to consummate the Acquisition under the Acquisition Agreement. 34 THE PLAN OF LIQUIDATION (Copies of the Plan of Liquidation, the Liquidating Trust Agreement and the Liquidating Trust Escrow Agreement are filed as Exhibits to the Registration Statement of which this Prospectus/Information Statement forms a part and are incorporated herein by reference. This summary of the Plan of Liquidation, the Liquidating Trust Agreement and the Liquidating Trust Escrow Agreement is qualified in its entirety by reference to such agreements.) General The Plan of Liquidation provides that, upon consummation of the Closing under the Acquisition Agreement, Holdings will be dissolved pursuant to the provisions of the DGCL. Following the procedures prescribed in the DGCL, the Board of Directors of Holdings will file with the Secretary of State of the State of Delaware a Certificate of Dissolution, thereby terminating the corporate existence of Holdings. Thomas Patty and David Wiener, the Liquidating Trustees of the Liquidating Trust established pursuant to the Liquidating Trust Agreement will, however, function with authority to wind up Holdings' affairs, pay, satisfy and discharge certain liabilities and obligations not assumed by TBWA under the Acquisition Agreement, and distribute to the Holdings Stockholders all of the remaining assets of Holdings. The distribution of the shares of Omnicom Common Stock will not occur until the Distribution Date. Assuming the Closing occurs on August 31, 1995, the earliest that the Distribution Date would occur is October 26, 1995. During the period from the Closing Date until the Distribution Date, Holdings Stockholders and Rightsholders will bear the risk of fluctuations in the market price of the Omnicom Common Stock. The Liquidating Trust, after the Acquisition and the distributions to occur on the Distribution Date, shall hold all the remaining assets of Holdings (except to the extent Holdings distributes any such assets directly to Holdings Stockholders), including the right to receive any assets remaining after the termination of the Escrow Agreement. If any assets remain in the Liquidating Trust after all claims, charges, liabilities and obligations of the Liquidating Trust have been paid or discharged, the Liquidating Trustees will, as expeditiously as is practicable, distribute such assets to the former holders of Holdings Common Stock on a pro rata basis according to their interests. All of the directors and officers of Holdings who are also Holdings Stockholders have indicated that they intend to vote for the Plan of Liquidation in their capacity as Holdings Stockholders. In order to effectuate the Plan of Liquidation, Holdings will give notice to all known creditors, if any, after giving effect to the assumption of liabilities by TBWA pursuant to the Acquisition Agreement, and will pay or make adequate provision for any Trust Liabilities. It is intended that the consummation of the transactions contemplated by the Acquisition Agreement, followed by the distribution to the Holdings Stockholders in complete liquidation of Holdings, will not give rise to dissenter's rights in favor of Holdings Stockholders under Delaware law. Liquidating Distribution to Holdings Stockholders Pursuant to the Plan of Liquidation, on the Distribution Date, Holdings Stockholders will receive a distribution of the shares of Omnicom Common Stock paid by TBWA to Holdings as acquisition price under the Acquisition Agreement (exclusive of the Contributed Stock), as reduced by (i) the five percent of such shares which will be deposited by Holdings on the Distribution Date into the Liquidating Trust on behalf of the Holdings Stockholders and (ii) the shares of Omnicom Common Stock used to fund on the Distribution Date the Stockholders General Escrow Fund and the Stockholders Special Escrow Fund under the Escrow Agreement. Based on an estimated total acquisition price of $25,366,749 (see "The Acquisition Agreement--The Acquisition--Determination of Acquisition Price"), each holder of Holdings Common Stock will be entitled to receive in such distribution, per share of Holdings Common Stock, shares of Omnicom Common Stock with a value (determined in accordance with the terms of the Acquisition Agreement) equal to $_____. If none of the Omnicom Common Stock received by Holdings were used to fund the Stockholders General Escrow Fund, the Stockholders Special Escrow Fund and the Liquidating Trust on behalf of the Stockholders, the value of the per share distribution for shares of Holdings Common Stock would be $_____. Since the amounts held in such escrows and such trust are subject to claims in respect of contingent liabilities, there can be no assurances that amounts held therein will in fact be distributed to the Holdings Stockholders. 35 Liquidating Distribution to Rightsholders On the Distribution Date, the Rightsholders will also receive a distribution of Omnicom Common Stock from Advertising. See "The Acquisition Agreement--The Acquisition--Payment of Obligations to Rightsholders". The shares of Omnicom Common Stock available for such distribution will be the shares of Omnicom Common Stock paid by TBWA to Advertising as acquisition price under the Acquisition Agreement (inclusive of the Contributed Stock), as reduced by (i) the five percent of such shares which will be deposited by Advertising on the Distribution Date into the Liquidating Trust Escrow Fund on behalf of the Rightsholders and (ii) the shares of Omnicom Common Stock used to fund on the Distribution Date the Rightsholders General Escrow Fund and the Rightsholders Special Escrow Fund under the Escrow Agreement. Based on an estimated total acquisition price of $25,366,749 (see "The Acquisition Agreement--The Acquisition--Determination of Acquisition Price"), each Rightsholder (whether an EPU holder or an EAR holder) will be entitled to receive in such distribution, per EPU or EAR, shares of Omnicom Common Stock with a value (determined in accordance with the terms of the Acquisition Agreement) equal to $_____. If none of the Omnicom Common Stock received by Advertising were used to fund the Rightsholders General Escrow Fund, the Rightsholders Special Escrow Fund and the Liquidating Trust Escrow Fund on behalf of the Rightsholders, the value of the per unit distribution for each EPU or EAR would be $_____. Since the amounts held in such escrows are subject to claims in respect of contingent liabilities, there can be no assurances that amounts held therein will in fact be distributed to the Rightsholders. Fractional Shares If any of the foregoing distributions does not result in a Holdings Stockholder or Rightsholder being entitled to a whole number of shares of Omnicom Common Stock, the Holdings Stockholder or Rightsholder will receive a cash payment in lieu of any entitlement to a fractional share of Omnicom Common Stock from the proceeds of a sale on the NYSE by Holdings or Advertising (as the case may be) of a sufficient number of shares of Omnicom Common Stock to settle the aggregate amount of fractional share distribution entitlements of all similarly situated Holdings Stockholders and Rightsholders. As a result, no fractional shares of Omnicom Common Stock will be distributed under the Plan of Liquidation. Operation of the Liquidating Trust Following the dissolution of Holdings and the completion of the liquidating distributions described above, each share of Holdings Common Stock, regardless of class, shall have an equal interest in the Liquidating Trust. After such time, the Liquidating Trustees will, on behalf of the Holdings Stockholders, (i) receive any additional liquidating distributions from Holdings, (ii) act as the agent of the Holdings Stockholders in connection with the administration of the Escrow Agreement and the Liquidating Trust Escrow Agreement, (iii) respond to the assertion of any and all claims of indemnification by TBWA pursuant to the terms of the Acquisition Agreement and the Escrow Agreement, (iv) pursue any claims which Holdings may have against the Special Escrow Fund and (v) complete the winding up of the affairs of Holdings and the payment of certain liabilities not assumed by TBWA under the Acquisition Agreement out of the assets of the Liquidating Trust. As described above under "--Liquidating Distribution to Holdings Stockholders", five percent of the shares of Omnicom Common Stock received by Holdings as part of the acquisition price under the Acquisition Agreement (exclusive of the Contributed Stock) will be deposited in the Liquidating Trust, on behalf of the Holdings Stockholders, for the satisfaction of the following liabilities (collectively, "Trust Liabilities") of Holdings (in each case other than the liabilities assumed by TBWA pursuant to the Acquisition Agreement): (i) all claims and obligations, including all contingent, conditional or unmatured contractual claims, known to Holdings or the Liquidating Trustees, (ii) any claim which is the subject of a pending action, suit or proceeding against Holdings and (iii) claims which, based on facts known to Holdings or the Liquidating Trustees, are likely to arise or become known to Holdings or the Liquidating Trustees within ten years. The obligation of Holdings to indemnify TBWA and Advertising for losses arising out of retained liabilities will constitute a Trust Liability. See "The Advertising Stock Sale Agreement". In addition, Trust Liabilities will include the costs and expenses payable by Holdings in respect of (i) the Escrow Agent's fees under the Escrow Agreement, (ii) maintaining insurance to cover indemnification obligations of Holdings under the Holdings Certificate and the Liquidating Trust Agreement to its directors, officers and agents (including the Liquidating Trustees) and (iii) certain legal and other professional fees in connection with the liquidation, 36 the establishment of the trust, final tax returns and other post-Closing transactions and matters. As described more fully below under "--The Liquidating Trust Escrow", the Liquidating Trustees shall be reimbursed from the Liquidating Trust Escrow Fund for the Rightsholders' share of any such Trust Liabilities. The Liquidating Trust will also receive from time to time, on behalf of the Holdings Stockholders, distributions of Omnicom Common Stock from the Stockholders General Escrow Fund and the Stockholders Special Escrow Fund maintained pursuant to the Escrow Agreement. See "The Acquisition Agreement--The Acquisition--The Escrow Agreement". Pursuant to the Liquidating Trust Agreement, the Liquidating Trustees will promptly sell any shares of Omnicom Common Stock received by them and retain the net cash proceeds as the property (the "Trust Property") of the Liquidating Trust. Pursuant to the Liquidating Trust Agreement, the Liquidating Trustees shall invest and reinvest the Trust Property and shall maintain any income earned on such Trust Property ("Trust Income") separately from the Trust Property. The Trust Income will include any cash and other taxable dividends paid to the Liquidating Trustees, on behalf of the Holdings Stockholders, in respect of Omnicom Common Stock on deposit in the Stockholders General Escrow Fund and the Stockholders Special Escrow Fund. See "The Acquisition Agreement--The Acquisition--The Escrow Agreement". All Trust Income will be distributed by the Liquidating Trustees at the end of each fiscal quarter to the former Holdings Stockholders, pro rata in accordance with their interests. The Liquidating Trustees shall distribute Trust Property at least once annually to the former Holdings Stockholders, pro rata in accordance with their interests, provided that no distribution shall be made without satisfying or adequately providing for (i) a reserve for all remaining Trust Liabilities, (ii) a reserve for Trustee expenses and (iii) a reserve for payments owing to missing beneficiaries. The termination of the Liquidating Trust will occur on the later of (i) three years and six months from the date the Liquidating Trust is established or upon payment to the former Holdings Stockholders of all of the Trust Property and Trust Income, whichever is earlier, and (ii) the date of termination of the Escrow Agreement, provided that the Liquidating Trust shall continue for a reasonable period for the limited purpose of discharging any remaining Trust Liabilities. The Liquidating Trust Escrow As described above under "The Acquisition Agreement--The Acquisition--Payment of Obligations to Rightsholders" five percent of the shares of Omnicom Common Stock received by Advertising as part of the acquisition price under the Acquisition Agreement (including five percent of the Contributed Stock) will be deposited in the separate Liquidating Trust Escrow Fund created by the escrow agreement (the "Liquidating Trust Escrow Agreement") among Holdings (or, after the creation and funding of the Liquidating Trust, the Liquidating Trust), Advertising and ___________________, as escrow agent (the "Liquidating Trust Escrow Agent"), on behalf of the Rightsholders, for the satisfaction of the Rightsholders' share of Trust Liabilities. The Liquidating Trust Escrow Agent may also receive from time to time, on behalf of the Rightsholders, distributions of Omnicom Common Stock from the Rightsholders General Escrow Fund and the Rightsholders Special Escrow Fund maintained pursuant to the Escrow Agreement. See "The Acquisition Agreement--The Acquisition--The Escrow Agreement". Pursuant to the Liquidating Trust Escrow Agreement, the Liquidating Trust Escrow Agent will promptly sell any shares of Omnicom Common Stock received by it and retain the net cash proceeds in the Liquidating Trust Escrow Fund. Pursuant to the Liquidating Trust Escrow Agreement, the Liquidating Trust Escrow Agent shall invest and reinvest the funds on deposit in the Liquidating Trust Escrow Fund (any income earned in respect of such funds, the "Liquidating Trust Escrow Income"). The Liquidating Trust Escrow Income will include any cash and other taxable dividends paid to the Liquidating Trust Escrow Agent, on behalf of the Rightsholders, in respect of Omnicom Common Stock on deposit in the Rightsholders General Escrow Fund and the Rightsholders Special Escrow Fund. All Liquidating Trust Escrow Income will be distributed by the Liquidating Trust Escrow Agent at the end of each fiscal quarter to the former Rightsholders, pro rata in accordance with their interests. The Liquidating Trust Escrow Agent will reimburse the Liquidating Trust from the Liquidating Trust Escrow Fund, upon proper request made by the Liquidating Trustees, for the Rightsholders' proportionate share of payments 37 made by the Liquidating Trust in respect of Trust Liabilities. Such proportionate share shall be equal to (x) the total amount of the payment made by the Liquidating Trustee multiplied by (y) a fraction, the numerator of which equals the total amount of funds then on deposit in the Liquidating Trust Escrow Fund and the denominator of which equals (1) the numerator plus (2) the amount of Trust Property then on deposit in the Liquidating Trust. Upon each distribution by the Liquidating Trustee of Trust Property to the Stockholders pursuant to the Liquidating Trust Agreement, the Liquidating Trust Escrow Agent shall distribute to the Rightsholders, pro rata in accordance with their interests, the same percentage of the Liquidating Trust Escrow Fund as is being distributed to the Holdings Stockholders from the Liquidating Trust. The Liquidating Trust Escrow Agent will act as the agent of the Rightsholders for purposes of the administration of the Liquidating Trust Escrow Agreement. The Liquidating Trust Escrow Agent will also serve as a trustee of the Liquidating Trust. FEDERAL INCOME TAX CONSEQUENCES OF THE SALES OF ASSETS AND DISSOLUTION AND LIQUIDATION The following discussion summarizes certain federal income tax consequences associated with the transactions under the Internal Revenue Code of 1986, as amended (the "code"). Because the following discussion does not describe all potentially relevant tax considerations, each Holdings Stockholder and Rightsholder (each, a "Holder") should consult his or her own tax advisor regarding the tax consequences of the transactions in light of his or her own tax situation. In particular, the following discussion may not be complete or applicable in its entirety with respect to Holders who are not individuals, who are dealers in securities, or who acquired their Holdings Common Stock througH employee stock option programs. Corporate Tax Holdings believes that although the asset sales by it and Advertising and the Advertising Stock Sale are taxable transactions, they will not result in significant federal income tax liability being incurred by Holdings. This conclusion is based on a number of positions taken or to be taken by Holdings which might be subject to IRS challenge. To the extent that the IRS were to successfully challenge any of Holdings' positions, amounts held in the Liquidating Trust and the Liquidating Trust Escrow Fund would be used to pay the ensuing tax liability. Accordingly, no assurance can be given that any of the portions held in the Liquidating Trust will be ultimately distributed to the Holdings Stockholders or that funds held in the Liquidating Trust Escrow Fund will be ultimately distributed to the Rightsholders. To the extent that funds available from these sources were inadequate to satisfy amounts due to the IRS, the IRS could seek payment from Holdings Stockholders to the extent of such unsatisfied liability up to the amounts distributed to such Holdings Stockholders. Holder Tax The following summary applies only to Holders who are United States persons for federal income tax purposes and except as specifically described below, does not apply to Holders who are not U.S. persons. Holders of Class A Common Stock and Mojo B Common Stock For federal income tax purposes, holders of Class A Common Stock ("Class A Stockholders") and Mojo B Common Stock ("Mojo B Stockholders") will recognize gain or loss as a result of the Transactions equal to the difference between the sum of (i) the fair market value of all of the Omnicom shares received (whether distributed or placed in the Liquidating Trust or the Stockholders General or Special Escrow Funds) plus (ii) the cash received in respect of any fractional shares, and their adjusted basis in the Class A Common Stock or Mojo B Common Stock. Class A Stockholders and Mojo B Stockholders who have held their shares for over one year at the time of the transaction will be subject to tax at rates up to the 28% maximum rate currently applicable to long-term capital gain. The basis in the shares of Omnicom Common Stock received will be equal to their fair market value on the Distribution Date and the holding period for the shares of Omnicom Common Stock will commence on the date of the distribution. Provided that the Liquidating Trust is classified as a trust for federal income tax purposes (see discussion below), if amounts in the Liquidating Trust are subsequently used to pay creditors (or payments are made to Omnicom out of the 38 Stockholders General or Special Escrow Funds), Class A Stockholders and Mojo B Stockholders should be entitled to a capital loss in the year such payments are made. If the amount of payments made to creditors that are allocable to a Class A Stockholder or Mojo B Stockholder are in excess of $3,000 and the other requirements of section 1341 of the Code are met, such shareholder should be able to compute his or her federal income tax liability for the year such payments are made under the provisions of section 1341 of the Code. Under section 1341 of the Code, a shareholder's federal income tax liability would be the lesser of the tax liabilities as computed under two alternative computation methods. Under the first method, the shareholder would compute his or her tax liability by taking a regular capital loss in the year that payments are made. Under the second method, the shareholder would decrease his or her tax liability in the year of payment by the amount of tax liability that was generated by the prior inclusion. The tax return for the year of inclusion would not be reopened under either computation method. No additional federal income tax consequences will occur when amounts are distributed from the Liquidating Trust to a Class A Stockholder or a Mojo B Stockholder. With respect to a Class A Stockholder's or Mojo B Stockholder's shares of Omnicom Common Stock that are placed in the Liquidating Trust or the Stockholders General or Special Escrow Funds, in the event the shares are disposed of by the Liquidating Trust or the Stockholders General or Special Escrow Funds, any difference in the value of the shares of Omnicom Common Stock between the date of distribution and the date disposed of by Liquidating Trust or such Escrow Funds will be treated as long-term or short-term capital gain or loss by such Holder, depending on the holding period. Such Holder's share of any other income (including dividends paid on the Omnicom Common Stock), gain or loss realized by the Liquidating Trust or the Stockholders General or Special Escrow Funds will be recognized by such Holder (whether or not distributed) in computing his or her federal income tax. Holders of Class B Common Stock Holders of Class B Common Stock (other than holders of Mojo B Common Stock) ("Class B Stockholders") will recognize compensation income on the date of distribution of shares of Omnicom Common Stock pursuant to the Plan of Liquidation, equal to the excess of the sum of (i) the then fair market value of the shares of Omnicom Common Stock (including the value of any amount to be held in the Liquidating Trust or the Stockholders General or Special Escrow Funds) plus (ii) the cash received in respect of any fractional shares, over the sum of (a) the amount they paid for their Class B Common Stock, and (b) the amount, if any, of ordinary income which they have previously recognized in respect of their Class B Common Stock. The Holder's holding period for his or her shares of Omnicom Common Stock will commence on the date of distribution and the basis of the shares of Omnicom Common Stock will be the fair market value on the date of such distribution. With respect to a Class B Stockholder's shares of Omnicom Common Stock that are placed in the Liquidating Trust or the Stockholders General or Special Escrow Funds, in the event the shares are disposed of by the Liquidating Trust or such Escrow Funds, any difference in the value of the shares of Omnicom Common Stock between the date of distribution and the date disposed of by the Liquidating Trust or such Escrow Funds will be treated as long-term or short-term capital gain or loss by such Holder, depending on the holding period. Such Holder's share of any other income (including dividends paid on the Omnicom Common Stock), gains or losses realized by the Liquidating Trust or such Escrow Funds will be recognized by such Holder in computing his or her federal income taxes. In addition, to the extent that any amount placed in the Liquidating Trust or the Stockholders General or Special Escrow Funds is subsequently utilized to discharge an obligation of Holdings, the affected Class B Stockholder should be entitled to a federal income tax deduction, in the year of such expenditure, equal to the amount of such expenditure previously included in the Class B Stockholder's income. If the amount of the deduction exceeds $3,000, such deduction may qualify for treatment under the provisions of Code section 1341, previously described above. No additional federal income tax consequences will occur when amounts are distributed from the Liquidating Trust to the Class B Stockholder. Tax on Holders of EPUs and EARs Rightsholders will recognize compensation income equal to the sum of (i) the fair market value of the shares of Omnicom Common Stock which they are entitled to receive in the liquidation of Holdings, on the date such Omnicom 39 Common Stock is either distributed or made available to them, plus (ii) the cash received in respect of any fractional shares. For this purpose, any Omnicom Common Stock placed in the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds on their behalf is treated as having been distributed to them. With respect to a Rightsholder's shares of Omnicom Common Stock that are placed in the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds, in the event the shares are disposed of while in the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds, any difference in the value of the Omnicom Common Stock between the date of distribution and the date disposed of will be treated as long-term or short-term capital gain or loss by the Rightsholder, depending on the holding period. The Rightsholder's share of any other income (including dividends paid on the Omnicom Common Stock), gains or losses realized by the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds will be recognized by the Rightsholder in computing his or her federal income tax. In addition, to the extent that any amount placed in the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds is subsequently utilized to discharge an obligation of Holdings, the affected Rightsholder should be entitled to a federal income tax deduction, in the year of such expenditure, equal to the amount of such expenditure previously included in the Rightsholder's income. If the amount of the deduction exceeds $3,000, such deduction may qualify for treatment under the provisions of Code section 1341 previously discussed above. No additional federal income tax consequences will occur when amounts are distributed from the Liquidating Trust Escrow Fund or the Rightsholders General or Special Escrow Funds to the Rightsholder. Certain Consequences to Non-U.S. Holders A Holder who is not a U.S. person (a "Non-U.S. Holder") will generally not be subject to United States federal income tax with respect to gain or ordinary income recognized as a result of the transaction unless (i) the gain is effectively connected with a trade or business of the Non-U.S Holder in the United States (or, in the case of ordinary income, is from United States sources; i.e., is payable as the result of services performed in the United States) or (ii) in the case of a Non-U.S. Holder who is an individual and holds Class A common stock or Mojo B Common Stock as a capital asset, such Holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met. Assuming the Liquidating Trust and Liquidating Trust Escrow Fund are each classified as a trust for federal income tax purposes (see discussion below) dividends paid on the shares of Omnicom Stock held in the Liquidating Trust and Liquidating Trust Escrow Fund and dividends paid on Omnicom Common Stock held in the Rightsholders or Stockholders General or Special Escrow Funds will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty, unless the dividends are effectively connected with the conduct of a trade or business of the Non-U.S. Holder in the United States. Under the current United States- Australia income tax treaty, for example, dividends are subject to withholding at a 15% rate. A Non-U.S. Holder who wishes to claim the benefit of an applicable treaty rate may be required to satisfy applicable certification and other requirements. Dividends that are effectively connected with a trade or business in the United States are subject to United States federal income tax on a net basis. Liquidating Trust and Liquidating Trust Escrow Fund Holdings believes that the Liquidating Trust and the Liquidating Trust Escrow Fund will each be treated as a grantor trust for federal income tax purposes and not as an association taxable as a corporation. As such, items of taxable income, deduction, gain and loss (including gain or loss on the sale of shares of Omnicom Common Stock) would be passed through to the Holders and reported by them on their tax return (whether or not distributed). However, since the Liquidating Trust and the Liquidating Trust Escrow Fund will not meet all of the IRS requirements to obtain a ruling as to grantor trust status, there is a risk that the IRS could successfully assert that the Liquidating Trust or the Liquidating Trust Escrow Fund should be taxed as a corporation. In that event, the Liquidating Trust or the Liquidating Trust Escrow Fund would pay tax on its income at the regular corporate rates of up to 35% and any distributions to Holders would be taxed as dividends at ordinary income tax rates to the extent of the earnings and profits of the Liquidating Trust or the Liquidating Trust Escrow Fund. 40 Withholding Taxes That portion of the Omnicom Common Stock (and any cash received in respect of fractional shares) which is taxable to Holders as ordinary or compensation income is subject to federal income tax withholding at the prescribed rate of 28%, as well as FICA and other applicable federal, state and local withholding. Holdings expects that Holders will make arrangements with Holdings to satisfy their tax obligations. A Holder who fails to satisfy this withholding requirement could be subject to potential additional estimated tax payment liability and to penalties if such liability is not satisfied. If any person receiving shares of Omnicom Common Stock in respect of his employment with Holdings does not pay the relevant taxes, the Liquidating Trust and the related Liquidating Trust Escrow Fund would have liability for the amount of such tax. THE TAX CONSEQUENCES OF THE SALES OF ASSETS, THE LIQUIDATION OF HOLDINGS AND THE INCOME WITH RESPECT TO THE LIQUIDATING TRUST, LIQUIDATING TRUST ESCROW FUND, AND ESCROW FUNDS MAY BE INFLUENCED BY THE IRS'S VIEWS OF FACTUAL CIRCUMSTANCES SURROUNDING THE TRANSACTIONS PROVIDED FOR HEREIN. NO RULINGS OR OPINIONS OF COUNSEL HAVE BEEN OBTAINED WITH RESPECT TO THESE MATTERS. EACH HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EXTENT OF ANY RELEVANT STATE, LOCAL OR FOREIGN TAX LAWS. 41 BUSINESS INFORMATION CONCERNING OMNICOM (The information contained in this section is qualified in its entirety by reference to documents incorporated by reference.) Omnicom, through its wholly and partially owned companies, operates advertising agencies which plan, create, produce and place advertising in various media such as television, radio, newspaper and magazines; and offers clients such additional services as marketing consultation, consumer market research, design and production of merchandising and sales promotion programs and materials, direct mail advertising, corporate identification, and public relations. Omnicom offers these services to clients worldwide on a local, national, pan-regional or global basis. Operations cover the major regions of North America, the United Kingdom, Continental Europe, the Middle East, Latin America, the Far East and Australia. In 1994 and 1993, 54% and 52%, respectively, of Omnicom's billings came from its non-U.S. operations. According to the unaudited industry-wide figures published in the trade journal, ADVERTISING AGE, in 1994 Omnicom was ranked as the third largest advertising agency group worldwide. Omnicom operates three separate, independent agency networks: the BBDO Worldwide Network, the DDB Needham Worldwide Network and the TBWA International Network. Omnicom also operates independent agencies, Altschiller & Company and Goodby, Silverstein & Partners, and certain marketing service and specialty advertising companies through Diversified Agency Services. BBDO Worldwide, DDB Needham Worldwide and TBWA International, by themselves and through their respective subsidiaries and affiliates, independently operate advertising agency networks worldwide. Their primary business is to create marketing communications for their clients' goods and services across the total spectrum of advertising and promotion media. Each of the agency networks has its own clients and competes with each other in the same markets. The BBDO Worldwide, DDB Needham Worldwide and TBWA International agencies typically assign to each client a group of advertising specialists which may include account managers, copywriters, art directors and research, media and production personnel. The account manager works with the client to establish an overall advertising strategy for the client based on an analysis of the client's products or services and its market. The group then creates and arranges for the production of the advertising and/or promotion and purchases time, space or access in the relevant media in accordance with the client's budget. 42 SELECTED FINANCIAL DATA OF OMNICOM The following table summarizes certain selected consolidated financial data of Omnicom and its subsidiaries and is qualified in its entirety by the more detailed financial information and notes thereto incorporated by reference into this Prospectus/Information Statement.
(Dollars in Thousands Except Per Share Amounts) -------------------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- For the year: Commissions and fees ................ $1,756,205 $1,516,475 $1,385,161 $1,236,158 $1,178,233 Income before change in accounting principles .......... 108,134 85,345 65,498 57,052 52,009 Net income .......................... 80,125 85,345 69,298 57,052 52,009 Earnings per common share before change in accounting principles: Primary ......................... 3.15 2.79 2.31 2.08 2.01 Fully diluted ................... 3.07 2.62 2.20 2.01 1.94 Cumulative effect of change in accounting principles: Primary ........................... (0.81) -- 0.14 -- -- Fully diluted ..................... (0.81) -- 0.11 -- -- Earnings per common share after change in accounting principles: Primary ........................... 2.34 2.79 2.45 2.08 2.01 Fully diluted ..................... 2.34 2.62 2.31 2.01 1.94 Dividends declared per common share ............................. 1.24 1.24 1.21 1.10 1.07 At year end: Total assets ........................ 2,852,204 2,289,863 1,951,950 1,885,894 1,748,529 Long-term obligations: Long-term debt ...................... 187,338 278,312 235,129 245,189 278,960 Deferred compensation and other liabilities ....................... 95,973 56,933 51,919 31,355 25,365
43 BUSINESS INFORMATION CONCERNING HOLDINGS General The principal line of business of Holdings and its subsidiaries includes planning and creating advertising campaigns for clients, purchasing various media spots (television, radio, newspapers and magazines), and providing marketing consultation, market research and production services. In 1994, Holdings was the 16th largest advertising agency in the U.S. and 27th largest in the world according to statistics published in Advertising Age, a trade publication. Holdings operates major offices in Venice, California, London, New York and Toronto, and a regional network of offices in, Atlanta, Calgary, Chicago, Dallas, San Francisco, Washington, D.C. and Jacksonville. The principal office of Chiat/Day is located at 180 Maiden Lane, New York, New York 10038. Sales and Marketing Holdings believes that it has a reputation as an industry leader in terms of the creativity and effectiveness of its campaigns. Holdings believes that its reputation and the "Chiat/ Day" name are important generators of business. Holdings has organized management teams to explore and pursue clients in the major industry groups that it does not currently service. Holdings maintains constant contact with industry sources for new business leads and presents five to eight extensive business pitches per office per year. Customers Holdings serves a diversified and well-known client base in many industries, including airlines, automobile, banking, cellular communications, consumer electronics, entertainment, financial services, food products, insurance, footwear, personal computers and soft drinks. Eight of Holdings' ten largest clients representing 57% of 1994 gross income have been with Holdings for more than five years. Since 1988, Nissan Motor Company has been Holdings' largest client. In 1992, Nissan awarded its Infiniti account to Holdings without requiring competitive bids. Nissan and Infiniti accounted for 49% of Holdings' gross income in 1993 and 55% of Holdings' gross income in 1994. Holdings has no other client which accounts for 10% or more of its gross income. Like most advertising agencies, Holdings experiences a certain amount of client turnover. Agreements between Holdings and its clients are generally terminable by either Holdings or the client on 90 days notice. Turnover is primarily generated by a change in the management of the client, an effort by Holdings to pursue a client in the same category as an existing client, a client merger or a change in the client's financial or strategic direction. Competition Agencies typically pitch new clients by presenting an ad campaign in competition against other firms. The basis for the selection includes: relevance of the campaign to the product strategy, creativity, market insights, the agency's ability to provide the appropriate media exposure, past success and personal chemistry. Holdings believes that agencies are rarely selected on the basis of price. Typically, agencies are precluded from representing more than one client in an industry for reasons of potential conflicts. Services Holdings' principal line of business includes planning and creating advertising campaigns for clients; purchasing various media placements in local television, network, cable, radio, newspapers, magazines and outdoor; and providing marketing, market research and production services. Holdings' four major offices (New York, Venice, Toronto and London) are full service operations with a total workforce of approximately 600, committed to Account Management, Account Planning, Creative, Media Planning and Buying, and Production. The offices that form the regional network with a total workforce of approximately 150 support the localized needs of Holdings' national clients. 44 Pricing and Billing Holdings generates most of its revenue from fees and commissions for production and placement in various media of agency generated advertising campaigns. Most of Holdings' revenue is based on a combination of commissions and fees with seven of the ten largest accounts on this system. This pricing method provides a fixed minimum fee augmented by commissions based on the client's media billings. This pricing method protects the agency from large variations in its clients' media budgets. Some clients are billed on a "cost plus mark-up" fee structure. Cost plus mark-up billing entails billing the client a fixed monthly fee for the staffing dedicated to the account plus an amount to cover overhead. In addition, Holdings is sometimes paid a bonus by clients based on predetermined performance criteria. Billing and Accounting Practices Revenue is recognized in the month in which the advertisement is run. "Advance billings" in the current liability section of the balance sheet represents costs and commissions which have been approved by and billed to clients but for which related vendor invoices have not been received and income has not been earned. "Expenditures billable to clients" in the current asset portion of the balance sheet represents unbilled receivables. Both "Advance billings" and "Expenditures billable to clients" are primarily the result of timing differences between the receipt of invoices (media and production) and the client billing cycle. For media placement, Holdings obtains written approval of an estimate (the "Estimate") from its clients before commitments are made to media vendors. Clients are billed based on the approved Estimate. Production of advertising spots follows a similar pattern, except that in this case Holdings bills the client as costs are incurred. On average, production costs charged to clients account for about 10% of all billing activity. Spot (local television), newspaper, magazine and radio advertising account for about 65% of billings. Network advertising represents the remaining 25% of billings. Seasonality Historically, Holdings' business has been seasonal, with increased billings generated in the third and fourth quarters of each fiscal year. The seasonality generally reflects the media placement patterns of Holdings' clients and is similar to that experienced by other firms in the industry. Personnel On March 31, 1995, Holdings employed approximately 750 persons. In addition, turnover at the senior management level has been very low. All of the eight senior executives of Holdings have been with Holdings for at least eight years, with an average tenure of over 13 years. Since most employees are assigned to one specific account, Holdings can respond quickly to account losses or acquisitions by hiring or reducing staff accordingly. None of Holdings' employees are represented by unions. Legal Proceedings Holdings is not involved in any material pending legal proceedings not covered by insurance or by adequate indemnification, which, if decided adversely to Holdings' interest, would have a material adverse effect on the financial position of Holdings. Properties All of Holdings' offices are located in leased premises. Holding's principal offices are in New York City and Venice. Holdings also leases offices in Calgary, Chicago, Dallas, London, Toronto, San Francisco, Washington, D.C. and Jacksonville. 45 SELECTED FINANCIAL DATA OF HOLDINGS The following table summarizes certain selected consolidated financial data of Holdings and is qualified in its entirety by the more detailed financial information and notes thereto appearing elsewhere in this Prospectus/Information Statement. The financial data as of and for each of the five years ended October 31, 1994 is derived from the financial statements audited by Coopers & Lybrand LLP, independent public accountants. The financial data for the three-month periods ended January 31, 1994 and 1995, are derived from unaudited financial statements and, in the opinion of Holdings, reflect all adjustments, consisting only of normal non-recurring adjustments, necessary for a fair statement of results of operations for such periods. Operating results for the three months ended January 31, 1995, are not necessarily indicative of the results that may be achieved for the entire year ending October 31, 1995. See "Financial Statements", the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Holdings".
(Dollars in Thousands Except Per Share Amounts) --------------------------------------------------------------- 1994 1993 1992 1991 1990 ------ ------- ------- ------- ------- For the years ended October 31, Fee and commission income $89,277 $97,198 $106,013 $115,470 $131,457 Operating expenses 78,117 88,224 95,421 120,369 147,375 Restructuring expenses -- 25,848 -- -- -- Income (loss) before income tax provision 7,573 (20,690) 4,162 (5,656) (16,642) Net income (loss) 5,971 (21,545) 3,407 (6,089) (17,389) Earnings per share: Net income (loss): Primary 0.11 (0.39) 0.06 (0.10) (0.25) Primary (including EPUs and EARs) 0.05 (0.39) 0.04 (0.10) (0.25) Total assets 96,077 74,871 99,843 150,701 165,771 Long-term obligations: Long-term debt 10,448 20,697 43,657 70,398 92,598 Other liabilities 12,800 15,433 4,103 25,995 7,019
46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF HOLDINGS Results of Operations Fiscal year 1993 compared to fiscal year 1992 and fiscal year 1994 compared to fiscal year 1993. Fee and commission income decreased in fiscal years ended October 31, 1993 and 1994 by 9% and 8%, respectively, compared to the prior fiscal years. The decrease in fiscal year 1993 was mainly attributable to the loss of the American Express and Nutrasweet accounts and the fiscal year 1994 decrease was mainly attributable to loss of the Reebok account. Salaries and employee benefit expenses were reduced by 6% in fiscal year 1993 and 3% in fiscal year 1994, respectively, as compared to the prior fiscal years. Due to the reduction in fee and commission income in fiscal years 1993 and 1994, staff reductions were made to reduce costs. Selling, general and administrative expenses were slightly higher in fiscal year 1993 from fiscal year 1992. In fiscal year 1994, Holdings established a "virtual office" in its New York and Venice offices by eliminating fixed office locations for personnel. Holdings and Advertising employees carry portable phones and computers and are encouraged to work where they feel most productive. Based on the implementation of the virtual office, selling, general and administrative expenses were reduced in fiscal year 1994 by 26% compared to fiscal year 1993. A one-time restructuring charge was taken in fiscal year 1993 of $25,848,000. This restructuring charge represented the estimated loss on subletting the premises at 79 Fifth Avenue in New York through its December 31, 1997 term, the write-down of leaseholds at 79 Fifth Avenue in New York and at 340 Main Street and 320 Hampton Avenue in Venice, California. The $637,000 and $12,000 losses from operations of a foreign subsidiary in fiscal years 1993 and 1992 reflect the operating results of Holdings' Australian subsidiary, the stock of which was transferred effective January 1, 1993 to an unrelated third party. As a result of such transfer, Holdings recorded a $3,504,000 gain on disposal of foreign subsidiary in fiscal year 1993. The 42% decrease in other operating expenses in fiscal year 1993 compared to fiscal year 1992 was due largely to the impact of a $3,200,000 charge in fiscal year 1992 to reflect the settlement of certain litigation. An additional 92% reduction in other operating expenses was realized in fiscal year 1994 compared to fiscal year 1993 primarily due to income received in connection with the sale of Holdings' Australian subsidiary and due to increased deferred compensation expenses in fiscal year 1993 of approximately $1,000,000. Interest expense was reduced by 39% in fiscal year 1993 versus fiscal year 1992 due to reduced levels of debt. A 2% increase in interest expense in fiscal 1994 versus fiscal 1993 was due to an increase in dividends issued to the profit sharing plan in 1994. The income tax provision for fiscal year 1993 decreased 63% compared to fiscal year 1992 due largely to the use in fiscal year 1993 of net operating loss carryforwards previously generated. While the income tax provision increased 87% in fiscal year 1994 compared to fiscal year 1993, the income tax provision was less than what would have been provided under the statutory rate due to the use of net operating loss carryforwards and a foreign tax credit generated in fiscal year 1994. FASB 109 was adopted effective October 1, 1993 creating a deferred tax asset of $18,717,000. No benefit was recorded on the financial statements, but the effect is described in the footnotes. First quarter 1995 compared to first quarter 1994. In the first quarter 1995, fee and commission income were down by 9% as compared to the same period of the previous year due to a change in spending patterns of clients. In first quarter 1995, salaries and employee benefits increased by 12% as compared to first quarter 1994 due to increased staffing in the creative and account services area. At the same time, reductions of 9% were made in the first quarter 1995 in administrative salaries as compared to the first quarter of the previous year. A reduction in selling, general and administrative expenses of 8% in first quarter 1995 versus first quarter 1994 was attributable to the implementation of the virtual office. 47 Liquidity and Capital Resources Holdings' principal source of operating capital has been from operations, Senior Debt of $20,000,000 under the Amended and Restated Credit Agreement and Senior Subordinated Debt of $11,000,000 under the 13.25% Senior Subordinated Notes. The Senior Debt is due and payable on December 10, 1995 and the Senior Subordinated Debt is payable on August 1, 1995. In the event the Transactions are not consummated, Holdings would be required to refinance its entire debt structure by December 10, 1995. Although Holdings received proposals regarding refinancing the Senior Subordinated Debt and Holdings bank debt, such proposals were not pursued. Working capital increased in fiscal year 1993 by 2.6% versus fiscal year 1992 and decreased in fiscal year 1994 by 15.7% versus fiscal year 1993. There was a slight decrease in working capital from fiscal year 1994 to the quarter ended January 31, 1995. Capital expenditures, net of retirements of $900,000, were made in fiscal year 1993 and $5,600,000 in fiscal year 1994. These expenditures included, among other things, leasehold improvements and upgraded telephone and computer systems. Holdings believes that its cash flows and funds available under existing debt facilities will be adequate to meet its cash requirements through the contemplated Closing Date of the Acquisition, but it is possible that additional borrowings from Omnicom may be required. DESCRIPTION OF OMNICOM CAPITAL STOCK Each share of Omnicom Common Stock entitles the holder thereof to one vote on all matters submitted to a vote of shareholders. All shares of Omnicom Common Stock have equal rights and are entitled to such dividends as may be declared by the Board of Directors out of funds legally available therefor and to share ratably upon liquidation in the assets available for distribution to stockholders. Omnicom is not aware of any restrictions on its present or future ability to pay dividends. However, in connection with certain borrowing facilities entered into by Omnicom and its subsidiaries, Omnicom is subject to certain restrictions on current ratio, ratio of total consolidated indebtedness to total consolidated capitalization, ratio of net cash flow to consolidated indebtedness, and limitation on investments in and loans to affiliates and unconsolidated subsidiaries. The Omnicom Common Stock is not subject to call or assessment, has no preemptive conversion or cumulative voting rights and is not subject to redemption. Omnicom's shareholders elect a classified board of directors, and may not remove a director except by an affirmative two-thirds vote of all outstanding shares. A two-thirds vote is also required for Omnicom's shareholders to amend Omnicom's by-laws or certain provisions of its charter documents, and to change the number of directors comprising the full board. Omnicom may issue Omnicom Preferred Stock in series having whatever rights and preferences the Board of Directors may determine. One or more series of Omnicom Preferred Stock may be made convertible into Omnicom Common Stock at rates determined by the Board of Directors, and Omnicom Preferred Stock may be given priority over the Omnicom Common Stock in payment of dividends, rights on liquidation, voting and other rights. Omnicom has no current plans to issue any Omnicom Preferred Stock. Omnicom Preferred Stock may be issued from time to time upon authorization of the Omnicom Board of Directors without action of the shareholders. Omnicom currently has outstanding $143,750,000 of 4.5%/6.25% Step-Up Convertible Subordinated Debentures with a scheduled maturity in 2000, which are convertible into Omnicom Common Stock at a conversion price of $54.88, subject to adjustment in certain events. Chemical Bank, 450 West 33rd Street, New York, New York 10001 is the transfer agent and the registrar of the Omnicom Common Stock. 48 DESCRIPTION OF HOLDINGS CAPITAL STOCK Holdings is a Delaware corporation incorporated on May 2, 1988. Holdings is the sole stockholder of Advertising, a Delaware corporation incorporated on March 15, 1985. Holdings Common Stock Holdings has two classes of Common Stock: Class A Common Stock, par value $0.01 per share and Class B Common Stock, par value $0.01 per share. Class A Common Stock: There are 75,000,000 shares of Class A Common Stock authorized and there were [13,527,269] shares outstanding at March 31, 1995. The holders of Class A Common Stock are entitled to receive dividends when and as declared by the Holdings Board of Directors, but only after full cumulative dividends on the Holdings Preferred Stock have been paid or declared in full and sums set aside for the payment thereof. Class A Common Stock and Class B Common Stock rank equal with respect to the payment of dividends. Pursuant to the Holdings Certificate, holders of Class A Common Stock, excluding certain shares originally issued to Morgan Capital Corporation, have additional voting rights with respect to (i) certain transactions with affiliates, (ii) the creation of certain employee benefit plans, (iii) changes to the Holdings Certificate or By-laws which adversely affect the Class A Common Stock, (iv) certain sales or issuances of stock, and (v) certain business combinations. In the event of certain dilutive transactions other than in connection with a merger, consolidation, reorganization, or any public offering of stock of Holdings or in consideration of the acquisition of stock or assets of another entity, holders of Class A Common Stock are entitled to receive additional shares to prevent dilution. At March 31, 1995, there were [19] record holders of Class A Common Stock. See "Plan of Liquidation" herein for a description of the rights of holders of Class A Common Stock in the event of a liquidation. Class B Common Stock: There are 200,000,000 shares of Class B Common Stock authorized and there were [39,993,465] shares outstanding at March 31, 1995. The holders of Class B Common Stock are entitled to receive dividends when and as declared by the Board of Directors, but only after full cumulative dividends on the Holdings Preferred Stock have been paid or declared in full and sums set aside for the payment thereof. Class A Common Stock and Class B Common Stock rank equal with respect to the payment of dividends. Class B Common Stock has the same voting rights as Class A Common Stock, except that certain shares of Class A Common Stock have additional voting rights in some situations as discussed above. At March 31, 1995, there were approximately 28 record holders of Class B Common Stock. See "Liquidation" herein for a description of the rights of holders of Class B Common Stock in the event of a liquidation. Shares of Class B Common Stock which have been issued pursuant to the 1988 Chiat/Day Holdings, Inc. Restricted Stock Purchase Plan (the "Holdings Stock Purchase Plan") are subject to the restrictions contained therein. Any sale, transfer or disposition of the shares must comply with the provisions of the Holdings Stock Purchase Plan and of the related Stockholders' Agreements. 49 The following table reflects the beneficial ownership of directors, executive officers and owners of more than 5% of the outstanding shares of each of the Class A Common Stock, the Class B Common Stock (without taking into account the outstanding EARs and EPUs), and all Holdings Common Stock, in each case on a fully diluted basis at the close of business on March 31, 1995:
Shares of Percent Shares of Class A Shares of Class Holdings of Holdings Name and Address Common Stock Percent of B Common Percent Common Common of Beneficial Owner Owned Class Stock Owned(1) of Class Stock Stock - ------------------- ------------- -------- ------------ ------ ------- --------- Jay Chiat ...................... 6,794,533 50% 18,547,970 46% 25,342,503 47% c/o Chiat/Day inc. Advertising 180 Maiden Lane New York, NY 10038 Leland Clow .................... 0 * 3,641,020 9% 3,641,020 7% c/o Chiat/Day inc. Advertising 340 Main Street Venice, CA 90291 Adelaide Horton ................ 100,000 * 0 * 100,000 * c/o Chiat/Day inc. Advertising 180 Maiden Lane New York, NY 10038 Robert Kuperman ................ 50,000 * 969,015 2% 1,019,015 2% c/o Chiat/Day inc. Advertising 340 Main Street Venice, CA 90291 Ira Matathia ................... 0 * 375,000 * 375,000 * c/o Chiat/Day inc. Advertising 180 Maiden Lane New York, NY 10038 Tom Patty ...................... 100,000 * 1,282,045 3% 1,382,045 3% c/o Chiat/Day inc. Advertising 340 Main Street Venice, CA 90291 David C. Wiener ................ 125,000 * 2,876,060 7% 3,001,060 6% 440 Sylvan Avenue Englewood Cliffs New Jersey, 07632 Robert Wolf .................... 200,000 1% 3,376,060 8% 3,576,060 7% c/o Chiat/Day inc. Advertising 340 Main Street Venice, CA 90291 Mac & Co (2) ................... 5,142,846 38% 0 * 5,142,846 10% c/o Harvey Rabinowitz Mellon Securities Trust Co. 120 Broadway, New York, NY 10271 Directors and Officers as a Group 7,419,533 55% 33,159,475 83% 40,579,008 76%
- ---------------- * represents holdings of less than 1% (1) Jay Chiat also holds 5,396,715 EPUs and 26,945,903 EARs; Leland Clow also holds 566,360 EPUs and 3,280,420 EARs; Adelaide Horton also holds 700,000 EPUs and 196,825 EARs; Robert Kuperman also holds 1,169,240 EPUs and 656,084 EARs; Ira Matathia also holds 1,125,000 EPUs and 131,217 EARs; Tom Patty also holds 1,132,725 EPUs and 984,126 EARs; David C. Wiener also holds 176,970 EPUs and 1,312,168 EARs; Robert Wolf also holds 1,176,970 EPUs and 1,968,252 EARs. (2) Chesterfield Investments is the beneficial owner. Following the Acquisition and the dissolution and liquidation of Holdings described herein there will be no Class A Common Stock or Class B Common Stock outstanding and none of the current directors and officers of Holdings will own in excess of % of Omnicom Common Stock. 50 No dividends have been declared or paid on the Holdings Class A Common Stock or Class B Common Stock in the current fiscal year, or in any of the periods presented in "Selected Financial Data of Holdings". Pursuant to the Amended and Restated Credit Agreement, Advertising is prohibited from paying dividends other than dividends paid in shares. There is no established trading market for Holdings Class A Common Stock or Class B Common Stock. Holdings Preferred Stock There are 200,000 shares of Holdings Preferred Stock authorized and there were 140,817.7393 shares outstanding at March 31, 1995. All of the outstanding shares of Holdings Preferred Stock are owned by the Profit Sharing Plan. The holders of Holdings Preferred Stock are entitled to receive cumulative dividends payable in cash, or at Holdings' option, in shares of Holdings Preferred Stock (valued at $100 per share) or a combination of cash and shares of Holdings Preferred Stock at a rate equal to 9% per annum of the liquidation preference of all shares of Holdings Preferred Stock outstanding, if such amount is paid entirely in cash, or at a rate of 10% per annum of the liquidation preference if such amount is paid entirely in additional shares of Holdings Preferred Stock, or at a blended rate based upon the weighted average of (i) the number of shares of Holdings Preferred Stock in respect of which dividends are paid in cash multiplied by 9%, and (ii) the number of shares in respect of which dividends are paid in additional shares of Holdings Preferred Stock multiplied by 10%. All dividends on shares of Holdings Preferred Stock are payable, if, when and as declared by the Board of Directors, annually in arrears on August 1, of each year. Any dividends in arrears on the Holdings Preferred Stock accrue dividends at the rate of 9% per annum. The holders of Holdings Preferred Stock are not entitled to vote on any corporate matters, except as required by law. In the event of liquidation, the holders of Holdings Preferred Stock are entitled to receive the amount of $100 in cash for each outstanding share of Holdings Preferred Stock plus all declared and unpaid dividends before any distribution to the holders of Class A Common Stock or Class B Common Stock. If the assets available are insufficient for such a payment, the holders of Holdings Preferred Stock shall share ratably in any distribution. Subject to the prior payment of certain senior indebtedness of Advertising, the Holdings Preferred Stock may be redeemed at Holdings' option on and after July 31, 1996 at a price of $100 per share plus accrued but unpaid dividends subject to certain restrictions provided in the Holdings Certificate. Subject to the prior payment of certain senior indebtedness of Advertising, the Holdings Preferred Stock may be redeemed at the holder's option on and after July 31, 1996 at a price of $100 per share plus accrued but unpaid dividends subject to certain restrictions provided in the Holdings Certificate. Dividends in respect of shares of Holdings Preferred Stock have been declared annually since issuance in July of each year and have been paid by the issuance of additional shares of Holdings Preferred Stock. There is no trading market for the Holdings Preferred Stock. Pursuant to the terms of the Profit Sharing Plan Purchase Agreement, the Profit Sharing Plan has agreed with Holdings to sell all of the outstanding shares of Holdings Preferred Stock to Holdings on or about July 1, 1995, but no later than July 10, 1995, for an amount payable in cash of $14,081,773.93 consisting of $100 per share. Vote Required The presence of the holders of a majority of the voting power of all shares of Class A Common Stock and Class B Common Stock entitled to vote outstanding on the record date is necessary to constitute a quorum at the Special Meeting. Under the DGCL and the Holdings Certificate the affirmative vote of the holders of the majority of the outstanding shares of Class A Common Stock and Class B Common Stock voting together as a class, are required to approve each of the sales pursuant to the Acquisition Agreement and Advertising Stock Sale Agreement, the Plan of Liquidation and the Amendment to the Holdings Certificate. Abstentions will have the effect of negative votes. Directors, officers and affiliates of Holdings who hold in the aggregate more than a majority of the outstanding Class A Common Stock and Class B Common Stock in the aggregate have indicated their intention to vote in favor of each of the Holdings Vote Matters. See "The Transactions--Interests of Certain Persons in the Transactions." Accordingly, if such persons vote in favor of these the Transactions, they may be approved even if all of the other Holdings Stockholders vote against these proposals. 51 None of the Holdings Vote Matters shall become effective unless all of the proposals are adopted by the requisite vote of the Holdings Stockholders. Rights of Dissenting Holdings Stockholders It is intended that the transactions described herein, including the sale of the assets and the distribution to the Holdings Stockholders in liquidation of Holdings, will not give rise to dissenters' rights in favor of Holdings Stockholders under Delaware law. Equity Appreciation Rights Pursuant to the EAR Plan, Holdings has authorized [54,084,848] EARs each of which is equivalent to one share of Class B Common Stock and has the same priority as Class B Common Stock in the event of a liquidation. In the absence of liquidation, the EARs are valued at their net book value, which was $0 at March 31, 1995. At the close of business on March 31, 1995, there were [36,939,112] EARs outstanding. At the Closing Date, all of the outstanding EARs will be vested. Equity Participation Units Pursuant to the EPU Plan, Holdings has authorized 50,000,000 EPUs, each of which is equivalent to one share of Class B Common Stock and has the same priority as Class B Common Stock in the event of a liquidation. In the absence of liquidation, the EPUs are valued at their net book value, which was $0 at March 31, 1995. At March 31, 1995 there were [22,498,890] EPUs outstanding. At the Closing Date all of the EPUs will be vested. COMPARISON OF SHAREHOLDER RIGHTS Upon consummation of the Acquisition and the subsequent dissolution of Holdings and distribution of shares of Omnicom Common Stock to Holdings Stockholders and Rightsholders, the shareholders of Holdings, a Delaware corporation, will become shareholders of Omnicom, a New York corporation, and their rights as such will be governed by New York law, as well as the Omnicom Certificate of Incorporation (the "Omnicom Certificate") and By-laws (the "Omnicom By-laws") as amended from time to time in accordance with New York law. While it is not practical to describe all changes in the rights of Holdings shareholders that will result from the application of New York law in lieu of Delaware law and the differences between the Omnicom Certificate and the Omnicom By-laws and the Holdings Certificate and the Holdings By-laws (the "Holdings By-laws"), the following is a summary of material differences. References to the "NYBCL" are to the New York Business Corporation Law, while references to the "DGCL" are to the Delaware General Corporation Law. Special Meetings of Stockholders Under Delaware law, a special meeting of stockholders may be called only by the board of directors or by such person as may be authorized by the certificate of incorporation or by-laws. The Holdings By-laws provide that a special meeting of stockholders may be called by the Board of Directors, the Chairman of the Board or the President and shall be called by the Board upon the written request of the holders of record of a majority of the outstanding shares entitled to vote at the meeting requested to be called. Under New York law, a special meeting of shareholders may be called by the board of directors and by such person or persons as may be authorized to do so in the certificate of incorporation or by-laws. In addition, if an annual shareholder meeting has not been held for a certain period of time and a sufficient number of directors were not elected to conduct the business of the corporation, the board shall call a special meeting for the election of directors. If the board fails to do so, or sufficient directors are not elected within a certain period, holders of 10% of the shares entitled to vote in an election of directors may call a special meeting for such an election. The Omnicom By-laws provide that a special meeting of shareholders may be called, for any purpose or purposes, by the Board of Directors or by the President, or by the Secretary upon the request of a majority of the Board of Directors. 52 Removal of Directors Under Delaware law, unless otherwise provided in the certificate of incorporation or the by-laws, shareholders may remove any director, with or without cause, by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of directors. The Holdings By-laws provide that directors may be removed with or without cause by vote of the stockholders. Under New York law, (i) shareholders may remove any director for cause, and the certificate or provision of a by-law adopted by the shareholders may give the board such right; (ii) if the certificate or the by-laws so provide, shareholders may remove directors without cause; and (iii) an action to remove a director for cause may be brought by the attorney-general or by the holders of ten percent of the outstanding shares, whether or not entitled to vote. Neither the Omnicom Certificate nor the Omnicom By-Laws permit the removal of directors other than for cause. Vacancies On The Board Under Delaware law, unless otherwise provided in the certificate of incorporation or the by-laws, the board of directors may fill any vacancy on the board including vacancies resulting from an increase in the number of directors. Under the Holdings By-laws, vacancies on the Board for any reason (including vacancies resulting from an increase in the number of directors) except the removal of directors by stockholders (which may only be filled by vote of the stockholders) may be filled by vote of a majority of the directors then in office. A director elected to fill a vacancy shall be elected to hold office for the unexpired term of his predecessor. Under New York law, newly created directorships resulting from an increase in the number of directors and vacancies occurring in the board for any reason except the removal of directors without cause may be filled by vote of the board. However, the certificate of incorporation or by-laws may provide that such newly created directorships or vacancies are to be filled by vote of the shareholders. Unless the certificate of incorporation or the specific provision of a by-law adopted by the shareholders provide that the board may fill vacancies occurring in the board by reason of the removal of directors without cause, such vacancies may be filled only by vote of the shareholders. A director elected to fill a vacancy, unless elected by the shareholders, will hold office until the next meeting of shareholders at which the election of directors is in the regular order of business and until his or her successor has been elected and qualified. The Omnicom By-laws provide that any vacancy in the Omnicom Board may be filled by a majority vote of the remaining directors or by the shareholders. Classification of the Board of Directors Holdings' Board of Directors is not classified into classes. Omnicom's Certificate of Incorporation provides that directors are to be classified into three classes, which are to hold office in staggered three-year terms. Books and Records; Inspection Under Delaware law, any person who is a shareholder of record has the right to examine, for any purpose reasonably relating to his or her interest as a shareholder, the minutes of a corporation and the right to receive upon request certain financial statements of the corporation. Under New York law, only shareholders of record for at least six months and any person or the authorized agent of any person or persons holding at least five percent of any class of the outstanding shares have the right to examine the minutes of a corporation and the right to receive upon request certain financial statements of the corporation. Under the federal securities laws, shareholders of Omnicom receive financial information substantially more extensive than that required under New York law. Amendments of the Certificate of Incorporation Under Delaware law, an amendment to the certificate of incorporation proposed by the board of directors requires an affirmative vote of a majority of the outstanding stock entitled to vote thereon, and a majority of the outstanding stock of each class entitled to vote as a class thereon. Whether or not entitled by the charter, the holders of the outstanding shares of a class 53 are entitled to vote as a class on a charter amendment if the amendment would increase or decrease the aggregate number of authorized shares of such class or adversely affect the powers, preferences or special rights of such class. In addition, the Holdings Certificate specifically requires the approval of the holders of a majority of the shares of Class A Common Stock (excluding those shares originally issued to Morgan Capital Corporation) voting separately for any amendment to the Holdings Certificate which adversely affects their rights. Under New York law, an amendment or change of the certificate of incorporation may be authorized by vote of the Board, followed by vote of the holders of a majority of all outstanding shares entitled to vote thereon. Certain categories of amendments which adversely affect the rights of any holders of shares of a class or series of stock require the affirmative vote of the holders of a majority of all outstanding shares of such class or series, voting separately. The Omnicom Certificate requires the affirmative vote of 66 2/3% of the voting power of all outstanding shares of voting stock of Omnicom in order to amend or repeal the provisions of the Omnicom Certificate setting the number of directors constituting the entire Board of Directors and dividing the directors into classes, and absolving directors from personal liability pursuant to Section 719 of the NYBCL. Amendments to By-Laws Under Delaware law, the by-laws of a corporation generally may be amended or repealed by the affirmative vote of the holders of a majority of the shares entitled to vote thereon. As permitted by the DGCL, the Holdings By-laws provide that the Holdings By-laws may be made, altered or repealed by the Holdings Board. Any By-law adopted by the Holdings Board may be amended or repealed by the stockholders entitled to vote thereon. In addition, the Holdings Certificate specifically requires the approval of the holders of a majority of the shares of Class A Common Stock (excluding those shares originally issued to Morgan Capital Corporation) voting separately for any amendment to the Holdings By-laws which adversely affects their rights. Under New York law, except as otherwise provided in the certificate of incorporation, by-laws may be amended, repealed or adopted by the holders of shares entitled to vote in the election of any director. When so provided in the certificate of incorporation or a by-law adopted by the shareholders, by-laws may also be amended, repealed or adopted by the board by such vote as may be therein specified, which may be greater than the vote otherwise prescribed by law, but any by-law adopted by the board may be amended or repealed by the shareholders entitled to vote thereon. Under the terms of the Omnicom Certificate and Omnicom By-laws, Omnicom By-laws may be amended, repealed or adopted only by the affirmative vote of at least 66 2/3% of the total voting power of all outstanding shares of voting stock of Omnicom. Dividends and Distributions Delaware law permits the payment of dividends on capital stock, subject to any restrictions contained in the certificate of incorporation, out of a corporation's surplus (the excess of net assets over capital) or, in case there is no surplus, out of net profits for the current and/or preceding fiscal year. If the capital of the corporation is diminished to an amount less than the aggregate amount of capital represented by the outstanding stock having a preference on the distribution of assets, then dividends may not be declared and paid out of such net profits until the deficiency in the amount of capital represented by the shares having a preference on the distribution of assets shall have been repaired. The Holdings Certificate provides that unless full cumulative dividends on the Holdings Preferred Stock have been paid or declared in full and sums set aside for their payment, no dividends may be paid or declared on the Class A Common Stock or Class B Common Stock. The Amended and Restated Credit Agreement prohibits the payment of dividends other than dividends paid in shares. Under New York law, dividends may be declared or paid and other distributions may be made out of surplus only, so that the net assets of the corporation remaining after such declaration, payment or distribution must at least equal the amount of its stated capital. When any dividend is paid or any other distribution is made from sources other than earned surplus, a written notice must accompany such payment or distribution as provided by the NYBCL. A corporation may declare and pay dividends or make other distributions except when currently the corporation is insolvent or would thereby be made insolvent, or when the declaration, payment or distribution would be contrary to any restrictions contained in the corporation's certificate of incorporation. 54 State Takeover Legislation Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date such person became an interested stockholder, unless (i) prior to such date, the business combination or the transaction which resulted in the stockholder becoming an interested stockholder is approved by the board of directors of the corporation, (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the outstanding voting stock of the corporation outstanding at the time the transaction commenced, or (iii) on or after such date the business combination is approved by the board of directors of the corporation and by the affirmative vote, not by written consent, of at least 66 2/3% of the voting stock which is not owned by the interested stockholder. A "business combination" includes mergers, consolidations, asset transfers (including any sale, lease, exchange, mortgage, pledge or other disposition of assets) and other transactions resulting in a financial benefit to the interested stockholder. An "interested stockholder" is a person who (i) owns 15% or more of the outstanding voting stock of the corporation or (ii) is an affiliate or associate of a corporation and was the owner of 15% or more of the outstanding voting stock at any time within the past three years. The NYBCL prohibits any business combination (defined to include a variety of transactions, including mergers, consolidations, sales or dispositions of assets, issuances of stock, liquidations, reclassifications and the receipt of certain benefits from the corporation, including loans or guarantees) with, involving or proposed by any interested shareholder (defined generally as any person who, (i) directly or indirectly, beneficially owns 20% or more of the outstanding voting stock of a resident domestic New York corporation or (ii) is an affiliate or associate of such resident domestic corporation and at any time within the past five years was a beneficial owner of 20% or more of such stock) for a period of five years after the date on which the interested shareholder became such. After such five-year period a business combination between a resident domestic New York corporation and such interested shareholder is prohibited unless either certain "fair price" provisions are complied with or the business combination is approved by a majority of the outstanding voting stock not beneficially owned by such interested shareholder or its affiliates or associates. The NYBCL exempts from its prohibitions any business combination with an interested shareholder if such business combination, or the purchase of stock by the interested shareholder that caused such shareholder to become such, is approved by the board of directors of the resident domestic New York corporation prior to the date on which the interested shareholder becomes such. Section 203 of the DGCL does not apply to Holdings, as Holdings is not a publicly held corporation as defined by the DGCL. Under the NYBCL, corporations may opt to not be governed by the statute; Omnicom has not so elected. Business Combinations Generally, under the DGCL, the affirmative vote of the holders of a majority of the outstanding shares entitled to vote on the matter is required to approve mergers, consolidations, and any sales, leases or exchanges of all or substantially all of the assets of a corporation. The Holdings Certificate requires in addition the approval of the holders of a majority of the shares of Class A Common Stock (excluding the shares originally issued to Morgan Capital Corporation) voting separately as a class for any such transactions. The Holdings Certificate further provides that this requirement shall not prevent a merger, consolidation or asset sale if the consideration received by Holdings, its subsidiaries and holders of shares of Class A Common Stock consists solely of cash or freely tradeable registered securities or a combination thereof. Under the NYBCL, the affirmative vote of the holders of two-thirds of all outstanding shares of stock of a New York corporation entitled to vote thereon is required to approve mergers and consolidations, and for sales, leases, exchanges or other dispositions of all or substantially all the assets of a corporation, if not made in the usual or regular course of the business actually conducted by such corporation. Rights of Dissenting Shareholders Delaware law grants appraisal rights to any stockholder opposing a merger or consolidation (except that it restricts the appraisal rights of shareholders of the merging domestic corporation which is to be the surviving corporation by eliminating appraisal rights for such shareholders if the merger did not require for its approval the vote of the holders of the surviving corporation). 55 Accordingly, a dissenting shareholder is entitled to receive in cash the fair value of his shares as determined by the Delaware Court of Chancery in the event the merger or consolidation is consummated. Shareholders of a New York corporation have the right to dissent not only in the context of a merger or consolidation, but also in the event of certain amendments or changes to the certificate of incorporation adversely affecting their shares, certain sales, exchanges or other dispositions of all or substantially all of the corporation's assets and certain share exchanges. Indemnification of Directors, Officers and Employees Section 145 of the DGCL generally provides that a corporation may, and in certain circumstances, must, indemnify any person who is or was threatened with any action, suit or proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of such corporation for expenses, judgments or settlements actually and reasonably incurred by such person in connection with suits and other legal action or proceedings if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. The determination of whether a director, officer, employee or agent has met the applicable standard of conduct is made (i) by a majority vote of a quorum of directors not party to the action, suit or proceeding, or (ii) by an independent legal counsel in a written opinion if a quorum of disinterested directors is unobtainable or if the disinterested directors so direct or (iii) by the shareholders. In the case of shareholder derivative suits, the corporation may indemnify any person who is or was threatened with any action, suit or proceeding by reason of the fact that he or she is or was a director, officer, employee or agent if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged liable to the corporation unless and only to the extent that the Court of Chancery or the court in which the action was brought determined upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. The DGCL also permits a corporation to adopt procedures for advancing expenses to directors, officers and others without the need for a case-by-case determination of eligibility, so long as in the case of officers and directors they undertake to repay the amounts advanced if it is ultimately determined that the officer or director was not entitled to be indemnified. The aforementioned provisions relating to indemnification and advancement of expenses are not exclusive and a corporation may provide additional rights to those seeking indemnification or advancement of expenses. The Holdings Certificate provides for indemnification of directors, officers, employees and agents to the fullest extent authorized under the DGCL. The Holdings Certificate also authorizes the advancement of expenses relating to actions for which such persons may be indemnified. Under Section 722 of the NYBCL, a corporation may indemnify any person made, or threatened to be made, a party to any action or proceeding, except for shareholder derivative suits, by reason of the fact that he or she was a director or officer of the corporation, provided such director or officer acted in good faith for a purpose which he or she reasonably believed to be in the best interests of the corporation and, in criminal proceedings, in addition, had no reasonable cause to believe his or her conduct was unlawful. In the case of shareholder derivative suits, the corporation may indemnify any person by reason of the fact that he or she was a director or officer of the corporation if he or she acted in good faith for a purpose which he or she reasonably believed to be in the best interests of the corporation, except that no indemnification may be made in respect of (i) a threatened action, or a pending action which is settled or otherwise disposed of, or (ii) any claim, issue or matter as to which such person has been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. The indemnification described above under the NYBCL is not exclusive of other indemnification rights to which a director or officer may be entitled, whether contained in the certificate of incorporation or by-laws, or, when authorized by (i) such certificate of incorporation or by-laws, (ii) a 56 resolution of shareholders, (iii) a resolution of directors, or (iv) an agreement providing for such indemnification, provided that no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his or her acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled. Any person who has been successful on the merits or otherwise in the defense of a civil or criminal action or proceeding will be entitled to indemnification. Except as provided in the preceding sentence, unless ordered by a court pursuant to the NYBCL, any indemnification under the NYBCL pursuant to the above paragraphs may be made only if authorized in the specific case and after a finding that the director or officer met the requisite standard of conduct (i) by the disinterested directors if a quorum is available, or (ii) in the event a quorum of disinterested directors is not available or so directs by either (A) the board upon the written opinion of independent legal counsel, or (B) by the shareholders. The Omnicom By-laws provide that Omnicom shall provide indemnification to its directors and officers in respect of claims, actions, suits or proceedings based upon, arising from, relating to or by reason of the fact that any such director or officer serves or served in such capacity with Omnicom or at the request of Omnicom in any capacity with any other enterprise, and permits Omnicom to indemnify others and to advance expenses to the fullest extent permitted by law. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling Omnicom or Holdings pursuant to the foregoing provisions, Omnicom and Holdings have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Limitation of Personal Liability of Directors Section 102 (b) (7) of the DGCL permits a corporation to include in its certificate of incorporation a provision that would eliminate a director's monetary liability for breaches of his fiduciary duty in a lawsuit by or on behalf of the corporation or in an action by stockholders of the corporation, provided that such provision may not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or stock purchases or redemptions, or (iv) for any transaction from which the director derived an improper personal benefit. The Holdings Certificate contains such a provision providing for the limitation of liability of directors for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the DGCL. Section 402(b) of the NYBCL provides that a corporation's certificate of incorporation may contain a provision eliminating or limiting the personal liability of directors to the corporation or its shareholders for damages for any breach of duty in such capacity. However, no such provision can eliminate or limit (i) the liability of any director if a judgment or other final adjudication adverse to such director establishes that such director's acts or omissions were in bad faith, or involved intentional misconduct or a knowing violation of law, or that the director personally gained in fact a financial profit or other advantage to which such director was not legally entitled or that the director's acts violated certain provisions of the NYBCL or (ii) the liability of any director for any act or omission prior to the adoption of such a provision in the certificate of incorporation. The Omnicom Certificate provides that no director shall be personally liable to Omnicom or any of its shareholders for damages for any breach of duty as a director, except for liability resulting from a judgment or other final adjudication adverse to the director (i) for acts or omissions in bad faith or which involve intentional misconduct or a knowing violation of the law, (ii) for any transaction from which the director derived a financial profit or other advantage to which the director was not legally entitled, or (iii) under Section 719 of the NYBCL. LEGAL MATTERS The validity of the shares of Omnicom Common Stock to be issued in connection with the Acquisition will be passed on by Davis & Gilbert, 1740 Broadway, New York, New York 10019, counsel to Omnicom. 57 EXPERTS The consolidated financial statements and schedules of Omnicom and its subsidiaries incorporated by reference in this Prospectus/Information Statement and the Registration Statement of which this Prospectus/Information Statement is a part, have been audited by Arthur Andersen, LLP independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The consolidated balance sheets as of October 31, 1994 and 1993, and the consolidated statements of operations, stockholders deficit, and cash flows for each of the three years in the period ended October 31, 1994 of Holdings contained in this Prospectus/Information Statement and the Registration Statement of which this Prospectus/Information Statement is a part have been audited by Coopers & Lybrand LLP, independent certified public accountants as indicated in their report, which includes an explanatory paragraph concerning Holding's ability to continue as a going concern, and are included herein in reliance upon the authority of that firm as experts in accounting and auditing. 58 INDEX TO HOLDINGS FINANCIAL STATEMENTS Page ---- Report of Independent Accountants .................................... F-1 Consolidated Balance Sheets as of October 31, 1994 and 1993 (audited) F-2 Consolidated Statements of Operations for the years ended October 31, 1994, 1993 and 1992 (audited) ......................... F-3 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended October 31, 1994, 1993 and 1992 (audited) ..... F-4 Consolidated Statements of Cash Flows for the years ended October 31, 1994, 1993 and 1992 (audited) ......................... F-5 Notes to Consolidated Financial Statements (audited) ................. F-6 Consolidated Condensed Balance Sheets as of January 31, 1995 and 1994 (unaudited) ............................................... F-15 Consolidated Condensed Statements of Operations for the three months ended January 31, 1995 and 1994 (unaudited) ................. F-17 Consolidated Condensed Statements of Cash Flows for the three months ended January 31, 1995 and 1994 (unaudited) ........................ F-18 Notes to Consolidated Condensed Financial Statements (unaudited) ..... F-19 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors Chiat/Day Holdings, Inc. We have audited the accompanying consolidated balance sheets of Chiat/Day Holdings, Inc. and Subsidiaries as of October 31, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the three years in the period ended October 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chiat/Day Holdings, Inc. and Subsidiaries as of October 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 1994 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1, the Company's debt under its Senior Note and Senior Subordinated Note totaling $18,750,000 is due in 1995, which combined with its working capital and stockholders' deficits at October 31, 1994, raises substantial doubt about the Company's ability to continue as a going concern. Management's plans as to this matter are discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Coopers & Lybrand LLP Sherman Oaks, California April 7, 1995, except for Note 10 as to which the date is June 7, 1995 F-1 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 31, 1994 and 1993
ASSETS 1994 1993 ------------ ------------ Current assets: Cash and cash equivalents .............................................................. $ 5,831,000 $ 3,393,000 Receivables: Client accounts receivable ........................................................... 57,468,000 46,324,000 Expenditures billable to clients ..................................................... 16,746,000 10,704,000 Notes and other receivables .......................................................... 375,000 861,000 Income taxes receivable .............................................................. 894,000 774,000 Notes receivable from employees ...................................................... 1,158,000 852,000 Less--allowance for doubtful accounts ................................................ (4,007,000) (2,218,000) ------------ ------------ 72,634,000 57,297,000 Prepaid expenses and other ............................................................. 736,000 1,292,000 ------------ ------------ Total current assets ........................................................... 79,201,000 61,982,000 ------------ ------------ Fixed assets, at cost: Furniture and fixtures ................................................................. 3,211,000 1,134,000 Office equipment ....................................................................... 4,760,000 4,913,000 Leasehold improvements ................................................................. 9,227,000 6,578,000 Construction in progress ............................................................... -- 250,000 ------------ ------------ 17,198,000 12,875,000 Less--accumulated depreciation and amortization ........................................ (5,999,000) (5,375,000) ------------ ------------ 11,199,000 7,500,000 ------------ ------------ Other assets: Notes receivable ....................................................................... 3,201,000 281,000 Other .................................................................................. 2,476,000 5,108,000 ------------ ------------ 5,677,000 5,389,000 ------------ ------------ $ 96,077,000 $ 74,871,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current portion of long-term debt ...................................................... $ 18,750,000 $ 64,000 Accounts payable and advanced billings ................................................. 112,094,000 96,018,000 Other accrued liabilities .............................................................. 12,139,000 13,397,000 Bank overdraft ......................................................................... -- 8,625,000 Income tax payable ..................................................................... 1,180,000 15,000 ------------ ------------ Total current liabilities ...................................................... 144,163,000 118,119,000 ------------ ------------ Long-term debt, net of current portion .................................................... 10,448,000 20,697,000 Other non-current liabilities ............................................................. 12,800,000 15,433,000 Redeemable preferred stock, cumulative, $.01 par value; 200,000 shares authorized; issued--140,718 in 1994 and 121,218 in 1993; liquidation value of $14,072,000 at October 31, 1994 ................................... 14,072,000 12,122,000 Stockholders' equity (deficit): Class A common stock, $.01 par value; 75,000,000 shares authorized; issued--16,749,344 in 1994 and 1993 .................................................. 167,000 167,000 Class B common stock, $.01 par value; 200,000,000 shares authorized; issued --40,190,305 in 1994 and 41,015,305 in 1993 .......................................... 402,000 410,000 Additional paid-in capital ............................................................. 26,288,000 26,280,000 Foreign currency translation adjustment ................................................ (373,000) (496,000) Accumulated deficit .................................................................... (107,616,000) (113,587,000) ------------ ------------ (81,132,000) (87,226,000) Less--treasury stock at cost; 3,222,075 Class A common shares and 196,840 Class B common shares in 1994 and 1993 ................................................. (4,274,000) (4,274,000) ------------ ------------ Total stockholders' equity (deficit) ........................................... (85,406,000) (91,500,000) ------------ ------------ $ 96,077,000 $ 74,871,000 ============ ============
See notes to consolidated financial statements. F-2 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended October 31, 1994, 1993 and 1992
1994 1993 1992 ------------- ------------- ------------- Fee and commission income ................... $ 89,277,000 $ 97,198,000 $ 106,013,000 Costs and expenses: Salaries and employee benefits ........... 50,976,000 52,817,000 56,013,000 Selling, general and administrative ...... 27,000,000 36,408,000 36,160,000 Restructuring costs ...................... -- 25,848,000 -- Loss from operations of foreign subsidiary -- 637,000 12,000 Gain on sale of foreign subsidiary ....... -- (3,504,000) -- Other, net ............................... 141,000 1,866,000 3,236,000 ------------- ------------- ------------- 78,117,000 114,072,000 95,421,000 Operating profit (loss) .......... 11,160,000 (16,874,000) 10,592,000 Interest income (expense): Interest expense ......................... (4,678,000) (4,585,000) (7,517,000) Interest income .......................... 1,091,000 769,000 1,087,000 ------------- ------------- ------------- (3,587,000) (3,816,000) (6,430,000) Income (loss) before income tax provision and extraordinary item ....................... 7,573,000 (20,690,000) 4,162,000 Income tax provision ........................ 1,602,000 855,000 2,337,000 ------------- ------------- ------------- Income (loss) before extraordinary item .. 5,971,000 (21,545,000) 1,825,000 Extraordinary item: Utilization of loss carryforwards ........ -- -- 1,582,000 ------------- ------------- ------------- Net income (loss) ........................ $ 5,971,000 ($ 21,545,000) $ 3,407,000 ============= ============= =============
See notes to consolidated financial statements. F-3 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) For the Years Ended October 31, 1994, 1993 and 1992
Number Of Shares Common Common Additional Common Stock Stock Paid-In Treasury Stock Class A Class B Capital Stock ---------- -------- -------- ----------- ---------- Balance, October 31, 1991 ................... 58,984,566 $168,000 $456,000 $6,156,000 ($4,274,000) Relinquishment and retirement of Common Stock - Class B ................... (1,800,000) (18,000) 18,000 Adjustment for foreign subsidiary held for disposition ...................... Foreign currency translation adjustment ..... Net income for the year ended October 31, 1992 .......................... ---------- -------- -------- ----------- ---------- Balance, October 31, 1992 ................... 57,184,566 168,000 438,000 6,174,000 (4,274,000) Repurchase of Common Stock - Class A ........ (73,832) Retirement of Common Stock - Class A ........ (1,000) 1,000 Repurchase of Common Stock - Class B ........ (765,000) (8,000) (340,000) Relinquishment and retirement of Common Stock - Class B .................... (2,000,000) (20,000) 20,000 Conversion of Junior Subordinated Notes ..... 20,425,000 Foreign currency translation adjustment ..... Net (loss) for the year ended October 31, 1993 .................... ---------- -------- -------- ----------- ---------- Balance, October 31, 1993 ................... 54,345,734 167,000 410,000 26,280,000 (4,274,000) Relinquishment and retirement of Common Stock - Class B .................... (825,000) (8,000) 8,000 Foreign currency translation adjustment ..... Net income for the year ended October 31, 1994 .................... ---------- -------- -------- ----------- ---------- Balance, October 31, 1994 ................... 53,520,734 $167,000 $402,000 $26,288,000 ($4,274,000) ========== ======== ======== =========== ==========
Foreign Currency Translation Accumulated Adjustment Deficit Total -------- ------------ ----------- Balance, October 31, 1991 ................... ($482,000) ($95,449,000) ($93,425,000) Relinquishment and retirement of Common Stock - Class B ................... Adjustment for foreign subsidiary held for disposition ...................... 237,000 237,000 Foreign currency translation adjustment ..... 103,000 103,000 Net income for the year ended October 31, 1992 .......................... 3,407,000 3,407,000 -------- ------------ ----------- Balance, October 31, 1992 .................. (142,000) (92,042,000) (89,678,000) Repurchase of Common Stock - Class A ........ Retirement of Common Stock - Class A ........ Repurchase of Common Stock - Class B ........ (348,000) Relinquishment and retirement of Common Stock - Class B .................... Conversion of Junior Subordinated Notes ..... 20,425,000 Foreign currency translation adjustment ..... (354,000) (354,000) Net (loss) for the year ended October 31, 1993 .................... (21,545,000) (21,545,000) -------- ------------ ----------- Balance, October 31, 1993 ................... (496,000) (113,587,000) (91,500,000) Relinquishment and retirement of Common Stock - Class B .................... Foreign currency translation adjustment ..... 123,000 123,000 Net income for the year ended October 31, 1994 .................... 5,971,000 5,971,000 -------- ------------ ----------- Balance, October 31, 1994 ................... ($373,000) ($107,616,000) ($85,406,000) ======== ============ ===========
See notes to consolidated financial statements. F-4 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended October 31, 1994, 1993 and 1992
1994 1993 1992 ------------- ------------- ------------- Cash flows from operating activities: Net income (loss) ....................................... $ 5,971,000 ($ 21,545,000) $ 3,407,000 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ......................... 2,831,000 4,773,000 5,049,000 Gain on disposition of foreign subsidiary and sale of certain assets ............................. -- (3,504,000) (743,000) Provision for losses on receivables ................... 1,789,000 2,057,000 219,000 Amortization of discount on long-term debt ............ 10,000 593,000 800,000 Increase in interest payable .......................... 891,000 418,000 2,531,000 Contribution of preferred stock to profit sharing plan 575,000 450,000 900,000 Preferred stock dividends issued to profit sharing plan 1,375,000 1,127,000 929,000 Restructuring provision ............................... -- 24,582,000 -- Change in assets and liabilities: (Increase) decrease in receivables .................. (17,126,000) 11,135,000 (34,425,000) Decrease (increase) in prepaid expenses and other ... 556,000 (176,000) 41,000 Increase (decrease) in accounts payable and advanced billings ................................ 16,076,000 (8,459,000) 25,634,000 (Decrease) increase in other accrued liabilities .... (1,408,000) (3,568,000) 2,012,000 Cash provided (used) by foreign subsidiary held for disposition .................................. -- 1,723,000 (2,127,000) Increase (decrease) in income taxes payable ......... 1,165,000 (545,000) (200,000) (Decrease) increase in deferred income taxes ........ -- (25,000) 25,000 (Decrease) increase in other noncurrent liabilities . (2,633,000) (683,000) 948,000 ------------- ------------- ------------- Total adjustments ............................... 4,101,000 29,898,000 1,593,000 ------------- ------------- ------------- Net cash provided by operating activities ....... 10,072,000 8,353,000 5,000,000 ------------- ------------- ------------- Cash flows from investing activities: Purchases of fixed assets, net of retirements ........... (5,615,000) (882,000) (374,000) (Increase) decrease in other assets ..................... (1,202,000) 1,523,000 125,000 Cash used by foreign subsidiary held for diposition, including $9,850,000 of cash included in net liabilities of foreign subsidiary held for disposition -- -- (10,446,000) ------------- ------------- ------------- Net cash (used) provided by investing activities (6,817,000) 641,000 (10,695,000) ------------- ------------- ------------- Cash flows from financing activities: (Decrease) increase in bank overdraft ................... (8,625,000) 8,625,000 -- Debt borrowings (repayments) ............................ 7,685,000 (16,057,000) (6,052,000) Repurchase of Chiat/Day Holdings, Inc. stock ............ -- (348,000) -- Cash used by foreign subsidiary held for disposition .... -- -- (923,000) ------------- ------------- ------------- Net cash (used) in financing activities .......... (940,000) (7,780,000) (6,975,000) ------------- ------------- ------------- Effect of exchange rate changes on cash .................... 123,000 354,000 (535,000) ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents ....... 2,438,000 1,568,000 (13,205,000) Cash and cash equivalents, beginning of year ............... 3,393,000 1,825,000 15,030,000 ------------- ------------- ------------- Cash and cash equivalents, end of year ..................... $ 5,831,000 $ 3,393,000 $ 1,825,000 ============= ============= ============= Supplemental disclosure of cash flow information: (excluding foreign subsidiary amounts): Cash paid during the year for: Interest .............................................. $ 2,475,000 $ 2,507,000 $ 3,155,000 ============= ============= ============= Income taxes .......................................... $ 279,000 $ 1,820,000 $ 1,365,000 ============= ============= =============
See notes to consolidated financial statements. F-5 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary Of Significant Accounting Policies: Line Of Business: Chiat/Day Holdings, Inc. (the "Company") is a holding company that directly or indirectly owns 100% of the common stock of companies (including Chiat/Day inc. Advertising ["Advertising"] and Venice Holdings Pty. Limited ["Mojo"]) that collectively are known as "Chiat/Day" (see Notes 2 and 8). The Company's principal line of business includes planning and creating advertising campaigns for clients, placing ads with various media (including television, radio, newspaper and magazines), and providing marketing consultation, market research and production services. Chiat/Day also provides public relations and direct marketing services. The Company's clients operate in a broad range of product industries throughout the world. Credit is extended to clients based on an evaluation of each client's financial condition, and generally collateral is not required. Credit losses, if any, have been generally provided for in the financial statements and have been consistently within management's expectations. Basis Of Presentation: The Company's consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As discussed in Note 5, the Company's Senior Note and Senior Subordinated Notes are due in 1995. In February 1995 the Company reached an agreement in principal to sell the assets and assign the liabilities of its businesses (see Note 10). If the sale does not occur, the Company will have to pursue alternative financing arrangements to meet its current debt obligations. Principles Of Consolidation: The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany transactions and balances have been eliminated. Fees, Commissions and Costs: The principal sources of advertising revenues are commissions and fees for the production and placement of advertisements in television, radio and print media. Revenue earned from television and radio media is recognized on the date of broadcast. Revenue earned from advertising production is recognized as costs are incurred. Generally, commission revenue earned from print media is recognized on the space closing date (the date upon which the advertiser has made a binding commitment to the publication to run an advertisement) of the related publications. Generally, revenue is billed and earned in accordance with contractual provisions. For the Company's most significant contract, commissions are billable on a sliding scale subject to a maximum annual amount for 1994 and 1993 only. As of October 31, 1994 and 1993 under this contract, the Company has recognized commissions earned of 78% and 78% for the contract period April 1, 1994 through March 31, 1995 and April 1, 1993 through March 31, 1994, respectively. Revenues from other sources, including public relations and direct marketing, are primarily derived from fees for services rendered. Fee revenue earned from these sources is recognized as services are rendered. Salaries and other agency costs are generally expensed as incurred. The Company's major client, Nissan Motor Corporation, accounted for 41%, 39% and 38% of total revenues in 1994, 1993 and 1992, respectively, and Infiniti, its division, accounted for 14% and 10% of total revenues in 1994 and 1993, respectively. F-6 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary Of Significant Accounting Policies, Continued: Fixed Assets: Depreciation and amortization are provided over the estimated useful lives of the assets using primarily the straight-line method for financial reporting purposes and accelerated depreciation methods for tax reporting purposes. Estimated useful lives of these assets are as follows: Furniture and fixtures ................................. 5-10 years Office equipment ....................................... 5-10 years Leasehold improvements ................................. Lease term Gains and losses on sales and retirements are reflected in Other income (expense). Improvements which increase the useful lives of fixed assets are capitalized. Maintenance, repairs and minor replacements are expensed as incurred. Foreign Currency Translation: The Company translates the financial statements of its foreign subsidiaries in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 52. Assets and liabilities reported in the consolidated balance sheet have been translated at the current rates of exchange as of October 31, 1994 and 1993. Revenues and expenses reported in the consolidated statements of operations have been translated using the average exchange rates during 1994, 1993 and 1992. Resulting translation adjustments have been excluded from the consolidated statements of operations and are reported in a separate component of stockholders' equity (deficit). Gains and losses resulting from foreign currency transactions are charged to other income (expense) as incurred and were not material in 1994, 1993 or 1992. Income Taxes: Effective November 1, 1993, the Company adopted the provisions of SFAS No. 109 which requires recognition of deferred tax assets and liabilities for temporary differences and net operating loss (NOL) and tax credit carryforwards. Under SFAS No. 109, deferred income taxes are established based on enacted tax rates expected to be in effect when temporary differences are scheduled to reverse and NOL and tax credit carryforwards are expected to be utilized. The principle temporary differences relate to restructuring costs and employee bonuses. Adoption of SFAS No. 109 did not have a material impact on the Company's financial position or results of operations. For years ended 1993 and 1992 the Company accounted for income taxes under the requirements of APB Opinion No. 11. Cash Flows: The Company places its temporary cash investments in short-term financial instruments and money market funds, which generally mature within 90 days. The Company limits the amount of credit exposure to any one issuer. For purposes of reporting cash flows, the Company considers amounts due from banks (including certificates of deposit and repurchase agreements) and commercial paper with maturities at date of purchase of three months or less to be cash equivalents. Reclassifications Certain reclassifications have been made to the 1993 and 1992 reported amounts to conform them to the current presentation. F-7 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Foreign Operations: The Company's foreign divisions and subsidiaries are primarily engaged in providing advertising and related services. On February 16, 1993 (effective January 1, 1993), the Company completed the transfer of the stock of its foreign subsidiary to FCB International, Inc. ("FCB") (see Note 8). The financial results for 1993 and 1992 of this subsidiary are summarized in Note 8. Combined condensed financial information for foreign divisions and subsidiaries (excluding the financial results of the subsidiary transferred to FCB) is as follows: 1994 1993 1992 ----------- ----------- ----------- Total assets ................... $16,589,000 $12,926,000 $11,973,000 Total liabilities .............. 12,959,000 11,378,000 14,502,000 Fee and commission income ...... 13,674,000 10,574,000 12,905,000 3. Income Taxes: Income (loss) before income tax provision (benefit) and provision (benefit) for taxes for the years ended October 31, 1994, 1993 and 1992 consisted of the following: 1994 1993 1992 ------------ ------------ ------------ Income (loss) before income tax provision: Domestic ............. $ 4,460,000 ($ 23,576,000) $ 3,518,000 International ........ 3,113,000 2,886,000 644,000 ------------- ------------- ------------- Totals ........... $ 7,573,000 ($ 20,690,000) $ 4,162,000 ============= ============= ============= Current Deferred Total ------------ ------------ ------------ Provision for taxes: October 31, 1994: Federal ............... $ 35,000 -- $ 35,000 State and local ....... 152,000 -- 152,000 Foreign ............... 1,415,000 -- 1,415,000 ------------ ------------ ------------ $ 1,602,000 -- $ 1,602,000 ============ ============ ============ October 31, 1993: Federal ............... $ 542,000 -- $ 542,000 State and local ....... 277,000 -- 277,000 Foreign ............... 36,000 -- 36,000 ------------ ------------ ------------ $ 855,000 -- $ 855,000 ============ ============ ============ October 31, 1992: Federal ............... $ 1,698,000 $ 25,000 $ 1,723,000 State and local ....... 927,000 (333,000) 594,000 Foreign ............... 20,000 -- 20,000 ------------ ------------ ------------ $ 2,645,000 ($ 308,000) $ 2,337,000 ============ ============ ============ F-8 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Income Taxes, Continued: The Company's effective income tax rate varied from the statutory federal income tax rate as a result of the following factors: 1994 1993 1992 ---- ---- ---- Statutory federal income tax rate ........ 35.0% (34.0)% 34.0% State and local taxes, net of federal benefit ....................... 1.3 0.9 9.4 Foreign taxes ............................ 18.7 0.2 0.5 Net operating loss ....................... (4.8) -- -- Tax credits .............................. (11.0) -- -- Realization of valuation allowance ....... (26.3) -- -- Preferred stock dividends ................ 6.4 1.9 7.6 Alternative minimum tax .................. 0.4 2.6 3.4 Unrealized benefit of net operating loss .................................. -- 32.0 -- Extraordinary credit ..................... -- -- (38.0) Other .................................... 1.4 0.5 1.2 ----- ---- ---- Effective rate ........................... 21.1% 4.1% 18.1% ===== ==== ==== The major components of the net deferred tax asset as of October 31, 1994 are as follows: Deferred tax assets: Accrued reserves ........................................ $ 8,743,000 Deferred compensation ................................... 5,835,000 Tax loss/tax credit carryforwards ....................... 1,219,000 Fixed assets and depreciation ........................... 441,000 Rent .................................................... 329,000 Other ................................................... 2,150,000 ------------ Total deferred tax assets ........................... 18,717,000 Valuation allowance ..................................... (18,717,000) ------------ Net deferred tax asset .............................. $ -- ============ A full valuation allowance has been established as the potential deferred tax asset above may not be realized. As of October 31, 1994, for income tax purposes, the Company had state and foreign net operating loss carryforwards of approximately $3.1 million and $2.1 million, respectively, which will expire during the years 1995-2000. Also, the Company had $344,000 of AMT credits which can be carried forward indefinitely. U.S. tax rules impose limitations on the use of net operating losses and tax credits following certain changes in ownership (See Note 10). 4. Related-Party Transactions: In October 1991, the Company moved into new office facilities in Venice, California which it leases from Venice Operating Corporation ("VOC"), a company owned by the majority stockholder and certain members of the Board of Directors of the Company. In October 1994, VOC sold its office facilities to an unrelated third party. Effective October 17, 1994 the lease with VOC was terminated and the Company entered into a new twenty year lease with six consecutive five-year renewal options. The Company was assigned a $3,000,000 promissory note by VOC in satisfaction of the return of the Company's security deposit and accrued interest thereon due from VOC. The note bears interest at 10% per annum and will be paid to the Company when it achieves certain financial targets or the F-9 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Related-Party Transactions, Continued: property is sold, but no later than October 17, 2014. In 1994, 1993 and 1992 the Company paid $2,474,000, $2,056,000 and $2,018,000, respectively, in rent to VOC. At October 31, 1993, the Company had $1,998,000 and $552,000 of security deposit and accrued interest thereon, respectively, outstanding. The Company also has consulting, employment, non-compete and loan agreements with certain members of the Board of Directors and officers. 5. Long-Term Debt and Redeemable Preferred Stock: Long-term debt as of October 31, 1994 and 1993 consisted of the following:
1994 1993 ------------ ------------ Senior Note payable to banks. Interest rates averaged 8.1% in 1994 and 7.5% in 1993 .................... $ 7,750,000 -- Senior Subordinated Notes due in 1995; various rates; interest payable semiannually in arrears ................................. 11,000,000 11,000,000 8.17% Junior Subordinated Installment Note (less unamortized discount of $304,000 and $305,000 at October 31, 1994 and 1993, respectively); due July 31, 2005; interest compounded semiannually at an effective interest rate of 8.65%; payment of interest and principal subject to certain restrictions contained in the Senior Bank Note and Senior Subordinated Notes ....................................... 5,249,000 5,247,000 13.25% Junior Subordinated Note; maturing July 31, 2005 (less unamortized discount of $90,000 and $98,000 at October 31, 1994 and 1993, respectively); interest compounded annually at an effective interest rate of 8.45%; payment of interest and principal subject to certain restrictions contained in the Senior Bank Note and Senior Subordinated Notes ............................................ 1,400,000 1,391,000 Other notes payable, payments due in 1994; interest at 11.25% ............... -- 64,000 Accrued interest on Junior and Senior Subordinated Notes .................... 3,799,000 3,059,000 ------------ ------------ 29,198,000 20,761,000 Less--current portion ....................................................... (18,750,000) (64,000) ------------ ------------ $ 10,448,000 $ 20,697,000 ============ ============
Aggregate annual maturities of long-term obligations including accrued interest on Junior and Senior Subordinated Notes are as follows: Year Ending October 31, ----------- 1995 ....................................... $18,750,000 1996 ....................................... -- 1997 ....................................... -- 1998 ....................................... -- 1999 ....................................... -- Thereafter ................................. 10,448,000 ----------- $29,198,000 =========== F-10 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Long-Term Debt and Redeemable Preferred Stock, Continued: On September 17, 1992 and June 30, 1993, Advertising amended and restated its Credit Agreement for the Senior Bank Note wherein the banks originally agreed to make loans up to an aggregate principal amount of $42,000,000, of which $20,000,000 in aggregate principal was available and outstanding on September 17, 1992. In addition to amending certain terms of the Senior Bank Note, the banks provided an additional $6,000,000 revolving credit facility. The 1993 amendment further modified the Credit Agreement to extend the commitment reduction dates and change the financial covenants. $4,200,000 of the revolving credit facility expired on October 31, 1993. At October 31, 1994 and 1993, $7,750,000 and $16,000,000, respectively, of the Senior Bank Note was available; $7,750,000 was outstanding at October 31, 1994 and no borrowings were outstanding at October 31, 1993. The revolving credit facility was guaranteed by certain key executives and stockholders of the Company. In January 1995, the Senior Bank Note was assigned to Omnicom (see Note 10). As a result of this assignment, the available commitment was increased to $20,000,000, the revolving credit facility was terminated and the term was extended to December 10, 1995. Interest is payable at prime plus 2%. In 1992, certain terms of the Senior Subordinated Notes due in 1995 ("Senior Notes") were amended. For $5 million of such Notes, the cash interest rate was capped at 14.25% effective August 1, 1991. Interest that increases by one quarter percent every six months from August 1, 1991 until the Senior Notes have been registered under the Securities Act of 1993 will be capitalized and paid on redemption, but no later than August 1995. The interest rate on $6 million of the Senior Notes has been fixed at 13.25% effective August 1, 1991. In October 1993, the maturity dates of the Junior Subordinated Notes ("Junior Notes") were extended from July 31, 1995 to July 31, 2005 and participants in the Junior Notes were offered the ability to exchange their participation in the Junior Notes for participation in a new Equity Appreciation Rights Plan (see Note 6). As a result of acceptances of this proposal, the outstanding principal and accrued interest in the Junior Notes was reduced by $20,425,000 at October 31, 1993 and charged to paid-in capital. Borrowing arrangements contain restrictive covenants which require, among other things, the maintenance of minimum cash flow and working capital requirements, and certain limitations on capital expenditures and the payment of dividends. Redeemable Preferred Stock: The Preferred Stock has no voting rights and does not participate in Common Stock dividends. The Preferred Stock is entitled to cumulative dividends equal to 9% of the liquidation preference of shares held by the Plan if such amount is paid in cash, or 10% of the liquidation preference if such amount is paid in shares of Preferred Stock, or any combination thereof. In addition, the trustees of the Plan have the right to compel the redemption of Preferred Stock held by the Plan in an aggregate amount not to exceed $500,000 per year. In the event the Preferred Stock is not redeemed within 180 days from the date surrendered, then such surrendered shares shall be entitled to dividends at the rate of 14% per annum. In 1994, 1993 and 1992, stock dividends equal to 13,750, 11,272 and 9,290 shares of Preferred Stock, respectively, were issued to the Plan. In the event of liquidation or sale of substantially all of the assets of the Company, holders of the Preferred Stock will be entitled to receive, before any distribution to holders of Common Stock, $100 per share plus any accrued but unpaid dividends. The Preferred Stock may be redeemed, subject to applicable law, at the end of eight years at the option of the Company or the holders of such Preferred Stock, provided that the Senior Bank Note and Senior Subordinated Notes have been paid in full, and, at any time at the option of the holder, to the extent the shares sought to be redeemed are allocated for the benefit of a Plan participant who is entitled to a distribution of his account balance in such Plan. The purchase price for redemption would be equal to the liquidation preference plus any unpaid dividends. The sale of such Preferred Stock to third parties will be subject to the right of first refusal by the Company. F-11 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Stockholders' Equity: Common Stock: The Class A and Class B Common Stock are alike in all respects except that the Class A Common Stock has certain registration and preferential rights, including the right to receive additional shares, and the holders of Class A Common Stock have the right to approve certain transactions. Holders of Class A Common Stock also are entitled to receive, in consideration for and upon payment of an amount equal to the par value thereof, additional shares of Class A Common Stock in the event that additional shares of Class B Common Stock or equity participation units are issued or granted in connection with dilutive transactions as defined in the Company's restated certificate of incorporation. In addition, the Chiat/Day Profit Sharing and 401(k) Plan (the "Plan") (see Note 7) is entitled to receive, for no consideration, additional Class B Common Stock in the event of certain issuances of Common Stock to the majority stockholder. At October 31, 1994, 13,434 additional shares of Class A Common Stock are entitled to be received by current Class A stockholders due to anti-dilution provisions. In conjunction with the transaction discussed in Note 8, 765,000 shares of Class B Common Stock were repurchased by the Company for approximately $348,000. Restricted Stock Plan: In August 1988, the Board of Directors of the Company approved a restricted stock purchase plan for which 100,000,000 shares of Class B Common Stock were reserved. These shares are offered for sale to certain key employees and others selected by the Board of Directors at a purchase price to be determined from time to time by the Company. The shares of stock purchased under the plan vest over a five-year period of employment beginning from the date of purchase. The plan provides that upon termination of employment, vested shares may be sold back to or purchased by the Company at book value at date of sale. Non-vested shares may be sold back to or purchased by the Company at the lower of the original purchase price or book value at date of sale. At October 31, 1994, 59,809,695 shares remain unissued. Equity Participation Plan: Under an equity participation plan approved by the Board of Directors of the Company in August 1988, the Company may grant up to 50,000,000 equity participation units to eligible participants. All full-time employees of the Company are eligible to be selected as participants in the equity participation plan. Each equity participation unit is equivalent in value to one share of Class B Common Stock and is treated in the same manner as Class B Common Stock with respect to its priority in the event of a liquidation. Equity participation units awarded under the plan vest over a five-year period of employment beginning from the date of award. Participants are entitled, upon the redemption of equity participation units, to receive payment in cash determined by multiplying the number of vested equity participation units by the increase between the book value per unit (as defined in the plan) as of the date of grant (which is determined to be zero when the book value is negative) and the book value per unit as of the valuation date immediately preceding the date of redemption. As of October 31, 1994, there were 26,591,110 equity participation units available for award. In conjunction with the transaction described in Note 8, 2,970,000 equity participation units were relinquished to the Company. Equity Appreciation Rights Plan: Under an Equity Appreciation Rights Plan approved by the Board of Directors of the Company in October 1993, the Company may grant up to 54,084,848 equity appreciation rights to eligible participants. Only Junior Note participants (as defined in the plan) are eligible to be awarded equity appreciation rights under the plan. Each equity appreciation right is equivalent in value to one share of Class B Common Stock and is treated in the same manner as Class B Common Stock with respect to its priority in the event of a liquidation. F-12 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Stockholders' Equity, Continued: Equity appreciation rights awarded under the plan are 41.27% vested in each participant on the date of award except for certain participants that are 100% vested on the date of award. Participants not 100% vested at the date of award become fully vested 21 months from October 31, 1993 based upon conditions stated in the plan. Upon redemption of the equity appreciation rights, participants are entitled to receive payment in cash determined by multiplying the number of equity appreciation rights by the increase, if any, between the book value per unit (as defined in the plan and determined to be zero when the book value is negative) as of October 31, 1993 and the book value per unit as of the valuation date immediately preceding the date of redemption. As of October 31, 1994, there were 36,939,112 equity appreciation rights outstanding. 7. Employee Benefit Plans: Effective November 1, 1990, the Chiat/Day inc. Advertising Employees' Profit Sharing and Pre-Tax Savings Investment Plan (the "401(k) Plan") was merged into the Chiat/Day Holdings, Inc. Employee Profit Sharing Plan (the "Profit Sharing Plan"), formerly known as the Chiat/Day inc. Advertising Employee Stock Ownership Plan ("ESOP"), to form the Chiat/Day Profit Sharing and 401(k) Plan (the "Plan"), a defined contribution plan. The Company contributed cash of $250,000 in 1994 and preferred stock with a liquidation value of $275,000 for the fiscal year ended October 31, 1994. In February 1994 and 1993 the Company made stock contributions of $781,000 related to its 1993 obligation. The Company contributed cash of $315,000 and preferred stock with a liquidation value of $450,000 for the obligation related to the fiscal year ended October 31, 1992. The Company has certain future fixed minimum contributions of $525,000, in stock and cash, to the Plan for fiscal years ending October 31, 1995 to October 31, 2000. 8. Disposition Of Foreign Subsidiary: On February 16, 1993 (effective January 1, 1993), the Company completed the transfer of the stock of its foreign subsidiary to FCB for no consideration. Concurrent with the transfer of shares to FCB, the Company exercised its option to acquire $10,350,000 of debt owed to the bank by the foreign subsidiary for $700 and agreed to accept from FCB, in full satisfaction of such debt, $1,380,000 plus future contingent payments up to a maximum of $3,450,000. In 1994, the Company received $653,000 from FCB in contingent payments. Future payments are contingent upon certain future conditions being satisfied as specified in the debt restructuring deed between the Company and FCB. Any future payments will be recognized as income when received. The net loss from operations for the two months ended December 31, 1992 and the year ended October 31, 1992 is reflected as loss from operations of foreign subsidiary in the consolidated statements of operations. The Company recognized a gain on the disposal of such subsidiary in 1993. The financial results as of and for the two months ended December 31, 1992 and the year ended October 31, 1992 are summarized as follows: 1993 1992 ------------ ------------ Fee and commission income .................. $ 3,069,000 $ 22,708,000 Operating (loss) profit .................... (933,000) 1,983,000 Other nonoperating income (expense) ........ 296,000 (1,971,000) Net loss ................................... (637,000) (12,000) Current assets ............................. 17,951,000 22,211,000 Total assets ............................... 53,341,000 58,418,000 Current liabilities ........................ 19,268,000 23,880,000 Long-term debt ............................. 31,656,000 32,578,000 Total liabilities .......................... 51,585,000 57,198,000 Total stockholders' equity ................. 1,756,000 1,220,000 F-13 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Commitments And Contingencies: Litigation: The Company is involved in legal actions arising in the normal course of business. After taking into consideration legal counsel's evaluation of such actions, management is of the opinion that their outcome will not have a material effect on the Company's consolidated financial position or results of operations. On October 26, 1992 and November 20, 1992, the Company settled two lawsuits which were filed in 1990 related to real estate matters. The aggregate cost of such settlements was $6,246,000. In 1992, the Company recognized an incremental charge of $3,200,000 related to these lawsuits. Adequate provision for the balance of the settlements was made in prior years. Leases: The Company recorded a $25,848,000 charge in 1993 related to costs associated with certain real estate operating leases. Effective November 1, 1993, Advertising entered into a new real estate operating lease in New York that will enable the Company to significantly reduce future rental expense through a reduction in the total amount of space leased. Occupancy of the new space occurred in 1994 and the net future rental obligations and related costs for the write-off of fixed assets abandoned of $18,054,000 associated with the old lease have been accrued in 1993. $11,776,000 of net future rental obligations remain at October 31, 1994. $6,062,000 of the charge related to the early termination of a lease and other costs incurred in conjunction with the consolidation of operations into one location at the Company's headquarters in California and the write-off of fixed assets abandoned in conjunction with such lease termination. The remaining balance of $1,732,000 represents a reserve for costs in excess of anticipated sublease income for other property leased in California. The Company leases facilities and equipment under various operating lease agreements expiring at various dates through the year 2015. The aggregate minimum future commitments under such leases (excluding the old New York lease) are as follows: Years Ending October 31, ----------- 1995 ....................................... $ 4,395,000 1996 ....................................... 3,716,000 1997 ....................................... 4,150,000 1998 ....................................... 3,892,000 1999 and thereafter ........................ 47,998,000 ----------- $64,151,000 =========== Rental expense for leases was $5,580,000, $9,422,000 and $9,140,000 (excluding rental expense related to the Company's foreign subsidiary disposed of in 1993) for the years ended October 31, 1994, 1993 and 1992, respectively. 10. Subsequent Event: On May 11, 1995, the Company signed an agreement whereby TBWA International Inc., a wholly-owned subsidiary of Omnicom Group Inc. ("Omnicom"), will acquire the assets of the Company's businesses and assume substantially all of its liabilities in exchange for Omnicom common stock. The sale is conditional on the registration of the Omnicom common stock on Form S-4, clearance by the appropriate governmental agencies, approval by a majority of the Company's stockholders and certain other conditions. The sale is anticipated to close by August 1995. F-14 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS ASSETS January 31, January 31, 1995 1994 ------------ ------------- Current assets: Cash and cash equivalents ................. $ 19,054,000 $ 11,786,000 Receivables: Client accounts receivable ................ 25,243,000 26,425,000 Expenditures billable to clients .......... 16,722,000 6,222,000 Income tax receivable ..................... 681,000 665,000 Notes and other receivables ............... 871,000 913,000 Notes receivable from employees ........... 1,390,000 1,084,000 Less: allowance for doubtful accounts ..... (3,971,000) (2,656,000) ------------ ------------ 40,936,000 32,653,000 Prepaid expenses and other ................... 1,087,000 1,250,000 ------------ ------------ Total current assets ................ 61,077,000 45,689,000 ------------ ------------ Fixed assets, at cost: Furniture and fixtures .................... 3,205,000 1,162,000 Office equipment .......................... 4,966,000 3,764,000 Leasehold improvements .................... 9,174,000 6,582,000 Construction in progress .................. -- 1,839,000 ------------ ------------ 17,345,000 13,347,000 Less: accumulated depreciation and amortization ....................... (6,429,000) (4,666,000) ------------ ------------ 10,916,000 8,681,000 ------------ ------------ Other assets: Notes receivable ........................... 3,166,000 166,000 Other ...................................... 2,904,000 5,085,000 ------------ ------------ 6,070,000 5,251,000 ------------ ------------ $ 78,063,000 $ 59,621,000 ============ ============ The accompanying notes to consolidated condensed financial statements are an integral part of these balance sheets. F-15 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) January 31, January 31, 1995 1994 ----------- ----------- Current liabilities: Current portion of long-term debt ........................... $28,746,000 $7,312,000 Accounts payable and advanced billings ...................... 84,672,000 73,441,000 Other accrued liabilities ................................... 14,743,000 13,600,000 ----------- ----------- Total current liabilities ............................. 128,161,000 94,353,000 ----------- ----------- Long-term debt, net of current portion ......................... 10,661,000 28,665,000 Other non-current liabilities .................................. 12,043,000 14,745,000 Redeemable preferred stock, cumulative, $.01 par value; 200,000 shares authorized; issued and outstanding - 140,818 in 1995; 121,218 in 1994; liquidation value of $14,082,000 in 1995 ......................................... 14,082,000 12,122,000 Stockholders' equity (deficit): Class A common stock, $.01 par value; 75,000,000 shares authorized; issued and outstanding - 16,749,344 in 1995 and 1994 ................................................. 167,000 167,000 Class B common stock, $.01 par value; 200,000,000 shares authorized; issued and outstanding - 40,190,305 in 1995 and 41,015,305 in 1994 ................ 402,000 410,000 Additional paid-in capital .................................. 26,288,000 26,280,000 Foreign currency translation adjustment ..................... (347,000) (519,000) Accumulated deficit ......................................... (109,120,000) (112,328,000) ----------- ----------- (82,610,000) (85,990,000) Less: treasury stock at cost; 3,222,075 Class A Common shares and 196,840 shares Class B Common shares in 1995 and 1994 ............................................ (4,274,000) (4,274,000) ----------- ----------- Total stockholders' equity (deficit) .................. (86,884,000) (90,264,000) ----------- ----------- $78,063,000 $59,621,000 =========== ===========
The accompanying notes to consolidated condensed financial statements are an integral part of these balance sheets. F-16 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS Three months ended January 31, ------------------------------ 1995 1994 ------------ ------------ Fee and commission income .................... $ 17,798,000 $ 19,591,000 Costs and expenses: Salaries and employee benefits ............ 12,801,000 11,431,000 Selling, general and administrative ....... 5,685,000 6,211,000 ------------ ------------ 18,486,000 17,642,000 Operating (loss) profit ................... (688,000) 1,949,000 Interest income (expense): Interest expense .......................... (697,000) (735,000) Interest income ........................... 240,000 126,000 ------------ ------------ (457,000) (609,000) ------------ ------------ (Loss) income before income tax provision ........................ (1,145,000) 1,340,000 Income tax provision ......................... (359,000) (81,000) ------------ ------------ Net (loss) income ...................... ($ 1,504,000) $ 1,259,000 ============ ============ The accompanying notes to consolidated condensed financial statements are an integral part of these statements. F-17 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Three months ended January 31, ------------------------------ 1995 1994 ------------ ------------ Increase (Decrease) in Cash and Cash Equivalents: Cash flows from operating activities: Net (loss) income ..................................... ($ 1,504,000) $ 1,259,000 ----------- ------------ Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization ......................... 750,000 567,000 Provision for losses on receivables ................... (36,000) 438,000 Amortization of discount on long-term debt ............ 2,000 4,000 (Decrease) in interest payable ........................ (144,000) (161,000) Decrease in income tax receivable ..................... 213,000 -- Preferred stock dividends issued to profit sharing plan 10,000 -- Change in assets and liabilities Decrease in receivables ............................. 31,522,000 24,204,000 (Increase) decrease in prepaid expenses and other ... (351,000) 42,000 (Decrease) in accounts payable and advanced billings (27,423,000) (31,513,000) (Decrease) in income tax payable .................... (1,132,000) -- Increase in other accrued liabilities ............... 2,910,000 876,000 (Decrease) in other noncurrent liabilities .......... (757,000) (688,000) ------------ ------------ Total adjustments ................................... 5,564,000 (6,231,000) ------------ ------------ Net cash provided (used) by operating activities .... 4,060,000 (4,972,000) ------------ ------------ Cash flows from investing activities: Purchases of fixed assets, net of retirements ....... (202,000) (1,526,000) (Increase) in other assets .......................... (658,000) (84,000) ------------ ------------ Net cash used in investing activities ............. (860,000) (1,610,000) ------------ ------------ Cash flows from financing activities: Debt borrowings ..................................... 9,997,000 14,998,000 ------------ ------------ Net cash provided by financing activities ......... 9,997,000 14,998,000 Effect of exchange rate changes on cash ............... 26,000 (23,000) ------------ ------------ Net increase in cash and cash equivalents ............. 13,223,000 8,393,000 Cash and cash equivalents at beginning of period ...... 5,831,000 3,393,000 ------------ ------------ Cash and cash equivalents at end of period ............ $ 19,054,000 $ 11,786,000 ============ ============ Supplemental disclosures: Interest ............................................ $ 829,000 $ 877,000 ============ ============ Income taxes ........................................ $ 1,279,000 $ 68,000 ============ ============
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. F-18 CHIAT/DAY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1) The consolidated condensed interim financial statements included herein have been prepared by Holdings, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although Holdings believes that the disclosures are adequate to make the information presented not misleading. 2) These statements reflect all adjustments consisting of normal recurring accruals which, in the opinion of management, are necessary for a fair presentation of the information contained therein. It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in Holdings' latest fiscal report. 3) Results of operations for the interim periods are not necessarily indicative of annual results. F-19 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. The Registrant's Certificate of Incorporation contains a provision limiting the liability of directors (except for approving statutorily prohibited dividends, share repurchases or redemptions, distributions of assets on dissolution or loans to directors) to acts or omissions in bad faith, involving intentional misconduct or a knowing violation of the law, or resulting in personal gain to which the director was not legally entitled. The Registrant's By-Laws provide that an officer or director will be indemnified against any costs or liabilities, including attorneys fees and amounts paid in settlement with the consent of the registrant in connection with any claim, action or proceeding to the fullest extent permitted by the New York Business Corporation Law. Section 722(a) of the New York Business Corporation Law provides that a corporation may indemnify any officer or director, made or threatened to be made, a party to an action other than one by or in the right of the corporation, including an action by or in the right of any other corporation or other enterprise, which any director or officer of the corporation served in any capacity at the request of the corporation, because he was a director or officer of the corporation, or served such other corporation or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred as a result of such action, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or in the case of service for any other corporation or other enterprise, not opposed to, the best interests of the corporation and, in criminal actions, in addition, had no reasonable cause to believe that his conduct was unlawful. Section 722(c) of the New York Business Corporation Law provides that a corporation may indemnify any officer or director made, or threatened to be made, a party to an action by or in the right of the corporation by reason of the fact that he is or was a director of the corporation, or is or was serving at the request of the corporation as a director of officer of any other corporation of any type or kind, or other enterprise, against amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred by him in connection with the defense or settlement of such action, or in connection with an appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for another corporation or other enterprise, not opposed to, the best interests of the corporation. The corporation may not, however, indemnify any officer or director pursuant to Section 722(c) in respect of (1) a threatened action, or a pending action which is settled or otherwise disposed of, or (2) any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action was brought or, if no action was brought, any court of competent jurisdiction, determines in its discretion, that the person is fairly and reasonably entitled to indemnity for such portion of the settlement and expenses as the court deems proper. Section 723 of the New York Business Corporation Law provides that an officer or director who has been successful on the merits or otherwise in the defense of a civil or criminal action of the character set forth in Section 722 is entitled to indemnification as permitted in such section. Section 724 of the New York Business Corporation Law permits a court to award the indemnification required by Section 722. The Registrant has entered into agreements with its directors to indemnify them for liabilities or costs arising out of any alleged or actual breach of duty, neglect, errors or omissions while serving as a director. The Registrant also maintains and pays premiums for directors' and officers' liability insurance policies. Item 21. Exhibits and Financial Statement Schedules. (a) See Exhibit Index (b) See the financial statement schedules included in Omnicom's Annual Report on Form 10-K incorporated in this Prospectus/Information Statement included in this Registration Statement. II-1 Item 22. Undertakings. (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement. Provided however, that paragraphs (1)(i) and (1)(ii) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of post-effective amendment to this Registration Statement any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant further undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) (1) The undersigned Registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) under the Securities Act, the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. (2) The Registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415 under the Securities Act, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being II-2 registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (e) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such requests, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of the responding to the request. (f) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on June 7, 1995. OMNICOM GROUP INC. Registrant By: /s/ BRUCE CRAWFORD -------------------------- Bruce Crawford President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each officer or director of Omnicom Group Inc. whose signature appears below constitutes and appoints Bruce Crawford and Barry J. Wagner, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments, to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
Signature Title Date ---------- ----- ---- /S/ BRUCE CRAWFORD -------------------------------------- President and Chief June 7, 1995 (Bruce Crawford) Executive Officer and Director /S/ FRED J. MEYER -------------------------------------- Chief Financial Officer June 7, 1995 (Fred J. Meyer) and Director /S/ DALE A. ADAMS -------------------------------------- Controller (Principal June 7, 1995 (Dale A. Adams) Accounting Officer) -------------------------------------- (Bernard Brochand) Director /S/ LEONARD S. COLEMAN, JR. -------------------------------------- (Leonard S. Coleman, Jr.) Director June 7, 1995 /S/ ROBERT J. CALLANDER -------------------------------------- (Robert J. Callander) Director June 7, 1995 /S/ JAMES A. CANNON -------------------------------------- (James A. Cannon) Director June 7, 1995 /S/ PETER I. JONES -------------------------------------- (Peter I. Jones) Director June 7, 1995 /S/ JOHN R. PURCELL -------------------------------------- Director June 7, 1995 (John R. Purcell) /S/ KEITH L. REINHARD -------------------------------------- Director June 7, 1995 (Keith L. Reinhard) /S/ ALLEN ROSENSHINE Director June 7, 1995 -------------------------------------- (Allen Rosenshine) /S/ GARY L. ROUBOS Director June 7, 1995 -------------------------------------- (Gary L. Roubos) -------------------------------------- Director (Quentin I. Smith, Jr.) /S/ ROBIN B. SMITH -------------------------------------- Director June 7, 1995 (Robin B. Smith) /S/ JOHN D. WREN -------------------------------------- Director June 7, 1995 (John D. Wren) /S/ WILLIAM G. TRAGOS -------------------------------------- Director June 7, 1995 (William G. Tragos) /S/ EGON P.S. ZEHNDER -------------------------------------- Director June 7, 1995 (Egon P.S. Zehnder)
II-5
INDEX TO EXHIBITS Exhibit Number Description of Exhibit Page - -------- ---------------------- ---- 2.1 Asset Purchase Agreement dated May 11, 1995, among Chiat/Day Holdings, Inc., Chiat/Day inc. Advertising, Omnicom Group Inc. and TBWA International Inc. .............. 2.2 Plan of Liquidation of Chiat/Day Holdings, Inc. ......................................... 2.3 Form of Escrow Agreement by and between Chiat/Day inc. Advertising, Chiat/Day Holdings, Inc., TBWA International and The Chase Manhattan Bank, N.A., as Escrow Agent ......................................................................... 2.4 Form of Liquidating Trust Agreement by and between Chiat/Day Holdings, Inc., on behalf of its stockholders, and Thomas Patty and David C. Wiener, as Trustees ........... 2.5 Form of Deposit and Pledge Agreement among Chiat/Day inc. Advertising Chiat/Day Holdings, Inc., Omnicom Group Inc., TBWA International and The Chase Manhattan Bank, as Deposit Agent .................................................................. 2.6 Stock Purchase Agreement dated May 11, 1995 between Chiat/Day Holdings, Inc. and Adelaide Horton (a/k/a the Advertising Stock Sale Agreement) ........................ 2.7 Profit Sharing Plan Purchase Agreement dated as of May 9, 1995 between Chiat/Day Holdings, Inc. and Michael Kooper, as Trustee ........................................... 2.8* Form of Liquidating Trust Escrow Agreement among Holdings, Advertising and , as Escrow Agent .......................................................... 5* Opinion of Davis & Gilbert as to the legality of the Omnicom Common Stock registered hereunder .................................................................... 23.1 Consent of Arthur Andersen LLP as to financial statements of Omnicom Group Inc. .............................................................................. 23.2 Consent of Coopers & Lybrand LLP as to financial statements of Chiat/Day Holdings, Inc. ................................................................ 23.3 Consent of Davis & Gilbert (included in Exhibit 5) ...................................... 24 Powers of Attorney (included on signature page) ......................................... - ------------------- * To be filed by amendment
EX-2 2 EXHIBIT 2.1 ASSET PURCHASE AGREEMENT by and among OMNICOM GROUP INC., TBWA INTERNATIONAL INC., CHIAT/DAY HOLDINGS, INC. and CHIAT/DAY INC. ADVERTISING Dated May 11, 1995 TABLE OF CONTENTS ARTICLE I SALES OF ASSETS Section 1.1 Company Assets and Liabilities............................ 2 1.1.1 Company Assets Transferred................................ 2 1.1.2 Excluded Company Assets................................... 2 1.1.3 Assumed Company Liabilities............................... 3 1.1.4 Retained Company Liabilities.............................. 4 Section 1.2 Advertising Assets and Liabilities........................ 5 1.2.1 Advertising Assets Transferred............................ 5 1.2.2 Excluded Advertising Assets............................... 5 1.2.3 Assumed Advertising Liabilities........................... 6 1.2.4 Retained Advertising Liabilities.......................... 7 ARTICLE II PURCHASE PRICE AND CLOSING Section 2.1 Purchase Price............................................ 8 2.1.1 Basic Payments............................................ 8 2.1.2 Preferred Stock Loan...................................... 9 Section 2.2 Closing................................................... 9 Section 2.3 Purchase of Preferred Stock............................... 11 Section 2.4 Payment of Liabilities and Establishment of Liquidating Trust...................................... 11 Section 2.5 Escrow Agreement.......................................... 12 Section 2.6 Dissolution; Distribution of the Company's Properties..... 13 Section 2.7 Payment of Obligations to Rights Holders by Advertising... 13 RTICLE III REPRESENTATIONS OF THE SELLERS Section 3.1 Execution and Validity of Agreement and Related Documents...................................... 14 3.1.1 Execution and Validity of Agreement by the Company........ 14 3.1.2 Execution and Validity of Agreement by Advertising........ 14 3.1.3 Execution and Validity of Related Agreements.............. 14 Section 3.2 Capitalization, Existence and Good Standing of the Company........................................... 15 Section 3.2.1 Capitalization............................................ 15 3.2.2 Existence and Good Standing............................... 15 Section 3.3 Subsidiaries and Investments.............................. 15 Section 3.4 Financial Statements and No Material Changes.............. 16 Section 3.5 Books and Records......................................... 17 Section 3.6 Title to Properties; Encumbrances......................... 17 i Section 3.7 Leases.................................................... 18 Section 3.8 Contracts................................................. 18 Section 3.9 Restrictive Documents..................................... 19 Section 3.10 Litigation................................................ 20 Section 3.11 Taxes..................................................... 20 3.11.1 Taxes..................................................... 20 3.11.2 VAT Legislation........................................... 21 3.11.3 Additional Representations................................ 22 Section 3.12 Liabilities............................................... 22 Section 3.13 Insurance................................................. 22 Section 3.14 Intellectual Properties................................... 22 Section 3.15 Compliance with Laws; Licenses and Permits................ 23 3.15.1 Compliance................................................ 23 3.15.2 Licenses.................................................. 23 Section 3.16 Client Relations.......................................... 24 Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable.... 24 Section 3.18 Employment Relations...................................... 24 Section 3.19 Employee Benefit Matters.................................. 25 3.19.1 List of Plans............................................. 25 3.19.2 Severance................................................. 25 3.19.3 No Retiree Benefits....................................... 26 3.19.4 Plan Compliance........................................... 26 3.19.5 Additional Representations................................ 26 Section 3.20 Interests in Customers, Suppliers, Etc.................... 26 Section 3.21 Bank Accounts and Powers of Attorney...................... 27 Section 3.22 Compensation of Employees................................. 27 Section 3.23 No Changes Since the Balance Sheet Date................... 27 Section 3.24 Required Approvals, Notices and Consents.................. 28 Section 3.25 Corporate Controls........................................ 29 Section 3.26 Information Supplied...................................... 29 Section 3.27 Brokers................................................... 29 Section 3.28 Other Disclosures......................................... 30 Section 3.29 Copies of Documents; Schedules............................ 30 ARTICLE IV REPRESENTATIONS OF OMNICOM AND THE PURCHASER Section 4.1 Existence and Good Standing............................... 31 Section 4.2 Execution and Validity of Agreements and Related Documents...................................... 31 Section 4.3 Restrictive Documents..................................... 31 Section 4.4 Omnicom Stock............................................. 32 Section 4.5 Financial Statements and No Material Changes.............. 32 Section 4.6 Litigation................................................ 32 ii Section 4.7 Consents and Approvals of Governmental Authorities........ 33 Section 4.8 Brokers................................................... 33 Section 4.9 Information Supplied...................................... 33 Section 4.10 Copies of Documents; Schedules............................ 33 ARTICLE V COVENANTS OF THE SELLERS Section 5.1 Regulatory and Other Approvals............................ 33 Section 5.2 HSR Filings............................................... 34 Section 5.3 Investigation by Omnicom and the Purchaser................ 34 Section 5.4 No Solicitations.......................................... 35 Section 5.5 Conduct of Business....................................... 35 Section 5.6 Financial Information..................................... 38 Section 5.7 Notice and Cure........................................... 38 Section 5.8 Termination of Profit Sharing Plan........................ 39 Section 5.9 Consultation.............................................. 39 Section 5.10 Company Stockholder Approval.............................. 39 Section 5.11 Fulfillment of Conditions................................. 40 ARTICLE VI COVENANTS OF OMNICOM AND THE PURCHASER Section 6.1 Regulatory and Other Approvals............................ 40 Section 6.2 HSR Filings............................................... 40 Section 6.3 Financial Information and Reports......................... 41 Section 6.4 Agreements Regarding Employees............................ 41 Section 6.5 Notice and Cure........................................... 42 Section 6.6 Fulfillment of Conditions................................. 42 Section 6.7 Blue Sky; New York Stock Exchange Listing................. 43 Section 6.8 Access to Books and Records............................... 43 Section 6.9 Purchases of Omnicom Stock................................ 43 Section 6.10 Financial Results of Combined Businesses.................. 43 Section 6.11 Chiat Art Lease; Insurance................................ 43 Section 6.12 Exchange Act Filings...................................... 44 Section 6.13 Mojo Receivable........................................... 44 ARTICLE VII MUTUAL COVENANTS Section 7.1 Preparation of Registration Statement..................... 44 Section 7.2 Affiliates' Letters....................................... 45 Section 7.3 Reasonable Efforts to Consummate Transaction.............. 46 iii Section 7.4 Sales Tax Liability....................................... 46 Section 7.5 Financial Transactions.................................... 46 Section 7.6. Calculation of Revenues................................... 46 7.6.1 Delivery of Revenues Statement............................ 46 7.6.2 Definition of Annualized Revenues......................... 47 Section 7.7 Public Announcements...................................... 48 Section 7.8 Renegotiation of Purchase Price........................... 48 ARTICLE VIII CONDITIONS TO OBLIGATIONS OF OMNICOM AND THE PURCHASER Section 8.1 Representations and Warranties............................ 48 Section 8.2 Good Standing Certificates................................ 49 Section 8.3 Performance............................................... 49 Section 8.4 Certified Resolutions..................................... 49 Section 8.5 No Litigation............................................. 49 Section 8.6 Regulatory Consents and Approvals......................... 49 Section 8.7 Registration Statement; New York Stock Exchange Listing... 50 Section 8.8 Company Stockholder Approval.............................. 50 Section 8.9 Required Approvals, Notices and Consents.................. 50 Section 8.10 Pooling of Interests Accounting........................... 50 Section 8.11 Opinion of Counsel........................................ 50 Section 8.12 Escrow Agreements......................................... 50 Section 8.13 Employment Agreements..................................... 50 Section 8.14 Non-Competition Agreements................................ 51 Section 8.15 Employment/Consulting Agreements.......................... 51 Section 8.16 Loss of Client Account.................................... 51 Section 8.17 Affiliates Representation Letters......................... 51 Section 8.18 EAR and EPU Holders....................................... 51 Section 8.19 Closing of Profit Sharing Plan Purchase Agreement......... 51 Section 8.20 Repayment of Indebtedness................................. 52 Section 8.21 Material Adverse Effect................................... 52 Section 8.22 Proceedings............................................... 52 Section 8.23 Financial Transactions.................................... 52 Section 8.24 Deposit and Pledge Agreement.............................. 52 ARTICLE IX CONDITIONS TO OBLIGATIONS OF THE SELLERS Section 9.1 Representations and Warranties............................ 53 Section 9.2 Good Standing Certificates................................ 53 Section 9.3 Performance............................................... 53 Section 9.4 Certified Resolutions..................................... 53 iv Section 9.5 No Litigation............................................. 53 Section 9.6 Regulatory Consents and Approvals......................... 53 Section 9.7 Registration Statement, New York Stock Exchange Listing... 54 Section 9.8 Company Stockholder Approval.............................. 54 Section 9.9 Opinion of Counsel........................................ 54 Section 9.10 Employment Agreements..................................... 54 Section 9.11 Employment/Consulting Agreements.......................... 54 Section 9.12 Increased Revenues of the Sellers......................... 54 Section 9.13 Proceedings............................................... 55 Section 9.14 Financial Transactions.................................... 55 Section 9.15 Incentive Agreement....................................... 55 Section 9.16 Escrow Agreements......................................... 55 Section 9.17 Closing of Profit Sharing Plan Purchase Agreement......... 55 Section 9.18 Material Adverse Effect................................... 55 ARTICLE X ADDITIONAL AGREEMENTS Section 10.1 Change of Name of Sellers................................. 55 Section 10.2 Change of Name of TBWA Advertising Inc.................... 56 Section 10.3 Allocation of Purchase Price.............................. 56 Section 10.4 Future Tax Returns........................................ 56 Section 10.5 Tax Elections............................................. 57 Section 10.6 Canadian Elections........................................ 57 Section 10.7 Dispute Resolution........................................ 57 Section 10.8 Termination............................................... 58 Section 10.9 Effect of Termination..................................... 58 Section 10.10 Bulk Transfer Laws........................................ 58 Section 10.11 No Merger................................................. 59 Section 10.12 Transfer Tax Compliance................................... 59 Section 10.13 Indebtedness to the Purchaser............................. 59 ARTICLE XI SURVIVAL; INDEMNIFICATION Section 11.1 Survival.................................................. 59 Section 11.2 Obligation of the Company to Indemnify.................... 60 Section 11.3 Indemnification Procedures................................ 60 11.3.1 Notice of Asserted Liability.............................. 60 11.3.2 Defense of Asserted Liability............................. 60 11.3.3 Cooperation............................................... 60 11.3.4 Settlements............................................... 61 Section 11.4 Limitations on Indemnification............................ 61 v 11.4.1 Indemnity Cushion......................................... 61 11.4.2 Termination of Indemnification Obligations and Other Limitations...................................... 61 11.4.3 Treatment................................................. 62 11.4.4 Tax Effects............................................... 62 ARTICLE XII MISCELLANEOUS Section 12.1 Expenses.................................................. 63 Section 12.2 Governing Law............................................. 63 Section 12.3 Jurisdiction.............................................. 63 Section 12.4 Person Defined............................................ 63 Section 12.5 Knowledge Defined......................................... 64 Section 12.6 Affiliate Defined......................................... 64 Section 12.7 Captions.................................................. 64 Section 12.8 Confidentiality........................................... 64 Section 12.9 Notices................................................... 64 Section 12.10 Parties in Interest....................................... 65 Section 12.11 Severability.............................................. 66 Section 12.12 Counterparts.............................................. 66 Section 12.13 Entire Agreement.......................................... 66 Section 12.14 Amendment................................................. 66 Section 12.15 Third Party Beneficiaries................................. 66 Section 12.16 Extension; Waiver......................................... 66 Section 12.17 Exchange Rate............................................. 66 vi EXHIBITS Exhibit A Escrow Agreement Exhibit B Affiliates Representation Letter Exhibit C Opinion of Simpson Thacher & Bartlett Exhibit D Letter from Coopers & Lybrand LLP Exhibit E Letter from Arthur Andersen LLP Exhibit F Form Non-Competition Agreement Exhibit G Form Jay Chiat Non-Competition Agreement Exhibit H Consent Letter Exhibit I Opinion of Davis & Gilbert ANNEXES Annex I Additional Tax Representations Annex II Additional Employee Benefit Plan Representations SCHEDULES Schedule 1.1.4(ix) Company Guarantees Schedule 3.2 Foreign Qualifications Schedule 3.3 Subsidiaries Schedule 3.4A Financial Statements Schedule 3.4B GAAP Exceptions Schedule 3.5 Books and Records Schedule 3.6 Title to Properties; Encumbrances Schedule 3.7 Leases Schedule 3.8 Contracts Schedule 3.9 Restrictive Documents Schedule 3.10 Litigation Schedule 3.11 Taxes Schedule 3.13 Insurance Schedule 3.14 Intellectual Properties Schedule 3.16 Client Relations Schedule 3.19 Employee Benefit Matters Schedule 3.20 Interests in Customers; Suppliers Schedule 3.21 Bank Accounts and Powers of Attorney Schedule 3.22 Compensation of Employees Schedule 3.23 Changes Since the Balance Sheet Date Schedule 3.24 Approvals, Notices and Consents of Sellers Schedule 4.3 Restrictive Documents Schedule 4.7 Approvals, Notices and Consents of Purchaser Schedule 5.5 Conduct of Business vii Schedule 6.4 Benefits Offered to Affected Employees Schedule 7.8 Calculation of EBIT viii Index of Defined Terms Term Page - ---- ---- Advertising...................................................................1 Advertising Assets............................................................5 Advertising Balance Sheet....................................................16 Advertising Contracts.........................................................6 Advertising Stock Sale Agreement..............................................2 Affected Employees...........................................................41 Affiliate....................................................................64 Agreement.................................................................... 1 Amended and Restated Credit Agreement........................................18 Annualized Revenues..........................................................47 Arbitrator...................................................................57 Asserted Liability...........................................................60 Assets........................................................................5 Assumed Advertising Liabilities...............................................7 Assumed Company Liabilities...................................................3 Assumed Liabilities...........................................................7 Balance Sheet................................................................17 Balance Sheet Date...........................................................17 Businesses....................................................................1 Chiat Consulting Agreement...................................................36 Claims Notice................................................................60 Closing......................................................................10 Closing Date.................................................................10 Clow Employment Agreement....................................................36 Code.........................................................................26 Common Stock.................................................................12 Company.......................................................................1 Company Affiliates...........................................................45 Company Assets................................................................2 Company Balance Sheet........................................................16 Company Contracts.............................................................3 Contributed Stock.............................................................9 Deposit and Pledge Agreement.................................................52 Distribution Date............................................................12 EARs.........................................................................13 EAR Plan.....................................................................13 ix Term Page - ---- ---- EBIT.........................................................................48 EPUs.........................................................................13 EPU Plan.....................................................................13 ERISA........................................................................25 Escrow Agent.................................................................12 Escrow Agreement.............................................................12 Escrow Funds.................................................................12 Excluded Advertising Assets.................................................. 5 Excluded Assets...............................................................6 Excluded Company Assets.......................................................2 Execution Date................................................................1 GAAP.........................................................................17 Gains Tax....................................................................59 General Escrow Fund..........................................................12 Group........................................................................50 HSR Act......................................................................34 Inactive Subsidiary..........................................................16 Indemnified Parties..........................................................60 Information Statement........................................................29 Intellectual Property........................................................23 International................................................................16 Knowledge....................................................................64 Liabilities..................................................................22 Licenses.....................................................................23 Liens.........................................................................2 Liquidating Trust............................................................11 Liquidating Trust Escrow Fund................................................13 Losses.......................................................................60 Lost Clients.................................................................47 Market Value..................................................................9 Material Adverse Effect......................................................20 Measuring Month..............................................................47 Measuring Period.............................................................47 Mojo Receivable..............................................................30 New Clients..................................................................47 Omnicom.......................................................................1 Omnicom Group................................................................41 Omnicom Stock.................................................................8 Original Clients.............................................................47 x Term Page - ---- ---- Person.......................................................................63 Plan.........................................................................25 Post Execution Date Event....................................................39 Preferred Stock..............................................................11 Preferred Stock Purchase Date................................................11 Profit Sharing Plan..........................................................11 Profit Sharing Plan Purchase Agreement.......................................11 Prospectus Materials.........................................................44 Publication Date.............................................................12 Purchase Price................................................................8 Purchase Price Allocation....................................................56 Purchaser.....................................................................1 Registration Statement.......................................................29 Related Group................................................................26 Representatives..............................................................34 Requirements of Law..........................................................23 Retained Advertising Liabilities..............................................7 Retained Company Liabilities..................................................4 Retained Liabilities..........................................................7 Revenues Statement...........................................................47 Sales Taxes..................................................................46 SEC..........................................................................29 Securities Act...............................................................29 Sellers.......................................................................1 Special Escrow Fund..........................................................12 Stockholders.................................................................11 Subsidiary...................................................................16 Taxes........................................................................20 Termination Date.............................................................61 Third Party Claim............................................................60 Transaction Costs............................................................30 Transfer Taxes...............................................................59 VAT..........................................................................20 xi ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT (the "Agreement") dated May 11, 1995 (the "Execution Date") by and among OMNICOM GROUP INC., a New York corporation ("Omnicom"); TBWA INTERNATIONAL INC., a Delaware corporation and wholly-owned subsidiary of Omnicom (the "Purchaser"); CHIAT/DAY HOLDINGS, INC., a Delaware corporation (the "Company"); and CHIAT/DAY INC. ADVERTISING, a Delaware corporation, and wholly-owned subsidiary of the Company ("Advertising"; together with the Company, sometimes collectively referred to herein as the "Sellers"). W I T N E S S E T H : WHEREAS, the Sellers are engaged in the advertising business (the "Businesses"); WHEREAS, the Sellers wish to sell, and the Purchaser wishes to purchase, the assets of the Sellers relating to the Businesses, and in connection therewith, the Purchaser has agreed to assume the liabilities of the Sellers relating to the Businesses, all upon the terms and subject to the conditions of this Agreement; and WHEREAS, the respective Boards of Directors of the Company, Advertising, Omnicom and the Purchaser have approved this Agreement and the transactions contemplated hereby; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: 1 ARTICLE I SALES OF ASSETS Section 1.1 Company Assets and Liabilities. 1.1.1 Company Assets Transferred. On the terms and subject to the conditions set forth in this Agreement, the Company will sell, transfer, convey, assign and deliver to the Purchaser, and the Purchaser will purchase, at the Closing (as defined in Section 2.2), free and clear of all mortgages, liens, security interests, encumbrances, claims, charges, hypothecates and restrictions of any kind or character (collectively, "Liens"), except as set forth in Section 3.6, all of the Company's right, title and interest in, to and under all of the Company's assets, properties and business, of every kind and description and wherever located, including without limitation, (i) all of the issued and outstanding shares of capital stock owned directly by the Company in any other corporations (except for any shares of capital stock owned in Advertising and any other subsidiaries of the Company which are designated on Schedule 3.3 as an Inactive Subsidiary (as defined in Section 3.3)); (ii) all of the assets, properties and rights of the Company on the Company Balance Sheet (referred to in Section 3.4) as modified or changed between the Balance Sheet Date (as defined in Section 3.4) and the Closing Date (as defined in Section 2.2) without violation of the provisions of Section 3.23 or Section 5.5; (iii) the Chiat Consulting Agreement and the Clow Employment Agreement (each as defined in Section 5.5(xi) below); and (iv) all other property, tangible and intangible, real, personal or mixed, cash, securities, bank accounts, accounts receivable, goodwill, the trade name "Chiat/Day", the Company's and Advertising's corporate name, advances, deposits, prepayments, inventories, work-in-process, expenditures billable to clients, supplies, leaseholds, leasehold improvements, fixtures, machinery, equipment, vehicles, office furnishings and fixtures, claims of all kinds, rights under contracts, client lists, open media commitments and purchase orders, licenses, insurance policies, trade names of the Company and each of its subsidiaries, trademarks, trademark registrations and applications, copyrights, copyright registrations and applications, publication rights, trade secrets, all other intellectual property, and all books and records of the Company (collectively, the "Company Assets"). 1.1.2 Excluded Company Assets. Anything in Section 1.1.1 to the contrary notwithstanding, there shall be excluded from the assets, properties, rights and business to be transferred to the Purchaser hereunder the following (collectively, the "Excluded Company Assets"): (i) the corporate seal, minute book, charter documents and stock records of the Company, (ii) the issued and outstanding capital stock of Advertising and any Inactive Subsidiary (including without limitation, Chiat/Day Direct Marketing, Inc.), (iii) rights arising under the stock purchase agreement of even date herewith between the Company and Adelaide Horton relating to the sale of the capital stock of Advertising (the "Advertising Stock Sale Agreement"), other than the right to receive the cash purchase price receivable thereunder to the extent reflected in the books and 2 records of the Company, (iv) any rights of the Company or any subsidiary of the Company in and to the assets described in Sections 1.2.2(iii) and (iv) below. 1.1.3 Assumed Company Liabilities. In connection with the sale, transfer, conveyance, assignment and delivery of the Company Assets pursuant to this Agreement, on the terms and subject to the conditions set forth in this Agreement, at the Closing, the Purchaser agrees to: (i) assume, pay and discharge in due course all debts and liabilities of the Company existing on the Closing Date to the extent duly reflected in the books and records of the Company, including without limitation, (x) any indebtedness owing by the Company to Omnicom or any of its affiliates (as defined in Section 12.6) (whether pursuant to Sections 2.1.2, 2.3 or 7.5 hereof or otherwise), and (y) all debts and liabilities to the extent reflected on the Company Balance Sheet, as modified or changed between the Balance Sheet Date and the Closing Date in the ordinary course of business, and provided that the Purchaser will not assume or discharge debts or liabilities, if any, incurred by the Company as a result of transactions that the Company may enter in violation of this Agreement and which are not recorded on the books and records of the Company, or liabilities not related to the operating Businesses to the extent provided in Section l.l.4; (ii) assume, observe, perform and fulfill all terms and conditions of all executory contracts, agreements, licenses, leases, commitments and undertakings of the Company ("Company Contracts") including those incurred by the Company subsequent to the Balance Sheet Date, provided that the Purchaser will not assume or discharge any of the Company Contracts entered into in violation of this Agreement or those contracts not related to the operating Businesses to the extent provided in Section 1.1.4 (including without limitation those contracts marked on any Schedule to this Agreement as not being assigned to and assumed by the Purchaser); (iii) assume, pay and discharge the liability for Sales Taxes arising out of the transfer of the Company Assets to the Purchaser to the extent provided in Section 7.4; (iv) assume, pay and discharge the liability for all Transaction Costs (as defined in Section 3.28); and (v) assume, pay and discharge the liability for any severance benefits payable by the Company as a result of the termination of any employee prior to the Closing at the written request of Omnicom or the Purchaser. The items referred to in this Section 1.1.3 are collectively referred to as the "Assumed Company Liabilities". 3 1.1.4 Retained Company Liabilities. The Purchaser shall not assume by virtue of this Agreement or the transactions contemplated hereby, and shall have no liability for, the following non-operating liabilities of the Company (the "Retained Company Liabilities"): (i) except as otherwise provided in Section 1.1.3(iii), any tax liability arising out of or in connection with or resulting from the transactions contemplated by this Agreement; (ii) any obligation of the Company to distribute to its stockholders or the Liquidating Trust (as defined in Section 2.4) or the Escrow Funds (as defined in Section 2.5) or otherwise apply the Purchase Price (as defined in Section 2.1) paid to it pursuant to this Agreement; (iii) any liability or obligation under the Profit Sharing Plan Purchase Agreement (as defined in Section 2.3); (iv) any liability or obligation of the Company for taxes imposed on or measured by the income or capital of the Company, sales, payroll, or other Taxes (as defined in Section 3.11), or any interest or penalties thereon, applicable to or arising from any period, except with respect to periods ending on or prior to October 31, 1994 to the extent provided for on the Company Balance Sheet; (v) any liability or obligation of the Company which was required to be disclosed to the Purchaser pursuant to this Agreement and which was not so disclosed, provided that any liability or obligation reflected on the Company Balance Sheet shall be deemed to have been disclosed to the Purchaser to the extent reserved for thereon; (vi) any liability or obligation of the Company arising from the failure of the Company to perform or discharge any of its agreements contained herein; (vii) any claim, cause of action, proceeding or other litigation pending or threatened on the Closing Date or which is initiated at any time thereafter, against the Company and which is based on acts, facts, circumstances, events or conditions occurring or existing prior to the Closing except to the extent reserved against on the Company Balance Sheet or to the extent disclosed to the Purchaser on Schedule 3.10; (viii) any liability or obligation under the Advertising Stock Sale Agreement; (ix) any liability or obligation of the Company under any guarantee issued by the Company, except for those guarantees set forth on Schedule 1.1.4(ix); (x) except as otherwise provided in Section 1.1.3, any liability or obligation of the Company with respect to any plan, policy, arrangement or 4 agreement providing employment benefits or compensation to employees or severance payments (if any) arising solely by reason of the consummation of this Agreement, including any Plan referred to in Section 3.19, other than (x) employment, consulting or severance agreements and Plans specifically assumed by the Purchaser, (y) any liability reserved for on the Company Balance Sheet to the extent reserved for thereon, or (z) any liability incurred between the Balance Sheet Date and the Closing Date and which relates to the ordinary and normal course of business; (xi) any liability or obligation of the Company arising under the Deed of Transfer and Acceptance of Shares agreement, dated February 16, 1993 between the Company and FCB International, Inc.; and (xii) any liability or obligation of the Company incurred by or accruing to the Company after the Closing Date unless specifically assumed by the Purchaser under this Agreement. Section 1.2 Advertising Assets and Liabilities. 1.2.1 Advertising Assets Transferred. On the terms and subject to the conditions set forth in this Agreement, Advertising will sell, transfer, convey, assign and deliver to the Purchaser, and the Purchaser will purchase, at the Closing, free and clear of all Liens, except as set forth in Section 3.6, all of Advertising's right, title and interest in, to and under all of Advertising's assets, properties and business, of every kind and description and wherever located, including without limitation, (i) all of the issued and outstanding shares of capital stock directly owned by Advertising (except for any shares of capital stock owned in any subsidiaries which are designated on Schedule 3.3 as an Inactive Subsidiary), (ii) all of the assets, properties and rights of Advertising on the Advertising Balance Sheet (referred to in Section 3.4) as modified or changed between the Balance Sheet Date and the Closing Date without violation of the provisions of Section 3.23 or Section 5.5 and (iii) all other property, tangible and intangible, real, personal or mixed, cash, securities, bank accounts, accounts receivable, goodwill, advances, deposits, prepayments, inventories, work-in-process, expenditures billable to clients, supplies, leaseholds, leasehold improvements, fixtures, machinery, equipment, vehicles, office furnishings and fixtures, claims of all kinds, rights under contracts, client lists, open media commitments and purchase orders, licenses, insurance policies, trademarks, trademark registrations and applications, copyrights, copyright registrations and applications, publication rights, trade secrets, all other intellectual property, and all books and records of Advertising (collectively, the "Advertising Assets"; and together with the Company Assets but excluding the Excluded Assets (as defined in Section 1.2.2 below), sometimes collectively referred to herein as the "Assets"). 1.2.2 Excluded Advertising Assets. Anything in Section 1.2.1 to the contrary notwithstanding, there shall be excluded from the assets, properties, rights and business to be transferred to the Purchaser hereunder the following 5 (collectively, the "Excluded Advertising Assets"; and together with the Excluded Company Assets, sometimes collectively referred to herein as the "Excluded Assets"): (i) the corporate seal, minute book, charter documents and stock records of Advertising, (ii) the issued and outstanding capital stock of the Company and any Inactive Subsidiary (including without limitation Chiat/Day Direct Marketing, Inc.), (iii) any and all rights of Advertising in, to and under the lease relating to, all tenant improvements made to and all furniture and other appurtenances from time to time on the premises of, the residential townhouse at 149 East 38th Street, New York, New York and (iv) any and all rights of Advertising in or to the legal action entitled Chiat/Day Direct Marketing, Inc. f/k/a Perkins/Butler Direct Marketing, Inc. v. National Car Rental Systems, Inc., No. 93 Civ. 2717 (S.D.N.Y.), including without limitation, the sole and exclusive right to prosecute such legal action and to any proceeds resulting therefrom received after Closing, whether by way of judgment, settlement or otherwise (the value of such asset having been obtained by the Purchaser through the right to receive the cash purchase price receivable under the Advertising Stock Sale Agreement to the extent reflected in the books and records of the Company); provided, however, if prior to the Closing such action is fully resolved, whether by judgment, settlement or otherwise, and the proceeds thereof are received by Advertising, such asset shall not be an Excluded Asset. 1.2.3 Assumed Advertising Liabilities. In connection with the sale, transfer, conveyance, assignment and delivery of the Advertising Assets pursuant to this Agreement, on the terms and subject to the conditions set forth in this Agreement, at the Closing, the Purchaser agrees to: (i) assume, pay and discharge in due course all debts and liabilities of Advertising existing on the Closing Date to the extent duly reflected in the books and records of Advertising, including without limitation, (x) any indebtedness owing by Advertising to Omnicom or any of its affiliates (whether pursuant to Sections 2.1.2, 2.3 or 7.5 hereof or otherwise), and (y) all debts and liabilities to the extent reflected on the Advertising Balance Sheet, as modified or changed between the Balance Sheet Date and the Closing Date in the ordinary course of business, provided that the Purchaser will not assume or discharge debts or liabilities, if any, incurred by Advertising as a result of transactions that Advertising may enter in violation of this Agreement and which are not recorded on the books and records of Advertising or liabilities not related to the operating Businesses to the extent provided in Section l.2.4 (including without limitation those contracts marked on any Schedule to this Agreement as not being assigned to and assumed by the Purchaser); (ii) assume, observe, perform and fulfill all terms and conditions of all executory contracts, agreements, licenses, leases, commitments and undertakings of Advertising ("Advertising Contracts"), including those incurred by Advertising subsequent to the Balance Sheet Date, provided that the Purchaser will not assume or discharge any of the Advertising Contracts entered into in violation of this Agreement or those contracts not related to the operating Businesses to the extent provided in Section 1.2.4 6 (including without limitation those contracts marked on any Schedule to this Agreement as not being assigned to and assumed by the Purchaser); (iii) assume, pay and discharge the liability for Sales Taxes arising out of the transfer of the Advertising Assets to the Purchaser to the extent as provided in Section 7.4; and (iv) assume, pay and discharge the liability for any severance benefits payable by Advertising as a result of the termination of any employee prior to the Closing at the written request of Omnicom or the Purchaser. The items referred to in this Section 1.2.3 are collectively referred to as the "Assumed Advertising Liabilities"; and together with the Assumed Company Liabilities, collectively, the "Assumed Liabilities." 1.2.4 Retained Advertising Liabilities. The Purchaser shall not assume by virtue of this Agreement or the transactions contemplated hereby, and shall have no liability for, the following non-operating liabilities of Advertising (the "Retained Advertising Liabilities"; and together with the Retained Company Liabilities, sometimes collectively referred to herein as the "Retained Liabilities"): (i) except as otherwise provided in Section 1.2.3(iii), any tax liability arising out of or in connection with or resulting from the transactions contemplated by this Agreement; (ii) any obligation of Advertising to distribute to its stockholder or the participants in the EAR Plan and EPU Plan (as defined in Section 2.7 below) or the Liquidating Trust Escrow Fund (as defined in Section 2.7) or the Escrow Funds or otherwise apply the Purchase Price paid to it pursuant to this Agreement; (iii) any liability or obligation under the lease agreement dated June 1, 1987, as amended, relating to the residential townhouse at 149 East 38th Street, New York, New York; (iv) any liability or obligation of Advertising under the EAR Plan and the EPU Plan; (v) any liability or obligation of Advertising for taxes imposed on or measured by the income or capital of Advertising, sales, payroll, or other Taxes or any interest or penalties thereon, applicable to or arising from any period, except with respect to periods ending on or prior to October 31, 1994 to the extent provided for on the Advertising Balance Sheet; 7 (vi) any liability or obligation of Advertising which was required to be disclosed to the Purchaser pursuant to this Agreement and which was not so disclosed, provided that any liability or obligation reflected on the Advertising Balance Sheet shall be deemed to have been disclosed to the Purchaser to the extent reserved for thereon; (vii) any liability or obligation of Advertising arising out of the failure of Advertising to perform or discharge any of its agreements contained herein; (viii) except as otherwise provided in Section 1.2.3, any liability or obligation of Advertising with respect to any plan, policy, arrangement or agreement providing employment benefits or compensation to employees or severance benefits (if any) arising solely by reason of the consummation of this Agreement, including any Plan referred to in Section 3.19, other than (x) employment, consulting or severance agreements and Plans specifically assumed by the Purchaser, (y) any liability reserved for on the Advertising Balance Sheet to the extent provided for thereon, or (z) any liability incurred between the Balance Sheet Date and the Closing Date and which relates to the ordinary and normal course of business; (ix) any claim, cause of action, proceeding or other litigation pending or threatened on the Closing Date or which is initiated at any time thereafter against Advertising and which is based on acts, facts, circumstances, events or conditions occurring or existing prior to the Closing except to the extent provided for on the Advertising Balance Sheet or to the extent disclosed to the Purchaser on Schedule 3.10; and (x) any liability or obligation of Advertising incurred by or accruing to Advertising after the Closing Date unless specifically assumed by the Purchaser under this Agreement. ARTICLE II PURCHASE PRICE AND CLOSING Section 2.1 Purchase Price. In full consideration for the purchase by the Purchaser of the Assets, the purchase price (the "Purchase Price") shall be calculated and paid by the Purchaser as follows: 2.1.1 Basic Payments. (a) At the Closing, the Purchaser will pay the Company shares of Omnicom Group Inc. common stock, par value $.50 per share ("Omnicom Stock"), having an aggregate Market Value (as defined below) of (i) if the Closing Date is on or prior to October 31, 1995, (x) $11,180,563 plus (y) an amount equal to $2,418 multiplied by the number of days in the period commencing on the Closing Date and ending on October 31, 1995 or (ii) if the Closing Date is after October 31, 1995 and on or prior to December 31, 1995, (1) $11,930,880 8 plus (2) an amount equal to $2,418 multiplied by the number of days in the period commencing on the Closing Date and ending on December 31, 1995, in each case rounded to the nearest full share. As used in this Agreement the term, "Market Value" shall mean the average of the closing prices per share of Omnicom Stock reported on the New York Stock Exchange for the 20 consecutive trading days ending three business days immediately prior to the Closing Date. The closing price for each day shall be the closing price on the New York Stock Exchange Consolidated Tape (or any successor composite tape reporting transactions on the New York Stock Exchange) or, if such a composite tape shall not be in use or shall not report transactions in the Omnicom Stock, or if the Omnicom Stock shall be listed on a stock exchange other than the New York Stock Exchange, the last reported sales price regular way on the principal national securities exchange on which the Omnicom Stock shall be listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of the Omnicom Stock has been traded during such twenty consecutive business days), or, in either case, if there is no transaction on any such day, the average of the bid and asked prices regular way on such day. (b) At the Closing, the Purchaser will pay Advertising shares of Omnicom Stock having an aggregate Market Value of $14,000,000, rounded to the nearest full share. (c) All certificates representing Omnicom Stock to be paid by the Purchaser to the Company or Advertising at the Closing shall be registered in such names and represent such number of shares as the Company and Advertising may request. (d) On the Closing Date, the Company shall contribute to Advertising such number of shares of Omnicom Stock (valued at the Market Value) as may be necessary to insure that, after giving effect to the distributions described in Section 2.7 hereof, the obligations of the Company and Advertising to holders of EPUs and EARs (each as defined in Section 2.7 below) will be satisfied (such contributed shares, the "Contributed Stock"). 2.1.2 Preferred Stock Loan. On the day prior to the Closing Date the Purchaser shall lend the Company an amount equal to the outstanding balance of the loan (including accrued and unpaid interest) described in Section 2.3(b) and the Company shall use the proceeds of such loan from the Purchaser to repay the loan (including accrued and unpaid interest) described in Section 2.3(b). At the Closing, the Purchaser shall cancel its loan to the Company described in the preceding sentence. Section 2.2 Closing. (a) Not more than five days from the occurrence of the special meeting of stockholders of the Company contemplated by Section 5.10, Omnicom shall notify the other parties to this Agreement of its desire to close, specifying a closing date not more than thirty days following the date of mailing of such notice of its intention to close, provided that the parties hereto shall use their best efforts to close on or prior to August 31, 1995, and provided further that if the Closing does not occur on or prior to August 31, 1995, the parties agree to use their best efforts to close as soon as is practicable after October 31, 1995. The transfer of the Assets and Assumed 9 Liabilities to the Purchaser and delivery of the Purchase Price in exchange therefor (the "Closing") shall take place at 10:00 a.m. at the offices of Davis & Gilbert, 1740 Broadway, New York, New York on the date so determined (the "Closing Date"). In the event a proceeding shall have been instituted attacking the legality of this Agreement or seeking to enjoin its consummation, or there is a pending dispute being resolved under Section 10.7 to determine whether the condition of Closing set forth in the last sentence of Section 8.21 has been satisfied, then the Closing Date shall be suspended pending a final determination of any such proceeding or dispute, unless any party to this Agreement avails itself of the right to terminate this Agreement as permitted by Section 10.8. (b) At the Closing, each of the Sellers shall, by delivery of appropriate deeds, assignments, bills of sale or other documents of transfer and any necessary consents, transfer to the Purchaser title as required by this Agreement to all of the Assets. Notwithstanding anything to the contrary contained in this Agreement, each of the Sellers may retain its respective stockholder and minute books, stock record books and such of its other corporate and accounting records as it may be required to keep in order to conclude its affairs, liquidate and dissolve, in the case of the Company, or to continue its existence, in the case of Advertising, but the Sellers shall afford Omnicom and the Purchaser such reasonable access to such records as Omnicom and the Purchaser may require. (c) At the Closing, the Purchaser shall deliver to the Sellers one or more written instruments of assumption in such form as the Sellers or their counsel shall reasonably request to effect the assumption by the Purchaser as required by this Agreement of all of the Assumed Liabilities. (d) Each of the Sellers will, from time to time, at the request of the Purchaser, whether at or after the Closing Date, execute and deliver such other and further instruments of conveyance, assignments, transfer and consent as the Purchaser or its counsel may reasonably require for the most effectual conveyance and transfer of the Assets to the Purchaser, and the Sellers will assist the Purchaser in the collections and reduction to possession of the Assets and the Businesses. (e) Anything in this Agreement to the contrary notwithstanding, in the event an assignment or purported assignment of any of the Company Contracts or Advertising Contracts, or any claim, right or benefit arising thereunder or resulting therefrom, without the consent of other parties thereto, would constitute a breach thereof or would not result in the Purchaser receiving all of the rights of the Company or Advertising thereunder, such contract shall be deemed not to have been assigned by the Sellers to the Purchaser. In those circumstances, if requested by the Purchaser, the Sellers will use their best efforts to obtain any such consent. If such consent is not obtained and is required to effectively assign the Company Contract or Advertising Contract to the Purchaser, the Sellers will cooperate with the Purchaser in any reasonable 10 arrangement to provide the Purchaser with the full claims, rights and benefits under any such Company Contracts or Advertising Contracts, including enforcement at the cost and for the benefit of the Purchaser of any and all rights of the Company or Advertising, as the case may be, against a third party thereto arising out of the breach or cancellation by such third party or otherwise, and any amount received by the Company or Advertising in respect thereof shall be held for and paid over to the Purchaser. Section 2.3 Purchase of Preferred Stock. (a) On or about July 1, 1995 (the "Preferred Stock Purchase Date"), the Trustee of the Chiat/Day Profit Sharing Plan and 401(k) Plan (the "Profit Sharing Plan"), the sole record owner of the Preferred Stock, cumulative, $.01 par value per share, of the Company (the "Preferred Stock"), will sell for a cash payment of $14,081,773.93 all the shares of Preferred Stock it owns to the Company pursuant to the terms of that certain agreement of even date herewith (the "Profit Sharing Plan Purchase Agreement") between Michael Kooper, a Trustee of the Profit Sharing Plan and the Company. (b) On the Preferred Stock Purchase Date, Omnicom shall guarantee or cause one of its affiliates to guarantee a loan to the Company in the principal amount of $14,081,773.93 from a bank acceptable to Omnicom and on terms acceptable to Omnicom, and the Company shall apply the proceeds of such loan to purchase the Preferred Stock pursuant to the Profit Sharing Plan Purchase Agreement. Section 2.4 Payment of Liabilities and Establishment of Liquidating Trust. Immediately upon Closing, the Company shall make provision for the payment and satisfaction of all obligations and liabilities of the Company and Advertising not constituting Assumed Liabilities. In the course of its orderly winding-up process, the Company shall cause to be created a liquidating trust (the "Liquidating Trust") for and on behalf of the Company's Class A and Class B stockholders (collectively, the "Stockholders"). Approval of the creation and operation of the Liquidating Trust, as well as the identity of (or means of selecting) the trustee or trustees thereof, shall be included in the resolution to be acted upon by the Company's stockholders entitled to vote upon and adopt the plan of voluntary dissolution. Such resolution shall provide for (x) the Company's Stockholders' acceptance of such trustee or trustees as their collective agent under the terms of the Liquidating Trust; and (y) such trustee or trustees (i) to receive on their behalf liquidating distributions from the Company; (ii) to act as the agent of the Company's Stockholders in connection with the administration of the Escrow Agreement, from and after the transfer by the Company to the Liquidating Trust of the Company's right and interests therein; (iii) to respond to the assertion of any and all claims for indemnification by the Purchaser, and to assert claims, pursuant to the terms of the Escrow Agreement, and the provisions of this Agreement pertaining thereto; and (iv) to complete the winding up of the Company's affairs and payment of its liabilities not assumed by the Purchaser pursuant to this Agreement from the assets of the Liquidating Trust. The terms of the Liquidating Trust shall include provisions, among others, which: 11 (a) provide for receipt from the Company of all of the liquidating distributions (other than the initial distribution described in Section 2.6 hereof) from the Company for and on behalf of the Company's Stockholders, which receipt shall include the Company's interests and right to receive any distributions from the General Escrow Fund and the Special Escrow Fund (as such terms are defined below in Section 2.5), and the Omnicom Stock; (b) provide for the trustee or trustees (and their successor trustees, if any) to serve as the party designated to act for the Company and for and on behalf of the Stockholders, under the Escrow Agreement; and (c) provide that the duration of the Liquidating Trust will extend at least to the termination of the Escrow Agreement. Section 2.5 Escrow Agreement. Solely to fund (together on a pro-rata basis with the holders of EARs and EPUs) and secure the indemnification obligations of the Company described in Section 11.2, on the Distribution Date the Company for and on behalf of itself and the Stockholders (i) shall transfer to The Chase Manhattan Bank, N.A., as escrow agent (the "Escrow Agent"), 10% of the Omnicom Stock received by the Company under Section 2.1.1(a) (after deducting the Contributed Stock) to be held in the separate general escrow account (the "General Escrow Fund") created pursuant to the terms of that certain Escrow Agreement (the "Escrow Agreement") in the form attached hereto as Exhibit A among the Company, Advertising, the Purchaser and the Escrow Agent, and (ii) shall transfer to the Escrow Agent whole shares of Omnicom Stock having an aggregate Market Value of $1,700,000 multiplied by a fraction, the numerator of which is the number of shares of Class A common stock of the Company and Class B common stock of the Company (collectively, "Common Stock") outstanding on the Closing Date and the denominator of which is the sum of the number of shares of Common Stock and the number of EARs and EPUs outstanding on the Closing Date to be held in the separate special escrow account (the "Special Escrow Fund"; and together with the General Escrow Fund, sometimes collectively referred to herein as the "Escrow Funds") created pursuant to the terms of Escrow Agreement. To the extent that the Company transfers shares of Omnicom Stock received pursuant to Section 2.1.1(a) into the Escrow Funds, such shares shall be valued at Market Value. The Escrow Funds shall also contain shares of Omnicom Stock deposited by Advertising pursuant to Section 2.7 below. The term "Distribution Date" as used in this Agreement shall mean one of the following dates: (a) if the Closing Date occurs on or before October 31, 1995, the date shall be the earlier of (x) the date on which Omnicom makes publicly available interim financial results satisfying all applicable FASB pooling-of-interests requirements covering at least thirty days of post-Closing combined operations of Omnicom and the Businesses of the Company and Advertising acquired hereunder (the "Publication Date") and (y) October 30, 1995; and (b) if the Closing Date occurs after October 31, 1995, the date shall be the Publication Date. 12 Section 2.6 Dissolution; Distribution of the Company's Properties. As soon as practicable after the Closing, the Company shall file a Certificate of Dissolution with the Secretary of State of the State of Delaware and dissolve. As soon as practicable on or after the Distribution Date and after the establishment of the Liquidating Trust, the Company shall distribute to its Stockholders such number of shares of Omnicom Stock delivered at the Closing pursuant to Section 2.1.1(a), less (x) any shares of Omnicom Stock used to fund the Escrow Funds, on behalf of the Stockholders, and (y) 5% of the shares of Omnicom Stock received by the Company under Section 2.1.1(a) after deducting the Contributed Stock which shall be delivered to the Liquidating Trust, on behalf of the Stockholders, to fund (together on a pro-rata basis with the holders of EARs and EPUs) the payment and satisfaction of any obligations and liabilities of the Company and Advertising not constituting Assumed Liabilities and (z) the Contributed Stock. It is intended that the sale of the Assets, the purchase of the Preferred Stock and Class B common stock pursuant to the Profit Sharing Plan Purchase Agreement, and the distribution to the Stockholders in complete liquidation of the Company, shall not give rise to dissenters' rights in favor of the Company's Stockholders under Delaware law. Section 2.7 Payment of Obligations to Rights Holders by Advertising. On the Distribution Date, Advertising (for and on behalf of itself and each of the holders of Equity Appreciation Rights ("EARs") issued under the 1993 Equity Appreciation Rights Plan of the Company (the "EAR Plan"), and each of the holders of Equity Participation Awards ("EPUs") issued under the 1988 Amended and Restated Equity Participation Plan of the Company (the "EPU Plan")), (i) shall transfer to the Escrow Agent 10% of the Omnicom Stock delivered at the Closing pursuant to Section 2.1.1(b) or as Contributed Stock to be held in the General Escrow Fund created pursuant to the Escrow Agreement and (ii) shall transfer to the Escrow Agent whole shares of Omnicom Stock having an aggregate Market Value of $1,700,000 multiplied by a fraction, the numerator of which is the number of EARs and EPUs outstanding on the Closing Date and the denominator of which is the sum of the number of shares of Common Stock and the number of EARs and EPUs outstanding on the Closing Date to be held in the Special Escrow Fund created pursuant to the Escrow Agreement, in order in each case to fund (together on a pro-rata basis with the Stockholders) and secure the indemnification obligations of the Company described in Section 11.2 below, and (iii) shall transfer to a separate escrow fund (the "Liquidating Trust Escrow Fund") 5% of the shares of Omnicom Stock received by Advertising under Section 2.1.1(b) or as Contributed Stock to fund (together on a pro rata basis with the Stockholders) the payment and satisfaction of any obligations and liabilities of the Company and Advertising not constituting Assumed Liabilities. As soon as practicable on or after the Distribution Date and prior to the closing of the Advertising Stock Sale Agreement, Advertising shall distribute to the holders of EARs and EPUs such number of shares of Omnicom Stock delivered at the Closing pursuant to Section 2.1.1(b) and shares of Omnicom Stock received from the Company as the Contributed Stock pro rata in accordance with their interests, less any shares of Omnicom Stock used to fund the Escrow Funds and the Liquidating Trust Escrow Fund as aforesaid. To the extent that Advertising 13 transfers shares of Omnicom Stock received pursuant to Section 2.1.1(b) or as Contributed Stock into the Escrow Funds, such shares shall be valued at Market Value. ARTICLE III REPRESENTATIONS OF THE SELLERS The Sellers, jointly and severally, represent, warrant and agree to and with Omnicom and the Purchaser as follows: Section 3.1 Execution and Validity of Agreement and Related Documents. 3.1.1 Execution and Validity of Agreement by the Company. The Company has the full corporate power and authority to enter into this Agreement and to perform its obligations hereunder, provided that certain matters require Stockholder approval as provided in Section 5.10. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby have been authorized by the Board of Directors of the Company. This Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by Omnicom and the Purchaser, constitutes the legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, provided that certain matters require Stockholder approval as provided in Section 5.10. 3.1.2 Execution and Validity of Agreement by Advertising. Advertising has the full corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by Advertising and the consummation of the transactions contemplated hereby have been authorized by the Board of Directors of Advertising, and the Company, as its sole stockholder. This Agreement has been duly and validly executed and delivered by Advertising and, assuming due authorization, execution and delivery by Omnicom and the Purchaser, constitutes the legal, valid and binding obligation of Advertising enforceable against it in accordance with its terms. 3.1.3 Execution and Validity of Related Agreements. Each of the Sellers has the full corporate power and authority to enter into the Escrow Agreement and the Deposit and Pledge Agreement referred to in Section 8.24 and to perform its obligations under each such agreement; and the execution and delivery of each of such agreements and the consummation of the transactions contemplated thereby have been duly authorized by the Boards of Directors of the Sellers. Each of the Escrow Agreement and the Deposit and Pledge Agreement has been duly and validly executed and delivered by each Seller and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of each Seller enforceable against each Seller in accordance with its terms, provided that certain matters require Stockholder approval as provided in Section 5.10. The Company has the full corporate power and authority 14 to enter into the Advertising Stock Sale Agreement and the Profit Sharing Plan Purchase Agreement and to perform its obligations under each such agreement, provided that certain matters require Stockholder approval as provided in Section 5.10; and the execution and delivery of each of such agreements and the consummation of the transactions contemplated thereby have been duly authorized by the Board of Directors of the Company. Each of the Advertising Stock Sale Agreement and the Profit Sharing Plan Purchase Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, provided that certain matters require Stockholder approval as provided in Section 5.10. Section 3.2 Capitalization, Existence and Good Standing of the Company. 3.2.1 Capitalization. The Company has an authorized capitalization consisting of 75,000,000 shares of Class A common stock, $.01 par value per share, of which 13,527,269 shares are issued and outstanding and no shares are held in Treasury; 200,000,000 shares of Class B common stock, $.01 par value per share, of which 39,993,465 shares are issued and outstanding and no shares are held in Treasury; and 200,000 shares of Preferred Stock, cumulative, $.01 par value per share, of which 140,817.7393 shares are issued and outstanding. All such outstanding shares have been duly authorized and validly issued and are fully paid and non-assessable and have not been issued in violation of any preemptive rights of stockholders. No other class of capital stock of the Company is authorized or outstanding. Except as contemplated under the Profit Sharing Plan Purchase Agreement and except for the repurchase agreements set forth on Schedule 3.8, there are no outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, plans or other agreements of any character providing for the purchase, issuance or sale of any shares of the capital stock of the Company, or providing for the payment of any additional monies in respect of the Company's previous repurchase of any shares of its capital stock. 3.2.2 Existence and Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with the full corporate power and authority to own its property and to carry on its business all as and in the places where such properties are now owned or operated or such business is now being conducted. Except as set forth on Schedule 3.2, the Company has not qualified to do business as a foreign corporation in any jurisdiction, and neither the character nor location of the properties owned or leased by the Company, nor the nature of the business conducted by the Company, requires such qualification in any jurisdiction. The Company is in good standing in each state or other jurisdiction in which it is qualified to do business as a foreign corporation or foreign branch as set forth on Schedule 3.2. Section 3.3 Subsidiaries and Investments. Schedule 3.3 contains a true and complete list of all of the Company's directly and indirectly owned subsidiaries 15 (individually a "Subsidiary" and collectively the "Subsidiaries"). Schedule 3.3 indicates those Subsidiaries which are inactive, those which own no assets, and those which are in the process of liquidation (each, an "Inactive Subsidiary"), which list of Inactive Subsidiaries shall be updated through the Closing to include any other Subsidiaries falling within such defined term. Except as set forth in Schedule 3.3, neither the Company nor any Subsidiary owns any capital stock or other equity or ownership or proprietary interest in any corporation, partnership, association, trust, joint venture or other entity. Schedule 3.3 also sets forth the name, jurisdiction of organization and capitalization of each of the Subsidiaries, and a list of all of the stockholders of each Subsidiary (indicating the number of shares owned by each such stockholder). Except for shares held by a nominee of the Company or another Subsidiary to satisfy local law requirements, the Company or another Subsidiary owns of record and beneficially and has valid title to that percentage of the issued and outstanding shares of capital stock of each Subsidiary as set forth on Schedule 3.3, free and clear of all Liens. Each Subsidiary is a corporation duly incorporated and organized, validly existing and in good standing under the laws of its jurisdiction of organization, with the full corporate power and authority to own its property and to carry on its business all as and in the places where such properties are now owned or operated or such business is now being conducted. The Canadian branch of Advertising is duly qualified to do business in Ontario as an Extra-Provincial corporation. Except as set forth on Schedule 3.3, no Subsidiary has qualified to do business as a foreign corporation in any jurisdiction, and neither the character nor the location of the properties owned or leased by the Subsidiary, nor the nature of the business conducted by such Subsidiary, requires such qualification in any jurisdiction. Each Subsidiary is in good standing in each state or other jurisdiction in which it is qualified to do business as a foreign corporation or foreign branch as set forth on Schedule 3.3. Except for the Canadian branch of Advertising and the U.K. branch of Chiat/Day inc. Advertising International ("International") and as otherwise set forth on Schedule 3.3, no Subsidiary has a branch, agency, place of business or permanent establishment outside of the United States. All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are duly paid and non-assessable, and have not been issued in violation of any preemptive rights of Stockholders. Except as contemplated under the Advertising Stock Sale Agreement, there are no outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, plans or other agreements of any character, providing for the purchase, issuance or sale of any shares of the capital stock of any Subsidiary. Section 3.4 Financial Statements and No Material Changes. Schedule 3.4A sets forth the following: (a) an audited consolidated balance sheet of the Company and its subsidiaries as at October 31, 1992, 1993 and 1994, and the related statements of operations, stockholders' equity (deficit) and cash flow for the years then ended, reported on by Coopers & Lybrand, independent certified public accountants, (b) consolidating balance sheets of the Company and Advertising as at October 31, 1994 (such consolidating balance sheets of the 16 Company and Advertising are referred to herein as the "Company Balance Sheet" and the "Advertising Balance Sheet," respectively), (c) consolidating balance sheets as at October 31, 1994 of the U.S. offices of Advertising, the Toronto office of Advertising and the London office of International. The consolidated balance sheet of the Company and its subsidiaries as at October 31, 1994 is referred to in this Agreement as the "Balance Sheet". Such financial statements, including the footnotes thereto, are true and correct in all material respects and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") consistently applied throughout the periods indicated except as set forth on Schedule 3.4B. Each of the consolidated balance sheets of the Company and its subsidiaries fairly presents the consolidated financial position of the Company and its subsidiaries at the respective date thereof and reflects all claims against and all debts and liabilities of the Company and its subsidiaries, fixed or contingent, as at the date thereof, required to be shown thereon under GAAP, and the related statements of operations, stockholders' equity (deficit) and cash flow fairly present the consolidated results of operations of the Company and its subsidiaries, retained earnings and the cash flow for the respective periods indicated. Each of the consolidating balance sheets as at October 31, 1994 fairly presents the financial condition of the applicable operating unit at the Balance Sheet Date and reflects all claims against and all debts and liabilities of such operating unit, fixed and contingent, as at such date, required to be shown thereon under GAAP. Since October 31, 1994 (the "Balance Sheet Date"), except for the execution and delivery of this Agreement and the transactions required or permitted to take place pursuant hereto on or prior to the Closing Date, there has been no material adverse change in the assets or liabilities, or in the business or condition, financial or otherwise, in the results of operations of the Company and its Subsidiaries. Section 3.5 Books and Records. All accounts, books, ledgers and official and other records material to the business of the Company and its Subsidiaries of whatsoever kind have been properly and accurately kept and completed in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein. Except as set forth on Schedule 3.5, neither the Company nor any of its Subsidiaries have any of its records, systems, controls, data or information recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of the Company or such Subsidiary. The Company has delivered to the Purchaser complete and correct copies of the Certificate of Incorporation and By-laws (or equivalent charter documents) of the Company and of each Subsidiary which is not an Inactive Subsidiary; and prior to the Closing will deliver any approved amendments, changes or restatements of such instruments. Section 3.6 Title to Properties; Encumbrances. The Company and its Subsidiaries have good and valid title to (a) all their properties and assets owned by them (real and personal, tangible and intangible), including, without limitation, all the properties and assets reflected in the Balance Sheet, and (b) all the properties and assets purchased by the Company and its Subsidiaries since the Balance Sheet Date except for properties and assets reflected in the 17 Balance Sheet or acquired since the Balance Sheet Date that have been sold or otherwise disposed of in the ordinary course of business, free and clear of all Liens except as reflected on Schedule 3.6 and except for Liens granted to secure the obligations of the Company and Advertising under the Amended and Restated Credit Agreement dated as of February 1, 1995 among the Company, Advertising, Omnicom and Cargill, Wilson & Acree, as agent (as such agreement may be amended from time to time, the "Amended and Restated Credit Agreement"). The property, plant and equipment owned by the Company and the Subsidiaries taken as a whole are in a state of good maintenance and repair and are adequate and suitable for the purposes for which they are presently being used. Section 3.7 Leases. Neither the Company nor any Subsidiary owns a freehold interest in any real property. Schedule 3.7 contains an accurate and complete list of all personal property leases with a fixed annual rental in excess of $50,000 and all real property leases to which the Company or a Subsidiary is a party (as lessee, lessor, sublessee or sublessor), including without limitation, leases which the Company or a Subsidiary has subleased or assigned to a third party and as to which the Company or a Subsidiary remains liable. Each lease set forth on Schedule 3.7 (or required to be set forth on Schedule 3.7) is in full force and effect; all rents and additional rents due to date on each such lease have been paid; in each case, the lessee has been in peaceable possession since the commencement of the original term of such lease and no waiver, indulgence or postponement of the lessee's obligations thereunder has been granted by the lessor; and, except as set forth in Schedule 3.7, there exists no default or event of default by the Company or any Subsidiary or to the best knowledge, information and belief of the Sellers, by any other party, or occurrence, condition or act (including the purchase of the Assets hereunder) which, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default or event of default under such lease, and there are no outstanding claims of breach or indemnification or notice of default or termination of any such lease. Except as set forth on Schedule 3.7, there are no rent reviews under any lease held by the Company or a Subsidiary currently in progress or to commence within the next 60 day period. The real property and personal property leased by the Company and its Subsidiaries taken as a whole is in a state of good maintenance and repair and is adequate and suitable for the purposes for which it is presently being used, and the Sellers are not aware of any material repair or restoration works likely to be required in connection with any of their leased properties. Except as set forth on Schedule 3.7, the Company or a Subsidiary is in physical possession and actual and exclusive occupation of the whole of each of their leased properties. Section 3.8 Contracts. Schedule 3.8 hereto contains an accurate and complete list of the following agreements to which the Company or any Subsidiary is a party: (a) all Plans (as defined in Section 3.19) and Disclosed Schemes (as defined in Section 1.1 of Annex II hereto), (b) any agreement, contract or commitment relating to capital expenditures which involve payments of $250,000 or more in any single or related transaction, (c) any agreement, contract or commitment relating to the making of any loan, advance or investment to or in any Person (as defined in Section 12.4), which in any case involves more than 18 $50,000, (d) any instrument or arrangement evidencing or related in any way to indebtedness (excluding intercompany indebtedness) for money borrowed or to be borrowed, whether directly or indirectly, by way of loan, purchase money obligation, guaranty (other than the endorsement of negotiable instruments for collection in the ordinary course of business), conditional sale, purchase or otherwise, which in any case involves $50,000 or more, (e) any management service, employment, consulting or any other similar type of contract which is not cancelable without penalty or other financial obligation within 30 days, (f) any agreement, contract or commitment limiting its freedom to engage in any line of business or to compete with any other Person, including agreements limiting its ability to take on competitive accounts after the termination thereof or limiting the ability of its affiliates to take on competitive accounts during the term thereof, but excluding standard exclusivity requirements in agency-client agreements entered into in the ordinary course of business, (g) any agreement, contract or commitment not covered by another clause of this Section 3.8 which is material to the businesses of the Company and its Subsidiaries taken as a whole, (h) any collective bargaining or union agreement, (i) any agreement with any of its officers or directors or stockholders (including stockholder agreements or indemnification agreements), (j) any secrecy or confidentiality agreement (other than standard confidentiality agreements in computer software license agreements or agency-client agreements entered into in the ordinary course of business), (k) any licensing or franchise agreement (other than computer software license agreements and other than those entered into in its capacity as agent), (l) any agency/client agreement which generated commissions and fees during 1994, or is expected to generate commission and fees during 1995, of at least $100,000, (m) any agreements with media buying services; provided, however, commitments to purchase media in the ordinary course of business do not have to be set forth on Schedule 3.8, and (n) any joint venture or partnership agreement involving a sharing of profits not covered by (a) through (m) above; provided, however, that (x) commitments to media and production expenses which are fully reimbursable from clients, and (y) estimates or purchase orders given in the ordinary course of business relating to the execution of projects, do not have to be set forth on Schedule 3.8. Each contract, agreement or commitment set forth on Schedule 3.8 (or required to be set forth on Schedule 3.8) is in full force and effect, and there exists no default or event of default by the Company or any Subsidiary or to the best knowledge, information and belief of the Sellers, by any other party, or occurrence, condition, or act (including the purchase of the Assets hereunder) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default or event of default thereunder, and there are no outstanding claims of breach or indemnification or notice of default or termination of any such agreements, contracts or commitments. Schedule 3.8 also indicates which of the agreements set forth thereon are not being assigned to, or assumed by, the Purchaser. Section 3.9 Restrictive Documents. Except for approvals required under the HSR Act (as defined in Section 5.2 below) and except as set forth on Schedule 3.9, neither the Company nor any of its Subsidiaries is subject to, or a party to, any charter, by-law, mortgage, lien, lease, license, permit, agreement, contract, instrument, law, rule, ordinance, regulation, order, judgment or 19 decree, or any other restriction of any kind or character, which would prevent consummation of the transactions contemplated by this Agreement or any other agreement entered into by any of them in connection with the transactions contemplated hereby. Except as set forth on Schedule 3.9, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) violate, conflict with or result in the breach of any provision of the charter documents or by-laws of the Company or any Subsidiaries; (ii) violate, conflict with or result in the breach or modification of any of the terms of, or constitute (or with notice or lapse of time or both constitute) a default under, or otherwise give any other contracting party the right to accelerate or terminate, any obligation, contract, agreement, lien, judgment, decree or other instrument to which the Company or any Subsidiary is a party or by or to which the Company or any Subsidiary or any of their assets or properties may be bound or subject; (iii) violate any order, writ, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, the Company or any Subsidiary or any of their assets or properties; or (iv) result in a violation by the Company or any Subsidiary of any statute, law or regulation of any jurisdiction which is applicable to the business or operations of the Company or such Subsidiary except as could not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, the term "Material Adverse Effect" shall mean any material and adverse effect on the financial condition, results of operations, assets, properties or businesses of the Company and the Subsidiaries taken as a whole. Section 3.10 Litigation. Except as set forth on Schedule 3.10, there is no action, suit, proceeding at law or in equity by any Person, or any arbitration or any administrative or other proceeding by or before (or to the best knowledge, information and belief of the Sellers, any investigation by) any governmental or other instrumentality or agency, pending or, to the best knowledge, information and belief of the Sellers, threatened against either of the Sellers with respect to this Agreement or the transactions contemplated hereby, or against or affecting the Company or any of its Subsidiaries or any of their properties or rights. Except as set forth on Schedule 3.10, neither the Company nor any Subsidiary is subject to any judgment, order or decree entered in any lawsuit or proceeding. Section 3.11 Taxes. Except as set forth on Schedule 3.11; 3.11.1 Taxes. The Company and its Subsidiaries have timely filed or caused to be filed, taking into account any valid extensions of due dates, completely and accurately, (x) all Federal and foreign, tax or information returns and (y) all material state and local tax or information returns (including estimated tax returns), in each case, required under the statutes, rules or regulations of such jurisdictions to be filed by the Company and its Subsidiaries. The term "Taxes" means taxes, duties, charges or levies of any nature imposed by any taxing or other governmental authority, including without limitation income, gains, capital gains, surtax, capital, franchise, capital stock, value-added taxes ("VAT"), taxes required to be deducted from payments made by the payor and 20 accounted for to any tax authority, employees' income withholding, back-up withholding, withholding on payments to foreign persons, social security, national insurance, unemployment, worker's compensation, payroll, disability, real property, personal property, sales, use, goods and services or other commodity taxes, business, occupancy, excise, customs and import duties, transfer, stamp and other taxes (including interest, penalties or additions to tax in respect of the foregoing), and includes all taxes payable by the Company or any Subsidiary pursuant to Treasury Regulations ss.1.1502-6 or any similar provision of state, local or foreign law, and, (i) for the purposes of United Kingdom taxation "Taxes" shall also include corporation tax, advance corporation tax, inheritance tax, national insurance contributions, stamp duty, stamp duty reserve tax, and general business rates income tax, in each case whether disputed or not, and (ii) for the purposes of Canadian taxation the term "Taxes" shall also include employer health taxes and Canada or Quebec Pension Plan contributions. All Taxes shown on said returns to be due have been paid and all additional assessments received prior to the date hereof have been paid or are being contested in good faith, in which case such contested assessments are disclosed on Schedule 3.11. The amount set up as an accrual for Taxes on the Balance Sheet is sufficient for the payment of all unpaid Taxes of the Company and its Subsidiaries, whether or not disputed, for all periods ended on and prior to the date thereof. Since the Balance Sheet Date, neither the Company nor any Subsidiary has incurred any liabilities for Taxes other than in the ordinary course of business. The Company and its Subsidiaries have withheld all amounts required to be withheld on account of Taxes from amounts paid to employees, former employees, directors, officers and residents and non-residents and remitted the same to the appropriate taxing authority within the prescribed time periods. The Company and its Subsidiaries have collected all sales, use, goods and services or other commodity Taxes required to be collected and remitted the same to the appropriate taxing authority within the prescribed time periods. The Company and its Subsidiaries have delivered to the Purchaser correct and complete copies of all federal, state and foreign income tax returns filed with respect to the Companies for all taxable periods beginning on or after November 1, 1991. The Federal income tax returns of the Company or its Subsidiaries have been audited by the Internal Revenue Service for all periods through October 31, 1989. The Company has delivered to the Purchaser true and complete copies of all notices of deficiencies or proposed deficiencies and of all audit reports issued to the Company by any taxing authority for periods beginning on or after November 1, 1988. No examination by any taxing authority of any return of the Company or any Subsidiary is currently in progress, and neither the Company nor any Subsidiary has received written notice of any proposed audit or examination. No deficiency in the payment of Taxes by the Company or any Subsidiary for any period has been asserted in writing by any taxing authority and remains unsettled at the date of this Agreement. Neither the Company nor any Subsidiary has made any agreement, waiver or other arrangement providing for an extension of time with respect to the assessment or collection of any Tax against it. 3.11.2 VAT Legislation. Each Subsidiary, branch or division of the Company or any Subsidiary which is incorporated or doing business in a Member State of the European Economic Community is registered for the purposes of the VAT legislation in such Member State and in each Member State where it carries on business. Neither the Company nor any Subsidiary has agreed to become an agent, 21 manager or factor of or fiscal representative of or for any Person other than the Company or another Subsidiary not resident in its jurisdiction for the purposes of the relevant VAT legislation. 3.11.3 Additional Representations. The Sellers hereby further make the representations and warranties set forth on Annex I hereto, which is incorporated herein and made a part hereof as if set forth herein in its entirety. Section 3.12 Liabilities. Except as set forth on the Balance Sheet or referred to in the footnotes thereto, and except for liabilities under the Profit Sharing Plan Purchase Agreement, the Advertising Stock Sale Agreement, liabilities under loans required to be taken pursuant to the terms of this Agreement, and liabilities permitted under Section 5.5 of this Agreement, neither the Company nor any Subsidiary has any outstanding claims, liabilities or indebtedness of any nature whatsoever (collectively in this Section 3.12, "liabilities"), whether accrued, absolute or contingent, determined or undetermined, asserted or unasserted, and whether due or to become due, other than (i) liabilities disclosed in any Schedule hereto; (ii) liabilities under contracts, agreements, licenses, leases, commitments and undertakings of the type required to be disclosed on any Schedule but because of the dollar amount or other qualifications are not required to be listed on such Schedule; (iii) liabilities incurred in the ordinary course of business and consistent with past practice since the Balance Sheet Date not involving borrowings by the Company and its Subsidiaries; and (iv) liabilities which are fully covered by insurance maintained by the Company or any of its Subsidiaries on or prior to the Closing Date and which will inure to the Purchaser's benefit after the Closing Date. Section 3.13 Insurance. Schedule 3.13 is a schedule of all insurance policies (including life insurance) or binders maintained by the Company and its Subsidiaries. All such policies are valid, outstanding and enforceable policies and all premiums that have become due have been currently paid. None of such policies shall lapse or terminate by reason of the transactions contemplated hereby. Neither the Company nor any Subsidiary has received any notice of cancellation or non-renewal of any such policy or binder. Neither the Company nor any Subsidiary has received notice from any of its insurance carriers that any premiums will be materially increased in the future or that any insurance coverage listed on Schedule 3.13 will not be available in the future on substantially the same terms now in effect; provided, that the Sellers make no representation as to any cancellation, non-renewal, premium increase or change in terms which may occur after the Execution Date with respect to any earthquake or flood insurance (provided, that the Sellers have no current knowledge regarding the likely occurrence of the foregoing). Except as set forth on Schedule 3.13, within the last two years neither the Company nor any Subsidiary has filed for any claim exceeding $100,000 against any of its insurance policies, exclusive of automobile policies. Section 3.14 Intellectual Properties. Schedule 3.14 hereto contains an accurate and complete list of all patents, patent applications, trade name, trademark, copyright and service mark registrations and applications (now pending) owned by the Company and its Subsidiaries (collectively, the 22 "Intellectual Property") and all agreements under which any Person has granted a license under any Intellectual Property to the Company or any Subsidiary (other than "off-the-shelf" computer software licenses). The term "Intellectual Property" as used in this Section shall not include any of the foregoing listed items which are owned or licensed by a client of the Company or any of its Subsidiaries and which are used by the Company or one of its Subsidiaries in the rendering of services to such client, provided that in all cases the Company and its Subsidiaries have the requisite permission and authority to use such items as currently used or anticipated to be used. No claim of infringement or misappropriation of Intellectual Property is or has been pending or, to the best knowledge, information and belief of the Sellers, threatened against the Company or any of its Subsidiaries and, to the best knowledge, information and belief of the Sellers, neither the Company nor any of its Subsidiaries is infringing or misappropriating any intellectual property of others and none of the trademarks or trade names set forth in Schedule 3.14 have been abandoned. Except as set forth on Schedule 3.14, neither the Company nor any of its Subsidiaries has expressly granted any license, franchise or permit in effect on the date hereof to any person or entity to use any of the trade names or any of the trademarks owned by it. Section 3.15 Compliance with Laws; Licenses and Permits. 3.15.1 Compliance. The Company and its Subsidiaries are, and their business have been conducted, in compliance with all applicable laws, regulations, orders, judgments, decrees, codes, and ordinances ("Requirements of Law"), except in each case where the failure to so comply would not have a Material Adverse Effect, including without limitation, (i) all Requirements of Law promulgated by the Federal Trade Commission or any other Federal, state, provincial, municipal or local governmental regulatory agency or enforcement authority; (ii) all environmental Requirements of Law, whether regarding emissions, hazardous materials, hazardous wastes, toxic chemicals or otherwise; and (iii) all Requirements of Law relating to labor, civil rights, and occupational safety and health laws, worker's compensation, employment or pay equity. Neither the Company nor any Subsidiary has been charged with, or, to the best information, knowledge and belief of the Sellers threatened with, or under any investigation with respect to, any charge concerning any violation of any Requirements of Law. 3.15.2 Licenses. The Company and its Subsidiaries have all licenses, permits and other governmental certificates, authorizations and approvals (collectively "Licenses") required by any governmental or regulatory body for the operation of their businesses and the use of their properties as presently operated or used, except where the failure to have such Licenses would not have a Material Adverse Effect. All of the Licenses are in full force and effect and no action or claim is pending, nor to the best knowledge, information and belief of the Sellers is threatened, to revoke or terminate any of the Licenses or declare any License invalid in any material respect. 23 Section 3.16 Client Relations. Except as set forth on Schedule 3.16, there has not been, and the Sellers have no reasonable basis to believe that there will be any adverse change in relations with clients as a result of the purchase and sale of the Assets contemplated by this Agreement. Schedule 3.16 sets forth for the Company and the Subsidiaries taken as a whole, the twenty largest clients (measured by revenues) as at the date hereof, the revenues from each such client and from all clients (in the aggregate) for the fiscal year ended October 31, 1994, and the projected revenues of such twenty largest clients and all clients (in the aggregate) for the fiscal year ending October 31, 1995. The Sellers do not warrant that the estimated projected revenues set forth on Schedule 3.16 will prove to be accurate; provided, however, the Sellers do represent that they were made in good faith and upon a reasonable basis. Except as set forth on Schedule 3.16, no current client of the Company or any Subsidiary has advised the Company or any Subsidiary in writing that it is terminating or considering terminating the handling of its business by the Company or any Subsidiary, as a whole or in respect of any particular product, project or service, or is planning to reduce its future spending with the Company or any Subsidiary in any material manner, and to the best knowledge, information and belief of the Sellers, no client has orally advised the Company or any Subsidiary of any of the foregoing events. Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable. Except for the Mojo Receivable (as defined in Section 3.28), the amount of all work-in-process, accounts receivable, expenditures billable to clients and other debts due or recorded in the records and books of account of the Company and the Subsidiaries as being due to the Company or any Subsidiary will be good and collectible in full (less the amount of any provision, reserve or similar adjustment therefor made in such records and books of account) in the ordinary course of business, but in no event later than one year from the Closing Date, and none of such accounts receivable or other debts (or accounts receivable arising from such work-in-process) is or will be subject to any counterclaim or set-off except to the extent of any such provision, reserve or adjustment. There has been no material adverse change since the Balance Sheet Date in the amount or aging of the work-in-process, accounts receivable, expenditures billable to clients or other debts due to the Company or any Subsidiary or the reserves with respect thereto, or accounts payable of the Company or any Subsidiary, in each case other than in the ordinary course of business. Section 3.18 Employment Relations. (a) The Company and the Subsidiaries are in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages, hours and vacation, and is not engaged in any unfair labor practice; (b) no unfair labor practice complaint against the Company or any Subsidiary is pending before any applicable government entity and without limiting the generality of the foregoing, no complaint has been filed by any Person alleging a violation by the Company or any Subsidiary of the Employment Standards Act (Ontario), Human Rights Act (Ontario) or any similar legislation; (c) there is no organized labor strike, dispute, slowdown or stoppage actually pending or to the best knowledge, information and belief of the Sellers threatened against or involving the Company or any Subsidiary; (d) there are no labor unions 24 representing or, to the best knowledge, information and belief of the Sellers, attempting to represent the employees of the Company or any Subsidiary; (e) no claim or grievance nor any arbitration proceeding arising out of or under any collective bargaining agreement is pending and to the best knowledge, information and belief of the Sellers, no claim or grievance therefor has been threatened; (f) no collective bargaining agreement is currently being negotiated by the Company or any of its Subsidiaries; (g) neither the Company nor any Subsidiary has experienced any work stoppage or similar organized labor dispute during the last three years; and (h) all filings and payments under the Worker's Compensation Act (Ontario) have been filed or are made and up to date and there are no claims made under this or similar legislation which, if adversely determined, would have a Material Adverse Effect. There is no legal action, suit, proceeding or claim pending or, to the best knowledge, information and belief of the Sellers, threatened between the Company or any Subsidiary and any of their employees, former employees, agents, former agents, job applicants or any association or group of any of their employees, except as set forth on Schedule 3.10. Section 3.19 Employee Benefit Matters. 3.19.1 List of Plans. Schedule 3.8 to this Agreement lists all written employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, restricted stock, stock appreciation rights, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all termination, severance or other contracts or agreements (other than employment agreements), whether formal or informal, whether covering one person or more than one person, and whether or not subject to any of the provisions of ERISA, which are maintained, contributed to or sponsored by the Company and its Subsidiaries for the benefit of any employee (each item listed on Schedule 3.8 being referred to herein individually, as a "Plan" and collectively, as the "Plans"). The Company has delivered to the Purchaser a complete and accurate copy of (i) each welfare benefit plan (as defined in Section 3(1) of ERISA (a "Welfare Plan") (including all amendments thereto whether or not such amendments are currently effective), (ii) each trust agreement or other funding arrangement with respect to each Welfare Plan, including insurance contracts, (iii) each summary plan description and summary of material modifications relating to a Plan, and (iv) the three most recently filed IRS Form 5500 relating to each Welfare Plan. The information reported on each such Form 5500 is accurate and true. Except as set forth on Schedule 3.19 or as contemplated by Section 6.4, neither the Company nor any Subsidiary has any commitment (i) to create or cause to exist any other employee benefit plan, program or arrangement or (ii) to modify, change or terminate any Plan. 3.19.2 Severance. Except as set forth on Schedule 3.19, none of the Plans, any employment agreement or other arrangement to which the Company or any Subsidiary is a party, provides for the payment of separation, severance, 25 termination or similar-type benefits to any person or obligates the Company or any Subsidiary to pay separation, severance, termination or similar-type benefits solely as a result of any transaction contemplated by this Agreement or as a result of a "change in control," within the meaning of such term under section 280G of the Internal Revenue Code of 1986, as amended (the "Code"). 3.19.3 No Retiree Benefits. No Welfare Plan provides or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Subsidiary. 3.19.4 Plan Compliance. Each Plan has been operated materially in accordance with the requirements of all applicable law, including, without limitation, to the extent applicable, ERISA and the Code and the regulations and authorities published thereunder. The Company and the Subsidiaries have performed all material obligations required to be performed by it under, is not in any respect in default under or in violation of, and the Sellers have no knowledge of any default or violation by any party to, any Plan. No legal action, suit, audit, investigation or claim is pending or to the best knowledge, information and belief of the Sellers threatened with respect to any Plan (other than claims for benefits in the ordinary course) and, no fact, event or condition exists that could give rise to any such action, suit, audit, investigation or claim. All reports, disclosures, notices and filings with respect to such Plans required to be made to employees, participants, beneficiaries, alternate payees and government agencies have been timely made or an extension has been timely obtained. There has been no prohibited transaction (within the meaning of Section 406 of ERISA or section 4975 of the Code) with respect to any Plan subject to ERISA. Neither the Company nor any Subsidiary has incurred any liability for any excise tax arising under Sections 4975 or 4980B of the Code or any civil penalty arising under Sections 502(i) or 502(l) of ERISA, and, to the best knowledge, information and belief of the Sellers no fact, event or condition exists which could give rise to any such liability. All contributions, premiums or payments required to be made, paid or accrued with respect to any Plan have been made, paid or accrued on or before their due dates, including extensions thereof. All such contributions have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any government entity and no fact or event exists which could give rise to any such challenge or disallowance. 3.19.5 Additional Representations. The Sellers hereby further make the representations and warranties set forth on Annex II hereto, which is incorporated by reference herein and made a part hereof as if set forth herein in its entirety. Section 3.20 Interests in Customers, Suppliers, Etc. Except as set forth on Schedule 3.20, to the best knowledge, information and belief of the Sellers, no officer, director, or employee of the Company or any Subsidiary, any parent, brother, sister, child or spouse of any such officer, director or employee (collectively, the "Related Group"), or any entity controlled by anyone in the Related Group: (i) owns, directly or indirectly, any interest in (excepting less than 1/4 of 1% stock holdings for investment purposes in securities of publicly held and traded companies), or has any right to receive payments from, or 26 is an officer, director, employee or consultant of, any Person which is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, sales agent, customer or client of the Company or any Subsidiary; (ii) owns, directly or indirectly (other than through the ownership of stock or other securities of the Company or any Subsidiary), in whole or in part, any tangible or intangible property that the Company or any Subsidiary uses in the conduct of business; or (iii) has any cause of action or other claim whatsoever against, or owes any amount to, the Company or any Subsidiary, except for claims in the ordinary course of business such as for accrued vacation pay, accrued benefits under employee benefit plans, employment agreements, loans to any employee, in each case consistent with past practice and individually not in excess of $5,000, and except as set forth on Schedule 3.8(c) and similar matters and agreements existing on the date hereof. Section 3.21 Bank Accounts and Powers of Attorney. Set forth in Schedule 3.21 is an accurate and complete list showing (a) the name of each bank in which the Company and its Subsidiaries have an account, credit line or safe deposit box and the names of all persons authorized to draw thereon or to have access thereto, and (b) the names of all persons, if any, holding powers of attorney from the Company and its Subsidiaries and a summary statement of the terms thereof. Section 3.22 Compensation of Employees. Schedule 3.22 is an accurate and complete list showing (a) the names and positions of all employees and consultants who are currently being compensated in the aggregate from the Company or any Subsidiary at an annualized rate of $150,000 or more, together with a statement of the current annual salary, and material fringe benefits of such employees and consultants not generally available to all employees of the Company and its Subsidiaries, (b) all bonus compensation paid or payable in the aggregate (whether by agreement, custom or understanding) to any employee of the Company and its Subsidiaries for services rendered during the fiscal year ended October 31, 1994 and October 31, 1995, and (c) the names of all retired employees, if any, of the Company or its Subsidiaries who are receiving or entitled to receive any healthcare or life insurance benefits or any payments from the Company and its Subsidiaries not covered by any pension plan to which the Company or its Subsidiaries are a party, their ages and current unfunded pension rate, if any. The present severance and vacation policy of the Company and each of its Subsidiaries is set forth on Schedule 3.22. Section 3.23 No Changes Since the Balance Sheet Date. Since the Balance Sheet Date except as specifically stated on Schedule 3.23 or as contemplated or otherwise permitted under the terms of this Agreement, neither the Company nor any Subsidiary has (a) incurred any liability or obligation of any nature 27 (whether accrued, absolute, contingent or otherwise), except in the ordinary course of business, (b) permitted any of its assets to be subjected to any Lien (other than Liens in favor of Omnicom or any of its subsidiaries), (c) sold, transferred or otherwise disposed of any assets or properties except in the ordinary course of business, (d) made any capital expenditure or commitment therefor which individually or in the aggregate exceeded $100,000, (e) declared or paid or set aside for payment any dividends or made any distribution on any shares of its capital stock, or redeemed, purchased or otherwise acquired any shares of its capital stock or any option, warrant or other right to purchase or acquire any such shares, (f) paid any bonuses to employees in excess of "spot" bonuses which individually do not exceed $5,000 and in the aggregate do not exceed $50,000, (g) increased or prepaid its indebtedness for borrowed money, except current borrowings under credit lines listed on the Balance Sheet in the ordinary course of business or borrowings made from Omnicom or its affiliates, or made any loan to any employee, including for normal travel and expense advances or relocation allowances, except in each case consistent with past practice and individually not in excess of $5,000, or made any loan to any other Person, (h) written down the value of any work-in-process, or written off as uncollectible any notes or accounts receivable, except write-downs and writeoffs in the ordinary course of business, none of which individually or in the aggregate, is material to the Company and its Subsidiaries (i) granted any increase in the rate of wages, salaries, bonuses or other remuneration of any employee who, whether as a result of such increase or prior thereto, receives aggregate compensation from the Company or any Subsidiary at an annual rate of $150,000 or more, or except in the ordinary course of business to any other employees, (j) canceled or waived any claims or rights of substantial value, (k) made any change in any method of accounting, (l) otherwise conducted its business or entered into any transaction, except in the usual and ordinary manner and in the ordinary course of its business, (m) amended or terminated any agreement (other than agreements with Omnicom or any of its affiliates) which is material to its businesses, (n) renewed, extended or modified any lease of real property or except in the ordinary course of business any lease of personal property, (o) adopted, amended or terminated any Plan or (p) agreed, whether or not in writing, to do any of the foregoing. Section 3.24 Required Approvals, Notices and Consents. Except as set forth on Schedule 3.24 and except for third party consents, the obtaining of which have been waived by Purchaser under this Section 3.24, and except for approvals required under the HSR Act, no consent, approval or authorization of, or declaration or registration with, or action by, or notice to, any governmental or regulatory authority, domestic or foreign, or any third party, is required in connection with the execution and delivery by the Sellers of this Agreement and the consummation of the transactions contemplated hereby. Notwithstanding anything to the contrary contained in this Agreement, (x) to the extent that the assignment to the Purchaser of any agency-client contract of the Company or any Subsidiary requires the consent of any other party thereto, except for any agency/client contract with Nissan Motor Corp., Omnicom and the Purchaser waive the obligation to obtain such consent, and (y) to the extent that the assignment to the Purchaser of any agreement, contract or commitment listed on Schedule 3.7, Schedule 3.8 and/or Schedule 3.13 hereof requires the consent of any other 28 party thereto, except for those agreements, contracts or commitments which have been marked with an asterisk on Schedule 3.7, Schedule 3.8 or Schedule 3.13, Omnicom and the Purchaser waive the obligation to obtain such consent; and in each case under (x) and (y), for the purposes of the representations, warranties, agreements and covenants made by the Sellers in this Agreement, consents in respect of such non-asterisked contracts shall be deemed to have been received. Section 3.25 Corporate Controls. To the best knowledge, information and belief of the Sellers, neither the Company, its Subsidiaries nor any director, officer, agent, employee or other Person associated with or while acting on behalf of the Company and its Subsidiaries, has, directly or indirectly: used any corporate fund for unlawful contributions, gifts, or other unlawful expenses relating to political activity; made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; established or maintained any unlawful or unrecorded fund of corporate monies or other assets; made any false or fictitious entry on its books or records; made any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment, or other payment of a similar or comparable nature, to any person or entity, private or public, regardless of form, whether in money, property, or services, to obtain favorable treatment in securing business or to obtain special concessions, or to pay for favorable treatment for business secured or for special concessions already obtained, and neither the Company nor any Subsidiary has participated in any boycott or other similar practices affecting any of its actual or potential customers. Section 3.26 Information Supplied. None of the information supplied or to be supplied by the Sellers for inclusion in either (i) the registration statement on Form S-4 to be filed with the Securities and Exchange Commission ("SEC") by Omnicom in connection with the issuance of Omnicom Stock (the "Registration Statement") under this Agreement or (ii) the information statement relating to the meeting of the Company's stockholders to be held in connection with this Agreement and the transactions contemplated hereby (the "Information Statement"), contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, or will, at the time the Registration Statement becomes effective under the Securities Act of 1933, as amended (the "Securities Act"), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Section 3.27 Brokers. No broker, finder, agent or similar intermediary has acted on behalf of the Sellers in connection with this Agreement or the transactions contemplated hereby, and no brokerage commissions, finder's fees or similar fees or commissions are payable by the Company or any Subsidiary in connection therewith based on any agreement, arrangement or understanding with any of them. 29 Section 3.28 Other Disclosures. The legal, accounting, other professional fees and other expenses of the Sellers and the Subsidiaries, expended or accrued by the Sellers or the Subsidiaries in connection with the financing arrangements with Purchaser and its affiliates and in connection with this Agreement, including without limitation the preparation of the Prospectus Materials as provided in Section 7.1 and the transactions contemplated thereby (the "Transaction Costs"), will not be more than $1,000,000. Within 30 days after the Distribution Date, the Purchaser, as assignee, will collect from the Company the purchase price due under paragraph 1(b) of the Advertising Stock Sale Agreement. After the Execution Date and within two years from the Closing Date, the Company or the Purchaser, as assignee of the Company, shall recover payments due under the Chiat/Day Debt Restructuring Deed dated February 16, 1993 between the Company, FCB International Inc., and Foote, Cone & Belding Communications, Inc. and Venice Holdings Pty Limited (the "Mojo Receivable") of not less than $1,700,000 after deducting (i) the costs and expenses (including attorneys fees and disbursements) incurred from and after the Execution Date in connection with recovering any such payments and (ii) $250,000 if the Mojo Determination Date (as such term is defined in the Escrow Agreement) is within one year of the Closing Date or $300,000 if the Mojo Determination Date is later than one year from the Closing Date. Section 3.29 Copies of Documents; Schedules. The Company has caused to be made available for inspection and copying by Omnicom and the Purchaser and their advisers, true, complete and correct copies of all documents referred to in this Article III or in any Annex or Schedule. Summaries of all material oral contracts contained in Schedule 3.8 are complete and accurate in all respects. The Schedules referred to in this Article III have been previously delivered to Omnicom and the Purchaser by the Sellers. 30 ARTICLE IV REPRESENTATIONS OF OMNICOM AND THE PURCHASER Omnicom and the Purchaser, jointly and severally, represent, warrant and agree to and with the Sellers as follows: Section 4.1 Existence and Good Standing. Omnicom is a corporation duly organized, validly existing and in good standing under the laws of the State of New York. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Omnicom and the Purchaser is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character or location of the properties owned or leased by it, or the nature of the business conducted by it, requires such qualification. Each of Omnicom and the Purchaser has all requisite corporate power and authority to own its assets and to carry on its business as presently conducted. Section 4.2 Execution and Validity of Agreement and Related Documents. Each of Omnicom and the Purchaser has the full corporate power and authority to enter into this Agreement, the Escrow Agreement and the Deposit and Pledge Agreement and to perform its respective obligations hereunder and thereunder. The execution and delivery of this Agreement, the Escrow Agreement and the Deposit and Pledge Agreement by Omnicom and the Purchaser and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required corporate action on behalf of Omnicom and the Purchaser. Each of this Agreement, the Escrow Agreement and the Deposit and Pledge Agreement has been duly and validly executed and delivered by Omnicom and the Purchaser and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of Omnicom and the Purchaser, enforceable against each of them in accordance with its terms. Section 4.3 Restrictive Documents. Except as set forth on Schedule 4.3, and except for approvals required under the HSR Act, neither Omnicom nor the Purchaser is subject to, or a party to, any charter, by-law, mortgage, lien, lease, license, permit, agreement, contract, instrument, law, rule, ordinance, regulation, order, judgment or decree, or any other restriction of any kind or character, which would prevent consummation of the transactions contemplated by this Agreement or any other agreement entered into by it in connection with the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) violate, conflict with or result in the breach of any provision of the charter documents or by-laws of Omnicom or the Purchaser; (ii) except as set forth on Schedule 4.3, violate, conflict with or result in the breach or modification of any of the terms of, or constitute (or with notice or lapse of time or both constitute) a default under, or otherwise give any other contracting party the right to accelerate or terminate, any obligation, 31 contract, agreement, lien, judgment, decree or other instrument to which Omnicom or the Purchaser is a party or by or to which Omnicom or the Purchaser or their respective assets or properties may be bound or subject; (iii) violate any order, writ, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, Omnicom or the Purchaser or their respective assets or properties; or (iv) result in a violation by Omnicom or the Purchaser of any statute, law or regulation of any jurisdiction which is applicable to the business or operations of Omnicom or the Purchaser, except as could not reasonably be expected to have a material and adverse effect on the financial condition, results of operations, assets, properties or businesses of Omnicom and its subsidiaries taken as a whole. Section 4.4 Omnicom Stock. The shares of Omnicom Stock to be delivered to the Sellers pursuant to this Agreement, when delivered as provided herein, will be validly issued and outstanding shares of voting common stock of Omnicom, fully paid and non-assessable, and will not be subject to preemptive rights of any Person. The Omnicom Stock to be so delivered will be registered under the Registration Statement and duly listed for trading on the New York Stock Exchange as of the Closing Date. Section 4.5 Financial Statements and No Material Changes. Omnicom has previously furnished to the Sellers true and complete copies of its Annual Reports on Form 10-K for the three fiscal years ended December 31, 1992, 1993 and 1994, as amended by the Annual Reports on Form 10-K/A filed in respect of the 1992 and 1993 Annual Reports. Since December 31, 1994, there has been no material adverse change in the assets or liabilities, or in the business or condition, financial or otherwise, or the results of consolidated operations of Omnicom and its subsidiaries. As of their respective dates, such Form 10-Ks (in the case of the 1992 and 1993 Annual Reports, as amended by the applicable Form 10-K/A) did not contain any untrue statement of a material fact, or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, or in which they will be made, not misleading. The audited financial statements included in such Reports have been prepared in accordance with GAAP applied on a consistent basis (except as stated therein) and present fairly, in all material respects, the consolidated financial position of Omnicom and its subsidiaries as of the respective dates thereof, and the consolidated results of operations and cash flows for each of the periods then ended. Section 4.6 Litigation. There is no action, suit, proceeding at law or in equity by any Person, or any arbitration or any administrative or other proceeding by or before (or to the best knowledge, information and belief of Omnicom and the Purchaser, any investigation by), any governmental or other instrumentality or agency, pending or, to the best knowledge, information and belief of Omnicom and the Purchaser, threatened against Omnicom or the Purchaser (a) with respect to this Agreement or the transactions contemplated hereby, or (b) against or affecting Omnicom or any of its subsidiaries or any of their properties or rights which, if adversely determined, would be reasonably likely to have a material and adverse effect on the financial condition, results of 32 operations, assets, properties or businesses of Omnicom and its subsidiaries taken as a whole. Section 4.7 Consents and Approvals of Governmental Authorities. Except as set forth on Schedule 4.7 and except for approvals required under the HSR Act, no consent, approval or authorization of, or declaration or registration with, or action by, or notice to, any governmental or regulatory authority, domestic or foreign, or any third party, is required in connection with the execution and delivery by Omnicom and the Purchaser of this Agreement and the consummation of the transactions contemplated hereby. Section 4.8 Brokers. No broker, finder, agent or similar intermediary has acted on behalf of Omnicom or the Purchaser or their affiliates in connection with this Agreement or the transactions contemplated hereby, and no brokerage commissions, finders' fees or similar fees or commissions are payable by Omnicom or the Purchaser in connection therewith based on any agreement, arrangement or understanding with any of them. Section 4.9 Information Supplied. None of the information supplied or to be supplied by Omnicom for inclusion in either (a) the Registration Statement or (b) the Information Statement contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, or will, at the time the Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. Section 4.10 Copies of Documents; Schedules. Omnicom and the Purchaser have caused to be made available for inspection and copying by the Sellers and their advisers, true, complete and correct copies of all documents referred to in this Article IV or in any Schedule. The Schedules referred to in this Article IV have been previously delivered to the Sellers by Omnicom or the Purchaser. ARTICLE V COVENANTS OF THE SELLERS The Sellers covenant and agree with Omnicom and the Purchaser that, at all times from and after the Execution Date until the Closing, the Sellers will comply with all covenants and provisions of this Article V, except to the extent Omnicom (on behalf of itself and the Purchaser) may otherwise consent in writing. Section 5.1 Regulatory and Other Approvals. The Sellers will (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and 33 in good faith and use all commercially reasonable efforts, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to governmental or regulatory authorities or any other Person required of the Sellers to consummate the transactions contemplated hereby including without limitation those described on Schedule 3.24 (except as otherwise contemplated in Section 3.24), (b) provide such other information and communications to such governmental or regulatory authorities or other Persons as such governmental or regulatory authorities or other Persons may reasonably request in connection therewith and (c) provide reasonable cooperation to Omnicom and the Purchaser in obtaining all consents, approvals or actions of, making all filings with and giving all notices to governmental or regulatory authorities or other Persons required of Omnicom or the Purchaser to consummate the transactions contemplated hereby, including without limitation complying, if necessary, with the Workers Adjustment and Retraining Notification Act (P.L. 100-379). The Sellers will provide prompt notification to Omnicom when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Omnicom of any communications (and, unless precluded by law, provide copies of any such communications that are in writing) with any governmental or regulatory authority or other Person regarding any of the transactions contemplated by this Agreement. Section 5.2 HSR Filings. In addition to and not in limitation of the Sellers' covenants contained in Section 5.1, the Sellers will (a) take promptly all actions necessary to make the filings required of the Sellers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (b) comply at the earliest practicable date with any request for additional information received by the Sellers from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with Omnicom in connection with Omnicom's filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general. Section 5.3 Investigation by Omnicom and the Purchaser. The Sellers will (a) provide Omnicom and the Purchaser and their respective officers, employees, counsel, accountants, financial advisors, consultants and other representatives (collectively, "Representatives") with full access, upon reasonable prior notice and during normal business hours, to the employees and such other officers and agents of the Sellers who have any responsibility for the conduct of the Businesses, to the Sellers' accountants and their work papers, and to the Assets, but only to the extent that such access does not unreasonably interfere with the Businesses and (b) furnish Omnicom, the Purchaser and the Representatives with all such information and data concerning the Businesses, the Assets and the Assumed Liabilities as Omnicom, the Purchaser or the Representatives reasonably may request in connection with such investigation, except to the extent that furnishing any such information or data would violate any law, order, contract or License applicable to the Sellers or by which any of their Assets are bound. 34 Section 5.4 No Solicitations. Subject to the duties imposed by applicable law, the Sellers will not take, nor will they permit any affiliate of the Sellers (or authorize or permit any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of the Sellers or any such affiliate) to take, directly or indirectly, any action to solicit, encourage, receive, negotiate, assist or otherwise facilitate (including by furnishing confidential information with respect to the Businesses or permitting access to the Assets of the Sellers) any offer or inquiry concerning the acquisition of the Businesses from any Person other than Omnicom or the Purchaser. Section 5.5 Conduct of Business. From the Execution Date to the Closing Date, except as contemplated or otherwise permitted under the terms of this Agreement, the Sellers will operate the Businesses only in the ordinary course consistent with past practice; provided, however, the Sellers shall diligently proceed with the liquidation and dissolution of the Inactive Subsidiaries. Without limiting the generality of the foregoing, except as contemplated by or otherwise permitted by this Section 5.5, each Seller will refrain, and will cause its subsidiaries to refrain, from taking any of the following actions unless consented to in writing by Omnicom (on behalf of itself and the Purchaser), which consent shall not be unreasonably withheld: (i) other than pursuant to this Agreement or the Advertising Stock Sale Agreement, selling, leasing or otherwise disposing of all or a substantial part of its assets or Businesses; (ii) amending its Certificate of Incorporation or by-laws (or equivalent charter documents), other than pursuant to Section 10.1 or as otherwise described on Schedule 5.5; (iii) changing its equity capitalization; (iv) engaging in any acquisition of the stock, assets or business of another corporation or entity or making any equity investment of corporate funds in another corporation or entity other than short-term investments in cash equivalents; (v) merging or consolidating with and into any corporation, limited liability company or other entity, or merging or consolidating any corporation, limited liability company or other entity with and into it; (vi) except in respect of any Inactive Subsidiary or any other Subsidiary indicated on Schedule 3.3 as being in the process of liquidation, engaging in any liquidation or dissolution; 35 (vii) engaging in any transaction involving an amount in excess of $250,000, other than in the ordinary course of business to service its clients; (viii) other than pursuant to the Advertising Stock Sale Agreement, engaging in the issuance or sale of stock or securities, or options, warrants or obligations convertible into such stock or securities or, issuing any phantom stock, equity participation units, stock appreciation rights or similar rights; (ix) entering into any line of business not related to advertising or public relations; (x) prepaying any indebtedness for borrowed money except for obligations to Omnicom or one of its affiliates or payments of the 8.17% Junior Subordinated Installment Notes, the 13.25% Junior Subordinated Notes, the 13.25% Senior Subordinated Notes and the notes issued under the Amended and Restated Credit Agreement; or creating or modifying any of the terms of any of the following financial arrangements: any lien on any of its assets or properties; any guarantee by it of the obligations of any third party, whether a director, officer or employee of the Company or any Subsidiary, or otherwise; and any indebtedness for borrowed money except in the ordinary course of its business under credit lines set forth on Schedule 3.8 or pursuant to a transaction with Omnicom or one of its affiliates; (xi) except as set forth on Schedule 5.5, entering into any arrangement with any employee or consultant pursuant to which the compensation or fee payable to such employee or consultant shall wholly or partially be contingent upon (a) a percentage of its revenues or the revenues generated by it relating to any of its clients or (b) its profits, except for renewals in the ordinary course of business and consistent with past practice of outstanding arrangements of such type which have been disclosed on Schedule 3.8, and except for the consulting and/or employment agreements to be entered into by each of Jay Chiat and Leland Clow with the Company, in the forms previously approved in writing by Omnicom (respectively, the "Chiat Consulting Agreement" and the "Clow Employment Agreement"); (xii) making any loans to any employee, including normal travel and expense advances or relocation allowances, except in each case consistent with past practice and individually not in excess of $5,000, or to any other Person; (xiii) except as disclosed in Schedule 3.8 hereto, entering into any lease or purchase of real property or commitment to construct real property; (xiv) granting any compensation increase to any employee whose total annual compensation would after such increase exceed $150,000, or paying bonuses to any employees, except (a) Advertising shall be permitted consistent with past practices to accrue (but not pay) bonuses for distribution to its senior executives and certain other key employees in 36 respect of the period commencing November 1, 1994 and ending with the Closing Date in an amount up to 10% of profit from normal advertising operations before all federal, state, local and foreign income taxes and adjusted to exclude interest income and income expense calculated in accordance with GAAP, such accrual to be reviewed and adjusted upward or downward after October 31, 1995 consistent with past practice (it being understood that for the period commencing the day after the Closing Date and ending October 31, 1995, the accrual shall be based on the financial results of the Businesses as conducted by the Purchaser), (b) the Company and its Subsidiaries shall be permitted to pay the bonuses accrued for on the Balance Sheet, and (c) the Company and its Subsidiaries shall be permitted to pay "spot" bonuses from time to time to employees in the ordinary course of business and consistent with past practice not to exceed $50,000 in the aggregate; (xv) except for the Chiat Consulting Agreement and the Clow Employment Agreement and the agreements referred to in Section 5.5(xix) below, entering into any contract or agreement with any officer or director; (xvi) except as set forth on Schedule 5.5, entering into any affiliation arrangement with any advertising agency, other than the Purchaser or another member of the TBWA International network; (xvii) declaring or paying any dividends to its stockholders or making other distributions in respect of its capital stock, splitting, combining or reclassifying any of its capital stock, or issuing or authorizing or proposing the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; provided that Advertising may declare a dividend to its stockholder consisting solely of shares of capital stock of the Company owned by Advertising; repurchasing (other than pursuant to the Profit Sharing Plan Purchase Agreement and the stock repurchase agreements existing as of the date hereof and described on Schedule 3.8), redeeming or otherwise acquiring any of its shares of capital stock; (xviii) amending in any material respect any contract or agreement material to the Businesses, including without limitation the Advertising Stock Sale Agreement, the Profit Sharing Plan Purchase Agreement or any agreement with Nissan Motor Corp.; (xix) entering into any severance agreement involving a payment, or obligation to pay, any amount in excess of the Company's normal severance benefit as set forth on Schedule 3.22; provided, however, that Omnicom and the Purchaser acknowledge that the Sellers collectively may also enter into up to sixteen severance agreements (in a form previously approved by Omnicom) each providing for not more than six months of severance pay; 37 (xx) releasing, canceling or assigning any indebtedness for borrowed money owed to it, or waiving any material right relating to its properties; (xxi) accepting as a client any Person that the Chief Executive Officer of Omnicom, in his reasonable discretion, determines to be competitive with any significant client serviced by any member of the TBWA International network, the DDB Needham Worldwide network or the BBDO Worldwide network; (xxii) accepting as a client any Person that the Chief Executive Officer of Omnicom, in his reasonable discretion, determines to be contrary to the best interests of Omnicom and its subsidiaries; (xxiii) except as set forth on Schedule 5.5, creating or modifying any Plan or entering (other than the Chiat Consulting Agreement and the Clow Employment Agreement) into or modifying any employment agreement which is not cancelable without penalty or other obligation on 30 days notice; (xxiv) entering into any transaction or performing any act which would be reasonably likely to result in any of the representations and warranties of the Sellers contained in this Agreement not being true and correct; or agreeing to take any of the actions that are prohibited herein or which would constitute a violation of any of the covenants of the Sellers contained herein; and (xxv) delegating to directors the power to take any of the actions prohibited by any of the foregoing clauses. Notwithstanding anything in this Section 5.5 to the contrary, Advertising shall be permitted to assign to Jay Chiat all of its rights and obligations in, to and under the lease relating to the residential townhouse at 149 East 38th Street, New York, New York. Section 5.6 Financial Information. Within 20 days after the close of each month between the Execution Date and the Closing Date, the Company shall furnish to Omnicom the unaudited consolidated and consolidating balance sheets of the Company and the Subsidiaries and the unaudited consolidating balance sheets of the Company and each Subsidiary and operating unit, specified in clauses (b) and (c) of Section 3.4, as at the close of such month, and the related consolidated and consolidating statements of income and (with respect to quarterly consolidated statements) cash flow for the period then ended and the fiscal year-to-date. The unaudited financial statements referred to in this Section 5.6 shall be prepared in accordance with GAAP applied on a consistent basis with the audited financial statements provided to Omnicom and the Purchaser pursuant to Section 3.4 above. Section 5.7 Notice and Cure. The Sellers will notify Omnicom in writing (where appropriate and only with respect to matters occurring after the Execution Date, through updates to the Schedules) of, and contemporaneously will 38 provide Omnicom with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance, as soon as practicable after it becomes known to the Sellers, occurring after the Execution Date that causes or will cause any covenant or agreement of the Sellers under this Agreement to be breached or that renders or will render untrue any representation or warranty of the Sellers contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance (each, a "Post Execution Date Event"). The Sellers also will notify Omnicom in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any other violation or breach, as soon as practicable after it becomes known to the Sellers, of any representation, warranty, covenant or agreement made by the Sellers in this Agreement. Except as herein provided, no notice given pursuant to this Section shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit the Purchaser's right to seek indemnity under Article XI; provided, however, for purposes of determining Purchaser's right to seek indemnity under Article XI, information contained on updates to the Schedules relating solely to a Post Execution Date Event shall be deemed to be disclosed to Omnicom and the Purchaser and such information shall be deemed to have been set forth in such Schedule as of the Execution Date. Section 5.8 Termination of Profit Sharing Plan. The Company shall obtain all governmental approvals (including approval by the Internal Revenue Service) and shall take all other action necessary to terminate the Profit Sharing Plan effective on or about the Closing Date, even though such approvals may be obtained and such action taken on or after the Closing Date. Section 5.9 Consultation. Between the Execution Date and the Closing Date, the Sellers will consult with Omnicom's management and the management of the TBWA International network with a view to informing such management as to the operation and management of the Businesses to be acquired by the Purchaser. The Sellers will use commercially reasonable efforts to preserve the business organization of the Businesses, to preserve for the Purchaser and the TBWA International network the present business relationships of the Businesses, and to preserve for the Purchaser and the TBWA International network all of the confidential information and trade and business secrets relating to the Businesses. Section 5.10 Company Stockholder Approval. Within five days after the Registration Statement becomes effective, the Company shall give notice of a meeting of its stockholders to be held not more than 20 days from the date of such notice for the purpose of voting on and approving, among other things, this Agreement, a plan for the liquidation and dissolution of the Company and the amendment to the Certificate of Incorporation of the Company contemplated by Section 10.1 and the agreements and the transactions contemplated hereby and 39 thereby. The Company shall use its best efforts to obtain such stockholder approval. The Company will, through its Board of Directors, recommend to its stockholders approval of the transactions contemplated by this Agreement. Section 5.11 Fulfillment of Conditions. Each Seller will execute and deliver at the Closing each agreement that such Seller is required hereby to execute and deliver as a condition to the Closing, will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each other condition to the obligations of Omnicom and the Purchaser contained in this Agreement and will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition. ARTICLE VI COVENANTS OF OMNICOM AND THE PURCHASER Omnicom and the Purchaser covenant and agree with the Sellers that, at all times from and after the Execution Date until the Closing, Omnicom and the Purchaser will comply with all covenants and provisions of this Article VI, except to the extent the Sellers may otherwise consent in writing. Section 6.1 Regulatory and Other Approvals. Omnicom and the Purchaser will (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and use all commercially reasonable efforts, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to governmental or regulatory authorities or any other Person required of Omnicom or the Purchaser to consummate the transactions contemplated hereby, including without limitation those described on Schedule 4.7, (b) provide such other information and communications to such governmental or regulatory authorities or other Persons as such governmental or regulatory authorities or other Persons may reasonably request in connection therewith and (c) provide reasonable cooperation to the Sellers in obtaining all consents, approvals or actions of, making all filings with and giving all notices to governmental or regulatory authorities or other Persons required of the Sellers to consummate the transactions contemplated hereby. Omnicom will provide prompt notification to the Sellers when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise the Sellers of any communications (and, unless precluded by law, provide copies of any such communications that are in writing) with any governmental or regulatory authority or other Person regarding any of the transactions contemplated by this Agreement. Section 6.2 HSR Filings. In addition to and without limiting the covenants contained in Section 6.1, Omnicom will (a) take promptly all actions necessary to make the filings required of Omnicom under the HSR Act, (b) comply at the earliest practicable date with any request for additional information received 40 by Omnicom from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with the Sellers in connection with the Sellers' filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general. Section 6.3 Financial Information and Reports. As soon as reasonably practicable after it becomes publicly available, Omnicom shall furnish to the Company any Form 10-Q or other registration statement or report filed by Omnicom with the SEC following the Execution Date and prior to the Closing Date. Section 6.4 Agreements Regarding Employees. (a) The Purchaser shall cause one or more companies operating within the TBWA International network to offer employment to all employees of the Company and the Subsidiaries (including those employees who are on vacation, temporary lay-off, leave of absence, sick-leave or short- or long-term disability) (the "Affected Employees") following the Closing Date (other than Jay Chiat, who shall become a consultant to Omnicom, and Robert Wolf, who shall become an employee of Omnicom). Such personnel who accept such employment will be employed on substantially the equivalent terms and conditions (including titles, salary or wages) as such personnel were employed by the Company or a Subsidiary immediately prior to the Closing Date (other than as may be provided in the employment agreements referred to in Sections 8.13 and 8.15), but nothing herein contained shall be deemed to create an employment contract between the Purchaser and/or any of its affiliates and any such personnel. In the event any employee of the Company or a Subsidiary shall be deemed to have been terminated solely by reason of the consummation of this Agreement, all liability for severance benefits and any other benefits not recorded on the books and records of the Company as of the Closing Date, if any, shall be borne by the Company. Except as provided below, employees of the Company or a Subsidiary who become employees of a company operating within the TBWA International network shall be subject to all rules, regulations, requirements and policies applicable to all new hires of such company, and any such employees who may be subsequently terminated will be entitled to severance benefits in accordance with the policy of such company as then applicable, except to the extent that written agreements with such employees that are assumed by the Purchaser or subsequently entered into, provide otherwise. Notwithstanding the foregoing, the Purchaser shall cause one or more companies operating within the TBWA International network to offer Affected Employees the benefits set forth on Schedule 6.4. (b) With respect to any welfare benefit plans (within the meaning of Section 3(1) of ERISA) maintained by Omnicom or a company operating within the TBWA International network in which an Affected Employee will participate (the "Omnicom Group") on or after the Closing Date, the Omnicom Group shall (i) cause to be waived any pre-existing condition limitations, (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims 41 incurred and amounts paid by, and amounts reimbursed to, such employees with respect to similar plans maintained by the Company and the Subsidiaries prior to the Closing Date and (iii) permit those Affected Employees who are eligible as of the Closing Date to participate in the Company and the Subsidiaries' applicable welfare plan(s) to participate immediately in the applicable welfare plan(s) of the Omnicom Group. (c) The Omnicom Group shall recognize under its employee benefit plans, programs, arrangements and policies in which an Affected Employee will participate the service credited to the Affected Employees as of the Closing Date to the extent recognized under the Company and the Subsidiaries' plans or continuity of service rules (or, with respect to any benefit under the applicable welfare plans of the Omnicom Group as to which there is no comparable benefit under the applicable welfare plans of the Company and the Subsidiaries, to the extent such service would have been recognized under the plans of the Omnicom Group as if such service had been rendered to the Omnicom Group) for purposes of any waiting period, eligibility conditions and benefits. Notwithstanding the foregoing, no past service credit for service with the Company and its Subsidiaries shall be given to any Affected Employee who may in the future participate in Omnicom's Executive Salary Continuation Plan. (d) The Omnicom Group shall observe the terms of the Company and the Subsidiaries' vacation policy with respect to Affected Employees or shall adopt a vacation policy covering Affected Employees with identical terms for the balance of the calendar year in which the Closing Date occurs. Section 6.5 Notice and Cure. Omnicom or the Purchaser will notify the Sellers in writing of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance, as soon as practicable after it becomes known to Omnicom or the Purchaser, occurring after the Execution Date that causes or will cause any covenant or agreement of Omnicom or the Purchaser under this Agreement to be breached or that renders or will render untrue any representation or warranty of Omnicom or the Purchaser contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance. Omnicom or the Purchaser also will notify the Sellers in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any other violation or breach, as soon as practicable after it becomes known to Omnicom or the Purchaser, of any representation, warranty, covenant or agreement made by Omnicom or the Purchaser in this Agreement. No notice given pursuant to this Section shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein. Section 6.6 Fulfillment of Conditions. Omnicom and the Purchaser will execute and deliver or cause the execution and delivery at the Closing each agreement that Omnicom and the Purchaser or one of their affiliates is hereby required to execute and deliver as a condition to the Closing, will take all commercially reasonable steps necessary or desirable and proceed diligently and 42 in good faith to satisfy each other condition to the obligations of the Sellers contained in this Agreement and will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition. Section 6.7 Blue Sky; New York Stock Exchange Listing. Omnicom and the Purchaser will use their best efforts to (a) obtain all necessary state securities and blue sky authorizations required to issue the Omnicom Stock as contemplated by this Agreement and (b) cause such shares of Omnicom Stock to be listed on the New York Stock Exchange, subject only to official notice of issuance. Section 6.8 Access to Books and Records. For a period of seven years from the Closing Date, Omnicom and the Purchaser shall provide, free of charge, to the Company (or, upon its dissolution, the Liquidating Trustee) and their respective representatives, upon reasonable advance notice and during normal business hours, access to all books and records of the Company and Advertising purchased by the Purchaser hereunder. Section 6.9 Purchases of Omnicom Stock. Omnicom will not, and will not permit the Purchaser or any other of its subsidiaries to, purchase any Omnicom Stock (whether pursuant to open-market purchases or otherwise) during the 20 consecutive trading days ending three business days immediately prior to the Closing Date. Section 6.10 Financial Results of Combined Businesses. In the event the Closing Date occurs prior to August 31, 1995, Omnicom agrees to prepare and on or before October 30, 1995 to make publicly available as required by the accounting rules referred to below, combined interim financial results of Omnicom and the Businesses of the Company and Advertising acquired hereunder satisfying all applicable FASB pooling-of-interests requirements, which financial results shall cover a 30-day period (or such shorter period as may be allowed, or longer period if required, by such accounting requirements at the time) immediately following the Closing Date (provided such period is a normal, complete fiscal period of Omnicom). In the event that Omnicom determines prior to the Closing that it will not be able to publish such financial results by October 30, 1995, Omnicom shall postpone the Closing Date and, subject to the provisions of Section 10.8, reschedule it to a date after October 31, 1995. Section 6.11 Chiat Art Lease; Insurance. At the Closing, the Purchaser shall enter into a lease with Jay Chiat in substantially the form previously approved by Jay Chiat and Omnicom pursuant to which the Purchaser will lease from Jay Chiat the art works described in such lease for the sum of $1 per year. Such lease will terminate on the date which is seven years from the Closing Date, provided that either party may terminate the lease upon 30 days prior written notice. The lease will provide, and the Purchaser hereby agrees, that the Purchaser will maintain and pay all premiums due under the art insurance policies described in such lease during the term of the lease. 43 Section 6.12 Exchange Act Filings. For a period of three years immediately following the Closing Date, Omnicom shall file in a timely manner all reports required to be filed pursuant to and in accordance with Section 13 and Section 15(d) of the Securities Exchange Act of 1934, as amended. Section 6.13 Mojo Receivable. Omnicom and the Purchaser agree to use their respective reasonable best efforts to recover, as promptly as practicable, all amounts remaining due after the Closing Date in respect of the Mojo Receivable, including any set-off or holdback in respect of payments made prior to the Closing Date. ARTICLE VII MUTUAL COVENANTS Omnicom, the Purchaser and the Sellers mutually covenant and agree with each other as follows: Section 7.1 Preparation of Registration Statement. Omnicom and the Company shall prepare the Registration Statement to be filed with the SEC under the Securities Act for the registration of the Omnicom Stock to be issued in connection with this Agreement. The Registration Statement and the related Information Statement and prospectus forming a part of the Registration Statement shall be mailed to stockholders of the Company in connection with the special meeting of stockholders, more fully described in Section 5.10, to be held for the purpose of authorizing the transactions contemplated by this Agreement (the Registration Statement and the Information Statement and prospectus are hereinafter referred to collectively as the "Prospectus Materials"). Omnicom and the Company shall cooperate with each other in the preparation of the Prospectus Materials and any related filings as shall be necessary under the securities laws of any state. Omnicom shall prepare and file the Registration Statement and shall use its best efforts to cause it to become effective as promptly as possible. Omnicom shall use its best efforts to keep the Registration Statement continuously effective until 60 days after the Distribution Date. The Registration Statement will cover resales by the trustee of the Liquidating Trust and by the escrow agent of the Liquidating Trust Escrow Fund to be effected within the 60-day period following the Distribution Date. Omnicom, the Purchaser and the Company shall furnish all information relating to Omnicom, the Purchaser or the Company and its Subsidiaries, as the case may be, necessary in order to prepare the Prospectus Materials. None of the information supplied by Omnicom, the Purchaser or the Company for inclusion or incorporation by reference in (i) the Registration Statement will, at the time it is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Prospectus Materials will, at the date mailed to stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which 44 they are made, not misleading. Each of the Company, the Purchaser and Omnicom, with respect to the materials to be furnished by it (and in the case of the Company, also with respect to the Liquidating Trust, the Liquidating Trust Escrow Fund and the sales of Omnicom Stock to be made by the respective trustee and escrow agent thereof) for inclusion in the Prospectus Materials, will ensure that such materials are presented in such a form as to comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder, except that no representation is made by a party with respect to statements made in such document based on information supplied by the other party for inclusion therein. Omnicom shall indemnify the Company and its directors, officers, agents, "controlling persons" as defined by the Securities Act, and the Stockholders and EAR and EPU holders against any liability, damage, cost, loss, or expense to them or any of them arising solely out of any untrue statement or alleged untrue statement of a material fact expressly furnished by Omnicom or the Purchaser for inclusion in the Prospectus Materials, or caused by any omission or alleged omission to furnish a material fact concerning Omnicom or the Purchaser that is required to be stated therein or that is necessary to make the statements furnished by Omnicom or the Purchaser not misleading. Independent of its obligations under Article XI, the Company shall indemnify Omnicom, the Purchaser and their respective directors, officers, agents, "controlling persons" as defined by the Securities Act, and attorneys against any liability, damage, cost, loss, or expense to them or any of them arising solely out of any untrue statement or alleged untrue statement of a material fact expressly furnished by the Company for inclusion in the Prospectus Materials, or caused by any omission or alleged omission to furnish a material fact concerning the Company and its Subsidiaries or the Liquidating Trust or Liquidating Trust Escrow Fund that is required to be stated therein or that is necessary to make the statements furnished by the Company not misleading. Omnicom will advise the Company, promptly after it receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order by the SEC or by any securities regulatory commission of any state, of the suspension of the qualification of Omnicom Stock that is issuable in connection with this Agreement for offering and sale in any jurisdiction, of the initiation or threat of any proceeding for any such purpose, and of any request by the SEC or any such state commission for the amendment or supplement of the Registration Statement or for additional information. Subject to Section 1.1.3(iv), each of the Sellers and the Purchaser shall bear the fees and expenses of their respective counsel, accountants and financial advisors in connection with the preparation of the Prospectus Materials; provided that all fees, costs and expenses relating to the filing, printing and distribution of the Registration Statement, "blue sky" fees and registration of the Omnicom Stock shall be borne by Omnicom. Section 7.2 Affiliates' Letters. Prior to the Closing Date, the Company shall furnish Omnicom with a list identifying all persons who may be considered, in its opinion, to be "affiliates" of the Company, as the term "affiliates" is used in Paragraphs (c) and (d) of Rule 145 under the Securities Act or in SEC ASR No. 135 (the "Company Affiliates"). The Company shall use its best efforts to cause each Person who it has identified as a Company Affiliate and each 45 additional Person, if any, that Omnicom has identified in writing to the Company as a Company Affiliate, to deliver to Omnicom on or before the Closing Date the affiliates representation letter attached hereto as Exhibit B; provided, however, nothing contained in this provision shall prohibit the Company or Advertising from transferring shares of Omnicom Stock delivered to it at the Closing to the Stockholders, the holders of EARs and EPUs, the Escrow Agent and the Liquidating Trust, as the case may be, or to The Chase Manhattan Bank, N.A., as Deposit Agent, under the Deposit and Pledge Agreement. Section 7.3 Reasonable Efforts to Consummate Transaction. Omnicom, the Purchaser and the Sellers will each use its reasonable efforts and will fully cooperate with each other to consummate the transactions contemplated by this Agreement. Section 7.4 Sales Tax Liability. The Purchaser and the Sellers shall obtain all necessary sales tax exemptions and take all such other action as may be necessary or advisable to cause the transfer of the Assets to the Purchaser not to be subject to sales tax. To the extent that, despite all such actions, the transfer of any of the Assets to the Purchaser gives rise to sales tax liability or other transfer, purchase or recordation documentary taxes and fees (collectively, "Sales Taxes"), the Purchaser shall promptly pay to the appropriate tax authorities up to the first $200,000 of the Sales Taxes incurred by the Company and Advertising. Any such liability in excess of $200,000 shall be shared equally between the Purchaser and the Sellers; the Sellers shall determine between them the allocation of any amounts so contributed by the Purchaser in respect of such Sales Taxes. Section 7.5 Financial Transactions. Omnicom, the Purchaser and the Sellers agree that between the Execution Date and the Closing Date they shall cause the following transactions to occur: (i) the Purchaser shall lend the Company $55,000,000 and lend Advertising $1,000,000 on reasonable commercial terms and pursuant to financing documents reasonably acceptable to the parties thereto and in substantially the form of the Amended and Restated Credit Agreement and the documents ancillary thereto; (ii) the Company shall make a capital contribution of not less than $55,000,000 to Advertising; and (iii) Advertising shall repay in full all outstanding principal, together with accrued interest, of the 8.17% Junior Subordinated Installment Notes, the 13.25% Junior Subordinated Notes, the 13.25% Senior Subordinated Notes and the notes issued under the Amended and Restated Credit Agreement. Upon the repayment in full of amounts outstanding under the Amended and Restated Credit Agreement in accordance with clause (iii) above and prior to the Closing, Omnicom agrees to release or cause to be released (by, among other things, filing UCC termination statements in all appropriate jurisdictions) all Liens granted to secure the obligations of the Company and Advertising thereunder. Section 7.6 Calculation of Revenues. 7.6.1 Delivery of Revenues Statement. The chief financial officer of the Company shall prepare an unaudited statement of the Annualized Revenues (as hereinafter defined) of the Company and its Subsidiaries as at the month ending 46 immediately following the Execution Date (the "Revenues Statement"); and shall prepare an updated Revenues Statement as at the end of each succeeding month until the Closing Date (each such month, a "Measuring Month"). A copy of each such Revenues Statement shall be delivered to Omnicom not later than five days after the end of each such month. If Omnicom (on behalf of itself and the Purchaser) does not agree that the Revenues Statement as at the earlier of (x) the last day of the month immediately preceding the Closing Date and (y) October 31, 1995, correctly sets forth the Annualized Revenues, then within ten days after delivery to it of such Revenues Statement, Omnicom shall give written notice to the Company of any exceptions thereto. If the Company and Omnicom do not reconcile their differences within five days thereafter the items in dispute shall be submitted to the Arbitrator in accordance with Section 10.7, and the Annualized Revenues as determined by the Arbitrator shall be final, conclusive and binding upon all of the parties hereto. The books and records of the Company and its Subsidiaries, and the work papers of the Company's accountants, shall be made available at the Company's principal offices to Omnicom and its representatives and the Arbitrator, for the purpose of reviewing the Annualized Revenues. 7.6.2 Definition of Annualized Revenues. The "Annualized Revenues" shall be the commissions and fees of the Company and its Subsidiaries for the fiscal year commencing November 1, 1994 and ending October 31, 1995 (the "Measuring Period"), calculated as follows: (a) There shall be calculated as of the end of the applicable Measuring Month a forecast of the amount of commissions and fees to be earned by the Company and its Subsidiaries during the Measuring Period from those clients of the Company and its Subsidiaries that were such on October 31, 1994 ("Original Clients"). Such calculation shall separately state the commissions and fees to be earned from the twenty largest clients as of the Execution Date, and the aggregate of the commissions and fees to be earned from all other clients. (b) The amount as so calculated shall be adjusted as follows: (i) there shall be added, the annualized amount of commissions and fees which would have been earned by the Company and its Subsidiaries from any new clients won since November 1, 1994 ("New Clients"), had such New Clients been clients during the entire Measuring Period; (ii) there shall be excluded any commissions and fees from any clients lost since November 1, 1994 ("Lost Clients"), whether Original Clients or New Clients; and (iii) Fruitopia/Cherry Coke shall be deemed a Lost Client. 47 The forecast of any unearned commissions and fees shall be made in good faith and upon a reasonable basis. The determination of earned commissions and fees shall be made in accordance with GAAP consistent with the accounting principles and practices used in preparing the Balance Sheet. Section 7.7 Public Announcements. Omnicom, the Purchaser and the Sellers will consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement or any of the transactions contemplated hereby and shall not issue any such press release or make any public statement without the prior consent of the other parties which shall not be unreasonably withheld, except as may be required by law or by obligations pursuant to any listing agreements with any national securities exchange. Section 7.8 Renegotiation of Purchase Price. In the event that on the Closing Date as initially scheduled pursuant to Section 2.2, the Annualized Revenues of the Company and its Subsidiaries exceed $100,000,000, and the EBIT as defined and as calculated in accordance with Schedule 7.8 to this Agreement ("EBIT") for the Company's fiscal year ending October 31, 1995 is reasonably expected to exceed $17,200,000, then each of the parties hereto agrees to negotiate in good faith an upward adjustment to the Purchase Price, and if agreement thereon is reached, to amend this Agreement and any documents incidental or ancillary hereto to the extent necessary to reflect such adjustment. Notwithstanding the foregoing, each of the parties hereto agrees that the failure to reach a renegotiated Purchase Price, regardless of the reason therefor, shall not be deemed a breach of this Agreement by any party hereto and accordingly, may not be the basis for any action or claim for damages. During any period of negotiation pursuant to this Section 7.8, the scheduled Closing Date shall be postponed to accommodate such negotiation efforts and rescheduled in the event an agreement to proceed to Closing (whether at an increased Purchase Price or otherwise) is reached. ARTICLE VIII CONDITIONS TO OBLIGATIONS OF OMNICOM AND THE PURCHASER The obligations of the Purchaser hereunder to purchase the Assets and to assume and pay, perform and discharge the Assumed Liabilities are subject to the fulfillment, at or before the Closing, of each of the following conditions (except with respect to Section 8.8 and the first sentence of Section 8.10, all or any of which may be waived in whole or in part by Omnicom, on behalf of itself and the Purchaser, in its sole discretion): Section 8.1 Representations and Warranties. The representations and warranties made by the Sellers in this Agreement, or in any Schedule delivered pursuant hereto, shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date, 48 and Sellers shall have delivered to Omnicom and the Purchaser a certificate, dated the Closing Date, to such effect. Section 8.2 Good Standing Certificates. The Sellers shall have delivered to Omnicom and the Purchaser a certificate from the Secretary of State (or comparable official) of each jurisdiction in which a Subsidiary whose stock is being acquired by the Purchaser under this Agreement is organized or qualified to do business, to the effect that such Subsidiary is in good standing in such jurisdiction. Section 8.3 Performance. The Sellers shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by the Sellers at or before the Closing (it being agreed that the Purchaser shall not be required to close either the Company Asset purchase or the Advertising Asset purchase unless both such Asset purchases are simultaneously closed), including without limitation, the execution and delivery of the conveyance documents referred to in Section 2.2(b), and the Sellers shall have delivered to Omnicom and the Purchaser a certificate, dated the Closing Date, to such effect. Section 8.4 Certified Resolutions. The Sellers shall have delivered to Omnicom and the Purchaser copies of resolutions of the boards of directors and of the stockholders of the Sellers authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby, certified to by the respective secretaries of the Company and Advertising. Section 8.5 No Litigation. There shall not be pending any litigation, proceeding, investigation, review, arbitration or claim by governmental representatives or authorities, and no preliminary or permanent injunction or other order shall have been issued, to restrain or invalidate the consummation by the Sellers of this Agreement and the transactions contemplated hereby, and no material litigation shall be pending or to the best knowledge, information and belief of the Sellers, threatened against the Company or any of its Subsidiaries or any of their respective directors, officers or stockholders (a) with respect to this Agreement or the transactions contemplated hereby or arising out of the actions required or permitted to be taken by any of them pursuant to this Agreement, or (b) against or affecting either Seller or any of the Subsidiaries or any of their properties or rights which, if adversely determined, would be reasonably likely to have a Material Adverse Effect. Section 8.6 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any governmental or regulatory authority necessary to permit Omnicom, the Purchaser and the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any governmental or regulatory authority necessary for the consummation of the 49 transactions contemplated by this Agreement, including under the HSR Act, shall have occurred. Section 8.7 Registration Statement; New York Stock Exchange Listing. The Registration Statement shall have been declared effective by the SEC and on the Closing Date shall remain effective and shall not be subject to a stop order or any threatened stop orders. All necessary state securities and blue sky authorizations required to carry out the transactions contemplated by this Agreement shall have been obtained. The Omnicom Stock issuable in connection with this Agreement shall have been duly listed on the New York Stock Exchange, subject only to official notice of issuance. Section 8.8 Company Stockholder Approval. The special meeting of stockholders of the Company shall have been duly held and at such meeting the requisite affirmative vote of the Company stockholders shall have been recorded to authorize and to approve the transactions contemplated hereby in accordance with applicable provisions of Delaware law, including the matters set forth in Section 5.10 hereof and such other matters presented to the Stockholders for approval. Section 8.9 Required Approvals, Notices and Consents. The Sellers shall have obtained or given, as the case may be, at no expense to Omnicom or the Purchaser and there shall not have been withdrawn or modified any notices, consents, approvals or other actions listed on Schedule 3.24 hereof (except as otherwise contemplated by Section 3.24). Each such consent shall be in form reasonably satisfactory to counsel for Omnicom and the Purchaser. Section 8.10 Pooling of Interests Accounting. The SEC shall not have objected to Omnicom's treatment of the purchase of the Assets as a pooling-of-interests for accounting purposes. Omnicom shall have received a letter from each of Coopers & Lybrand LLP and Arthur Andersen LLP substantially in the forms of Exhibit D and Exhibit E hereto, respectively, confirming that the Company and the Purchaser are poolable entities as provided in APB No. 16. Section 8.11 Opinion of Counsel. Omnicom and the Purchaser shall have received the opinion of Simpson Thacher & Bartlett, special counsel to the Sellers, dated the Closing Date, substantially in the form and to the effect of Exhibit C hereto. Section 8.12 Escrow Agreements. The Sellers and the Escrow Agent shall have entered into the Escrow Agreement. Section 8.13 Employment Agreements. The Purchaser and/or one of its affiliates and each of Steve Hancock, Adelaide Horton, Robert Kuperman, Ira Matathia, Tom Patty and Robert Wolf shall have entered into an employment agreement, each in a form previously approved by such party and the Purchaser. 50 Section 8.14 Non-Competition Agreements. Each of Leland Clow, Steve Hancock, Adelaide Horton, Robert Kuperman, Ira Matathia, Tom Patty and Robert Wolf shall have entered into a non-competition agreement in substantially the form of Exhibit F hereto; and Jay Chiat shall have entered into a non-competition agreement substantially in the form of Exhibit G hereto. Section 8.15 Employment/Consulting Agreements. Jay Chiat shall have entered into the Chiat Consulting Agreement and Leland Clow shall have entered into the Clow Employment Agreement and each shall have agreed to the assumption thereof by the Purchaser; and the Sellers shall have delivered to Omnicom and the Purchaser a certificate dated the Closing Date to the effect that the Chiat Consulting Agreement and the Clow Employment Agreement are in full force and effect, that Jay Chiat and Leland Clow are full-time employees of the Company, and no party to either such agreement has declared or threatened to declare, nor has any basis to declare the other party thereto in default thereunder. In addition, Jay Chiat and Leland Clow shall have each delivered to the Purchaser his written consent that the term "Group" as used in Section 7(a) of the Chiat Consulting Agreement and Clow Employment Agreement, as the case may be, shall on and after the Closing Date mean all companies operating within the combined Chiat/Day and TBWA International network. Section 8.16 Loss of Client Account. Advertising shall not have ceased to be or received notice that it will cease to be, (x) the advertising agency in the United States for the U.S. Nissan and/or Infiniti divisions of Nissan Motor Corp., or (y) the advertising agency for two or more of the following accounts: Eveready, Home Savings, NYNEX, Midland Bank, NY Life or Shoppers Drug Mart; provided, however, that the Sellers shall have been deemed to satisfy the condition under clause (y) in the event that Advertising replaces the lost account with an account of similar size (measured by revenues). Section 8.17 Affiliates Representation Letters. Each of the Company Affiliates shall have executed and delivered to Omnicom the affiliates representation letter referred to in Section 7.2. Section 8.18 EAR and EPU Holders. Holders of EARs and EPUs who own in the aggregate at least 83% of the outstanding EARs and EPUs on the Closing Date, which group must include each holder of EARs or EPUs who is also a Stockholder of the Company, shall have executed and delivered to the Company written consent to the actions described in Section 2.7, substantially in the form of Exhibit H hereto. The Company shall have delivered a copy of all such Consent Letters to Omnicom. Section 8.19 Closing of Profit Sharing Plan Purchase Agreement. The transactions contemplated by the Profit Sharing Plan Purchase Agreement shall have been completed. 51 Section 8.20 Repayment of Indebtedness. The Company shall have made adequate arrangements so that within 90 days after Closing, all indebtedness of directors, officers and employees of the Company or any Subsidiary to the Company or any Subsidiary shall have been repaid in full, other than routine travel and expense advances or relocation allowances or other loans to employees, in each case made (x) in the ordinary course of business, (y) within the prior 90 days, and (z) consistent in amount with past practice and individually not exceeding $5,000, and the Sellers shall have delivered to Omnicom and the Purchaser a certificate, dated the Closing Date, to such effect. Section 8.21 Material Adverse Effect. Except for the execution and delivery of this Agreement and the transactions required or permitted to take place pursuant hereto on or prior to the Closing Date, since the Execution Date there shall not have occurred any Material Adverse Effect, or any event or development which, individually or together with such events, could reasonably be expected to result in a Material Adverse Effect. Without limiting the generality of the foregoing, the Purchaser shall have received reasonable assurances and financial data to demonstrate that (i) if the Closing is on or prior to August 31, 1995, EBIT for the nine months ended July 31, 1995 is $7,500,000 and EBIT for the Company's fiscal year ending October 31, 1995 is reasonably expected to exceed $13,500,000; and (ii) if the Closing is on or after November 1, 1995, EBIT for the Company's fiscal year ended October 31, 1995 is $13,500,000. Section 8.22 Proceedings. All proceedings to be taken on the part of the Sellers in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to Omnicom and the Purchaser, and Omnicom and the Purchaser shall have received copies of all such documents and other evidences as Omnicom and the Purchaser may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith. Section 8.23 Financial Transactions. Each of the transactions required under Section 7.5(ii) and (iii) shall have been consummated. Section 8.24 Deposit and Pledge Agreement. The Sellers and the deposit agent shall have entered into a deposit and pledge agreement in a form previously approved by such parties and the Purchaser (the "Deposit and Pledge Agreement"). ARTICLE IX CONDITIONS TO OBLIGATIONS OF THE SELLERS The obligations of the Sellers hereunder to sell the Assets are subject to the fulfillment, at or before the Closing, of each of the following conditions (except with respect to Section 9.8, all or any of which may be waived in whole or in part by the Sellers in their sole discretion): 52 Section 9.1 Representations and Warranties. The representations and warranties made by Omnicom and the Purchaser in this Agreement, taken as a whole, shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, and Omnicom and the Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date, to such effect. Section 9.2 Good Standing Certificates. Omnicom shall have delivered to the Sellers a certificate from the Secretary of State of the State of New York to the effect that Omnicom is in good standing in such state and a certificate from the Secretary of State (or comparable official) of each state in which it is qualified to do business, to the effect that it is in good standing in such jurisdiction. The Purchaser shall have delivered to the Sellers a certificate from the Secretary of State of the State of Delaware to the effect that the Purchaser is in good standing in such state and a certificate from the Secretary of State (or comparable official) of each state in which it is qualified to do business to the effect that it is in good standing in such jurisdiction. Section 9.3 Performance. Omnicom and the Purchaser shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Omnicom and the Purchaser at or before the Closing (it being agreed that the Sellers shall not be required to close either the Company Asset sale or the Advertising Asset sale unless both such Asset sales are simultaneously closed), including without limitation, the execution and delivery of the assumption documents referred to in Section 2.2(c), and Omnicom and the Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date, to such effect. Section 9.4 Certified Resolutions. Omnicom and the Purchaser shall have delivered to the Sellers a copy of the resolutions of the boards of directors of each of Omnicom and the Purchaser authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby, certified to by the secretary or assistant secretary of Omnicom and the Purchaser, respectively. Section 9.5 No Litigation. There shall not be pending any litigation, proceeding, investigation, review, arbitration or claim by governmental representatives or authorities, and no preliminary or permanent injunction or other order shall have been issued to restrain or invalidate the consummation by Omnicom or the Purchaser of this Agreement and the transactions contemplated hereby, and Omnicom and the Purchaser shall have delivered to the Sellers a certificate, dated the Closing Date, to such effect. No material litigation shall be pending or threatened against the Company or any of its Subsidiaries or any of their respective directors, officers or stockholders arising out of the actions required or permitted to be taken by any of them pursuant to this Agreement. Section 9.6 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any governmental or regulatory authority 53 necessary to permit the Sellers, Omnicom and the Purchaser to perform their obligations under this Agreement and to consummate the transactions contemplated hereby shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any governmental or regulatory authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred. Section 9.7 Registration Statement, New York Stock Exchange Listing. The Registration Statement shall have been declared effective by the SEC and on the Closing Date shall remain effective and shall not be subject to a stop order or any threatened stop orders. All material necessary state securities and blue sky authorizations required to carry out the transactions contemplated by this Agreement shall have been obtained. The Omnicom Stock issuable in connection with this Agreement shall have been duly listed on the New York Stock Exchange, subject only to official notice of issuance. Section 9.8 Company Stockholder Approval. The special meeting of stockholders of the Company shall have been duly held and at such meeting the requisite affirmative vote of the Company stockholders shall have been recorded to authorize and to approve the transactions contemplated hereby in accordance with applicable provisions of Delaware law, including, without limitation, the matters set forth in Section 5.10 hereof and such other matters presented to the Stockholders for approval. Section 9.9 Opinion of Counsel. The Sellers shall have received the opinion of Davis & Gilbert, counsel to Omnicom and the Purchaser, dated the Closing Date, substantially in the form and to the effect of Exhibit I hereto. Section 9.10 Employment Agreements. The Purchaser and/or one of its affiliates, and each of Steve Hancock, Adelaide Horton, Robert Kuperman, Ira Matathia, Tom Patty and Robert Wolf shall have entered into an employment agreement, each in a form previously approved by such party and the Purchaser. Section 9.11 Employment/Consulting Agreements. The Purchaser shall have validly assumed each of the Chiat Consulting Agreement and the Clow Employment Agreement pursuant to an assumption agreement in a form previously approved by the Company and Omnicom, and the Chiat Consulting Agreement shall have been validly assigned by the Purchaser to Omnicom. Section 9.12 Increased Revenues of the Sellers. The Annualized Revenues of the Company and its Subsidiaries shall not be greater than $100,000,000 and EBIT for the Company's fiscal year ending October 31, 1995 shall not be reasonably expected to be greater than $17,200,000. 54 Section 9.13 Proceedings. All proceedings to be taken on the part of Omnicom and the Purchaser in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to the Sellers, and the Sellers shall have received copies of all such documents and other evidences as the Sellers may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith. Section 9.14 Financial Transactions. Each of the transactions required under Section 7.5(i) shall have been consummated. Section 9.15 Incentive Agreement. The Purchaser shall have validly assumed the Richard Sittig incentive agreement referred to on Schedule 3.8. Section 9.16 Escrow Agreement. The Purchaser and the Escrow Agent shall have entered into the Escrow Agreement. Section 9.17 Closing of Profit Sharing Plan Purchase Agreement. The transactions contemplated by the Profit Sharing Plan Purchase Agreement shall have been completed. Section 9.18 Material Adverse Effect. Since the Execution Date there shall not have occurred any material adverse change, or any event or development which, individually or together with such events, could reasonably be expected to result in a material adverse change, on the financial condition, results of operations, assets, properties or businesses of Omnicom and its subsidiaries taken as a whole, and Omnicom shall have delivered to the Sellers a certificate, dated the Closing Date, to such effect. ARTICLE X ADDITIONAL AGREEMENTS Section 10.1 Change of Name of Sellers. At the Closing, (i) the Company shall execute appropriate documents to change its corporate name to a name not including the "Chiat/Day" designation, or any variation thereof, and promptly thereafter shall file such documents with the Secretary of State of the State of Delaware and each other jurisdiction in which it is qualified to do business, (ii) Advertising shall execute appropriate documents to change its corporate name to a name not including the "Chiat/Day designation, or any variation thereof, and promptly thereafter shall file such documents with the Secretary of State of the State of Delaware and each other jurisdiction in which it is qualified to do business, and (iii) each Inactive Subsidiary shall execute appropriate documents to change its corporate name to a name not including the "Chiat/Day" designation, or any variation thereof, and promptly thereafter shall file such documents with the appropriate governmental authorities of the 55 jurisdiction of its incorporation and each other jurisdiction in which it is qualified to do business. Section 10.2 Change of Name of TBWA Advertising Inc. It is expressly agreed that, effective upon the Closing, the Purchaser and its affiliates shall have full and exclusive ownership of the corporate name and trade name "Chiat/Day" and shall have the right to use such corporate name and trade name anywhere in the world, and as promptly as practicable after the Closing, Omnicom will cause the companies operating as part of the TBWA International network in North America who currently include the designation "TBWA" as part of their corporate names, to change their corporate names to include the designation "TBWA Chiat/Day" by filing appropriate documents with the appropriate governmental authorities. Each of Omnicom and the Purchaser agrees that until December 31, 1998, without the consent of the Company (or after its dissolution, the Liquidating Trustee), it will not authorize the deletion of the "Chiat/Day" designation from the corporate name of any such entity. Nothing contained herein shall require Omnicom or the Purchaser to cause any company operating within the TBWA International network outside of North America to include the "Chiat/Day" designation in its corporate name or trade name. Section 10.3 Allocation of Purchase Price. The Sellers, Omnicom and the Purchaser agree that the Purchase Price shall be allocated in accordance with Section 1060 of the Code, as set forth on an allocation schedule (the "Purchase Price Allocation") to be agreed by the Sellers, Omnicom and the Purchaser prior to the Closing Date; provided, however, that the Purchaser at its sole expense may obtain an appraisal of the tangible assets including leasehold improvements of the Sellers from an independent appraiser of recognized standing, which appraisal shall be used for purposes of allocating the Purchase Price to such tangible assets. The Sellers, Omnicom and the Purchaser agree that they shall report the allocation of the Purchase Price in a manner entirely consistent with Purchase Price Allocation in all tax returns and forms (including without limitation, Forms 8594 filed with Omnicom's or the Purchaser's and the Company's respective federal income tax returns for the taxable year that includes the Closing Date) and in the course of any tax audit, tax review or tax litigation relating thereto unless otherwise required under applicable law. The Sellers, Omnicom and the Purchaser shall cooperate with each other to prepare the Forms 8594 in the manner required by this Section 10.3. The Sellers, Omnicom and the Purchaser shall each deliver to the other a copy of the Form 8594 it files with its respective federal income tax return. Section 10.4 Future Tax Returns. The Sellers, Omnicom and the Purchaser will report the transactions contemplated by this Agreement as a taxable purchase of the Assets of each of the Company and Advertising for federal, state, local and foreign income tax purposes and will not take any federal, state, local or foreign tax reporting position which is inconsistent with the treatment of such transactions as taxable for federal income tax purposes unless otherwise required under applicable law. The Sellers will deliver to Omnicom all 56 federal, state, local, and foreign tax returns which will be filed by either of the Sellers with respect to the taxable year of the Sellers beginning November 1, 1994, 10 days prior to the filing of any such returns with any taxing authority. Each return shall be in final form as it will be filed with the respective taxing authority. The Sellers, Omnicom and the Purchaser agree to cooperate fully in connection with any audit of any tax return filed by the Sellers, Omnicom or the Purchaser reporting the transactions contemplated by this Agreement (or administrative or judicial proceedings resulting therefrom), including without limitation the furnishing or making available of records, books of account, or personnel reasonably required in connection with such audit or proceeding. Each party shall bear its own out-of-pocket costs incurred in furnishing such cooperation. Section 10.5 Tax Elections. If requested by Omnicom, the Company agrees to join with Omnicom in an election under ss.338(h)(10) of the Code with respect to the Purchaser's acquisition of the stock of any Subsidiary. If so requested, the Company shall deliver to Omnicom a duly executed and completed Internal Revenue Service Form 8023 and similar forms under applicable state and local tax law with respect to each such sale no later than 60 days prior to the date each such Form is required to be filed. Section 10.6 Canadian Elections. Advertising and the Purchaser agree to elect jointly in prescribed form pursuant to Section 167 of the Excise Tax Act (Canada) so that no goods and services tax is payable by the Purchaser in respect of the purchase of any Advertising Assets located in Canada. Advertising and the Purchaser agree to elect jointly in prescribed form pursuant to section 22 of the Income Tax Act (Canada) and the corresponding provisions of any other provincial tax legislation in respect of the amount of the consideration allocated to the accounts receivable attributable to the Canadian business operations of Advertising transferred to the Purchaser pursuant to this Agreement. Advertising agrees to deliver to the Purchaser on or before the Closing Date a certificate issued by the Minister of National Revenue under subsection 116(2) of the Income Tax Act (Canada) specifying a certificate limit not less than the Purchase Price allocated to the Advertising Assets located in Canada. Advertising agrees to deliver a certificate under Section 6 of the Retail Sales Tax Act (Ontario) issued by the Minister of Finance that all taxes payable or collectable by Advertising under that Act have been paid or are otherwise satisfactorily secured. Section 10.7 Dispute Resolution. In the event of a disagreement with respect to Sections 8.16, the last sentence of Section 8.21, or Section 9.12, the items in dispute shall be submitted to the New York City office of KPMG Peat Marwick, and if they refuse or are otherwise unable to serve, the New York City office of Deloitte & Touche (the "Arbitrator"), and the determination of the Arbitrator shall become final and conclusive upon the parties hereto and enforceable in a court of law. The Arbitrator shall consider only the items in dispute and shall be instructed to act within ten days to resolve all items in dispute. The Arbitrator shall determine the party (i.e. Omnicom and the Purchaser, on the one hand, or the Sellers, on the other hand, as the case may be) whose asserted positions before the Arbitrator are in the aggregate further from the aggregate resolutions determined by the Arbitrator, which 57 non-prevailing party shall pay the fees and expenses of the Arbitrator. Any such fees and expenses borne by the Sellers shall be deemed to be Transaction Costs. Section 10.8 Termination. This Agreement may be terminated and the sale of Assets and other transactions contemplated herein may be abandoned at any time prior to the Closing, notwithstanding the adoption of this Agreement by the stockholders of the Company by: (a) mutual consent of the Boards of Directors of each of the Sellers, Omnicom and the Purchaser; (b) either Omnicom and the Purchaser, on the one hand, or the Sellers, on the other hand, (provided the terminating party is not then in breach hereof) if the other party breaches its representations, warranties or covenants hereunder in any material respect and such breach is not cured within 30 days after the delivery of written notice thereof to such breaching party unless the breach of any such representation, warranty, or covenant does not materially adversely affect the business or assets of the breaching party or the ability of any or all parties to consummate the transactions contemplated hereby; (c) the Boards of Directors of either Omnicom and the Purchaser or the Sellers in the event a final and nonappealable order, decree or judgment of any court, agency, commission or governmental authority is issued or existing against the parties or any of them or any of their directors which would enjoin the transactions contemplated hereby; or (d) either Omnicom and the Purchaser, on the one hand, or the Sellers, on the other hand, if the Closing Date has not occurred prior to the close of business on December 31, 1995; or (e) either Omnicom and the Purchaser, on the one hand, or the Sellers, on the other hand, at any time after October 31, 1995 if the conditions to such parties' obligation to close set forth in Article VIII or IX, respectively, shall have become incapable of being satisfied by the close of business on December 31, 1995. Section 10.9 Effect of Termination. If this Agreement is terminated as provided in Section 10.8 hereof, this Agreement (except as otherwise herein provided) shall forthwith become void and there shall be no liability on the part of any party hereto or its respective officers or directors arising from the act of such permitted termination. Nothing herein shall preclude, however, any action or claim for damages to which any party is otherwise entitled as a result of breach by the other party hereto. Section 10.10Bulk Transfer Laws. The parties hereto agree that they will comply with the provisions of Section 1141(c) of the New York State Sales and Use Tax Law and the provisions of Sections 6811 and 6812 of the California Sales and Use Tax Law. 58 Section 10.11No Merger. Before or after the Closing, neither the Company nor Advertising will take any action to merge or liquidate Advertising into the Company. Section 10.12 Transfer Tax Compliance. (a) The Sellers and the Purchaser shall comply with Article 31-B of the New York State Tax Law (the "Gains Tax"), relating to the New York State Real Property Transfer Gains Tax, Section 14.15 of the New York State Tax Law relating to the New York State Real Property Transfer Tax and Chapter 21, Title 11 of the Administrative Code of the City of New York relating the New York City Real Property Transfer Tax and any similar taxes of other applicable jurisdictions (all such taxes collectively, the "Transfer Taxes"). For such purposes, the Sellers, Omnicom and the Purchaser agree that the leasehold interests of the Sellers have no value and that no portion of the Purchase Price is allocable thereto. (b) If transferor and transferee questionnaires are required for compliance with the Gains Tax, the Sellers and the Purchaser shall promptly complete and execute such questionnaires, and the Sellers shall cause the questionnaires to be filed with the New York State Department of Taxation not later than twenty days prior to the Closing Date. Any similar pre-Closing filing required under the laws of any other applicable jurisdiction shall be made not later than the due date therefor. (c) At the Closing, the Sellers shall deliver and cause to be filed all returns required to be filed in connection with the Transfer Taxes. Section 10.13 Indebtedness to the Purchaser. At the Closing, the Purchaser will assume any indebtedness owing by the Company or Advertising to the Purchaser. Any such indebtedness shall be deemed discharged immediately after the Closing. ARTICLE XI SURVIVAL; INDEMNIFICATION Section 11.1 Survival. Subject to the limitations set forth in Sections 11.3 and 11.4 hereof, the respective representations, warranties, covenants and agreements of the Sellers, Omnicom and the Purchaser contained in this Agreement or in any Schedule, or in any certificate delivered at the Closing, shall survive the Closing. Notwithstanding any right of any party hereto fully to investigate the affairs of any other party, and notwithstanding any knowledge of facts determined or determinable pursuant to such investigation or right of investigation, each party hereto shall have the right to rely fully upon the representations, warranties, covenants and agreements of any other party contained in this Agreement or in any Schedule furnished by another party or in any certificate delivered at the Closing by any other party. 59 Section 11.2 Obligation of the Company to Indemnify. Subject to the limitations set forth in Sections 11.3 and 11.4 hereof, the Company agrees to indemnify the Purchaser and its affiliates, directors, officers and employees (collectively the "Indemnified Parties") against, and to protect, save and keep harmless the Indemnified Parties from, and to assume liability for, payment of all liabilities (including liabilities for Taxes), obligations, losses, damages, penalties, claims, actions, suits, judgments, settlements, out-of-pocket costs, expenses and disbursements (including reasonable costs of investigation, and reasonable attorneys', accountants' and expert witnesses' fees, whether or not suit is brought) of whatever kind and nature, to the extent not covered by insurance which the applicable Indemnified Parties will be entitled to obtain the benefits of (collectively, "Losses"), that may be imposed on or incurred by the Indemnified Parties as a consequence of or in connection with (i) any inaccuracy or breach of any representation or warranty or covenant of either Seller contained in or made pursuant to this Agreement, other than any inaccuracy or breach with respect to the last sentence of Section 3.8; (ii) the breach of or failure by either Seller to perform or discharge any of its obligations under this Agreement or under the transactions contemplated hereby; (iii) the assertion by any third party of any claim or cause of action relating to any liability of either Seller not assumed by the Purchaser pursuant to this Agreement; or (iv) any inaccuracy in or breach of the representation or warranty contained in the last sentence of Section 3.28 hereof. The term "Losses" as used herein is not limited to matters asserted by third parties against an Indemnified Party but includes Losses incurred or sustained by an Indemnified Party in the absence of third party claims. Section 11.3 Indemnification Procedures. 11.3.1 Notice of Asserted Liability. The Purchaser shall promptly give notice (the "Claims Notice") to the Company of any demand, claim or circumstances which gives rise, or with the lapse of time would or might give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation that may result in any Losses (an "Asserted Liability") without regard to the limitations on indemnification set forth in Section 11.4 below. The Claims Notice shall describe the Asserted Liability in reasonable detail, shall indicate the amount (estimated if necessary, and to the extent feasible) of the Losses that have been or may be suffered by an Indemnified Party. 11.3.2 Defense of Asserted Liability. If the facts giving rise to the claim for indemnification shall involve any actual or threatened claim or demand by any third party against any Indemnified Party or by an Indemnified Party against any third party (a "Third Party Claim"), the Purchaser shall have the right to defend or prosecute such Third Party Claim through counsel of the Purchaser's own choosing. 11.3.3 Cooperation. The Sellers shall cooperate in the defense or prosecution of any such claim or defense and furnish such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials, and appeals as may be reasonably requested in connection therewith. The Sellers shall be entitled to participate in the defense or prosecution of any 60 such claim, demand or litigation at their own expense and through counsel of their own choosing, but control thereof shall remain with the Purchaser. The Purchaser shall cooperate in such defense or prosecution to the same extent as the Sellers are obligated to cooperate under this Section 11.3.3. 11.3.4 Settlements. The Company will not be subject to any liability for any settlement made without its consent (but such consent shall not be unreasonably withheld or delayed). Section 11.4 Limitations on Indemnification. 11.4.1 Indemnity Cushion. Except as provided in the next sentence, no claim, action or other Asserted Liability (other than an Asserted Liability under Section 3.27 or one of the first two sentences of Section 3.28 hereof) with respect to Losses arising out of any of the matters referred to under clauses (i) through (iii) of Section 11.2 may be asserted until such time as claims, actions or other Asserted Liabilities with respect to Losses arising out of a matter referred to in clause (i) through (iii) of Section 11.2 shall exceed $300,000 in the aggregate (in which case the Company shall be liable for all Losses in excess of $300,000). Losses arising out of any of the matters referred to under clause (iv) of Section 11.2 shall be reimbursable without regard to the $300,000 cushion. 11.4.2 Termination of Indemnification Obligations and Other Limitations. (i) Except as otherwise provided in this Section 11.4.2 (and in particular the provisions of clause (ii) of Sections 11.4.2), the obligation of the Company to indemnify shall terminate and be of no further force and effect on the "Termination Date," which shall be earlier to occur of (x) the date of the first independent audit report, if any, of the consolidated financial results of the Purchaser and the Businesses following the Closing Date or (y) one year from the Closing Date; provided, however, that (A) claims for Losses arising under clauses (i) through (iii) of Section 11.2 asserted in writing against the Company on or prior to the Termination Date shall survive until they are decided and are final and binding upon the Purchaser and the Company as contemplated by the Escrow Agreement, and (B) no claim for Losses arising under clauses (i) through (iii) of Section 11.2 may be asserted after the Termination Date. (ii) In that the matter identified in clause (iv) of Section 11.2 is an asset whose collectibility cannot reasonably be assured on the Execution Date, the limitations set forth in clause (i) of Section 11.4.2 on the obligations of the Company to indemnify shall not apply with respect to the matter as to which the Purchaser is entitled to be indemnified under clause (iv) of Section 11.2. Notwithstanding the foregoing, the obligation of the Company to indemnify for Losses arising under clause (iv) of Section 11.2 shall terminate and be of no further force and effect on the second anniversary of the Closing Date; provided, however, that (A) claims for 61 Losses arising under clause (iv) of Section 11.2 asserted in writing against the Company on or prior to the second anniversary of the Closing Date shall survive until they are decided and are final and binding upon the parties hereto and (B) no claim for Losses arising under clause (iv) of Section 11.2 may be asserted after the earlier of (x) the second anniversary date of the Closing and (y) the date on which payments due under the Mojo Receivable shall have been fully paid or finally settled. (iii) The parties agree that the satisfaction of liabilities under the Escrow Agreement, and the procedures to be followed in respect thereof, are subject to the specific provision of such Escrow Agreement relating to the release of the Escrow Funds. (iv) Except as provided in Section 7.1, the rights of Omnicom and the Purchaser set forth in this Article XI are exclusive and in lieu of any and all other rights and remedies under this Agreement with respect to Losses, and such Losses shall be satisfied solely from the Escrow Funds in accordance with the provisions of this Article XI and the provisions of the Escrow Agreement and Omnicom and the Purchaser agree that except as provided in Section 7.1, none of the Indemnified Parties shall have any recourse for the payment of any Losses of any kind whatsoever against the Company or Advertising or their respective affiliates or past, present or future directors, officers and employees, the Stockholders or the holders of the EARs and EPUs, nor shall any of such persons be personally liable for any such Losses, it being expressly understood that the sole remedy of the Indemnified Parties shall be against the Escrow Funds in accordance with the Escrow Agreement. (v) Except as provided in Section 7.1, notwithstanding anything to the contrary contained in this Agreement or in the Escrow Agreement, (a) any rights of the Indemnified Parties of indemnification for Losses arising under clauses (i) through (iii) of Section 11.2 shall be satisfied solely from the General Escrow Fund, and the Indemnified Parties shall have no right of indemnity for any such Losses from the Special Escrow Fund and (b) any rights of the Indemnified Parties of indemnification for Losses arising under clause (iv) of Section 11.2 shall be satisfied solely from the Special Escrow Fund, and the Indemnified Parties shall have no right of indemnity for any such Losses against the General Escrow Fund. 11.4.3 Treatment. Any payments by the Sellers to the Purchaser under this Article XI (or under the Escrow Agreement) shall be treated by the parties as an adjustment to Purchase Price. 11.4.4 Tax Effects. A payment due and payable by Sellers hereunder (or under the Escrow Agreement) with respect to the matters set forth under clauses (i) through (iii) of Section 11.2 shall be decreased to the extent of any net actual reduction in Taxes payable by the Purchaser upon its payment of Losses, determined at an assumed marginal tax rate equal to the highest marginal tax 62 rate then in effect for corporate taxpayers in the relevant jurisdiction, and taking into account the tax consequences to the Purchaser of the receipt of any payment due and payable by Sellers under this Article XI (or under the Escrow Agreement). ARTICLE XII MISCELLANEOUS Section 12.1 Expenses. Except as otherwise provided under Section 1.1.3(iv) hereof, the parties hereto shall pay all of their own expenses relating to the transactions contemplated by this Agreement, including, without limitation, the fees and expenses of their respective counsel and financial advisors. Section 12.2 Governing Law. The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of New York without reference to its conflict of laws provisions. Section 12.3 Jurisdiction. Except as provided in Section 10.7 and except with respect to disputes governed by the Escrow Agreement and required to be submitted to arbitration thereunder, any judicial proceeding brought against any of the parties to this Agreement on any dispute arising out of this Agreement or any matter related hereto shall be brought in the courts of the State of New York or in the United States District Court for the Southern District of New York, and, by execution and delivery of this Agreement, each of the parties to this Agreement accepts for itself the process in any action or proceeding by the mailing of copies of such process to it, at its address as set forth in Section 12.9. Each party hereto irrevocably waives to the fullest extent permitted by law any objection that it may now or hereafter have to the laying of the venue of any judicial proceeding brought in such courts and any claim that any such judicial proceeding has been brought in an inconvenient forum. The foregoing consent to jurisdiction shall not constitute general consent to service of process in the State of New York for any purpose except as provided above and shall not be deemed to confer rights on any person other than the respective parties to this Agreement. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS UNDER THIS AGREEMENT. In addition, the Company shall cause the Trustee of the Liquidating Trust to agree to and be bound by the provisions of this Section 12.3 by a written instrument addressed to the Purchaser and executed by such Trustee in connection with any suit, action or proceeding commenced by the Purchaser whose gravamen is a claim asserted under Article XI. Section 12.4 "Person" Defined. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or other department or agency thereof. 63 Section 12.5 "Knowledge" Defined. Where any representation and warranty contained in this Agreement is expressly qualified by reference to knowledge, information and belief of a party, such party confirms that it has made such due and diligent inquiry as to the matters that are the subject of such representations and warranties that shall be reasonable under the circumstances. Section 12.6 "Affiliate" Defined. As used in this Agreement, an "affiliate" of any Person, shall mean any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such Person. Section 12.7 Captions. The Article and Section captions used herein are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. Section 12.8 Confidentiality. Unless and until the Closing shall have occurred and except as may be required in connection with (i) any public announcement that Omnicom, the Purchaser and the Sellers have executed this Agreement, or (ii) any governmental filings contemplated under this Agreement, Omnicom, the Purchaser and the Sellers shall, and shall cause their respective employees, agents, consultants and representatives to, maintain in confidence and not otherwise use or permit the use of information, documents, and data respecting any other party to this Agreement furnished to them, or to any person or entity on their behalf. If this Agreement is terminated pursuant to Section 10.8 hereof or otherwise, each party shall (and Omnicom and the Purchaser shall cause any third party to whom it has made permitted disclosures to) (i) return to the other party or destroy all written information, documents, and data furnished to it or to any person or entity on its behalf, and (ii) maintain in confidence all information received by it, or by any person or entity on its behalf, and shall not use or permit the use of such information by others except to the extent that such information is elsewhere available to the public or otherwise rightfully obtained without violation of this Section 12.8 or any other agreement. Notwithstanding the foregoing, the foregoing provision shall not apply to the extent that Omnicom is required to make any announcement or file information relating to or arising out of this Agreement by virtue of the federal securities laws of the United States or the rules and regulations promulgated thereunder or other rules of the New York Stock Exchange, or any announcement by any party pursuant to applicable law or regulations. Section 12.9 Notices. Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any party to any other party shall be in writing and shall be deemed to have been given (a) upon personal delivery, if delivered by hand, (b) three days after the date of deposit in the mails, postage prepaid, if mailed by certified first class mail, or (c) the next business day if sent by facsimile transmission (if receipt is electronically confirmed) or by a prepaid overnight courier service, and in each case at the respective addresses or numbers set forth below or such other address or number as such party may have fixed by notice: 64 If to either Omnicom or to the Purchaser, addressed to: Omnicom Group Inc. 437 Madison Avenue New York, New York 10022 Attention: Chief Financial Officer Fax: (212) 415-3536 with a copy to: Davis & Gilbert 1740 Broadway New York, New York 10019 Attention: Michael D. Ditzian, Esq. Fax: (212) 468-4888 If to either Advertising or to the Company, addressed to: Chiat/Day Holdings, Inc. 180 Maiden Lane New York, New York 10038 Attention: Chief Financial Officer Fax: (212) 804-1200 (or following the dissolution of the Company, to the Trustee of the Liquidating Trust at such address as the Company shall provide to Omnicom and the Purchaser) with a copy in either case to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: James M. Cotter, Esq. Fax: (212) 455-2502 Section 12.10 Parties in Interest. This Agreement and the rights and obligations of the parties hereunder shall not be assignable to any Person without the written consent of all parties, except that, without the Sellers' consent, the Purchaser may direct either Seller to assign or transfer at the Closing (or subsequent to the Closing the Purchaser may transfer) all or any portion of the Assets and/or Assumed Liabilities to one or more of its subsidiaries. Such assignment or transfer shall not relieve the Purchaser of its obligations or diminish its rights hereunder. Subsequent to the Closing all rights of the Company hereunder shall be assignable by it to its stockholders 65 pro rata, and/or to the Liquidating Trust created for the benefit of the Stockholders, upon the liquidation of the Company and all rights of Advertising hereunder shall be assignable by it to the Company, its stockholder. Section 12.11 Severability. In the event any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall nevertheless be binding upon the parties with the same effect as though the void or unenforceable part had been severed and deleted. Section 12.12 Counterparts. This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument. Section 12.13 Entire Agreement. This Agreement, including the Annexes, Schedules and Exhibits, and other documents referred to herein which form a part hereof, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein. This Agreement supersedes all prior oral and written agreements and understandings between the parties with respect to such subject matter. Section 12.14 Amendment. This Agreement and the Annexes and Schedules attached hereto or heretofore delivered may be amended, supplemented or modified by the parties hereto only by an agreement in writing signed on behalf of each of the parties hereto following due authorization at any time. Section 12.15 Third Party Beneficiaries. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto and their respective successors and assigns as permitted under Section 12.10. Section 12.16 Extension; Waiver. The Sellers, on the one hand, and Omnicom (on behalf of itself and the Purchaser), on the other hand, each may, by instrument duly authorized in writing signed on behalf of each party, (a) extend the time for performance of any of the obligations or other acts of such other party, (b) waive any inaccuracies in the representations and warranties of such other party contained herein or in any document delivered pursuant hereto, or (c) except as set forth in the first paragraph of each of Articles VIII and IX, waive compliance with any of the agreements or conditions of such other party contained herein. No such waiver or extension shall be effective unless in writing (and specifically describing the provision or provisions being waived) and signed by the party or parties sought to be bound thereby, and any such waiver or extension on a specific occasion shall not imply a waiver or extension on a future occasion. Section 12.17 Exchange Rate. Where a Section of this Agreement provides amounts in U.S. dollars for purposes of determining the disclosure required to 66 be made hereunder, it is understood that the equivalent amounts in foreign currencies shall be calculated in accordance with GAAP. 67 IN WITNESS WHEREOF, Omnicom, the Purchaser, the Company and Advertising have each caused its corporate name to be hereunto subscribed by its officer thereunto duly authorized on the day and year first above written. OMNICOM GROUP INC. By: /s/ Fred Meyer ---------------------------- Name: Fred Meyer Title: Chief Financial Officer TBWA INTERNATIONAL INC. By: /s/ William G. Tragos --------------------------- Name: William G. Tragos Title: Chief Executive Officer CHIAT/DAY HOLDINGS, INC. By: /s/ Jay Chiat -------------------------- Name: Jay Chiat Title: President and Chief Executive Officer CHIAT/DAY INC. ADVERTISING By: /s/ Jay Chiat -------------------------- Name: Jay Chiat Title: President and Chief Executive Officer 68 EX-2 3 EXHIBIT 2.2 CHIAT/DAY HOLDINGS, INC. PLAN OF COMPLETE LIQUIDATION 1. Plan of Liquidation; Closing of Transfer Books. (a) After (i) the adoption of this Plan, (ii) the consummation of the asset sales contemplated in that certain Asset Purchase Agreement dated ______________, 1995 among the Corporation, Chiat/Day inc. Advertising, a Delaware corporation ("Advertising"), Omnicom Group Inc., a New York corporation ("Omnicom") and TBWA International Inc., a Delaware corporation ("TBWA") (as the same may be amended, supplemented or otherwise modified from time to time, the "Purchase Agreement"), and (iii) the occurrence of the Distribution Date, CHIAT/DAY HOLDINGS, INC., a Delaware corporation (the "Corporation"), after deposits are made into the Liquidating Trust (as defined below) and the escrows described in paragraph 3(a) below on behalf of the Stockholders, will distribute to its stockholders, in accordance with paragraph 4 hereof, its properties and assets of every description, which at that time will consist entirely of shares of common stock, par value $.50 per share, of Omnicom, received by the Corporation (exclusive of the Contributed Stock (as defined in the Purchase Agreement)) pursuant to the terms of the Purchase Agreement (the "Omnicom Shares"). Capitalized terms used herein and not defined herein shall have the meanings ascribed thereto in the Purchase Agreement. At such time, the Corporation will also cause Advertising to distribute to the Rightsholders (as defined herein), in accordance with paragraph 5 hereof, after deposits are made into the escrows described in paragraphs 3(b) and 3(c) below on behalf of the Rightsholders, the Omnicom Shares received by Advertising (inclusive of the Contributed Stock) pursuant to the Purchase Agreement; provided, that such distribution is conditional upon and in consideration of the funding of such escrows on behalf of the Rightsholders. (b) On the Closing Date under the Purchase Agreement (on or immediately following which date the Corporation shall file a Certificate of Dissolution in accordance with the laws of the State of Delaware), the Corporation shall close its transfer books and no transfers of Class A or Class B Common Stock of the Corporation shall thereafter be recorded on the transfer books of the Corporation. Such Closing Date shall be the record date for determining the Stockholders entitled to receive any distributions described herein in respect of the Common Stock of the Corporation. 2. Liquidating Trust. (a) Following the Closing under the Purchase Agreement, the Corporation shall cause to be created a liquidating trust (the "Liquidating Trust") for and on behalf of the Class A and Class B stockholders (collectively, the "Stockholders") of the Corporation, all pursuant to a Liquidating Trust Agreement (the "Liquidating Trust Agreement") substantially in the form attached hereto as Annex I. The trustees of the Liquidating Trust shall be Thomas Patty and David C. Wiener (collectively, the "Liquidating Trustee"). Upon adoption of this 2 Plan by the Stockholders and the creation of the Liquidating Trust, the Liquidating Trustee will be authorized (i) to receive on behalf of the Stockholders liquidating distributions (other than the distribution described in paragraph 4 hereof) from the Corporation, (ii) to act as the agent of the Stockholders in connection with the administration of the Omnicom Indemnification Escrow Agreement (and the provisions of the Purchase Agreement relating thereto) and the Liquidating Trust Escrow Agreement (each as defined below), (iii) to respond to the assertion of claims under, and/or to make claims under, such escrow agreements and (iv) to complete the winding up of the affairs of the Corporation and the payment of certain liabilities not assumed by the Purchaser under the Purchase Agreement from the assets of the Liquidating Trust. (b) On the Distribution Date (as defined in the Purchase Agreement), 5% of the Omnicom Shares paid to the Corporation pursuant to Section 2.1 of the Purchase Agreement (exclusive of the Contributed Stock) will be deposited into the Liquidating Trust on behalf of the Stockholders. Such Omnicom Shares (and any other Omnicom Shares received by the Liquidating Trustee from time to time) will be sold by the Liquidating Trustee (in accordance with the Liquidating Trust Agreement) and the net cash proceeds held in the Liquidating Trust on behalf of the Stockholders for the purpose of liquidating contingent or other liabilities against the Corporation which may arise in the future (other than the liabilities assumed by TBWA pursuant to the Purchase Agreement and to the extent required under Section 3 281(b) of the Delaware General Corporation Law) and otherwise for application and distribution in accordance with the terms of the Liquidating Trust Agreement. Income earned on funds on deposit in the Liquidating Trust and dividends paid to the Liquidating Trustee, for the benefit of the Stockholders, in respect of Omnicom Shares on deposit under the Omnicom Indemnification Escrow Agreement will be distributed from time to time to the Stockholders, pro rata in accordance with their interests, in accordance with the Liquidating Trust Agreement. 3. Escrows. (a) On the Distribution Date, (i) 10% of the Omnicom Shares paid to the Corporation pursuant to Section 2.1 of the Purchase Agreement (exclusive of the Contributed Stock) will be deposited with an escrow agent (the "Omnicom Indemnification Escrow Agent") on behalf of the Stockholders to secure certain general indemnification obligations of the Corporation to the Purchaser and (ii) a number of Omnicom Shares having an aggregate Market Value (as determined in accordance with the Purchase Agreement) of $1,700,000 multiplied by a fraction, the numerator of which is the number of shares of Class A and Class B Common Stock outstanding on the Closing Date and the denominator of which is the sum of the number of shares of Class A and Class B Common Stock and the number of EPUs and EARs outstanding on the Closing Date, will be deposited with the Omnicom Indemnification Escrow Agent on behalf of the Stockholders to secure certain special indemnification obligations of the Corporation to the Purchaser, all pursuant to an escrow agreement substantially in 4 the form attached hereto as Annex II (the "Omnicom Indemnification Escrow Agreement"). From time to time, and upon termination of each such escrow, Omnicom Shares in such escrow shall be distributed to the Liquidating Trust, for the benefit of the Stockholders, in accordance with the Omnicom Indemnification Escrow Agreement. Cash and other taxable dividends on the Omnicom Shares held in such escrows shall be paid directly to the Liquidating Trustee, for the benefit of the Stockholders, in accordance with the Omnicom Indemnification Escrow Agreement. (b) On the Distribution Date, (i) 10% of the Omnicom Shares paid to Advertising pursuant to Section 2.1 of the Purchase Agreement (inclusive of the Contributed Stock) will be deposited with the Omnicom Indemnification Escrow Agent on behalf of the holders of EARs and EPUs (collectively, the "Rightsholders") to secure certain general indemnification obligations of the Corporation to the Purchaser and (ii) a number of Omnicom Shares having an aggregate Market Value (as determined in accordance with the Purchase Agreement) of $1,700,000 multiplied by a fraction, the numerator of which is the number of shares of EPUs and EARs outstanding on the Closing Date and the denominator of which is the sum of the number of shares of Class A and Class B Common Stock and the number of EPUs and EARs outstanding on the Closing Date, will be deposited with the Omnicom Indemnification Escrow Agent on behalf of the Rightsholders to secure certain special indemnification obligations of the Corporation to the Purchaser, all pursuant to the Omnicom Indemnification Escrow Agreement. From time to time, 5 and upon termination of each such escrow, Omnicom Shares in such escrow shall be distributed to the Liquidating Trust Escrow Agent (as defined below), for the benefit of the Rightsholders, in accordance with the Omnicom Indemnification Escrow Agreement. Cash and other taxable dividends on the Omnicom Shares held in such escrows shall be paid directly to the Liquidating Trust Escrow Agent, for the benefit of the Rightsholders, in accordance with the Omnicom Indemnification Escrow Agreement. (c) On the Distribution Date, 5% of the Omnicom Shares paid to Advertising pursuant to Section 2.1 of the Purchase Agreement (inclusive of the Contributed Stock) will be deposited with an escrow agent (the "Liquidating Trust Escrow Agent") on behalf of the Rightsholders to reimburse the Liquidating Trust for the Rightsholders' pro rata portion of any contingent or other liabilities of the Corporation which may arise in the future (such escrow, the "Liquidating Trust Escrow"), all pursuant to an escrow agreement substantially in the form attached hereto as Annex III (the "Liquidating Trust Escrow Agreement"). The Liquidating Trust Escrow Agent will also receive distributions of Omnicom Shares and dividends in respect thereof, for the benefit of the Rightsholders, pursuant to the Omnicom Indemnification Escrow Agreement. All Omnicom Shares received by the Liquidating Trust Escrow Agent at any time will be sold and the proceeds retained in the Liquidating Trust Escrow. From time to time, and upon termination of the Liquidating Trust Escrow Agreement, funds on deposit in the Liquidating Trust Escrow will be distributed to Rightsholders, 6 pro rata in accordance with their interests, in accordance with the Liquidating Trust Escrow Agreement. Income earned on funds on deposit in the Liquidating Trust Escrow and dividends paid to the Liquidating Trust Escrow Agent, for the benefit of the Rightsholders, in respect of Omnicom Shares on deposit under the Omnicom Indemnification Escrow Agreement will be distributed from time to time to the Rightsholders, pro rata in accordance with their interests, in accordance with the Liquidating Trust Escrow Agreement. 4. Liquidating Distribution to Stockholders. (a) As soon as practicable after the Liquidating Trust and the escrows described in the paragraph 3(a) have been established and funded (all of which is intended to occur on the Distribution Date), the Corporation shall make a distribution (the "Corporation Distribution") of the remaining Omnicom Shares paid to the Corporation pursuant to Section 2.1 of the Purchase Agreement (exclusive of the Contributed Stock) (the "Corporation Distribution Shares") directly to the Stockholders in accordance with subparagraph (b) hereof, provided that (i) all creditors of the Corporation (other than the liabilities assumed by TBWA pursuant to the Purchase Agreement and to the extent required under Section 281(b) of the Delaware General Corporation Law) shall first be paid in full for the amount of their claims, (ii) the proceeds of the sale of the Omnicom Shares deposited in the Liquidating Trust will remain in the Liquidating Trust pursuant to the terms of the Liquidating Trust Agreement, (iii) the Omnicom Shares deposited, on behalf of the Stockholders, with the 7 Omnicom Indemnification Escrow Agent will remain with such escrow agent pursuant to the terms of the Omnicom Indemnification Escrow Agreement, (iv) no fractional Omnicom Shares will be distributed, but rather, cash will be distributed in an amount equal to the value of any such fractional shares on the date of such Corporation Distribution and (v) the value of an Omnicom Share will be calculated in accordance with the Purchase Agreement and the calculation of such value for purposes of calculation of the Purchase Price (as defined in the Purchase Agreement). (b) The distribution of the Corporation Distribution Shares shall be as follows: (i) The Corporation Distribution Shares shall be distributed to the holders of Class A and Class B Common Stock, pro rata in accordance with their respective holdings, with each share of Class A Common Stock and Class B Common Stock to be treated equally with respect to such distribution. (ii) Dividends paid or payable with respect to the Corporation Distribution Shares prior to the Corporation Distribution will be retained by the Corporation and used to satisfy expenses of the Corporation incurred in connection with the transactions contemplated by this Plan. The foregoing distributions in complete liquidation shall be in exchange solely for, and in complete redemption and cancellation of, and in payment for, all of the outstanding shares of Class A Common Stock and Class B Common Stock of the Corporation, and the Stockholders shall, if the Board of Directors so determines, surrender their certificates for such 8 shares for recording thereon receipt of distributions prior to the Corporation Distribution, and shall surrender such certificates for cancellation upon receipt of the Corporation Distribution herein authorized. 5. Liquidating Distribution to Rightsholders. (a) As soon as practicable after the escrows described in the paragraphs 3(b) and 3(c) have been established and funded (all of which is intended to occur on the Distribution Date) and prior to the consummation of the transactions contemplated by the Advertising Stock Sale Agreement, the Corporation shall cause Advertising to make a distribution (the "Advertising Distribution") of the remaining Omnicom Shares paid to Advertising pursuant to Section 2.1 of the Purchase Agreement (inclusive of the Contributed Stock) (the "Advertising Distribution Shares") directly to the Rightsholders in accordance with subparagraph (b) hereof, provided that (i) all creditors of the Corporation (other than the liabilities assumed by TBWA pursuant to the Purchase Agreement and to the extent required under Section 281(b) of the Delaware General Corporation Law) shall first be paid in full for the amount of their claims, (ii) the Omnicom Shares deposited, on behalf of the Rightsholders, with the Omnicom Indemnification Escrow Agent and the Liquidating Trust Escrow Agent will remain with such escrow agents pursuant to the terms of the relevant escrow agreement, (iii) no fractional Omnicom Shares will be distributed, but rather, cash will be distributed in an amount equal to the value of any such fractional shares on the date of such Advertising Distribution 9 and (iv) the value of an Omnicom Share will be calculated in accordance with the Purchase Agreement and the calculation of such value for purposes of calculation of the Purchase Price (as defined in the Purchase Agreement). (b) The distribution of the Advertising Distribution Shares shall be as follows: (i) The Advertising Distribution Shares shall be distributed to the holders of EPUs and EARs, pro rata in accordance with their respective holdings, with each EPU and EAR to be treated equally with respect to such distribution. (ii) Dividends paid or payable with respect to the Advertising Distribution Shares prior to the Advertising Distribution will be retained by the [Corporation] and used to satisfy expenses of the [Corporation] incurred in connection with the transactions contemplated by this Plan. The foregoing distributions in complete liquidation shall be in exchange solely for, and in complete redemption and cancellation of, and in payment for, all of the outstanding EPUs and EARs of the Corporation[, and the Rightsholders shall, if the Board of Directors so determines, surrender their certificates for such rights for recording thereon receipt of distributions prior to the Advertising Distribution, and shall surrender such certificates for cancellation upon receipt of the Advertising Distribution herein authorized.] 6. Sale of Stock of Advertising. As soon as practicable after the consummation of the distributions contemplated by Sections 4 and 5 hereof, the Corporation shall 10 sell all of the common stock, par value $.01 per share, of Advertising owned by the Corporation to Adelaide Horton pursuant to a Stock Purchase Agreement in substantially the form attached hereto as Annex IV (the "Advertising Stock Sale Agreement"); provided, that pursuant to the Advertising Stock Sale Agreement, the Corporation shall indemnify the Purchaser thereunder and Advertising for any Losses (as defined in the Purchase Agreement) arising out of or in connection with any Retained Advertising Liabilities (as defined in the Purchase Agreement). 7. Termination of Profit Sharing Plan. The Corporation shall effect the termination of the Chiat/Day Profit Sharing Plan and 401(k) Plan (the "Profit Sharing Plan") as of the Closing Date under the Purchase Agreement and thereupon the trustees of the Profit Sharing Plan shall distribute the assets of the Profit Sharing Plan to the beneficiaries thereof in accordance with such plan. 8. Dissolution and Complete Liquidation. The officers and the Board of Directors of the Corporation shall proceed with the voluntary dissolution and complete liquidation of the Corporation in accordance with the laws of the State of Delaware as promptly as practicable after the adoption of this Plan and the occurrence of the Closing Date under the Purchase Agreement. 9. Authorization to Execute and File Documents. The officers of the Corporation are authorized, empowered and directed to execute and file all documents which they deem necessary or advisable to carry out the purposes and 11 intentions of this Plan, including a Certificate of Dissolution under the laws of the State of Delaware, and information returns with federal, state and local tax officials as may be required by the applicable regulations. 10. Authorization of Necessary Acts. The officers and directors of the Corporation are authorized, empowered and directed to do any and all other things in the name and on behalf of the Corporation which each of them may deem necessary or advisable in order to carry out the purposes and intentions of this Plan. They shall be held harmless by the Corporation for any action under this Plan taken in good faith, and any expense or liability so incurred by them shall be that of the Corporation. 12 ANNEX I LIQUIDATING TRUST AGREEMENT 13 ANNEX II OMNICOM INDEMNIFICATION ESCROW AGREEMENT 14 ANNEX III LIQUIDATING TRUST ESCROW AGREEMENT 15 ANNEX IV ADVERTISING STOCK SALE AGREEMENT 16 EX-2 4 EXHIBIT 2.3 Exhibit 2.3 ESCROW AGREEMENT ESCROW AGREEMENT, dated ____________, 1995 (the "Escrow Agreement"), among CHIAT/DAY inc. ADVERTISING, a Delaware corporation ("Advertising"); CHIAT/DAY HOLDINGS, INC., a Delaware corporation ("Holdings"); TBWA INTERNATIONAL INC., a Delaware corporation (the "Purchaser"); and THE CHASE MANHATTAN BANK, N.A. , as Escrow Agent (the "Escrow Agent"). INTRODUCTION A. Advertising, Holdings, the Purchaser and Omnicom Group Inc., a New York corporation ("Omnicom") are parties to a certain Asset Purchase Agreement dated May 11, 1995 (the "Purchase Agreement"), pursuant to which the Purchaser acquired assets and liabilities and the ongoing businesses of Advertising and Holdings. Terms defined in the Purchase Agreement that are not otherwise defined herein are used herein with the meanings ascribed to them therein; a list of such terms is attached hereto as Exhibit 1. B. Under the Purchase Agreement, Holdings and Advertising have made certain representations and warranties, and undertaken certain obligations, to the Purchaser, and Holdings has agreed to indemnify the Purchaser against, and hold the Purchaser harmless from, certain Losses which the Purchaser or other Indemnified Parties may sustain or to which the Purchaser or other Indemnified Parties may be subjected (as more fully set forth in the Purchase Agreement). Pursuant to the Purchase Agreement, Holdings is required to secure the Purchaser against such Losses by creating a "General Escrow Fund" and a "Special Escrow Fund" in accordance with the terms of this Agreement. The General Escrow Fund will consist of two separate and segregated accounts, the "Stockholders General Escrow Fund" and the "Rightsholders General Escrow Fund"; the Special Escrow Fund will consist of two separate and segregated accounts, the "Stockholders Special Escrow Fund" and the "Rightsholders Special Escrow Fund," as follows: (x) The Stockholders General Escrow Fund will contain deposits designated for such account made by or on behalf of the Stockholders. The Rightsholders General Escrow Fund will contain deposits designated for such account made by or on behalf of the Rightsholders (as defined below). Any General Claims (as defined in Section 2.1) made by the Purchaser against the General Escrow Fund shall become reimbursable hereunder only if, and to the extent that, they become "Final General Claims for Reimbursement", as defined in Section 2.3 hereof. (y) The Stockholders Special Escrow Fund will contain deposits designated for such account made by or on behalf of the Stockholders. The Rightsholders Special Escrow Fund will contain deposits designated for such account made by or on behalf of the Rightsholders. Any claim made by the Purchaser against the Special Escrow Fund is called a "Purchaser Special Claim"; any claim made by Holdings against the Special Escrow Fund is called a "Holdings Special Claim". The Purchaser Special Claim and the Holdings Special Claim are collectively called the "Special Claims"; however, Special Claims shall become reimbursable hereunder only if, and to the extent that, they become "Final Special Claims for Reimbursement", as defined in Section 4.3 hereof. C. The Purchase Agreement provides that Holdings will liquidate and dissolve and that, in the course of its expeditious and orderly winding up process, Holdings shall cause to be created a liquidating trust (hereinafter, the "Liquidating Trust" and the trustee or trustees thereof the "Liquidating Trustee") to act as the representative for Holdings and the Stockholders. Approval of the creation of the Liquidating Trust, as well as the identity of (or means of selecting) the Liquidating Trustee has been favorably acted upon by the Stockholders in their adopting, authorizing and approving the plan of voluntary dissolution. Pursuant to such resolution, the Stockholders have designated the Liquidating Trustee as their collective agent to act following the dissolution of Holdings as their agent in connection with the administration of this Escrow Agreement, including without limitation to amend, cancel or extend, or waive the terms of this Escrow Agreement; to respond to the assertion of any and all claims from the Escrow Funds (as hereinafter defined) by the Purchaser against Holdings pursuant to the terms of this Escrow Agreement and the provisions of the Purchase Agreement pertaining thereto; to assert any and all claims against the Special Escrow Funds by Holdings pursuant to the terms of this Escrow Agreement; to further act as their collective agent under the terms of the Liquidating Trust; to receive on their behalf the distributions, if any, that would otherwise be due to them upon the distribution of all or a portion of the Stockholders General Escrow Fund and the Stockholders Special Escrow Fund; and to complete the winding up of the affairs of Holdings. D. There will also be created pursuant to a separate escrow agreement (the "Liquidating Trust Escrow Agreement"; and the Escrow Agent thereunder, the "Liquidating Trust Escrow Agent ") a separate and segregated "Liquidating Trust Escrow Fund" (the "Liquidating Trust Escrow Fund") which shall be available solely to fund and secure indemnification obligations of holders of EARs and EPUs (collectively, the "Rightsholders") to the Liquidating Trust in accordance with the Liquidating Trust Escrow Agreement. The Liquidating Trust Escrow Fund will contain deposits designated for such fund made by or on behalf of the Rightsholders. The Liquidating Trust Escrow Fund is expressly not intended to fund or secure the indemnification obligations of Holdings to the Purchaser or any other Indemnified Party described in Section 11.2 of the Purchase Agreement 2 and none of Omnicom, the Purchaser or any other Indemnified Party shall have any recourse to the Liquidating Trust Escrow Fund for any purpose whatsoever. E. The Purchase Agreement further provides that Advertising shall distribute to the Rightsholders pro rata in accordance with their interests, the shares of Omnicom Stock received by it pursuant to the Purchase Agreement, less the shares of Omnicom Stock to be transferred by Advertising to the General Escrow Fund, to the Special Escrow Fund and to the Liquidating Trust Escrow Fund on behalf of such Rightsholders. Advertising and the Rightsholders have designated Holdings (or following the creation and funding of the Liquidating Trust, the Liquidating Trustee) (such designation by Advertising, for itself and on behalf of the Rightsholders, being made by its execution of this Escrow Agreement), as their collective agent in connection with the administration of the Escrow Agreement, including, without limitation, to amend, cancel or extend, or waive the terms of this Escrow Agreement; and to respond to the assertion of any and all claims from the Escrow Funds by the Purchaser against Holdings pursuant to the terms of this Escrow Agreement and the provisions of the Purchase Agreement, if any, pertaining thereto; to assert any and all claims against the Special Escrow Funds by Holdings pursuant to the terms of this Escrow Agreement. Advertising and the Rightsholders have designated the Liquidating Trust Escrow Agent (such designation by Advertising, for itself and on behalf of the Rightsholders, being made by its execution of this Escrow Agreement) to receive on their behalf the distributions, if any, that would otherwise be due to them upon the distribution of all or a portion of the Rightsholders General Escrow Fund and the Rightsholders Special Escrow Fund as herein provided. F. References herein to Holdings as to a time following the creation and funding of the Liquidating Trust shall be deemed to refer to the Liquidating Trust and/or the Liquidating Trustee, as the context so requires. Accordingly, the parties hereby agree as follows: 1. ESCROW AGENT; ESCROW FUNDS 1.1 Escrow Agent. The Purchaser and Holdings, on behalf of itself and the Stockholders, and Advertising on behalf of itself and the Rightsholders, hereby appoint The Chase Manhattan Bank, N.A. as, and The Chase Manhattan Bank, N.A. hereby accepts such appointment and agrees to perform the duties of, Escrow Agent under this Agreement. 1.2 Escrow Funds. The Escrow Agent shall establish and maintain as four separate and segregated accounts, the Stockholders General Escrow Fund and the Rightsholders General Escrow Fund (collectively, the "General Escrow Funds"), and the Stockholders Special Escrow Fund and the Rightsholders Special Escrow Fund (collectively, the "Special Escrow Funds" and together with the General 3 Escrow Funds the "Escrow Funds"). The Escrow Funds shall be held by the Escrow Agent and shall be dealt with by the Escrow Agent in accordance with the terms and conditions of this Escrow Agreement. This Escrow Agreement shall terminate at such time as the entirety of the Escrow Funds shall have been distributed by the Escrow Agent in accordance with the terms of this Escrow Agreement. 1.2.1. The General Escrow Funds Deposit. (a) Stockholders General Escrow Fund. Pursuant to the Purchase Agreement, Holdings shall deposit (or cause to be deposited) on the "Funding Date" (which shall be the Distribution Date under the Purchase Agreement) into the Stockholders General Escrow Fund on behalf of Holdings and the Stockholders, certificates registered in the name of the Liquidating Trustee representing ________(1) shares of Common Stock, par value $.50 per share, of Omnicom ("Common Stock"), together with stock powers duly executed in blank in respect of such certificates. (b) Rightsholders General Escrow Fund. Pursuant to the Purchase Agreement, Advertising shall deposit (or cause to be deposited) on the Funding Date into the Rightsholders General Escrow Fund on behalf of Advertising and the Rightsholders, certificates registered in the name of the Liquidating Trust Escrow Agent representing _________(2) shares of Common Stock, together with stock powers duly executed in blank in respect of such certificates. 1.2.2 The Special Escrow Funds Deposit. (a) Stockholders Special Escrow Fund. Pursuant to the Purchase Agreement, Holdings shall deposit (or cause to be deposited) on the Funding Date into the Stockholders Special Escrow Fund on behalf of Holdings and the Stockholders, certificates registered in the name of the Liquidating Trustee representing _________(3) shares of Common Stock, together with stock powers duly executed in blank in respect of such certificates. - -------------------- (1) The Stockholders General Escrow Fund shall consist of 10% of the Omnicom Stock issued to Holdings under Section 2.1.1(a) of the Purchase Agreement (exclusive of the Contributed Stock, as defined in the Purchase Agreement). (2) The Rightsholders General Escrow Fund shall consist of 10% of the Omnicom Stock issued to Advertising under Section 2.1.1(c) of the Purchase Agreement (inclusive of the Contributed Stock). (3) The Stockholders Special Escrow Fund shall consist of shares of Omnicom Stock having an aggregate Market Value equal to the Stockholders' pro rata share of $1,700,000. 4 (b) Rightsholders Special Escrow Fund. Pursuant to the Purchase Agreement, Advertising shall deposit (or cause to be deposited) on the Funding Date into the Rightsholders Special Escrow Fund on behalf of Advertising and the Rightsholders, certificates registered in the name of the Liquidating Trust Escrow Agent representing ______________(4) shares of Common Stock, together with stock powers duly executed in blank in respect of such certificates. 2. PROCEDURES WITH RESPECT TO GENERAL CLAIMS 2.1 General Claims. If an Indemnified Party has a Claim which arises under clauses (i) through (iii) of Section 11.2 of the Purchase Agreement (a "General Claim"), the Purchaser shall promptly give notice thereof (the "General Claims Notice") substantially in the form of Exhibit 2 hereto to Holdings and to the Escrow Agent in the manner set forth in the Purchase Agreement. The General Claims Notice shall describe the General Claim in reasonable detail, shall indicate the amount (estimated, if necessary, and to the extent feasible) of the Losses that have been or may be suffered by the applicable Indemnified Party, and shall identify which of such Indemnified Parties is alleged to have suffered the Losses in question. Losses which arise under clauses (i) through (iii) of Section 11.2 of the Purchase Agreement are hereinafter referred to as "General Losses"; and General Losses shall be reimbursed solely out of the General Escrow Funds. 2.2 Final General Claims for Reimbursement. A General Claim asserted in a General Claims Notice shall become a "Final General Claim for Reimbursement" whenever there shall be delivered to the Escrow Agent either: (a) a certificate substantially in the form of Exhibit 3 hereto signed by the Purchaser and Holdings certifying to, or (b) a certified copy of an arbitration award rendered pursuant to the provisions of Section 14 hereof determining, the amount that is due to the Purchaser (on behalf of the applicable Indemnified Party) from the General Escrow Funds in respect of such General Claim. 2.3 Limitation of General Claims. Notwithstanding anything to the contrary herein; - -------------------- (4) The Rightsholders Special Escrow Fund shall consist of shares of Omnicom Stock having an aggregate Market Value equal to the Rightholders' pro rata share of $1,700,000. 5 (a) None of the General Escrow Funds will be released and delivered to the Purchaser pursuant to any Asserted Liability arising under clauses (i), (ii) or (iii) of Section 11.2 of the Purchase Agreement (other than with respect to Asserted Liabilities under Section 3.27 or one of the first two sentences of Section 3.28 of the Purchase Agreement) except to the extent that the aggregate amount of all Final General Claims for Reimbursement (as defined below) exceeds the sum of $300,000, and then only to the extent of such excess. (b) Any payment to be made from, or any reservation to be made in or against, the General Escrow Funds in accordance with Section 3 hereof shall be reduced to the extent of any net actual reduction in Taxes payable by the Purchaser upon its payment of General Losses, determined at an assumed marginal tax rate equal to the highest marginal tax rate then in effect for corporate taxpayers in the relevant jurisdiction, and taking into account the tax consequences to the Purchaser of the receipt of any payment due and payable to the Purchaser under this Escrow Agreement. (c) No General Claim may be asserted for the first time hereunder, pursuant to a General Claims Notice or otherwise, after the First General Distribution Date (as defined below), and no General Claim shall become a Final General Claim for Reimbursement, if such General Claim would be invalid under Article XI (including, in particular, Section 11.4) of the Purchase Agreement. As a Claim becomes a Final General Claim for Reimbursement, the Purchaser and Holdings (or the arbitrator, as the case may be) shall provide the Escrow Agent with a certificate with respect to the compliance of the Final General Claim for Reimbursement with (a), (b) and (c). 3. DISTRIBUTIONS FROM GENERAL ESCROW FUNDS 3.1 Definitions. As used herein: "First General Distribution Date" shall mean the business day next following the earlier of (i) the date following the first independent audit report, if any, of the consolidated financial results of the Purchaser and the Businesses following the date hereof or (ii) one year from the date hereof; and "Final General Distribution Date" shall mean the first business day on which all matters reserved against, as set forth in Section 3.3, shall have been finally determined or settled or withdrawn. The Purchaser shall give notice to the Escrow Agent, with a copy to Holdings, five business days prior to the occurrence of the First Distribution Date. 6 3.2 Reimbursement of Final General Claims for Reimbursement Before or On First General Distribution Date. From the date of this Escrow Agreement to and including the First Distribution Date, the Escrow Agent from time to time shall (subject to Section 2.3) transfer and deliver to the Purchaser such number of shares of Common Stock forming the General Escrow Funds as shall have a value (computed in accordance with Section 5.1 hereof) equal to the Final General Claims for Reimbursement which have not previously been paid to the Purchaser; provided that any such distribution to be made from the General Escrow Funds shall be made __% from the Stockholders General Escrow Fund and __% from the Rightsholders General Escrow Funds; and provided, further, that in no event shall the Purchaser receive any distribution from the General Escrow Funds prior to such time as Omnicom releases and publishes financial results of the combined operations of Omnicom and the Businesses covering a period of at least 30 days after the Closing Date of the Purchase Agreement. The Purchaser shall promptly give notice to the Escrow Agent, with a copy to Holdings, of the release and publishing of such financial results. 3.3 Reservation of Amounts for Pending General Claims at First General Distribution Date. Subject in all cases to the limitations described in Section 2.3 hereof and receipt of the certifications described in (i) and (ii) below, on the First General Distribution Date, the Escrow Agent shall reserve in the General Escrow Fund such number of shares of Common Stock as shall have a value (computed in accordance with Section 5.1 hereof) equal to the sum of (i) amounts previously claimed in General Claims Notices given pursuant to Section 2.1 hereof which have not become Final General Claims for Reimbursement ("Pending General Claims") to the extent such Pending General Claims have become liquidated as to amount and such amounts have actually been paid by the Purchaser, all as certified in writing to the Escrow Agent by the chief financial officer of the Purchaser; (ii) an amount in respect of Pending General Claims (other than those which have become liquidated and have been previously paid by the Purchaser) to be determined in good faith by the Purchaser and Holdings, such amount to be based upon the amount which Purchaser has a reasonable expectation of becoming payable with respect to such Pending General Claims and to be set forth in a certificate signed by the Purchaser and Holdings and delivered to the Escrow Agent; provided, that if the Purchaser and Holdings cannot agree on such amount, the dispute shall be submitted by Holdings to the arbitration panel in accordance with Section 14 hereof within 10 days after the First General Distribution Date and the determination of the arbitration panel shall be final and conclusive (it being agreed, however, that pending the determination of the arbitration panel, the amount to be reserved shall be the amount certified in writing to the Escrow Agent by the chief financial officer of the Purchaser); and (iii) the aggregate amount of all Final General Claims for Reimbursement not theretofore paid to the Purchaser; provided, that the amount of any reserve made in respect of any Pending General Claim shall not be determinative of the amount (if any) to be reimbursed in respect of such Pending General Claim if it becomes a Final General Claim for Reimbursement. Such reservation shall be made in each of the Stock- holders General Escrow Fund and the Rightsholders General Escrow Fund pro 7 rata in accordance with the number of shares of Common Stock then on deposit in each such Fund. Holdings agrees that it will not object to the amount of the Common Stock to be reserved in respect of any Pending General Claim except as otherwise provided in Section 3.3(ii). 3.4 Distribution at First General Distribution Date. On the First General Distribution Date, the Escrow Agent shall (a) deliver to Holdings, on behalf of the Stockholders, that portion of the Stockholders General Escrow Fund equal to the entire amount of the Stockholders General Escrow Fund as originally deposited in accordance with Section 1 hereof (together with any distributions described in Section 6.2 hereof), less the sum of (i) all amounts theretofore delivered from the Stockholders General Escrow Fund to the Purchaser pursuant to Section 3.2 hereof and (ii) the amount of the Stockholders General Escrow Fund reserved pursuant to Section 3.3 hereof, (provided that if the foregoing calculation results in a negative amount, no portion of the Stockholders General Escrow Fund shall be delivered to Holdings at the First General Distribution Date) and (b) deliver to the Liquidating Trust Escrow Fund, on behalf of the Rightsholders, that portion of the Rightsholders General Escrow Fund equal to the entire amount of the Rightsholders General Escrow Fund as originally deposited in accordance with Section 1 hereof (together with any distributions described in Section 6.2 hereof), less the sum of (i) all amounts theretofore delivered from the Rightsholders General Escrow Fund to the Purchaser pursuant to Section 3.2 hereof and (ii) the amount of the Rightsholders General Escrow Fund reserved pursuant to Section 3.3 hereof (provided that if the foregoing calculation results in a negative amount, no portion of the Rightsholders General Escrow Fund shall be delivered to the Liquidating Trust Escrow Fund at the First General Distribution Date). 3.5 Distributions as to Pending General Claims after the First General Distribution Date. After the First General Distribution Date, as each Pending General Claim reserved for on the First General Distribution Date becomes (x) a Final General Claim for Reimbursement, or (y) is withdrawn by the Purchaser pursuant to notice given substantially in the form of Exhibit 4 hereto (a "Withdrawn General Claim"), or (z) is determined pursuant to an arbitration award rendered pursuant to Section 14 hereof not to be a proper Claim, the Escrow Agent shall subject to Section 2.3 deliver (a) to the Purchaser, from the General Escrow Fund such number of shares of Common Stock as shall have a value (computed in accordance with Section 5.1 hereof) equal to any Final General 8 Claim for Reimbursement which results from the determination of such Pending General Claim (and not previously paid to the Purchaser), provided that any such distribution to be made from the General Escrow Fund shall be made from the Stockholders General Escrow Fund and the Rightsholders General Escrow Fund pro rata in accordance with the number of shares of Common Stock then on deposit in each such fund, (b) to Holdings, on behalf of the Stockholders, such number of shares of Common Stock on deposit in the Stockholders General Escrow Fund as shall have a value (computed in accordance with Section 5.1 hereof) equal to the amount, if any, of the excess of the reserve for such Pending General Claim taken against the Stockholders General Escrow Fund over the Stockholders General Escrow Fund's "allocable share" of the amount, if any, of the Final General Claim for Reimbursement or Withdrawn General Claim with respect to such Pending General Claim, provided, however, that no delivery shall be made hereunder to Holdings unless the value (computed in accordance with Section 5.1 hereof) of the aggregate number of shares of Common Stock reserved in the Stockholders General Escrow Fund (after giving effect to such delivery) for all remaining Pending General Claims, is at least equal to the Stockholders General Escrow Fund's allocable share of the aggregate amount of such remaining Pending General Claims and (c) to the Liquidating Trust Escrow Fund, on behalf of the Rightsholders, such number of shares of Common Stock on deposit in the Rightsholders General Escrow Fund as shall have a value (computed in accordance with Section 5.1 hereof) equal to the amount, if any, of the excess of the reserve for such Pending General Claim taken against the Rightsholders General Escrow Fund over the Rightsholders General Escrow Fund's allocable share of the amount, if any, of the Final General Claim for Reimbursement or Withdrawn General Claim with respect to such Pending General Claim, provided, however, that no delivery shall be made hereunder to the Liquidating Trust Escrow Fund unless the value (computed in accordance with Section 5.1 hereof) of the aggregate number of shares of Common Stock reserved in the Rightsholders General Escrow Fund (after giving effect to such delivery) for all remaining Pending General Claims is at least equal to the Rightsholders General Escrow Fund's allocable share of the aggregate amount of such remaining Pending General Claims. As used herein, the term "allocable share" means, with respect to either the Stockholders General Escrow Fund or the Rightsholders General Escrow Fund, such fund's pro rata share based on the number of shares of Common Stock then on deposit in each such fund. 3.6 Distribution at Final General Distribution Date. On the Final General Distribution Date, the Escrow Agent shall (a) deliver to the Purchaser from the General Escrow Fund such number of shares of Common Stock as shall have a value (computed in accordance with Section 5.1 hereof and subject to Section 2.3 hereof) equal to the Final General Claims for Reimbursement which have not previously been paid to the Purchaser, provided that any such distribution to be made from the General Escrow Fund shall be made from the Stockholders General Escrow Fund and the Rightsholders General Escrow Fund pro rata in accordance with the number of shares of Common Stock then on deposit in each such fund, (b) deliver to Holdings, on behalf of the Stockholders, the balance, if any, of the Stockholders General Escrow Fund and (c) shall deliver to the Liquidating Trust Escrow Fund, on behalf of the Rightsholders, the balance, if any, of the Rightsholders General Escrow Fund. 9 4. DISTRIBUTIONS FROM SPECIAL ESCROW FUNDS 4.1 Definitions. As used herein, "Special Distribution Date" shall mean the earlier of (x) the date on which payments due under the Chiat/Day Debt Restructuring Agreement dated February 16, 1993 among Holdings, FCB International Inc. and Foote Cone & Belding Communications Inc. and Venice Holdings Pty. Limited (the "Mojo Receivable") shall have been fully paid or finally settled between the parties (the "Mojo Determination Date") and (y) __________, 1997 [insert date 2 years after Closing Date], the latest date by which the parties expect the outcome of such matter to have been finally determined. 4.2 Special Claims. On the Special Distribution Date, the Purchaser shall give notice (the "Special Notice") to Holdings and to the Escrow Agent setting forth the exact amount of payments recovered, between the Execution Date of the Purchase Agreement and the giving of the Special Notice, by Holdings or Purchaser or any of their respective affiliates in respect of the Mojo Receivable (the "Mojo Proceeds"), together with an accounting of the costs and expenses incurred in connection with recovering any such payments by Holdings or any Subsidiary and by Purchaser or its affiliates between the Execution Date of the Purchase Agreement and the giving of the Special Notice ("Mojo Costs"). The Purchaser shall have a Purchaser Special Claim in the amount of any Mojo Costs; Holdings shall have a Holdings Special Claim in an amount equal to (i) the amount of the Mojo Proceeds, less (ii) the amount of the Purchaser Special Claim, less (iii) the sum of $250,000 if the Mojo Determination Date occurs on or before ____________ [insert date one year after the Closing Date], or the sum of $300,000 if the Mojo Determination Date occurs after __________ [insert date one year after the Closing Date]. 4.3 Final Special Claims for Reimbursement. The Special Claims shall become "Final Special Claims for Reimbursement" whenever there shall be delivered to the Escrow Agent either: (a) a certificate substantially in the form of Exhibit 5 hereto signed by the Purchaser and Holdings certifying to , or (b) a certified copy of an arbitration award rendered pursuant to the provisions of Section 14 hereof determining, the amount that is due to Holdings and/or the Purchaser, as the case may be, from the Special Escrow Funds in respect of their respective Special Claims. Special Claims shall be reimbursed solely out of the Special Escrow Funds. 4.4 Reimbursement of Final Special Claims for Reimbursement. At such time as both the Purchaser Special Claim and the Holdings Special Claim shall have become Final Special Claims for Reimbursement, the Escrow Agent shall: (a) first 10 deliver to the Purchaser from the Special Escrow Funds such number of shares of Common Stock as shall have a value (computed in accordance with Section 5.1 hereof) equal to the Final Special Claim for Reimbursement arising out of the Purchaser Special Claim (with any such distribution to be made from the Stockholders Special Escrow Fund and the Rightsholders Special Escrow Fund pro rata in accordance with the number of shares of Common Stock then on deposit in each such fund); (b) then deliver to (i) Holdings, on behalf of the Stockholders, such number of shares of Common Stock from the Stockholders Special Escrow Fund as shall have a value (computed in accordance with Section 5.1 hereof) equal to the Stockholders Special Escrow Fund's allocable share of the Final Special Claim for Reimbursement arising out of the Holdings Special Claim, and (ii) to the Liquidating Trust Escrow Fund, on behalf of the Rightsholders, such number of shares of Common Stock from the Rightsholders Special Escrow Fund as shall have a value (computed in accordance with Section 5.1 hereof) equal to the Rightsholders Special Escrow Fund's allocable share of the Final Special Claim for Reimbursement arising out of the Holdings Special Claim; and (c) then deliver to the Purchaser any amounts then remaining in the Special Escrow Funds; provided, that in no event shall any distributions be made from the Special Escrow Funds prior to such time as Omnicom releases and publishes financial results of the combined operations of Omnicom and the Businesses covering a period of at least 30 days after the Closing Date of the Purchase Agreement. As used herein, the term "allocable share" means, with respect to either the Stockholders Special Escrow Fund or the Rightsholders Special Escrow Fund, such fund's pro rata share based on the number of shares of Common Stock then on deposit in each such fund. 5. PROCEDURES WITH RESPECT TO DISTRIBUTIONS. 5.1 Valuation. For all purposes of this Escrow Agreement, each share of Common Stock shall be valued at $[insert Market Value as determined under Section 2.1.1 of the Purchase Agreement]. If, at any time after the Closing Date and prior to the date of any distribution of Common Stock, Omnicom shall effect a stock dividend, stock split or combination of the shares of Common Stock, or other recapitalization affecting the shares of Common Stock, or shall effect a distribution (other than a distribution of cash dividends as described in Section 6.1 hereof) with respect to the shares of Common Stock, or if Omnicom shall fix a record date falling on or prior to the date of any distribution of Common Stock from any Escrow Fund for any such stock dividend, stock split, combination, recapitalization, or distribution to take place after the date of such distribution, the foregoing valuation shall be adjusted appropriately by the Purchaser. 5.2 Fractional Shares. No fractional shares of the Common Stock shall be issued or delivered pursuant to any provision of this Escrow Agreement. In making delivery of the Common Stock to any Person pursuant to this Escrow 11 Agreement, the Escrow Agent shall round off any fractional share resulting from any calculation hereunder to the nearest whole share. 5.3 No Transfer of Escrowed Property. While any Common Stock shall continue to be held by the Escrow Agent, except as provided by this Escrow Agreement neither Holdings, Advertising nor any Stockholder or Rightsholder nor the Liquidating Trustee will transfer, sell, pledge, create a security interest in or otherwise dispose of their rights to any distributions with respect to the General Escrow Fund or with respect to the Special Escrow Fund, except by will, the laws of intestacy or other operation of law. 5.4 Distribution Consent. Any other provision of this Escrow Agreement to the contrary notwithstanding, the Escrow Agent shall distribute the General Escrow Funds and the Special Escrow Funds, in such manner at such time or times as the Purchaser and Holdings may, in writing, jointly direct. 5.5 Limitation to Escrow Funds; No Recourse. If the aggregate of all Final General Claims For Reimbursement exceeds the value of the General Escrow Funds (computed in accordance with Section 5.1) then the total balance of such Final General Claims For Reimbursement shall be deemed to be satisfied on the release by the Escrow Agent to the Purchaser of all of the Common Stock out of the General Escrow Funds. Except as otherwise provided under Section 7.1 of the Purchase Agreement, it is understood and agreed that anything contained in this Escrow Agreement to the contrary notwithstanding, none of the Indemnified Parties shall have any recourse for the payment of any General Losses under Article XI of the Purchase Agreement of any kind whatsoever against Holdings or Advertising or their respective affiliates or past, present or future directors, officers and employees, the Stockholders or the Rightsholders, nor shall any of such persons be personally liable for any such General Losses, it being expressly understood that the sole remedy of the Indemnified Parties for General Losses shall be against the General Escrow Funds in accordance with this Escrow Agreement. Anything contained in this Escrow Agreement to the contrary notwithstanding, none of the Indemnified Parties shall have any recourse for the payment of any Special Claims of any kind whatsoever against Holdings or Advertising or their respective affiliates or past, present or future directors, officers and employees, the Stockholders or the Rightsholders, nor shall any of such persons be personally liable for any such Special Claims, it being expressly understood that the sole remedy of the Indemnified Parties for Special Claims shall be against the Special Escrow Funds in accordance with this Escrow Agreement. 5.6 No Certificates. No rights of the Purchaser, Holdings, Advertising, the Liquidating Trust, the Stockholders or the Rightsholders in, to and under the General Escrow Funds or the Special Escrow Funds (as the case may be) shall be represented by any form of certificate or instrument. 12 6. DIVIDENDS AND OTHER DISTRIBUTIONS ON COMMON STOCK; VOTING RIGHTS 6.1 Cash Dividends. (a) All cash dividends in respect of the Common Stock still then held in the Stockholders General Escrow Fund or the Rightsholders General Escrow Fund, and all other distributions in respect of the Common Stock still then held in such funds that are taxable dividends for Federal income tax purposes (net of any taxes required to be withheld from such cash dividends or other distributions by Omnicom), shall be paid directly by Omnicom to the Liquidating Trustee (in the case of the Stockholders) or to the Liquidating Trust Escrow Agent (in the case of the Rightsholders). If any such dividends are paid to the Escrow Agent, such dividends shall be promptly delivered by the Escrow Agent to the Liquidating Trustee or to the Liquidating Trust Escrow Agent, as the case may be. (b) All cash dividends in respect of the Common Stock still then held in the Stockholders Special Escrow Fund or the Rightsholders Special Escrow Fund, and all other distributions in respect of the Common Stock still then held in such funds that are taxable dividends for Federal income tax purposes (net of any taxes required to be withheld from such cash dividends or other distributions by Omnicom), shall be paid directly by Omnicom to the Liquidating Trustee (in the case of the Stockholders) or to the Liquidating Trust Escrow Agent (in the case of the Rightsholders). If any such dividends are made to the Escrow Agent, such dividends shall be promptly delivered by the Escrow Agent to the Liquidating Trustee or to the Liquidating Trust Escrow Agent, as the case may be. 6.2 Distributions. Distributions on the Common Stock of any kind, other than those described in Section 6.1, shall be made by Omnicom directly to the Escrow Agent or, if made to Holdings or Advertising, shall be delivered by it to the Escrow Agent forthwith upon its receipt thereof. All distributions shall be held in escrow pursuant to the provisions of this Escrow Agreement, but the Escrow Agent shall have no duty or obligation whatsoever to require that such distributions be delivered to it. Any delivery of the Common Stock to any Person pursuant to this Escrow Agreement after any such distribution shall be appropriately adjusted so that the distributee will be in the same position as if such distributee had been, on any record date for any such distribution with respect to the Common Stock, the holder of record of the number of shares of Omnicom Stock distributable to it prior to any such distributions. The Purchaser shall give notice to the Escrow Agent, with a copy to Holdings, of the occurrence of any such distributions, at least five business days prior to the occurrence thereof. 6.3 Voting. The Stockholders and the Rightsholders shall be entitled to exercise all voting rights with respect to the Common Stock constituting the 13 Escrow Funds, and the Escrow Agent shall deliver to Holdings (for further distribution to the Stockholders in accordance with their respective interests) and the Rightsholders (in accordance with their respective interests) any proxies with respect thereto which the Escrow Agent receives. 7. SECURITY INTEREST 7.1 Grant of Interest. Holdings on behalf of itself and the Stockholders, and Advertising on behalf of itself and the Rightsholders, hereby grant to the Purchaser a first priority perfected security interest in the Escrow Funds to secure the performance of the contingent obligations and indemnification obligations of Holdings, the Stockholders and the Rightsholders under the Purchase Agreement and the performance of their obligations under this Escrow Agreement. The Escrow Agreement shall constitute a security agreement under applicable law. 7.2 Attachment and Perfection. The parties agree that this security interest shall attach as of the execution of this Escrow Agreement. The parties agree that, for the purpose of perfecting the Purchaser's security interest in the above designated Escrow Funds held by the Escrow Agent pursuant to this Escrow Agreement, the Purchaser designates the Escrow Agent to acquire and maintain possession of the Escrow Funds and act as bailee for the Purchaser with notice of the Purchaser's security interest in said property under the Uniform Commercial Code and that by possession of the Escrow Funds, the Escrow Agent acknowledges that it holds the Escrow Funds for the Purchaser for purposes of perfecting the security interest. Holdings and the Stockholders, Advertising and the Rightsholders, and the Escrow Agent shall take all other actions requested by the Purchaser to maintain the perfection and priority of the security interest in the Escrow Funds; provided that the Escrow Agent does not make any representation or warranty with regard to the creation or perfection, hereunder or otherwise, of any such security interest, and shall have no responsibility at any time to ascertain whether or not any security interest exists. 7.3 Release. The Purchaser shall release the security interest herein granted and the security interest shall be terminated to the extent of any disbursement of the Escrow Funds hereunder by Escrow Agent in accordance with the terms of this Escrow Agreement. Upon final disbursement of the Escrow Funds to the Purchaser, Holdings, the Liquidating Trustee or the Liquidating Trust Escrow Fund, the Purchaser shall do all acts and things reasonably necessary to release and extinguish such security interest. Holdings on behalf of itself and the Stockholders, and Advertising on behalf of itself and the Rightsholders, and the Purchaser, hereby specifically agree that the grant of this security interest pursuant to this Section 7 shall not in any way modify the procedures the parties hereto must follow with respect to the release of Common Stock from the Escrow Funds. 14 8. ESCROW AGENT'S DUTIES AND FEES 8.1 Duties Limited. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein. The Escrow Agent shall not be bound by, or have any responsibility with respect to, any other agreement between any of the parties (other than an agreement to which the Escrow Agent is a party). The Escrow Agent shall have no duty or responsibility with regard to any loss resulting from the decline in the market value of the Escrow Funds in accordance with the terms of this Agreement. The Escrow Agent need not maintain any insurance with respect to the Escrow Funds. 8.2 Reliance. The Escrow Agent, acting (or refraining from acting) in good faith, shall not be liable for any mistake of fact or error of judgment by it or for any acts or omissions by it of any kind unless caused by gross negligence or willful misconduct, and the Escrow Agent may rely, and shall be protected in acting or refraining from acting, upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties; provided that, as set forth below, modification of this Escrow Agreement shall be signed by all of the parties hereto. The Escrow Agent is hereby authorized to comply with any judicial order or legal process which stays, enjoins, directs or otherwise affects the transfer or delivery of any Escrow Funds to any party hereto and shall incur no liability for any delay or loss which may occur as a result of such compliance. 8.3 Good Faith. Holdings on behalf of itself and the Stockholders, and Advertising on behalf of itself and the Rightsholders, and the Purchaser hereby agree, jointly and severally, to indemnify the Escrow Agent for, and to hold it harmless against, any loss, liability, expense (including reasonable attorneys' fees and expenses), third party claim and demand, incurred by it without gross negligence or bad faith on its part, arising out of or in connection with its entering into this Escrow Agreement and the carrying out of its duties hereunder and in any event its liability shall be limited to direct damages and shall not include special or consequential damages. The Escrow Agent may consult with counsel of its own choice, and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. The foregoing indemnification shall survive the resignation of the Escrow Agent or the termination of this Escrow Agreement. 8.4 Successor Escrow Agents. The Escrow Agent may resign and be discharged from its duties or obligations hereunder at any time by giving 30 days' notice in writing of such resignation to Holdings and the Purchaser. Holdings and the Purchaser, together, shall have the right to terminate the appointment of the Escrow Agent hereunder by giving to it notice in writing of such termination specifying the date upon which such termination shall take effect. In either such event, Holdings and the Purchaser hereby agree to promptly appoint a successor escrow agent; if Holdings and the Purchaser are unable to appoint a 15 successor Escrow Agent within 25 days after the Escrow Agent's notice of resignation, the Escrow Agent may petition a court of competent jurisdiction to appoint a successor. The parties hereto agree that, upon demand of such successor escrow agent, all property held by the Escrow Agent hereunder shall be turned over and delivered to such successor escrow agent, which thereupon shall become bound by all of the provisions hereof. 8.5 Fees and Expenses. The Purchaser, on the one hand, and Holdings, on the other hand, agree, jointly and severally, to pay on an equal basis to the Escrow Agent the fees determined in accordance with, and payable as specified in, the Schedule of Fees attached hereto as Attachment 1 (the "Fee Schedule") as compensation for the services to be rendered by it hereunder and to pay to or reimburse the Escrow Agent for all reasonable expenses, disbursements and advances (including reasonable attorneys' fees) incurred or made by it in connection with the carrying out of its duties hereunder. 9. WAIVERS This Escrow Agreement may be amended, superseded or canceled, and any of the terms or conditions hereof may be waived, only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance (or his agent). The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver of any nature, whether by conduct or otherwise in any one or more instances, of any provision hereof, shall be deemed to be, or construed as, a further or continuing waiver of any such provision or of another provision hereof. 10. NOTICES Any notice or other communication required or which may be given hereunder (including without limitation the delivery of Common Stock to any Person out of the Escrow Funds) shall be in writing and either delivered personally or mailed by certified or registered mail, postage prepaid, or sent by facsimile transmission, and shall be deemed given when so delivered personally, mailed or sent by facsimile, as follows: If to the Purchaser, to Omnicom at: Omnicom Group Inc. 437 Madison Avenue New York, New York 10022 Attention: Chief Financial Officer Fax No.: 212-415-3536 16 with a copy to: Davis & Gilbert 1740 Broadway New York, New York 10019 Attention: Michael D. Ditzian, Esq. Fax No.: 212-468-4888 If to Advertising or Holdings, to Holdings at: Chiat/Day Holdings, Inc. 180 Maiden Lane New York, New York 10038 Attention: Chief Financial Officer Fax No.: 212-804-1200 (or following the creation and funding of the Liquidating Trust to the Trustee of the Liquidating Trust at such address as Holdings shall provide to the Purchaser and the Escrow Agent) with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: James Cotter, Esq. Fax No.: 212-455-2502 If to the Liquidating Trust Escrow Agent, to it at: ------------------------------------- ------------------------------------- ------------------------------------- ------------------------------------- 17 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: James Cotter, Esq. Fax No.: 212-455-2502 If to the Escrow Agent, to The Chase Manhattan Bank, N.A. 4 Chase MetroTech Center, 3rd Floor Brooklyn, New York 11245 Attention: Escrow Department Fax No.: 718-242-3529 Any party may change the persons and addresses to which notices, payments, instructions or other communications are to be sent to such party by giving written notice of any such change in the manner provided herein for giving notice. Notices sent by facsimile transmission shall be confirmed in writing by registered or certified mail, return receipt requested. 11. GOVERNING LAW This Escrow Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within such State. 12. NO ASSIGNMENT This Escrow Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of Holdings, Advertising, the Purchaser, and the Escrow Agent, but, except as otherwise provided or permitted in this Escrow Agreement, no delegation of any obligations provided for herein may be made by any party hereto without the express written consent of the other parties hereto, except for the provisions of Section 6.4 hereof respecting successor escrow agents. 18 13. SECTION HEADINGS The section headings contained in this Escrow Agreement are inserted for convenience of reference only, and shall not affect the meaning or interpretation of this Escrow Agreement. 14. ARBITRATION Subject to the provisions of Section 3.3 hereof, any dispute, claim or controversy between the Purchaser and Holdings in respect of any Claim or other matter in dispute under this Agreement, shall be settled by arbitration in accordance with the rules and regulations thus pertaining of the American Arbitration Association. The arbitration panel shall consist of three arbitrators, one nominated by the Purchaser, one nominated by Holdings and the third to be selected by the other two. In the event the three arbitrators shall not have been nominated within 30 days following a notice by either Purchaser or Holdings to the other of its intention to arbitrate, an arbitrator for the party who has not nominated an arbitrator (if applicable) and the third arbitrator shall be chosen by the American Arbitration Association in New York City pursuant to its rules and regulations. The determination of the arbitrators shall be final and binding upon the parties to this Agreement, the Stockholders and the Rightsholders, without the right to appeal. The arbitration shall be held in New York City. The arbitrator shall consider only the items in dispute and shall be instructed to act within 30 days to resolve all disputes. The arbitration panel shall determine the party (the Purchaser or Holdings, as the case may be), whose asserted positions before the arbitration panel are in the aggregate further from the aggregate resolutions determined by the arbitrators, which non-prevailing party shall pay the costs and expenses of the arbitrators, together with the reasonable attorney's fees and disbursements of the prevailing party in the arbitration (as determined by the arbitrators). 15. JURY WAIVER. All parties to this Agreement waive any rights they may have to a jury trial. 19 WITNESS the execution of this Escrow Agreement as of the date first above written. TBWA INTERNATIONAL INC. By: _______________________ CHIAT/DAY HOLDINGS, INC. By: _______________________ CHIAT/DAY inc ADVERTISING By: _______________________ THE CHASE MANHATTAN BANK, N.A. By: _______________________ 20 EX-2 5 EXHIBIT 2.4 CHIAT/DAY HOLDINGS, INC. LIQUIDATING TRUST AGREEMENT THIS LIQUIDATING TRUST AGREEMENT (this "Trust Agreement"), made as of ____________ __, 1995, by and between Chiat/Day Holdings, Inc., a Delaware corporation (the "Corporation"), on behalf of its stockholders, and Thomas Patty and David C. Wiener (collectively, the "Trustees"). W I T N E S E T H: WHEREAS, the Class A and Class B common stockholders of the Corporation (collectively, the "Stockholders") adopted a Plan of Liquidation (the "Plan") at a Special Meeting of Stockholders held on _________ __, 1995; WHEREAS, pursuant to the Plan, the liquidation and dissolution of the Corporation shall be completed as soon as practicable after the date of adoption of the Plan; WHEREAS, there are or may be contingent or other liabilities against the Corporation which may arise in the future; WHEREAS, the Stockholders at said Special Meeting authorized the proper officers of the Corporation to transfer for their benefit a part or all of the Corporation's assets to the Trustees; WHEREAS, the form of this Trust Agreement and the trust hereby created (the "Trust") have been approved by a majority vote of the Stockholders at said Special Meeting; WHEREAS, the Corporation is party to a certain escrow agreement, dated ________, 1995, among the Corporation, Chiat/Day inc. Advertising ("Advertising"), TBWA International Inc. and The Chase Manhattan Bank, N.A., as escrow agent (the "Omnicom Indemnification Escrow Agreement"), pursuant to which the Trust may receive, on behalf of the Stockholders, distributions from time to time of shares of common stock, par value $.50 per share, of Omnicom Group Inc. ("Omnicom Stock"); and WHEREAS, the Corporation is party to a certain escrow agreement, dated _______, 1995, among the Corporation, Advertising and _________, as escrow agent (the "Liquidating Trust Escrow Agent"; such agreement, the "Liquidating Trust Escrow Agreement"), pursuant to which the Trust shall be entitled to request funds for the purpose of paying a portion of any contingent or other liabilities of the Corporation which may arise in the future, all in accordance with the further terms of this Trust Agreement and the Liquidating Trust Escrow Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein: ARTICLE I. Transfer To Trustees 1.1. Transfer to Trustees; Sale of Omnicom Stock; Trust Income. (a) On the Distribution Date under (as defined in) that certain Asset Purchase Agreement dated ___________, 1995 among Omnicom Group Inc., TBWA International Inc., Advertising and the Corporation (the "Purchase Agreement"), the Corporation shall, on behalf of the Stockholders, hereby transfer and assign to the Trustees, and the Trustees shall hereby accept, the Corporation's 2 entire right, title and interest in and to the Omnicom Stock described in Schedule A attached hereto and made a part hereof (the "Trust Property") and all income from investment and reinvestment (in accordance with Section 4.2 hereof) in respect thereof (the "Trust Income"). The Trust Property shall include all Omnicom Stock received from time to time by the Trustees, on behalf of the Stockholders, as distributions pursuant to the Omnicom Indemnification Escrow Agreement and all funds received from the Liquidating Trust Escrow Fund pursuant to Liquidating Trustee Requests in accordance with Section 3.4 hereof. (b) The Trustees shall, forthwith upon receipt of any Omnicom Stock (whether pursuant to Section 1.1(a), pursuant to the Omnicom Indemnification Escrow Agreement or otherwise) sell such Omnicom Stock and retain the cash proceeds of such sale, net of reasonable and customary brokers fees and other costs and expenses of such sale, as Trust Property for application in accordance with this Trust Agreement. The Trustees shall liquidate any other type of property received for deposit in the Trust in such manner as they deem appropriate and retain the cash proceeds of such sale, net of reasonable costs and expenses of such sale, as part of the Trust Property for application in accordance with this Trust Agreement. (c) The Trust Income shall include any cash and other taxable dividends paid to the Trustees, on behalf of the Stockholders, in respect of Omnicom Stock on deposit under the Omnicom Indemnification Escrow Agreement. The Trust Income shall 3 be segregated from the Trust Property and maintained, invested and distributed by the Trustees in accordance with this Trust Agreement. 1.2. Intention of Parties. It is the intention of the parties that the Trustees shall acquire title to the Trust Property so that the liquidation and dissolution of the Corporation shall be completed as soon as is practicable. Although the Corporation has transferred the Trust Property directly to the Trustees, the parties intend that, for Federal income tax purposes only, such transfer is to be considered in substance a transfer from the Corporation to the Former Stockholders (as hereinafter defined) and from them to the Trustees. The Trust Property is transferred and assigned to the Trustees, and the Trustees shall hold and deal with the Trust Property, in trust for the sole benefit of the Beneficiaries (as hereinafter defined), on the terms and conditions herein set forth. ARTICLE II. Beneficiaries 2.1. Stockholders as Beneficiaries. A list of the Stockholders as of the date of the closing of the transfer books of the Corporation (which date shall be the Closing Date under the Purchase Agreement) (collectively, the "Former Stockholders") is set forth in Schedule B attached hereto and made a part hereof. The Former Stockholders shall be the initial Beneficiaries with the same beneficial interest ("Beneficial 4 Interest") in the Trust as shown on Schedule B. For this purpose, the term Beneficial Interest shall mean, for each Beneficiary, the percentage determined by dividing the number of Class A and Class B shares of common stock of the Corporation (the "Common Stock") held by the Beneficiary on the date of the closing of the transfer books of the Corporation by the total number of shares of Common Stock outstanding on such date. For ease of administration, the Trustees may, if they so elect, express the Beneficial Interest of each Stockholder in terms of units. Each distribution by the Trustees to the Beneficiaries shall be made to the Former Stockholders, or their legal representatives or successor in interest authorized by Section 2.3 (together with the Former Stockholders, the "Beneficiaries"), pro rata according to their Beneficial Interest in the Trust. 2.2. Record of Beneficiaries.The Trustees shall maintain at their place of business a record of the names of each Beneficiary and his Beneficial Interest in the Trust. 2.3. Surrender of Stock Certificates; No Trust Certificates. (a) Each Beneficiary must surrender his certificates representing ownership of Common Stock (the "Stock Certificates") as a condition to his entitlement to any distribution from the Trust. If and to the extent that a Beneficiary fails to surrender his Stock Certificate(s), his share of any distribution will be retained by the Trustees until he surrenders his Stock Certificate(s), or until he furnishes an 5 indemnity bond or evidence of loss or destruction satisfactory to the Trustees in the event of loss or destruction thereof. (b) The rights of Beneficiaries in to and under the Trust Property and the Trust Income shall not be represented by any form of certificate or instrument. 2.4. Transfer of Interests. The Beneficial Interest of a Beneficiary in the Trust may not be transferred in any manner whatsoever (including, without limitation, by sale, exchanges, gift, pledge or creation of a security interest), except (a) by bequest or inheritance in the case of an individual Beneficiary, or (b) by operation of law. 2.5. Missing Beneficiaries. A "Missing Beneficiary" shall be defined as (a) a Stockholder who has neither surrendered his Stock Certificates nor provided the Trustees with an indemnity bond in the event of loss or destruction thereof, or (b) a Beneficiary who has not cashed one or more checks issued to him by the Corporation in payment of liquidating distributions or has not receipted for the delivery of property addressed to him as part of a liquidating distribution. If a notice or distribution is mailed by the Trustees to a Beneficiary and either the notice is returned by the United States Postal Service to the Trustee as undeliverable or any check included in such notice is not cashed within a reasonable period of time, such Beneficiary shall thereafter be a Missing Beneficiary. 6 ARTICLE III . Purpose, Limitations and Distribution to Beneficiaries 3.1. Purpose of Trust. This Trust is established for the sole purposes of: (a) holding the Trust Property transferred to it by the Corporation on behalf of the Beneficiaries, enforcing the rights of the Beneficiaries thereto; (b) collecting the income thereon; (c) satisfying the following liabilities (collectively, "Trust Liabilities") of the Corporation (in each case other than the liabilities assumed by TBWA International Inc. pursuant to the Purchase Agreement): (i) all claims and obligations, including all contingent, conditional or unmatured contractual claims, known to the Corporation or the Trustees, (ii) any claim which is the subject of a pending action, suit or proceeding against the Corporation and (iii) claims which, based on facts known to the Corporation or the Trustees, are likely to arise or become known to the Corporation or the Trustees within 10 years after the date hereof; (d) distributing the Trust Property and the Trust Income to the Beneficiaries; and (e) taking such other action as is necessary to conserve and protect the Trust Property and the Trust Income and to provide for the orderly liquidation of any and all of the Trust Property. Under no circumstances shall the Trust or the Trustees hereunder (1) have any power to engage in any trade or business, or in any other activity except as is necessary to the orderly liquidation of any and all of the Trust Property, and (2) except for the receipt of Omnicom Stock, on behalf of the Stockholders, pursuant 7 to the Omnicom Indemnification Escrow Agreement or Section 1.1(a) hereof, receive transfers of any listed stocks or securities, any readily-marketable assets or any operating assets of an on-going business. 3.2. Operation of Trust; Notice Under Liquidating Trust Escrow Agreement. The Trustees shall receive and hold all the Trust Property and shall from time to time pay over to the Beneficiaries any cash which is received as the result of the (a) collection of any Trust Income, and (b) any disposition of the Trust Property (which cash proceeds shall constitute Trust Property). Such distributions shall be made at least (a) once annually with respect to Trust Property and (b) at the end of each fiscal quarter with respect to Trust Income, in each case pro rata according to the Beneficiaries' respective Beneficial Interest in the Trust, provided, however, that no distribution of Trust Property shall be made to Beneficiaries without first satisfying or adequately providing for (i) a reserve for all remaining Trust Liabilities, (ii) a reserve for the reasonable expenses incurred or to be incurred by the Trustees, and (iii) a reasonable reserve for payments to be paid to Missing Beneficiaries. Pursuant to Section 2.1 of the Liquidating Trust Escrow Agreement, the Trustees shall give the Liquidating Trust Escrow Agent three business days prior notice before making any distribution of Trust Property to the Stockholders, and the 8 Trustee shall indicate to the Liquidating Trust Escrow Agent the pro rata portion of the Trust Property to be so distributed. 3.3. No Payment to the Corporation. In no event shall the Trustees convey to the Corporation any Trust Property or Trust Income. 3.4 Requests for Funds Pursuant to the Liquidating Trust Escrow Agreement. Pursuant to Section 2.2 of the Liquidating Trust Escrow Agreement, three business days prior to the making of any payment in respect of any Trust Liability pursuant to this Trust Agreement, the Liquidating Trustee shall deliver a request (a "Liquidating Trustee Request") to the Liquidating Trust Escrow Agent specifying the total amount of the payment to be made under this Trust Agreement (and setting forth the calculations described below), requesting reimbursement for a specified portion of such payment from the "Liquidating Trust Escrow Fund" maintained pursuant to the Liquidating Trust Escrow Agreement and certifying that such liability has become due and payable. The amount of funds so requested shall be equal to (x) the total amount of the payment to be made under this Trust Agreement multiplied by (y) a fraction, the numerator of which equals the total amount of funds then on deposit in the Liquidating Trust Escrow Fund (before making the requested payment) and the denominator of which equals (1) the numerator plus (2) the amount of Trust Property then on deposit (before making the required payment). Pursuant to Section 2.2 of the Liquidating Trust Escrow Agreement, the Liquidating Trust Escrow 9 Agent shall provide the Trustees with any information requested by it for the purposes of making the foregoing calculation. The Liquidating Trust Escrow Agent shall promptly distribute to the Trustees from the Liquidating Trust Escrow Fund the funds requested in any such validly made Liquidating Trustee Request; provided that if insufficient assets remain in the Liquidating Trust Escrow Fund to satisfy such request, the Liquidating Trust Escrow Agent shall distribute all such remaining assets to the Trustees and the Liquidating Trustee Request shall be deemed to be satisfied in full by such distribution. ARTICLE IV. Authority of Trustees 4.1. Authority of Trustees. Among the other powers stated herein, in connection with the administration of this Trust, the Trustees in their fiduciary capacity may exercise the following powers, authority and discretion: (a) to hold legal title to any and all rights of the Beneficiaries in or arising from the sale of any Trust Property, and to receive and collect any and all payments due in connection with any such sales; (b) to receive, hold, maintain, grant, sell, exchange, convey, release, assign or otherwise transfer legal title to any Trust Property; (c) to execute and deliver, upon proper payment, partial and complete releases of any third-party obligations transferred to the Trust; 10 (d) to protect and enforce the rights vested in the Trustees to the Trust Property by this Trust Agreement by any method deemed appropriate, including, without limitation, by judicial proceedings; (e) to take any steps necessary to establish clear title to any Trust Property; (f) to employ legal counsel, accountants, advisors, custodians and other agents in connection with the administration or termination of this Trust, to delegate to them any powers of the Trustees, and to pay out of the Trust Property to such legal counsel, accountants, advisors, custodians and other agents reasonable compensation for services rendered; (g) to file, if necessary, any and all tax returns in connection with the Trust created hereby and to pay any taxes properly payable by the Trust, if any, out of the Trust Property; (h) to select a fiscal year for the Trust; (i) to satisfy any and all liabilities of the Corporation which are not paid or otherwise discharged; (j) to continue to indemnify the officers, directors, employees and agents (including, without limitation, the Trustees hereunder) of the Corporation, as provided in its Certificate of Incorporation or By-Laws and the laws of the State of Delaware, and to obtain and maintain such insurance (the cost of such insurance to be deemed a Trust Liability 11 for purposes of this Trust Agreement) covering the Corporation's obligations to indemnify as they, in their discretion deem necessary, desirable or appropriate; (k) to serve as the party designated to act for the Corporation and for and on behalf of the Stockholders under each of the Omnicom Indemnification Escrow Agreement and the Liquidating Trust Escrow Agreement, to make claims under each such agreement and to respond to the assertion of claims for indemnification under the Omnicom Indemnification Escrow Agreement; (l) to compromise, adjust, arbitrate, sue on or defend, abandon or otherwise deal with and settle claims in favor of or against this Trust as the Trustees shall deem best; and (m) to take any steps necessary to enforce the choice of law provisions set forth in Section 11.2 of this Trust Agreement. 4.2. Limitation of Trustees' Investment Authority. The Trustees shall not engage in any income producing activity, except that the Trustees may keep the Trust Property and the Trust Income invested in (a) obligations of, or obligations which are guaranteed by, the United States of America, (b) obligations issued or guaranteed by any instrumentality or agency of the United States of America or the District of Columbia and (c) banker's acceptances of, or certificates of deposit or prime commercial paper issued by, time deposits or a money market 12 account with, any commercial bank having undivided capital and surplus aggregating at least $100,000,000, in each case which have a maturity of 90 days or less. ARTICLE V. The Trustees 5.1. Generally. The Trustees shall perform such duties, and only such duties, as are specifically set forth in this Trust Agreement or are reasonably implied for the administration of this Trust. All actions to be taken by the Trustees shall be by the affirmative consent of a majority of the Trustees then serving. A nonconcurring Trustee shall not be liable for any act or failure to act of the other Trustees. 5.2. Liability of Trustees. No provision of this Trust Agreement shall be construed to relieve the Trustees from liability for their own negligent actions, their own negligent failure to act or their own fraud or willful misconduct, except that: (a) the Trustees shall be liable only for the performance of such duties and obligations as are specifically set forth in this Trust Agreement; and (b) the Trustees shall not be liable for any error of judgment made in good faith, or with respect to any action taken or omitted to be taken in good faith, unless the Trustees were grossly negligent. 5.3. Reliance by Trustees. Except as otherwise provided in Section 5.2: 13 (a) the Trustees may rely, and shall be protected in acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order or other paper of document believed by them to be genuine and to have been signed or presented by the proper party or parties; (b) the Trustees may consult with legal counsel to be selected by them, and the Trustees shall not be liable for any action taken or omitted to be taken by them in accordance with the advice of such counsel; and (c) persons dealing with the Trustees shall look only to the Trust Property to satisfy any liability incurred by the Trustees to such person in carrying out the terms of this Trust, and the Trustees shall have no personal obligation to satisfy any such liability. 5.4. Safekeeping of Trust Assets. All moneys and other assets received by the Trustees shall, until distributed or paid over as herein provided, be held in trust for the benefit of the Beneficiaries, but need not be segregated from other trust assets, unless and to the extent required by law and except that the Trust Income shall be segregated pursuant to Section 1.1(c) hereof. The Trustees shall be under no liability for interest or producing income on any moneys received by them hereunder and held for distribution or payment to the Beneficiaries, except as such interest shall actually be received by the Trustees. 14 5.5. Expense Reimbursement and Compensation.The Trustees shall be entitled to reimburse themselves out of the Trust Property and the Trust Income, against and from any and all loss, liability, expense or damage which the Trustees may sustain in good faith and without willful misconduct, gross negligence or fraud in the exercise and performance of any of the powers and duties of the Trustees under this Trust Agreement, and may receive reasonable compensation out of the Trust Property and the Trust Income for serving as Trustees hereunder. 5.6. No Bond. The Trustees shall serve without bond. 5.7. Indemnification of Trustees. The Trustees shall be indemnified to the maximum extent permissible by the laws of the State of Delaware to officers and directors incorporated in that State, and may reimburse themselves out of the Trust Property and the Trust Income, against and from any and all loss, liability, expense or damage which the Trustees may sustain in good faith and without willful misconduct, gross negligence or fraud in the exercise and performance of any of the powers and duties of the Trustees under this Trust Agreement. ARTICLE VI. Successor Trustee 6.1. Specific Successors. In the event of the death, disability, resignation or removal of Thomas Patty, or in the event he is otherwise unable to service as a Trustee, _________ shall replace him as a successor Trustee. In the event of the death, disability, resignation or removal of David C. Wiener, or 15 if he is otherwise unable to serve as a Trustee, _____________ shall replace him as a successor Trustee. 6.2. Resignation and Removal. Any Trustee may resign by giving not less than sixty days' prior written notice thereof to the remaining Trustee(s). Such resignation shall become effective on the day specified in such notice or upon the appointment of a successor and the acceptance by such successor of such appointment, whichever is earlier. Any Trustee may be removed at any time, with or without cause, by Beneficiaries having an aggregate Beneficial Interest of more than 50 percent. 6.3. Appointment of Successor. Subject to the provisions of Section 6.1 in the event of any vacancy in the office of Trustee, a successor Trustee shall be appointed by Beneficiaries having an aggregate Beneficial Interest of more than 50 percent. 6.4. Acceptance of Appointment by Successor Trustee. Any successor Trustee appointed hereunder shall execute an instrument accepting such appointment hereunder and shall file such acceptance with the Trust records. Thereupon, such successor Trustee shall, without any further act, become vested with all the estates, properties, rights, powers, trusts and duties of his predecessor in the Trust with the like effect as if originally named herein; provided, however, that a retiring Trustee shall, nevertheless, when requested in writing by the successor Trustee, execute and deliver an instrument or instruments conveying and transferring to such successor Trustee 16 under the Trust all the estates, properties, rights, powers and trusts of such predecessor Trustee. ARTICLE VII. Reports to Beneficiaries 7.1. Reports to Beneficiaries.As soon as practicable after the end of each calendar year, and upon termination of the Trust, the Trustees shall submit a written report and account to the Beneficiaries showing (i) the assets and liabilities of the Trust at the end of such calendar year or upon such termination and the receipts and disbursements of the Trustees for such period, (ii) any changes in the Trust Property or Trust Income not previously reported, and (iii) any action taken by the Trustees in the performance of their duties which materially affects the Trust. The Trustees may submit similar reports for such interim periods as they deem advisable. In addition, as soon as practicable after the close of each calendar year, the Trustees shall supply each Beneficiary with a statement reflecting information which may be helpful in determining the amount of taxable income from the Trust that the Beneficiary should include in his Federal income tax return. ARTICLE VIII. Termination of Trust 8.1. Termination of Trust. This Trust Agreement shall terminate upon the later of (a) three years and six months from the date of this Trust Agreement or upon the payment to the Beneficiaries of all of the Trust Property and Trust Income, 17 whichever is earlier and (b) the termination of the Omnicom Indemnification Escrow Agreement; provided, however, that Trust Property and Trust Income which would otherwise be distributed to Missing Beneficiaries shall continue to be held by the Trustees until each Missing Beneficiary is located and distribution can be made to him, or until such earlier time as the Trustees, acting pursuant to and in accordance with applicable law, shall distribute the Trust Property and Trust Income theretofore held in trust for the Missing Beneficiaries; provided further, however, that this Trust Agreement shall continue to exist for a reasonable period beyond the date on which this Trust Agreement would otherwise terminate for the limited purpose of discharging any Trust Liabilities. ARTICLE IX. Amendment 9.1. Method of Amendment. The Beneficiaries shall have the right at any time by vote of Beneficiaries having an aggregate Beneficial Interest of more than 50 percent to alter, amend or revoke this Trust Agreement in whole or in part, provided, however, that (i) any such alteration or amendment which shall affect the duties of the Trustees hereunder shall not become effective until consented to by each of the Trustees in writing, (ii) no such alteration or amendment shall cause any of the Trust Property or the Trust Income to be reconveyed to the Corporation, cause the Trustees to engage in any activity other than that appropriate for liquidating trustees or prejudice the 18 rights of creditors of the Corporation and (iii) for so long as the Omnicom Indemnification Escrow Agreement remains in effect, no such alteration or amendment shall cause the Trustees (or any duly appointed successor) to cease in its capacity as agent for the Stockholders under the Omnicom Indemnification Escrow Agreement. 9.2. Effect of Revocation.In the case of revocation, the Trustees, as soon as is practicable and in no event later than one (1) year from the date of their receipt of written notice thereof, shall distribute all cash held in trust to the Beneficiaries pro rata according to their respective Beneficial Interest and distribute the rights to any other Trust Property and the Trust Income held by the Trustees to the Beneficiaries by whatever means they shall deem appropriate, and in this latter regard, reliance on opinion of counsel shall be full and complete authorization and protection for any such action taken hereunder; provided, however, that any Trust Property or the Trust Income which would otherwise be distributable to Missing Beneficiaries shall continue to be held by the Trustees until each such Missing Beneficiary is located and distribution can be made to him, or until such earlier time as the Trustees acting pursuant to and in accordance with applicable law shall distribute the Trust Property and the Trust Income theretofore held in trust for such Missing Beneficiaries. In the case of revocation, the Trustees shall be authorized to pay out of the Trust Property and the Trust Income the reasonable costs, including attorneys' fees, of 19 effecting the complete distribution of the Trust Property and the Trust Income to the Beneficiaries. ARTICLE X. Meetings of Beneficiaries 10.1. Purpose of Meetings. Meetings of Beneficiaries may be called at any time and from time to time pursuant to the provisions of this Article X for the purpose of taking any action which Beneficiaries are required or permitted to take under the terms of this Agreement or applicable law. 10.2. Meetings Called by Trustees. The Trustees may at any time call a meeting of the Beneficiaries to be held at such time and at such place as the Trustees shall determine. Notice of any meeting of the Beneficiaries shall be given by the Trustees (or by the Beneficiaries in the event the Trustees shall fail to give notice after a request by the Beneficiaries pursuant to Section 10.3). Such notice shall set forth the time and place of the meeting and in general terms the action to be proposed at the meeting, and shall be mailed not more than 60 nor less than 10 days before the meeting is to be held to all of the Beneficiaries as of a record date not more than 60 days before the date of the meeting. 10.3. Meetings Called on Request of Beneficiaries. Within 30 days after request to the Trustees by Beneficiaries having an aggregate Beneficial Interest of at least 25 percent to call a meeting of all of the Beneficiaries, which request shall specify in reasonable detail the action to be proposed, the 20 Trustees shall call a meeting of the Beneficiaries pursuant to Section 10.2. If the Trustees fail to call such meeting within such 30-day period, such meeting may be noticed by Beneficiaries having an aggregate Beneficial Interest of at least 25 percent, or by their designated representative. 10.4. Persons Entitled to Vote at Meetings of Beneficiaries. Each Beneficiary as of the record date shall be entitled to vote at a meeting of the Beneficiaries, either in person or by his proxy duly authorized in writing. The signature of the Beneficiary on such written authorization need not be witnessed or notarized. 10.5. Quorum. At any meeting of Beneficiaries, the presence of Beneficiaries having an aggregate Beneficial Interest of at least 50 percent of the aggregate Beneficial Interest of all Beneficiaries shall be necessary to constitute a quorum. If less than a quorum is present, Beneficiaries having an aggregate Beneficial Interest of more than 50 percent of the aggregate Beneficial Interest of all Beneficiaries represented at the meeting may adjourn such meeting with the same effect and for all intents and purposes as though a quorum had been present. 10.6. Adjournment of Meetings. Any meeting of Beneficiaries may be adjourned from time to time and a meeting may be held at such adjourned time and place without further notice. 10.7. Conduct of Meetings. The Trustees shall appoint a Chairperson and a Secretary of the meeting. The vote upon any 21 resolution submitted to any meeting of Beneficiaries shall be by written ballot. Two Inspectors of Votes, appointed by the Chairperson of the Meeting, shall count all votes cast at the meeting for or against any resolution and shall make and file with the Secretary of the meeting their verified written report. 10.8. Record of Meetings. A record of the proceedings of each meeting of Beneficiaries shall be prepared by the Secretary of the meeting. The record shall be signed and verified by the Secretary of the meeting and shall be delivered to the Trustees to be preserved by them. Any record so signed and verified shall be conclusive evidence of the matters therein stated. ARTICLE XI. Miscellaneous Provisions 11.1. Intention of Parties to Establish Trust. This Trust Agreement is not intended to create, and shall not be interpreted as creating, an association, partnership or joint venture of any kind. It is intended as a trust to be governed and construed in all respects as a trust. 11.2. Laws as to Construction. This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. 11.3. Separability. In the event any provision of this Trust Agreement or the application thereof to any person or circumstances shall be finally determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, the 22 remainder of this Trust Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Trust Agreement shall be valid and enforced to the fullest extent permitted by law. 11.4. Notices. Any notice or other communication hereunder shall be deemed to have been sufficiently given, for all purposes, if deposited, postage prepaid, in a post office or letter box addressed to the person for whom such notice is intended at his address last known to the person giving such notice. 23 IN WITNESS WHEREOF, the parties hereto have either executed and acknowledged this Trust Agreement, or caused it to be executed and acknowledged on their behalf by their duly authorized officers, all as of the date first above written. CHIAT/DAY HOLDINGS, INC. on behalf of its stockholders By: ______________________________ ------------------------------ Thomas Patty, as Trustee ------------------------------ David C. Wiener, as Trustee 24 STATE OF NEW YORK ) )ss.: COUNTY OF NEW YORK ) On the __th day of _________, 1995 before me personally came ___________ to me known, who, being by me duly sworn, did depose and say that he resides at ________________, ________, ________; that he is the _________ of Chiat/Day Holdings, Inc., the corporation described in and which executed the above instrument; and that he signed his name thereto by order to the board of directors of said corporation. ------------------------------ Notary Public STATE OF NEW YORK ) )ss.: COUNTY OF NEW YORK ) On the __th day of _________, 1995 before me personally came Thomas Patty and David C. Wiener, respectively, to me known, and known to me to be the persons described in and who executed the foregoing instrument, and they acknowledged to me that they executed the same. ------------------------------ Notary Public 25 SCHEDULE A TRUST PROPERTY 26 SCHEDULE B STOCKHOLDER LIST 27 EX-2 6 EXHIBIT 2.5 DEPOSIT AND PLEDGE AGREEMENT DEPOSIT AND PLEDGE AGREEMENT, dated ____________, 1995 (the "Agreement"), among CHIAT/DAY INC. ADVERTISING, a Delaware corporation ("Advertising"); CHIAT/DAY HOLDINGS, INC., a Delaware corporation ("Holdings"); OMNICOM GROUP INC., a New York corporation ("Omnicom"); TBWA INTERNATIONAL INC., a Delaware corporation ("TBWA"); and THE CHASE MANHATTAN BANK, N.A., as Deposit Agent (in such capacity, the "Deposit Agent"). INTRODUCTION A. Advertising, Holdings, TBWA and Omnicom are parties to a certain Asset Purchase Agreement dated __________, 1995 (the "Purchase Agreement"), pursuant to which TBWA acquired the assets and liabilities and the ongoing businesses of Advertising and Holdings. Terms defined in the Purchase Agreement that are not otherwise defined herein are used herein with the meanings ascribed to them therein. B. Pursuant to the Purchase Agreement, Holdings, Advertising and TBWA have entered into an escrow agreement of even date herewith (the "Omnicom Indemnification Escrow Agreement"; and the escrow agent thereunder, the "Omnicom Indemnification Escrow Agent") to secure TBWA against certain Losses (as more fully set forth in the Purchase Agreement). There will be created pursuant to the Omnicom Indemnification Escrow Agreement a "General Escrow Fund" which will consist of two separate and segregated sub-accounts, the "Stockholders General Escrow Fund" and the "Rightsholders General Escrow Fund", and a "Special Escrow Fund" which will consist of two separate and segregated sub-accounts, the "Stockholders Special Escrow Fund" and the "Rightsholders Special Escrow Fund". C. The Purchase Agreement provides that Holdings will liquidate and dissolve and that, in the course of its expeditious and orderly winding up process, Holdings shall cause to be created a liquidating trust (hereinafter, the "Liquidating Trust", and the trustees thereof, collectively, the "Liquidating Trustee") to act as the representative for Holdings and the Stockholders, all in accordance with that certain liquidating trust agreement entered into between Holdings and the Liquidating Trustee (the "Liquidating Trust Agreement"). D. Holdings and Advertising have also entered into a separate escrow agreement, (the "Liquidating Trust Escrow Agreement"; the fund created thereunder, the "Liquidating Trust Escrow Fund"; and the escrow agent thereunder, the "Liquidating Trust Escrow Agent") which shall be available solely to fund and secure reimbursement obligations of holders of EARs and EPUs (collectively, the "Rightsholders") to the Liquidating Trust. E. The Purchase Agreement further provides that, on the Distribution Date, (i) the shares of Omnicom Common Stock, par value $.50 per share ("Omnicom Stock"), paid to Holdings pursuant to Section 2.1 of the Purchase Agreement (exclusive of the Contributed Stock) will be distributed (in the proportions set forth in the Purchase Agreement and as further described herein) to the Stockholders and, on behalf of the Stockholders, to the Liquidating Trust, the Stockholders General Escrow Fund and the Stockholders Special Escrow Fund and (ii) the shares of Omnicom Stock paid to Advertising pursuant to Section 2.1 of the Purchase Agreement (inclusive of the Contributed Stock) will be distributed (in the proportions set forth in the Purchase Agreement and as further described herein) to the Rightsholders and, on behalf of the Rightsholders, to the Liquidating Trust Escrow Fund, the Rightsholders General Escrow Fund and the Rightsholders Special Escrow Fund. The Deposit Agent, pursuant to this Agreement, shall effect the foregoing distributions on the Distribution Date from the Omnicom Stock deposited in the Deposit Funds (as defined below), all in accordance with the terms of this Agreement. F. There shall be created, pursuant to this Agreement, eight separate deposit funds: (i) the "Stockholders Deposit Fund"; (ii) the "Rightsholders Deposit Fund"; (iii) the "Liquidating Trust Deposit Fund"; (iv) the "Liquidating Trust Escrow Deposit Fund"; (v) the "Stockholders General Escrow Deposit Fund"; (vi) the "Stockholders Special Escrow Deposit Fund"; (vii) the "Rightsholders General Escrow Deposit Fund"; and (viii) the "Rightsholders Special Escrow Deposit Fund" (collectively, the "Deposit Funds"; the Deposit Funds listed in clauses (i) through (iv), the "Unsecured Deposit Funds"; and the Deposit Funds listed in clauses (v) through (viii), the "Secured Deposit Funds"). Each of the Deposit Funds will contain shares of Omnicom Stock to be deposited by or on behalf of Holdings or Advertising, all as set forth in Article I of this Agreement. G. The Unsecured Deposit Funds are being created to insure the timely and orderly distribution of shares of Omnicom Stock received by Holdings and Advertising pursuant to the Purchase Agreement to the recipients described above. The Secured Deposit Funds are being created to secure the obligations of Holdings and Advertising to deposit shares of Omnicom Stock, on behalf of the Stockholders and Rightsholders, respectively, into the General Escrow Funds and the Special Escrow Funds pursuant to the Purchase Agreement and the Omnicom Indemnification Escrow Agreement. Accordingly, the parties hereby agree as follows: I. DEPOSIT AGENT; ESCROW FUND 1.1. Deposit Agent. Holdings, on behalf of itself and the Stockholders, and Advertising, on behalf of itself and the Rightsholders, hereby appoint The Chase Manhattan Bank, N.A. as, 2 and The Chase Manhattan Bank, N.A. hereby accepts such appointment and agrees to perform the duties of, Deposit Agent under this Agreement. 1.2. Deposit Funds. The Deposit Agent shall establish and maintain each of the Deposit Funds. The Deposit Funds shall be held by the Deposit Agent and shall be dealt with by the Deposit Agent in accordance with the terms and conditions of this Agreement. This Agreement shall terminate at such time as the entirety of the Deposit Funds shall have been distributed by the Deposit Agent in accordance with the terms of this Agreement. 1.3. Deposits Into Unsecured Deposit Funds. (a) On the Closing Date, Holdings shall deposit into (i) the Stockholders Deposit Fund, on behalf of the Stockholders, certificates registered in the name of Holdings representing an aggregate of _______ shares of Omnicom Stock and (ii) the Liquidating Trust Deposit Fund, on behalf of the Stockholders, certificates registered in the name of Holdings representing an aggregate of ________ shares of Omnicom Stock, in each case together with stock powers duly executed in blank in respect of such certificates. (b) On the Closing Date, Advertising shall deposit into (i) the Rightsholders Deposit Fund, on behalf of the Rightsholders, certificates registered in the name of Advertising representing an aggregate of _______ shares of Omnicom Stock and (ii) the Liquidating Trust Escrow Deposit Fund, on behalf of the Rightsholders, certificates registered in the name of Advertising representing an aggregate of ________ shares of Omnicom Stock, in each case together with stock powers duly executed in blank in respect of such certificates. 1.4. Deposits Into Secured Deposit Funds. (a) On the Closing Date, Holdings shall deposit into (i) the Stockholders General Escrow Deposit Fund, on behalf of Holdings and the Stockholders, certificates registered in the name of Holdings representing an aggregate of _______ shares of Omnicom Stock and (ii) the Stockholders Special Escrow Deposit Fund, on behalf of Holdings and the Stockholders, certificates registered in the name of Holdings representing an aggregate of ________ shares of Omnicom Stock, in each case together with stock powers duly executed in blank in respect of such certificates. (b) On the Closing Date, Advertising shall deposit into (i) the Rightsholders General Escrow Deposit Fund, on behalf of Advertising and the Rightsholders, certificates registered in the name of Advertising representing an aggregate of _______ shares of Omnicom Stock and (ii) the Rightsholders Special Escrow Deposit Fund, on behalf of Advertising and the Rightsholders, certificates registered in the name of Advertising representing an aggregate of ________ shares of Omnicom Stock, in each case together with stock powers duly executed in blank in respect of such certificates. 3 II. RE-REGISTRATION OF SHARE CERTIFICATES; DISTRIBUTIONS FROM THE DEPOSIT FUNDS 2.1. Re-Registration of Share Certificates. Five business days prior to the Distribution Date, the Deposit Agent shall instruct Chemical Bank N.A. [ADDRESS], in its capacity as transfer agent and registrar of the Omnicom Stock, to effect the re-registration of the stock certificates in the Deposit Funds as follows (such re-registration to be made effective as of the opening of business on the Distribution Date): (i) The shares of Omnicom Stock represented by the stock certificate in the Stockholders Deposit Fund shall be registered in the names of the Stockholders and in the denominations set forth on Schedule I hereto; (ii) The shares of Omnicom Stock represented by the stock certificate in the Rightsholders Deposit Fund shall be registered in the names of the Rightsholders and in the denominations set forth on Schedule II hereto; (iii) The stock certificate in the Liquidating Trust Deposit Fund shall be registered in the name of ["Thomas Patty and David C. Wiener, as Trustees of the Chiat/Day Holdings, Inc. Liquidating Trust"]; (iv) The stock certificate in the Liquidating Trust Escrow Deposit Fund shall be registered in the name of ["____________, as Liquidating Trust Escrow Agent"]; (v) The stock certificate in the Stockholders General Escrow Deposit Fund shall be registered in the name of ["Thomas Patty and David C. Wiener, as Trustees of the Chiat/Day Holdings, Inc. Liquidating Trust"]; (vi) The stock certificate in the Stockholders Special Escrow Deposit Fund shall be registered in the name of ["Thomas Patty and David C. Wiener, as Trustees of the Chiat/Day Holdings, Inc. Liquidating Trust"]; (vii) The stock certificate in the Rightsholders General Escrow Deposit Fund shall be registered in the name of ["____________, as Liquidating Trust Escrow Agent"]; and (viii) The stock certificate in the Rightsholders Special Escrow Deposit Fund shall be registered in the name of ["____________, as Liquidating Trust Escrow Agent"].(1) - -------- (1) For (v) through (viii), the Omnicom Indemnification Escrow Agreement will need to provide for new stock powers to be given by the Liquidating Trustee and the Liquidating Trust Escrow Agent. 4 2.2. Distributions from the Deposit Funds. On the Distribution Date, following the re-registration of the stock certificates pursuant to Section 2.1, the Deposit Agent shall distribute all of the shares of Omnicom Stock in each of the Deposit Funds as follows, provided that the Deposit Agent shall make the following distributions on October 30, 1995 if Holdings and TBWA do not notify the Deposit Agent of an earlier Distribution Date(2): (i) The shares of Omnicom Stock in the Stockholders Deposit Fund shall be distributed to the Stockholders in accordance with Schedule I; (ii) The shares of Omnicom Stock in the Rightsholders Deposit Fund shall be distributed to the Rightsholders in accordance with Schedule II; (iii) The shares of Omnicom Stock in the Liquidating Trust Deposit Fund shall be distributed to the Liquidating Trustee for deposit into the Liquidating Trust and application in accordance with the Liquidating Trust Agreement; (iv) The shares of Omnicom Stock in the Liquidating Trust Escrow Deposit Fund shall be distributed to the Liquidating Trust Escrow Agent for deposit into the Liquidating Trust and application in accordance with the Liquidating Trust Escrow Agreement; (v) The shares of Omnicom Stock in the Stockholders General Escrow Deposit Fund shall be distributed to the Omnicom Indemnification Escrow Agent for deposit into the Stockholders General Escrow Fund and application in accordance with the Omnicom Indemnification Escrow Agreement; (vi) The shares of Omnicom Stock in the Stockholders Special Escrow Deposit Fund shall be distributed to the Omnicom Indemnification Escrow Agent for deposit into the Stockholders Special Escrow Fund and application in accordance with the Omnicom Indemnification Escrow Agreement; (vii) The shares of Omnicom Stock in the Rightsholders General Escrow Deposit Fund shall be distributed to the Omnicom Indemnification Escrow Agent for deposit into the Rightsholders General Escrow Fund and application in accordance with the Omnicom Indemnification Escrow Agreement; and - -------- (2) This proviso will be modified if the Closing Date will be after October 31, 1995. 5 (viii) The shares of Omnicom Stock in the Rightsholders Special Escrow Deposit Fund shall be distributed to the Omnicom Indemnification Escrow Agent for deposit into the Rightsholders Special Escrow Fund and application in accordance with the Omnicom Indemnification Escrow Agreement. 2.3. No Transfer of Deposit Funds. While any shares of Omnicom Stock remain on deposit in the Deposit Funds, except as required pursuant to this Agreement, none of Holdings, the Liquidating Trustee, [the Liquidating Trust Escrow Agent], Advertising, any Stockholder or any Rightsholder will transfer, sell, pledge, create a security interest in or otherwise dispose of their rights to any distributions with respect to the Deposit Funds, except by will, the laws of intestacy or by other operation of law. 2.4. No Certificates. No rights of any Person in to and under any of the Deposit Funds shall be represented by any form of certificate or instrument. 2.5. Dividends on Omnicom Stock. All dividends in respect of any Omnicom Stock held in the Deposit Funds shall be paid directly to the record holders of such stock (as recorded in the records of the Transfer Agent and Registrar). In the event any such dividends are paid to the Deposit Agent, such dividends shall be promptly delivered to such record holders. 2.6. Voting. The record holders described in Section 2.5 above shall be entitled to exercise all voting rights with respect to the Omnicom Stock on deposit in the Deposit Funds and the Deposit Agent shall deliver to such record holders any proxies with respect thereto which the Deposit Agent receives. III. SECURITY INTEREST. (a) Holdings on behalf of itself and the Stockholders hereby grants to TBWA a first priority perfected security interest in each of the Stockholders General Escrow Deposit Fund and the Stockholders Special Escrow Deposit Fund, and Advertising on behalf of itself and the Rightsholders hereby grants to TBWA a first priority perfected security interest in each of the Rightsholders General Escrow Deposit Fund and the Rightsholders Special Escrow Deposit Fund, in each case solely to secure their respective obligations to deposit Omnicom Stock into the General Escrow Fund and the Special Escrow Fund pursuant to the Purchase Agreement the Omnicom Indemnification Escrow Agreement. To the extent provided in the immediately foregoing sentence, this Agreement shall constitute a security agreement under applicable law. No security interest is being created or granted hereby with respect to the Unsecured Deposit Funds. (b) The parties agree that the above-granted security interest shall attach as of the execution of this Agreement. The 6 parties agree that, for the purpose of perfecting TBWA's security interest in the above designated Secured Deposit Funds held by the Deposit Agent pursuant to this Agreement, TBWA designates the Deposit Agent to acquire and maintain possession of the Secured Deposit Funds and act as bailee for TBWA with notice of TBWA's security interest in said property under the Uniform Commercial Code and that possession of the Secured Deposit Funds by the Deposit Agent acknowledges that it holds the Secured Deposit Funds for TBWA for purposes of perfecting the security interest. Holdings, Advertising and the Deposit Agent shall take all other actions requested by TBWA to maintain the perfection and priority of the security interest in the Secured Deposit Funds; provided that the Deposit Agent does not make any representation or warranty with regard to the creation or perfection, hereunder or otherwise, of any such security interest, and shall have no responsibility at any time to ascertain whether or not any security interest exists. (c) TBWA shall release the security interest herein granted and the security interest shall be terminated upon the distribution of the Omnicom Stock on deposit in the Secured Deposit Funds in accordance with the terms of this Agreement. Upon such distribution, TBWA shall do all acts and things reasonably necessary to release and extinguish such security interest. Holdings on behalf of itself and the Stockholders, Advertising on behalf of itself and the Rightsholders, Omnicom and TBWA hereby specifically agree that the grant of this security interest pursuant to this Article III shall not in any way modify the procedures the parties hereto must follow with respect to the release of Omnicom Stock from the Secured Deposit Funds. IV. DEPOSIT AGENT'S DUTIES AND FEES 4.1. Duties Limited. The Deposit Agent undertakes to perform only such duties as are expressly set forth herein. The Deposit Agent shall not be bound by, or have any responsibility with respect to, any other agreement between any of the parties (other than an agreement to which the Deposit Agent is a party). The Escrow Agent shall have no duty or responsibility with regard to any loss or resulting from the transfer or other disposition of the Omnicom Stock on deposit in the Deposit Funds in accordance with the terms of this Agreement. The Deposit Agent need not maintain insurance with respect to the Deposit Funds. 4.2. Reliance. The Deposit Agent, acting (or refraining from acting) in good faith, shall not be liable for any mistake of fact or error of judgment by it or for any acts or omissions by it of any kind unless caused by gross negligence or willful misconduct, and the Deposit Agent may rely, and shall be protected in acting or refraining from acting, upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties; provided that, as set forth 7 below, modification of this Agreement shall be signed by all of the parties hereto. The Deposit Agent is hereby authorized to comply with any judicial order or legal process which stays, enjoins, directs or otherwise affects the transfer or delivery of any part of the Deposit Funds or any party hereto and shall incur no liability for any delay or loss which may occur as a result of such compliance. 4.3. Good Faith. Holdings on behalf of itself and the Stockholders, Advertising on behalf of itself and the Rightsholders, Omnicom and TBWA hereby agree to indemnify the Deposit Agent for, and to hold it harmless against, any loss, liability, expense (including reasonable attorneys' fees and expenses), third party claim and demand, incurred by it without gross negligence or bad faith on its part, arising out of or in connection with its entering into this Agreement and the carrying out of its duties hereunder. The Deposit Agent may consult with counsel of its own choice, and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. The foregoing indemnification shall survive the resignation of the Deposit Agent or the termination of this Agreement. 4.4. Successor Deposit Agents. The Deposit Agent may resign and be discharged from its duties or obligations hereunder at any time by giving 30 days' notice in writing of such resignation to Holdings and TBWA. Holdings and TBWA, together, shall have the right to terminate the appointment of the Deposit Agent hereunder by giving to it notice in writing of such termination specifying the date upon which such termination shall take effect. In either such event, Holdings and TBWA hereby agree to promptly appoint a successor deposit agent; if Holdings and TBWA are unable to appoint a successor Deposit Agent within 25 days after the Deposit Agent's notice of resignation, the Deposit Agent may petition a court of competent jurisdiction to appoint a successor. The parties hereto agree that, upon demand of such successor deposit agent, all property in the Deposit Funds shall be turned over and delivered to such successor deposit agent, which thereupon shall become bound by all of the provisions hereof. 4.5. Fees and Expenses. TBWA, on the one hand, and Holdings and Advertising, on the other hand, agree to pay [on the Distribution Date] on an equal basis to the Deposit Agent, a fee of $____________ for the services to be rendered by it hereunder and for the reasonable expenses, disbursements and advances (including reasonable attorneys' fees) to be incurred or made by it in connection with the carrying out of its duties hereunder. V. WAIVERS This Agreement may be amended, superseded or canceled, and any of the terms or conditions hereof may be waived, only by 8 a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance (or his agent). The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver of any nature, whether by conduct or otherwise in any one or more instances, of any provision hereof, shall be deemed to be, or construed as, a further or continuing waiver of any such provision or of another provision hereof. VI. NOTICES Any notice or other communication required or which may be given hereunder (including without limitation the delivery of Omnicom Stock to any Person out of the Deposit Funds) shall be in writing and either delivered personally (if so requested by the Person entitled to such notice or distribution) or mailed by certified or registered mail, postage prepaid, or sent by facsimile transmission, and shall be deemed given when so delivered personally, mailed or sent by facsimile, as follows: If to Holdings or Advertising, to Holdings at: Chiat/Day Holdings, Inc. 180 Maiden Lane New York, New York 10038 Attention: Chief Financial Officer Fax No.: (212-804-1200) (or following the dissolution of Holdings to the Liquidating Trustee at the address set forth below) with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: James Cotter, Esq. Fax No.: 212-455-2502 If to the Liquidating Trustee, to: ---------------------------- ---------------------------- ---------------------------- Fax No.: with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue 9 New York, New York 10017 Attention: James Cotter, Esq. Fax No.: 212-455-2502 If to the Liquidating Trust Escrow Agent, to: --------------------------- --------------------------- --------------------------- Fax No.: If to Omnicom or TBWA, to Omnicom at: Omnicom Group Inc. 437 Madison Avenue New York, New York 10022 Attention: Chief Financial Officer Fax No.: 212-415-3536 If to the Deposit Agent or the Omnicom Indemnification Escrow Agent, to: The Chase Manhattan Bank, N.A. ------------------------------------- ------------------------------------- ------------------------------------- Fax No.: Any party may change the persons and addresses to which notices, payments, instructions or other communications are to be sent to such party by giving written notice of any such change in the manner provided herein for giving notice. Notices sent by facsimile transmission shall be confirmed in writing by registered or certified mail, return receipt requested. VII. GOVERNING LAW This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within such State. VIII. NO ASSIGNMENT This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of Holdings, Advertising, Omnicom, TBWA and the Deposit Agent, but, except for as otherwise provided or permitted in this Agreement, no delegation of any obligations provided for herein may be made by any party hereto without the express written consent of the other parties hereto, except for the provisions of Section 4.4 hereof respecting successor deposit agents. 10 IX. SECTION HEADINGS The section headings contained in this Agreement are inserted for convenience of reference only, and shall not affect the meaning or interpretation of this Agreement. WITNESS the execution of this Agreement as of the date first above written. CHIAT/DAY HOLDINGS, INC. By: ________________________ CHIAT/DAY INC. ADVERTISING By: ________________________ OMNICOM GROUP INC. By:_________________________ TBWA INTERNATIONAL INC. By:_________________________ THE CHASE MANHATTAN BANK, N.A., as Deposit Agent By: ________________________ 11 Schedule I NAMES AND DENOMINATIONS FOR STOCKHOLDERS STOCK CERTIFICATES 12 Schedule II NAMES AND DENOMINATIONS FOR RIGHTSHOLDERS STOCK CERTIFICATES 13 EX-2 7 EXHIBIT 2.6 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into between Adelaide Horton (the "Purchaser"), and Chiat/Day Holdings, Inc., a Delaware corporation (the "Seller"), as of the 11th day of May, 1995. The Seller and the Purchaser hereby agree as follows: 1. Sale and Purchase of the Shares; Purchase Price; the Closing. (a) The Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Seller, on the Closing Date (as hereinafter defined), 100 shares of Common Stock (the "Shares"), par value $.01 share, of Chiat/Day inc. Advertising, a Delaware Corporation ("Advertising"), representing all of the shares of Common Stock of Advertising owned by the Seller. (b) The aggregate purchase price (the "Purchase Price") for the Shares shall be $250,000. (c) The sale and purchase of the Shares shall take place at a closing at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017 (or at such other place as the parties may determine) at 10:00 a.m., New York City time, on or as soon as practicable after the Distribution Date under (and as defined in) that certain Asset Purchase Agreement (the "Asset Purchase Agreement") of even date herewith by and among Omnicom Group Inc. ("Omnicom"), TBWA International Inc. ("TBWA"), the Seller and Advertising, provided that if the Closing under (and as defined in) the Asset Purchase Agreement occurs on or prior to October 31, 1995, the closing hereunder shall occur on or prior to October 31, 1995 (the "Closing Date"). On the Closing Date, (i) the Purchaser shall deliver a bank or certified check to the Seller in the amount of the Purchase Price against delivery by the Seller of certificates representing the Shares and (ii) the Seller shall deliver to the Purchaser, against delivery by the Purchaser of the Purchase Price, certificates representing the Shares, properly endorsed by the Seller and accompanied by such stock powers and other documents as may be necessary to transfer record ownership of the Shares into such names as Purchaser shall request on the transfer books of Advertising, together with evidence of payment of all applicable transfer and documentary stamp taxes and other fees. 2. Conditions Precedent. (a) The obligation of Purchaser to purchase the Shares pursuant to this Agreement are subject to the fulfillment (or waiver by the Purchaser) of each of the following conditions: (i) the Closing under the Asset Purchase Agreement shall have occurred; (ii) Advertising shall have full and exclusive rights (either directly or indirectly through the ownership of all outstanding capital stock of Chiat/Day Direct Marketing, Inc.) in, to and under that certain lawsuit entitled Chiat/Day Direct Marketing, Inc. f/k/a Perkins/Butler Direct Marketing, Inc. v. National Car Rental Systems, Inc., No. 93 Civ. 2717 (S.D.N.Y.) (the "National Car Suit") including, without limitation, all damages which may be awarded to the plaintiffs thereunder and none of such rights shall have been transferred to Omnicom, TBWA or any other person or entity pursuant to the Asset Purchase Agreement or otherwise; and (iii) the Seller shall have, or shall have caused Advertising to have, taken all actions reasonably necessary to preserve Advertising's rights in, to and under the National Car Suit prior to the Closing Date including, without limitation, making timely payment for all costs and expenses (including reasonable attorneys' fees) due and payable by it in respect of such suit. (b) The obligation of the Seller to sell the Shares pursuant to this Agreement is subject to the fulfillment of the following condition (which condition may not be waived by the Seller): the distribution of Omnicom Stock (as defined in the Asset Purchase Agreement) by each of Seller and Advertising contemplated by Sections 2.6 and 2.7 of the Asset Purchase Agreement shall have been completed. 3. Assignments.This Agreement shall not be assignable, except that (i) the Purchaser may assign its rights under this Agreement, including the right to the delivery of some or all of the Shares, to any person, and (ii) the Seller may assign its rights under this Agreement, including the right to receive payment of some or all of the Purchase Price, to any person (it being understood that the Seller intends to assign such rights to the Purchase Price to TBWA pursuant to the Asset Purchase Agreement). This Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the parties hereto and their successors. 4. Indemnification. Seller agrees to indemnify the Purchaser and Advertising and to protect, save and keep harmless the Purchaser and Advertising from, and to assume liability for, payment of all Losses (as defined in the Asset Purchase Agreement) that may be imposed on or incurred by the Purchaser or Advertising arising out of or in connection with any Retained Advertising Liabilities (as defined in the Asset Purchase Agreement). 5. Further Action. Upon the terms and subject to the conditions hereof, each of the parties hereto agrees to use its reasonable best efforts to do, or cause to be done, all things necessary, proper or advisable as are necessary for the consummation of the transactions contemplated hereby. 6. Amendments. No amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by or on behalf of the Purchaser and on behalf of the Seller. 2 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflicts of law principles thereof. 8. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but both of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ADELAIDE HORTON /s/ ADELAIDE HORTON ---------------------------------- CHIAT/DAY HOLDINGS, INC. By:/S/ IRA MATATHIA ----------------------------------- Name: Ira Matathia Title: Director 3 EX-2 8 EXHIBIT 2.7 PROFIT SHARING PLAN PURCHASE AGREEMENT PROFIT SHARING PLAN PURCHASE AGREEMENT dated as of May 9, 1995 by and between Chiat/Day Holdings, Inc. (the "Company") and Michael Kooper (the "Trustee"). WITNESSETH WHEREAS, the Company contemplates selling substantially all its assets and the assets of Chiat/Day inc. Advertising ("Advertising") to TBWA International Inc. ("TBWA") (the "Transaction") pursuant to an asset purchase agreement by and among the Company, Advertising, Omnicom Group Inc. ("Omnicom") and TBWA (the "Purchase Agreement"); and WHEREAS, TBWA is not willing to assume liabilities related to the Chiat/Day Profit Sharing and 401(k) Plan (the "Plan" and assets of the Plan will not be transferred to a plan sponsored by TBWA in connection with the Transaction; and WHEREAS, the majority of the Plan assets consist of the Company's preferred stock ("Company Preferred Stock") and Class B common stock ("Company Common Stock")(collectively, "Company Stock"), and the sale of Company Stock contemplated by this Agreement will significantly improve the liquidity and increase the value of the Plan's assets; and WHEREAS, if the sale of Company Stock contemplated by this Agreement is consummated, the Plan will receive, on the dates described below, cash in an amount which is greater than or equal to the fair market value of the Company Stock, in lieu of the Omnicom stock which will be paid to other shareholders of Company Common Stock on or about October 26, 1995 in connection with the Transaction, which payment of the Omnicom Stock will be subject to holdback and escrow requirements, and which payment of the Omnicom Stock would otherwise be payable to the Plan; and WHEREAS, the sale of Company Preferred Stock contemplated by this Agreement on the date described below shall be binding on the parties hereto even in the event that the Purchase Agreement is terminated in accordance with its terms after such date. NOW, THEREFORE, in accordance with Section 2.3(a) of the Purchase Agreement, the Company and the Trustee hereby agree as follows: 1. In light of the foregoing facts, the Company and the Trustee hereby agree that the following actions are in the best interests of Plan participants and beneficiaries: (a) (i) On or about July 1, 1995 but no later than July 10, 1995, the Plan shall sell all Company Preferred Stock held by the Plan on such date to the Company for an amount in cash of $14,081,773.93, which amount will be equal to the face amount of such Company Preferred Stock (the "Preferred Stock Payment"), and (ii) as soon as practicable after receipt of an appraisal as described in paragraph 2 hereof, the Plan shall sell all Company Common Stock to the Company for an amount in cash equal to $350,000 ("the Common Stock Payment"). (b) Neither the Preferred Stock Payment nor the Common Stock Payment shall be subject to any commission, holdback, adjustment or any other condition applicable to payments made to holders of Company Stock other than the Plan in connection with the Transaction. (c) All Plan participants shall become fully vested in their accounts under the Plan upon the closing of the Transaction (the "Closing Date"). (d) The Purchase Agreement shall provide that after the Transaction, former company employees shall receive the benefits listed on Schedule 6.4 thereto, which benefits have been designated and approved by the Company. (e) The Plan shall be terminated by the Company at its expense as of the Closing Date, and all Plan assets will be distributed to Plan participants as soon as practicable thereafter. (f) All legal, accounting, appraisal and other expenses, expended or accrued in connection with the transactions contemplated hereby shall be borne by the Plan. 2. The Company and the Trustee agree that the sales of Company Stock to the Company contemplated by this Agreement shall be contingent upon receipt by the Trustee of an appraisal from an independent appraisal firm which indicates that the fair market value (as defined in Section 3(18) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) of the Company Preferred Stock and the Company Common Stock is less than or equal to (i) the Preferred Stock Payment and the Common Stock Payment, respectively, on the applicable sales date, and (ii) the valuation on a per share basis of the Company Preferred Stock and the Company Common Stock, as the case may be, as determined by Duff & Phelps Financial Consulting Co. ("Duff & Phelps") in its valuation analysis as of October 31, 1993 as set forth in that certain letter dated April 14, 1994 from Duff & Phelps to the former trustee of the Plan. 3. Notwithstanding the foregoing, if the Purchase Agreement is terminated in accordance with its terms on or prior 2 to July 1, 1995, this Agreement shall be of no further force and effect, and if the Purchase Agreement is terminated in accordance with its terms prior to the consummation of the sale of the Company Common Stock, the provisions in this Agreement which pertain to Company Common Stock shall be of no further force and effect. In addition, it shall be a condition to the obligations set forth in this Agreement that the Company shall have obtained on terms and conditions satisfactory to the Company in its sole discretion, financing sufficient for the Company to consummate the transactions contemplated hereby. 4. As a material inducement to the Trustee to execute, deliver and perform under this Agreement, the Company represents and warrants to the Trustee that the statements contained in this Section 4 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the date of the Preferred Stock Payment and the Common Stock Payment as though made then and as though each such date were substituted for the date of this Agreement throughout this Section 4: (i) The Company is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (ii) The Company has all requisite power and authority under its Certificate of Incorporation and by-laws and applicable laws to execute and deliver this Agreement and to carry out all actions required of it pursuant to the terms of this Agreement. The Company has all requisite power and authority to carry on its business and to own and operate its properties as are now conducted. (iii) The Company will have obtained all necessary authorizations and approvals from its Board of Directors and stockholders required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement when duly executed and delivered by the Company will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights generally and by the application of general principles of equity, regardless of whether considered in a proceeding at law or in equity. (iv) The execution, delivery and performance of this Agreement by the Company will not constitute a violation of, or be in conflict with, or result in the breach of, or constitute or create a default under, result in the acceleration of, create in any person the right to accelerate, terminate, modify or cancel, or require any notice pursuant to, (a) the Certificate of Incorporation or by-laws of the Company, as amended to date; (b) any 3 agreement or commitment to which the Company is a party or to which the Company is subject; or (c) other than ERISA or the Internal Revenue Code of 1986, as amended, in respect of which no representation is being made, any statute, regulation or rule or any judgment, decree, order, ruling, charge or other restriction of any court, governmental agency or governmental authority. (v) No consent, approval or authorization of, or registration, qualification or filing with, any governmental agency or authority or any other third party is required for the execution, delivery and performance of this Agreement by the Company. No order, writ, injunction or decree has been issued, or threatened to be issued, by any court or governmental agency which would adversely affect the consummation of the transactions contemplated by this Agreement. (vi) The terms of the employment agreements, non-competition agreements and employment/consulting agreements to be entered into pursuant to Sections 8.14, 8.15 and 8.16 of the Purchase Agreement are not materially more advantageous to the covered executives than the terms of employment, non-competition and consulting currently in effect with respect to each such executive. (vii) Schedule A annexed hereto and made a part hereof sets forth the following: (a) an audited consolidated balance sheet of the Company and its subsidiaries as at October 31, 1992, 1993 and 1994, and the related statements of operations, stockholders' equity (deficit) and cash flow for the years then ended, reported on by Coopers & Lybrand, independent certified public accountants, (b) consolidated balance sheets of the Company and Chiat/Day Inc. Advertising ("Advertising") as at October 31, 1994 (such consolidated balance sheets of the Company and Advertising are referred to herein as the "Company Balance Sheets" and the "Advertising Balance Sheet," respectively), (c) consolidated balance sheets as at October 31, 1994 of the U.S. offices of Advertising, the Toronto office of Advertising and the London office of Chiat/Day Inc. Advertising International. The consolidated balance sheet of the Company and its subsidiaries as at October 31, 1994 is referred to in this Agreement as the "Balance Sheet". Such financial statements, including the footnotes thereto, are true and correct in all material respects and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") consistently applied throughout the periods indicated. Each of the consolidated balance sheets of the Company and its subsidiaries fairly presents the consolidated financial position of the Company and its subsidiaries at the respective date thereof and reflects all claims against and all debts and liabilities of the Company and its subsidiaries, fixed or contingent, as at the date 4 thereof, required to be shown thereon under GAAP, and the related statements of operations, stockholders' equity (deficit) and cash flow fairly present the consolidated results of operations of the Company and its subsidiaries, retained earnings and the cash flow for the respective periods indicated. Each of the consolidated balance sheets as at October 31, 1994 fairly presents the financial condition of the applicable operating unit at the Balance Sheet Date and reflects all claims against and all debts and liabilities of such operating unit, fixed and contingent, as at such date, required to be shown thereon under GAAP. Since October 31, 1994 (the "Balance Sheet Date"), except for the execution and delivery of the Purchase Agreement and the transactions required or permitted to take place pursuant thereto on or prior to the closing date thereof, there has been no material change in the assets or liabilities, or in the business or condition, financial or otherwise, in the results of operations of the Company and its subsidiaries which in the aggregate would materially increase the net worth of the Company. 5. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or mailed, first class mail, postage prepaid, return receipt requested, as follows: (a) If to the Company: Chiat/Day Holdings Inc. 180 Maiden Lane New York, New York 10038 Attn: Chief Financial Officer Fax: (212) 804-1200 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attn: James M. Cotter, Esq. Fax: (212) 455-2502 (b) If to the Trustee: Michael Kooper The Kooper Group 770 Lexington Avenue New York, New York 10021 Fax: (212) 755-0831 with a copy to: 5 Mandel and Resnik, P.C. 220 East 42nd Street New York, New York 10017 Attn: Barry H. Mandel, Esq. Fax: (212) 573-0067 or to such other address or to the attention of such other person as any party shall have specified by notice in writing to the other parties. All such notices, requests, demands and communications shall be deemed to have been received on the date of personal delivery or on the third business day after the mailing thereof. 6. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 7. This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any covenants or agreements contained herein and in any documents delivered or to be delivered pursuant to this Agreement. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 8. If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect. 9. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 10. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to conflicts of laws principles thereof except to the extent that issues hereunder are preempted by ERISA. 11. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein. This Agreement supersedes all prior oral and written agreements and understandings between the parties with respect to such subject matter. 6 12. This Agreement may be amended, supplemented or modified by the parties hereto only by an agreement in writing signed on behalf of each of the parties hereto following due authorization at any time. 13. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto. 7 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. CHIAT/DAY HOLDINGS INC. By:/S/ JAY CHIAT -------------------------------- Title: President/CEO /s/ MICHAEL KOOPER -------------------------------- Michael Kooper 8 EX-23 9 EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our report, dated February 20, 1995 included in the Omnicom Group Inc. Form 10-K for the year ended December 31, 1994 and to all references to our Firm included in this Registration Statement. /s/ ARTHUR ANDERSEN LLP New York, New York June 7, 1995 EX-23 10 EXHIBIT 23.2 Consent of Independent Accountants We consent to the inclusion in this Prospectus/Information Statement and the Registration Statement of which this Prospectus/Information Statement is a part on Form S-4 (File No.___________) of our report, which includes an explanatory paragraph concerning the Company's ability to continue as a going concern dated April 7, 1995, except for Note 10 as to which the date is June 7, 1995, on our audit of the consolidated financial statements of Chiat/Day Holdings, Inc. We also consent to the reference to our firm under the caption "Experts". Coopers & Lybrand L.L.P. Sherman Oaks, California June 9, 1995 -----END PRIVACY-ENHANCED MESSAGE-----