-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D1e2M6pT0UAhKuq+WDEwNkNMdZZPG7QwM52jRezSfSuewE9vCJyL6/DTbjAQc3Xh aUS/rDN5d/Ue8kD1tIOEog== 0000950123-97-010375.txt : 19971217 0000950123-97-010375.hdr.sgml : 19971217 ACCESSION NUMBER: 0000950123-97-010375 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 19971216 SROS: NONE GROUP MEMBERS: PUBLICIS COMMUNICATION GROUP MEMBERS: PUBLICIS S A SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TRUE NORTH COMMUNICATIONS INC CENTRAL INDEX KEY: 0000037931 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 361088161 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-34111 FILM NUMBER: 97738787 BUSINESS ADDRESS: STREET 1: 101 E ERIE ST CITY: CHICAGO STATE: IL ZIP: 60611-2897 BUSINESS PHONE: 4154256500 MAIL ADDRESS: STREET 1: 101 E ERIE ST CITY: CHICAGO STATE: IL ZIP: 60611-2897 FORMER COMPANY: FORMER CONFORMED NAME: FOOTE CONE & BELDING COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FOOTE CONE & BELDING INC DATE OF NAME CHANGE: 19720824 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TRUE NORTH COMMUNICATIONS INC CENTRAL INDEX KEY: 0000037931 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 361088161 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-34111 FILM NUMBER: 97738788 BUSINESS ADDRESS: STREET 1: 101 E ERIE ST CITY: CHICAGO STATE: IL ZIP: 60611-2897 BUSINESS PHONE: 4154256500 MAIL ADDRESS: STREET 1: 101 E ERIE ST CITY: CHICAGO STATE: IL ZIP: 60611-2897 FORMER COMPANY: FORMER CONFORMED NAME: FOOTE CONE & BELDING COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FOOTE CONE & BELDING INC DATE OF NAME CHANGE: 19720824 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PUBLICIS S A CENTRAL INDEX KEY: 0001046940 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 133 AVENUE DES CHAMPS ELYSEES CITY: 75008 PARIS FRANCE STATE: I0 ZIP: 00000 BUSINESS PHONE: 33144437000 MAIL ADDRESS: STREET 1: 133 AVENUE DES CHAMPS ELYSEES CITY: 75008 PARIS FRANCE STATE: I0 ZIP: 00000 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PUBLICIS S A CENTRAL INDEX KEY: 0001046940 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 133 AVENUE DES CHAMPS ELYSEES CITY: 75008 PARIS FRANCE STATE: I0 ZIP: 00000 BUSINESS PHONE: 33144437000 MAIL ADDRESS: STREET 1: 133 AVENUE DES CHAMPS ELYSEES CITY: 75008 PARIS FRANCE STATE: I0 ZIP: 00000 SC 14D1 1 PUBLICIS S.A./TRUE NORTH COMMUNICATIONS INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND AMENDMENT NO. 12 TO SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 TRUE NORTH COMMUNICATIONS INC. (Name of Subject Company) PUBLICIS S.A. (Bidder) COMMON STOCK, PAR VALUE $.33-1/3 PER SHARE (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) (Title of Class of Securities) 897844 10 6 (CUSIP Number of Class of Securities) JEAN-PAUL MORIN c/o PUBLICIS S.A. 133, AVENUE DES CHAMPS ELYSEES 75380 PARIS, FRANCE TELEPHONE: 011-33-1-44-43-70-00 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) COPIES TO: THOMAS J. KUHN, ESQ. HOWARD, DARBY & LEVIN 1330 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 TELEPHONE: (212) 841-1000 2 CALCULATION OF FILING FEE =========================================================================== TRANSACTION VALUATION* AMOUNT OF FILING FEE** ---------------------- ---------------------- $269,357,312 $53,871.46
=========================================================================== * For purposes of calculating the filing fee only. This calculation assumes the purchase of an aggregate of 9,619,904 shares of Common Stock, par value $.33-1/3 per share, of True North Communications, Inc. at $28 net per share in cash. ** 1/50 of one percent of the Transaction Valuation. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or ___ the Form or Schedule and date of its filing. Amount Previously Paid: Not Applicable Form or Registration No.: Not Applicable Filing Party: Not Applicable Date Filed: Not Applicable Page 1 of 9 pages Exhibit Index begins on Page 7 3 14D-1 CUSIP No. 897844 10 6 Page 2 of 9 pages 1) Name of Reporting Persons: PUBLICIS S.A. S.S. or I.R.S. Identification Nos. of Above Person: THIS OPTIONAL INFORMATION HAS BEEN EXCLUDED TO MAINTAIN THE FILER'S PRIVACY. - -------------------------------------------------------------------------------- - -------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group (See Instructions). [ ] (a) [ ] (b) - -------------------------------------------------------------------------------- - -------------------------------------------------- 3) SEC Use Only. - -------------------------------------------------------------------------------- - -------------------------------------------------- 4) Sources of Funds (See Instructions): OO - -------------------------------------------------------------------------------- - -------------------------------------------------- 5) [ ] Check box if Disclosure of Legal Proceedings is Required pursuant to Items 2(e) or 2(f). - -------------------------------------------------------------------------------- - -------------------------------------------------- 6) Citizenship or Place of Organization: FRANCE - -------------------------------------------------------------------------------- - -------------------------------------------------- 7) Aggregate Amount Beneficially Owned by Each Reporting Person: 4,658,000 SHARES - -------------------------------------------------------------------------------- - -------------------------------------------------- 8) [ ] Check box if the Aggregate Amount in Row 7 Excludes Certain Shares. - -------------------------------------------------------------------------------- - -------------------------------------------------- 9) Percent of Class Represented by Amount in Row 7: APPROXIMATELY 18.4% - -------------------------------------------------------------------------------- - -------------------------------------------------- 10) Type of Reporting Person (See Instructions): HC, CO 4 14D-1 CUSIP No. 897844 10 6 Page 3 of 9 pages 1) Name of Reporting Persons: PUBLICIS COMMUNICATION S.S. or I.R.S. Identification Nos. of Above Person: THIS OPTIONAL INFORMATION HAS BEEN EXCLUDED TO MAINTAIN THE FILER'S PRIVACY. - -------------------------------------------------------------------------------- - -------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group (See Instructions). [ ] (a) [ ] (b) - -------------------------------------------------------------------------------- - -------------------------------------------------- 3) SEC Use Only. - -------------------------------------------------------------------------------- - -------------------------------------------------- 4) Sources of Funds (See Instructions): OO - -------------------------------------------------------------------------------- - -------------------------------------------------- 5) [ ] Check box if Disclosure of Legal Proceedings is Required pursuant to Items 2(e) or 2(f). - -------------------------------------------------------------------------------- - -------------------------------------------------- 6) Citizenship or Place of Organization: FRANCE - -------------------------------------------------------------------------------- - -------------------------------------------------- 7) Aggregate Amount Beneficially Owned by Each Reporting Person: 4,658,000 SHARES - -------------------------------------------------------------------------------- - -------------------------------------------------- 8) [ ] Check box if the Aggregate Amount in Row 7 Excludes Certain Shares. - -------------------------------------------------------------------------------- - -------------------------------------------------- 9) Percent of Class Represented by Amount in Row 7: APPROXIMATELY 18.4% - -------------------------------------------------------------------------------- - -------------------------------------------------- 10) Type of Reporting Person (See Instructions): CO 5 This Statement on Schedule 14D-1 also constitutes Amendment No. 12 to the Schedule 13D with respect to the beneficial ownership of 4,658,000 Shares (as defined below) by Publicis S.A. and Publicis Communication. The item numbers and responses thereto below are in accordance with the requirements of Schedule 14D-1. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is True North Communications Inc., a Delaware corporation (the "Company"). The address of the Company's principal executive offices is 101 East Erie Street, Chicago, Illinois 60611. (b) This Statement on Schedule 14D-1 relates to the offer by Publicis S.A., a societe anonyme organized under the laws of France (the "Purchaser"), to purchase 9,619,904 shares of Common Stock, par value $.33-1/3 per share (the "Shares"), of the Company, or such greater number of Shares which, when added to the number of Shares owned by the Purchaser and its affiliates, constitutes a majority of the total number of Shares outstanding on a fully diluted basis (assuming the exercise or conversion, as applicable, of all outstanding options, rights and convertible securities (if any) and the issuance of all Shares that the Company is obligated to issue) as of the expiration of the Offer (as defined below), and (unless and until the Purchaser declares that the Rights Condition (as defined in the Offer to Purchase (as defined below)) has been satisfied, the associated Series A Junior Participating Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement (as defined in the Offer to Purchase), at a purchase price of $28 per Share (and associated Right), net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase (the "Offer to Purchase") and the related Letter of Transmittal, copies of which are attached to and filed with this Schedule 14D-1 as Exhibits (a)(1) and (a)(2) (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). According to the Company's Registration Statement under the Securities Act of 1933, on Form S-4, filed on November 26, 1997, as of November 18, 1997, there were 25,271,533 Shares outstanding. The information set forth in the "Introduction" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of the Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d); (g) This Statement is being filed by the Purchaser. The information set forth in the "Introduction," Section 9 ("Certain Information Concerning the Purchaser") and Schedule I ("Directors and Executive Officers of the Purchaser") of the Offer to Purchase is incorporated herein by reference. (e)-(f) During the last five years, neither the Purchaser, nor Somarel, Societe Civile Familiale, nor, to the best of its knowledge, any of the persons listed in Schedule I ("Directors and Executive Officers of the Purchaser") of the Offer to Purchase has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. 4 6 ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in the "Introduction," Section 9 ("Certain Information Concerning the Purchaser"), Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("Purpose of the Offer and the Proposed Publicis Combination; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 12 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the "Introduction," Section 10 ("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer and the Proposed Publicis Combination; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in Section 7 ("Possible Effects of the Offer on the Market for the Shares; Stock Exchange Listing; Exchange Act Registration; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in the "Introduction," Section 9 ("Certain Information Concerning the Purchaser"), Section 10 ("Background of the Offer; Contacts with the Company") and Schedule I ("Directors and Executive Officers of the Purchaser") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the "Introduction," Section 9 ("Certain Information Concerning the Purchaser"), Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("Purpose of the Offer and the Proposed Publicis Combination; Plans for the Company") and Section 13 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the "Introduction" and Section 16 ("Certain Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information required by Item 9 is set forth as Exhibit (g)(l) hereto and is incorporated herein by reference. 5 7 ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 9 ("Certain Information Concerning the Purchaser") and Section 10 ("Background of the Offer; Contacts with the Company") and is incorporated herein by reference. (b)-(c) The information set forth in the "Introduction," Section 11 ("Purpose of the Offer and the Proposed Publicis Combination; Plans for the Company") and Section 15 ("Certain Legal Matters; Required Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7 ("Possible Effects of the Offer on the Market for the Shares; Stock Exchange Listing; Exchange Act Registration; Margin Regulations") is incorporated herein by reference. (e) The information set forth in the "Introduction," Section 10 ("Background of the Offer; Contacts with the Company") and Section 15 ("Certain Legal Matters; Required Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and the related Letter of Transmittal is incorporated herein by reference. 6 8 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated December 15, 1997. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(6) Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. (b)(1) Credit Agreement, dated April 30, 1997, between Credit Lyonnais and the Purchaser. (b)(2) Credit Facility, dated May 2, 1997, between Banque Paribas and the Purchaser. (b)(3) Agreement, dated May 2, 1997, between Banque Nationale de Paris and the Purchaser. (b)(4) Credit Agreement, dated May 2, 1997, between Banque Francaise Du Commerce Exterieur and the Purchaser. (b)(5) Contract, dated May 2, 1997, between Union de Credit Pour Le Developpement Regional and the Purchaser. (b)(6) Line of Credit, dated May 2, 1997, between Banque OBC-Odier Bungener Courvoisier and the Purchaser. (b)(7) Line of Credit, dated April 9, 1997, between CIC-Paris and the Purchaser. (c)(1) Master Alliance Agreement and FCB Stockholders Agreement, each dated January 1, 1989, between Publicis Communication and Foote, Cone & Belding Communications, Inc. ("FCB"). (c)(2) Memorandum of Agreement, dated February 19, 1997, among the Purchaser, Publicis Communication, and Publicis-FCB Europe B.V. ("PBV"), on the one hand, and the Company, FCB and FCB International, Inc. ("FCBI"), on the other hand. (c)(3) Agreement, dated as of May 19, 1997, among the Purchaser, Publicis Communication, and PBV, on the one hand, and the Company, FCBI and True North Holdings Netherlands B.V., on the other hand.
7 9 (c)(4) Pooling Agreement, dated as of May 19, 1997, by and among the Purchaser, Publicis Communication and the Company. (d) Not applicable. (e) Not applicable. (f) Not applicable. (g)(1) Audited consolidated financial statements and notes thereto of the Purchaser for the three years ended December 31, 1996, 1995 and 1994 and unaudited consolidated financial statements of the Purchaser for the six-month periods ended June 30, 1997 and 1996. (h)(1) Complaint of Publicis Communication seeking Declaratory and Injunctive Relief filed with the United States District Court for the Northern District of Illinois, Eastern Division on November 26, 1997 (h)(2) Notice of Arbitration of True North in Connection with the May 1997 Agreements filed with the London Court of International Arbitration on December 3, 1997 (h)(3) Answer and Counterclaims of True North seeking Declaratory and Injunctive Relief and Damages filed with the United States District Court for the Northern District of Illinois, Eastern Division on December 3, 1997 (h)(4) True North's Motion for an Emergency Temporary Restraining Order, filed with the United States District Court for the Northern District of Illinois, Eastern Division on December 5, 1997 (h)(5) Preliminary Injunction Order of the United States District Court for the Northern District of Illinois, Eastern Division, dated December 10, 1997. (h)(6) Publicis' Amended and Supplemental Complaint filed with the United States District Court for the Northern District of Illinois, Eastern Division on December 11, 1997 (h)(7) Decision of the Seventh Circuit Court of Appeals, dated December 15, 1997
8 10 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. PUBLICIS S.A. By: /s/ Maurice Levy ____________________________________ Name: Maurice Levy Title: President PUBLICIS COMMUNICATION By: /s/ Jean-Paul Morin ____________________________________ Name: Jean-Paul Morin Title: Secretaire General Dated: December 15, 1997 9 EX-99.A1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH 9,619,904 SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. AT $28 NET PER SHARE BY PUBLICIS S.A. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS HEREINAFTER DEFINED) A NUMBER OF SHARES (AS HEREINAFTER DEFINED), INCLUDING THE RIGHTS (AS HEREINAFTER DEFINED) ASSOCIATED THEREWITH, WHICH, WHEN ADDED TO THE NUMBER OF SHARES (AND RIGHTS) BENEFICIALLY OWNED BY PUBLICIS S.A. (THE "PURCHASER") AND ITS AFFILIATES, CONSTITUTES A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES (AND RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. (THE "COMPANY") ON A FULLY DILUTED BASIS, (2) THE COMPANY HAVING ENTERED INTO A DEFINITIVE AGREEMENT WITH THE PURCHASER, PUBLICIS COMMUNICATION AND PUBLICIS WORLDWIDE B.V. (BOTH OF WHICH ARE SUBSIDIARIES OF THE PURCHASER) TO EFFECT THE PROPOSED PUBLICIS COMBINATION (AS HEREINAFTER DEFINED), (3) THE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS (COLLECTIVELY, THE "RIGHTS") OF THE COMPANY HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER BEING SATISFIED THAT THE RIGHTS HAVE BEEN INVALIDATED OR OTHERWISE ARE INAPPLICABLE TO THE OFFER AND THE PROPOSED PUBLICIS COMBINATION, (4) THE PURCHASER BEING SATISFIED THAT SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW HAS BEEN COMPLIED WITH IN CONNECTION WITH THE OFFER AND THE PROPOSED PUBLICIS COMBINATION OR IS INAPPLICABLE TO THE PURCHASER IN CONNECTION WITH THE OFFER AND THE PROPOSED PUBLICIS COMBINATION AND (5) THE AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY 30, 1997 (THE "BOZELL MERGER AGREEMENT"), AMONG THE COMPANY, CHEROKEE ACQUISITION CORPORATION AND BOZELL, JACOBS, KENYON & ECKHARDT, INC. ("BOZELL") HAVING BEEN TERMINATED WITHOUT ANY PAYMENTS BY OR PENALTIES TO THE COMPANY (OTHER THAN ANY APPLICABLE PAYMENTS PURSUANT TO SECTION 5.7(c) OF THE BOZELL MERGER AGREEMENT) AND THE COMPANY NOT HAVING ENTERED INTO OR EFFECTUATED ANY NEW OR AMENDED AGREEMENTS WITH BOZELL OR ANY OTHER PERSON OR ENTITY HAVING THE EFFECT OF IMPAIRING THE ABILITY OF THE PURCHASER TO CONSUMMATE THE OFFER OR THE PROPOSED PUBLICIS COMBINATION OR OTHERWISE DIMINISHING THE EXPECTED ECONOMIC VALUE TO THE PURCHASER OF THE SHARES PURCHASED IN THE OFFER OR THE PROPOSED PUBLICIS COMBINATION. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND 15. THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING. ------------------------ The Dealer Manager for the Offer is: LAZARD FRERES & CO. LLC December 16, 1997 2 IMPORTANT The Purchaser intends to continue to seek to negotiate with the Company with respect to the Proposed Publicis Combination. The Purchaser reserves the right to amend the Offer (including amending the number of Shares to be purchased, the purchase price and the consideration in the Proposed Publicis Combination) upon entry into an acquisition agreement or other agreement regarding a business combination with the Company or otherwise or to negotiate an acquisition agreement or other agreement regarding a business combination with the Company not involving a tender offer. The Purchaser and its subsidiary, Publicis Communication, a societe anonyme organized under the laws of France, are soliciting revocations and conditional proxies in opposition to the transactions contemplated by the Bozell Merger Agreement and reserve the right to solicit the consents, proxies or revocations of the stockholders of the Company at any subsequent annual or special meeting of such stockholders. Any stockholder desiring to tender all or any portion of his Shares, and the associated Rights, should either (a) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) representing tendered Shares and, if separate, the certificate(s) representing the associated Rights, and any other required documents, to the Depositary or tender such Shares (and associated Rights, if applicable) pursuant to the procedures for book-entry transfer set forth in Section 3 or (b) request his broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him. A stockholder whose Shares and, if applicable, associated Rights are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if he desires to tender such Shares and, if applicable, the associated Rights. Unless and until the Purchaser declares that the Rights Condition (as hereinafter defined) is satisfied, stockholders will be required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. A stockholder who desires to tender his Shares and associated Rights, and whose certificates representing such Shares (and, if applicable, associated Rights) are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis may tender such Shares (and, if applicable, associated Rights) by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or from brokers, dealers, commercial banks and trust companies. 3 TABLE OF CONTENTS
PAGE ---- INTRODUCTION.......................................................................... 1 THE TENDER OFFER...................................................................... 7 1. Terms of the Offer............................................................... 7 2. Acceptance for Payment and Payment............................................... 9 3. Procedures for Accepting the Offer and Tendering Shares and Rights............... 10 4. Withdrawal Rights................................................................ 14 5. Certain United States Tax Consequences........................................... 15 6. Price Range of the Shares; Dividends............................................. 16 7. Possible Effects of the Offer on the Market for the Shares; Stock Exchange Listing; Exchange Act Registration; Margin Regulations........................... 17 8. Certain Information Concerning the Company....................................... 18 9. Certain Information Concerning the Purchaser..................................... 21 10. Background of the Offer; Contacts with the Company............................... 25 11. Purpose of the Offer and the Proposed Publicis Combination; Plans for the Company.......................................................................... 35 12. Source and Amount of Funds....................................................... 41 13. Dividends and Distributions...................................................... 43 14. Certain Conditions of the Offer.................................................. 43 15. Certain Legal Matters; Required Regulatory Approvals............................. 47 16. Certain Fees and Expenses........................................................ 50 17. Miscellaneous.................................................................... 51 Schedule I -- Directors and Executive Officers of the Purchaser..................... 52 Schedule II -- Summary of Differences between Accounting Policies Generally Accepted in the United States and France....................................... 54 Schedule III -- Unaudited Pro Forma Combined Financial Information.................... 58
4 To: All Holders of Shares of Common Stock (Including the Associated Preferred Stock Purchase Rights) of True North Communications Inc.: INTRODUCTION Publicis S.A., a societe anonyme organized under the laws of France (the "Purchaser"), hereby offers to purchase 9,619,904 shares of Common Stock, par value $.33 1/3 per share (the "Shares"), of True North Communications Inc., a Delaware corporation (the "Company"), or such greater number of Shares which, when added to the number of Shares beneficially owned by the Purchaser and its affiliates, constitutes a majority of the total number of Shares outstanding on a fully diluted basis (assuming the exercise or conversion, as applicable, of all outstanding options, rights and convertible securities (if any) and the issuance of all Shares that the Company is obligated to issue) as of the Expiration Date (as hereinafter defined) (the greater of such numbers of Shares being the "Maximum Number") and (unless and until the Purchaser declares that the Rights Condition (as hereinafter defined) has been satisfied) the associated Series A Junior Participating Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of November 16, 1988, between the Company and Harris Trust and Savings Bank, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $28 per Share (and associated Right), net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Unless the context otherwise requires, (i) all references to "Publicis" herein shall mean the group of companies of which the Purchaser is the parent company, including Publicis Communication, a societe anonyme organized under the laws of France ("Publicis Communication"), and Publicis Worldwide B.V., a company organized and existing under the laws of the Netherlands ("Publicis Worldwide"), (ii) all references to "Shares" shall include the associated Rights, and (iii) all references to the "Rights" shall include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares or Rights by the Purchaser pursuant to the Offer. However, any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required backup federal income tax withholding of 31% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See Section 3. The Purchaser will pay all charges and expenses of Lazard Freres & Co. LLC, as Dealer Manager (the "Dealer Manager"), IBJ Schroder Bank & Trust Company, as Depositary (the "Depositary"), and MacKenzie Partners, Inc., as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. The purpose of the Offer is to acquire a majority of the total number of Shares outstanding on a fully diluted basis as the first step in consummating the Proposed Publicis Combination (as defined below). The Purchaser intends, as soon as practicable following consummation of the Offer, to effect the Proposed Publicis Combination. The purpose of the Proposed Publicis Combination is to contribute to the Company all of the advertising-related businesses owned directly and indirectly by the Purchaser in exchange for the issuance of additional Shares to the Purchaser. In order to effect the Proposed Publicis Combination, the Purchaser is seeking to negotiate a business combination with the Company pursuant to which, as soon as practicable following consummation of the Offer, each of Publicis Communication and Publicis Worldwide would be merged with and into the Company with the Company being the surviving corporation (the "Proposed Publicis Combination"). Publicis Communication and Publicis Worldwide own all of the Purchaser's global advertising-related businesses. The outstanding capital stock of Publicis Communication is owned 73.5% by the Purchaser and 26.5% by the Company, and the outstanding capital stock of Publicis Worldwide is owned 100% by the Purchaser. The Purchaser intends that in the Proposed Publicis Combination, (i) each Share that is issued and outstanding immediately prior to the effective time of the Proposed Publicis Combination would remain outstanding 5 (other than the 4,658,000 Shares owned by Publicis Communication, which would become treasury shares of the Company and cease to be outstanding) and (ii) the issued and outstanding shares of capital stock of Publicis Communication and Publicis Worldwide (other than the shares of capital stock of Publicis Communication held by the Company, which shares shall be canceled by operation of the merger) would be converted into an estimated 26,587,937 Shares. Following consummation of the transactions contemplated by the Offer and the Proposed Publicis Combination, the Purchaser estimates that it would own approximately 71.8% of the outstanding Shares on a fully diluted basis, with the remaining 28.2% of the Shares being owned by the stockholders of the Company immediately prior to the effective time of the Proposed Publicis Combination. Following the consummation of the Proposed Publicis Combination, the Purchaser expects that the Shares would continue to be listed on the New York Stock Exchange, Inc. (the "NYSE"). See Sections 9 and 11. The Purchaser estimates that on a pro forma basis, the Company's earnings per Share will be enhanced substantially as a result of the Proposed Publicis Combination. Set forth in Schedule III of this Offer to Purchase is unaudited Pro Forma Combined Financial Information of the Company for 1996, 1997 and 1998 after giving effect to the Offer and the Proposed Publicis Combination and to certain pro forma adjustments described in the accompanying notes thereto. Assuming consummation of the Offer and the Proposed Publicis Combination, in 1998 the Purchaser estimates that the Company's earnings per Share on a fully diluted basis will increase by approximately 17%, based on 1998 net income estimates for the Company on a stand-alone basis, published on July 1, 1997 by Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("Merrill Lynch") (financial advisor to Bozell), prior to the announcement of the Bozell Merger (as hereinafter defined). The exchange ratio for the Shares to be issued to the Purchaser in the Proposed Publicis Combination has been set with the intention of yielding a post-merger common equity valuation of the Company of $28 per Share. See Section 11. The strategic purpose of the Proposed Publicis Combination is to consolidate the Company's and Publicis' worldwide advertising agency networks within one corporate structure under the general control of one management comprised of the most talented executives of the Purchaser and the Company. The agreement effecting the Proposed Publicis Combination is expected to provide that, upon consummation of the Offer, the Purchaser will be entitled to designate a majority of the directors on the Company's Board of Directors. Such agreement is also expected to provide that the Company will use its best efforts to cause the Purchaser's designees to be elected as directors of the Company, including increasing the size of the Company's Board of Directors or securing the resignations of incumbent directors, or both. On July 31, 1997, the Company announced that the Company and Cherokee Acquisition Corporation, a wholly-owned subsidiary of the Company ("CAC"), had entered into an Agreement and Plan of Merger, dated as of July 30, 1997 (the "Bozell Merger Agreement"), with Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"). Under the Bozell Merger Agreement, the Company has proposed to acquire Bozell in exchange for the issuance to Bozell stockholders of approximately 18,627,141 Shares (the "Bozell Merger"). The Purchaser believes that the Bozell Merger is contrary to the best interests of the stockholders of the Company, of which Publicis is the largest, holding approximately 18.4% of the outstanding Shares. Pursuant to the Bozell Merger Agreement, CAC would be merged with and into Bozell, with Bozell continuing as the surviving corporation and a wholly-owned subsidiary of the Company. As a result of the Bozell Merger, the separate corporate existence of CAC would cease, and the surviving corporation would possess the assets and liabilities of CAC and Bozell by operation of law at the effective time of the Bozell Merger. Subject to the terms and conditions of the Bozell Merger Agreement, and without any further action on the part of any stockholder of Bozell or CAC, each share of the common stock of Bozell outstanding immediately prior to the effective time of the Bozell Merger would be converted into 0.51 Shares, including the corresponding percentage of a Right. Consummation of the Bozell Merger pursuant to the Bozell Merger Agreement is subject to certain conditions, including the approval by the stockholders of the Company and Bozell. On November 10, 1997, Publicis proposed a business combination between Publicis and the Company under which each Share would be valued at $28 and which Publicis believed would result in significantly increased stockholder value. That proposal was summarily rejected by the Board of Directors of the Company, 2 6 which refused to meet with Publicis or to seriously consider Publicis' proposed alternative to the Bozell Merger. As a result of the Board of Directors' refusal to negotiate, the Purchaser has now commenced the Offer and put forth the Proposed Publicis Combination. Publicis believes that the Bozell Merger significantly overvalues Bozell and that it undervalues the Company. The information in the proxy statement with respect to the Bozell Merger (the "Company Proxy") indicates that the Company is paying too high a price for a deal that does nothing to address the Company's basic strategic weakness: the lack of an international presence. The proposed Bozell Merger fails to address this basic flaw, and instead devotes additional resources to expanding the Company's already significant presence in the domestic market. Further, by undervaluing the Company and over-valuing Bozell, the Company proposes to pay dearly for this unnecessary acquisition. The Company's failure to establish a global network is a fundamental shortcoming. As global marketers have increasingly demanded worldwide coverage, the Company has continued to focus on the United States and, as a result, Publicis believes that the Company has placed itself at a significant competitive disadvantage to its global competitors. The Offer and the Proposed Publicis Combination directly address the Company's weakness by providing access to the type of integrated global network that today's international advertisers demand. The combination of Publicis with the Company would create a powerful and creative presence in most of the world's significant markets. Publicis believes that the resulting international network would be a market leader in both the United States and Europe with tremendous opportunities for growth around the world and that the strategic benefits of the Proposed Publicis Combination are undeniable and far superior to the Bozell Merger, which ignores the imperatives of the Company's businesses and wastes value upon an unnecessary transaction. Although the Purchaser recognizes that it has had disagreements in the past with the Company, those disagreements have been limited to disagreements with senior management at the holding company level concerning corporate policy. The Purchaser believes that its relations with operational and creative personnel at Foote, Cone & Belding, the Company's principal operating unit, have always been excellent. The Purchaser believes that the mutual interests of both companies' shareholders now require that the differences of senior management be set aside and that the parties work together to maximize stockholder value. The Proposed Publicis Combination contemplates the consolidation of the Company and the Purchaser under one management. In this way, the combined entity will have the tremendous advantage of a strong U.S. and international network, as today's market requires. This structure avoids, however, the difficulties inherent in the joint venture, formed by the Company and the Purchaser in 1989, in which the two companies combined certain of their European operations, which did not achieve its potential because it lacked a clear chain of command and a fully integrated structure. On December 3, 1997, the Board of Directors of the Purchaser approved the commencement of a tender offer for 9,619,904 Shares (the "Initial Offer"). On December 4, 1997, the Purchaser sent a letter to the Board of Directors of the Company informing the Board of the Initial Offer and the Proposed Publicis Combination. The Initial Offer, and the proposal set forth in such letter, were withdrawn prior to commencement because of the Preliminary Injunction Order issued on December 9, 1997 by Judge Joan B. Gottschall of the United States District Court for the Northern District of Illinois (the "District Court"). See Section 10. After the Preliminary Injunction Order was vacated by the United States Court of Appeals for the Seventh Circuit (the "Court of Appeals") on December 15, 1997, the Purchaser commenced the Offer. See Section 10. The making of the Offer will enable the Purchaser to commence the process of seeking regulatory approvals for its acquisition of the Company. See Section 15. In addition, by tendering Shares into the Offer, the Company's stockholders effectively will be given the opportunity to express to the Board of Directors of the Company that they wish to be able to accept the Offer and to approve the Proposed Publicis Combination or a similar transaction with the Company. 3 7 In order to facilitate the consummation of the Offer and the Proposed Publicis Combination, the Purchaser is currently soliciting revocations and conditional proxies of the Company's stockholders in opposition to the consummation of the Bozell Merger and related proposals. Such solicitation is being made only pursuant to separate solicitation materials, preliminary copies of which were filed with the Securities and Exchange Commission (the "Commission") on December 4, 1997 and, after the Court of Appeals vacated the District Court's Preliminary Injunction Order, amended on December 16, 1997. Such solicitation materials comply with the requirements of Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder. The Bozell Merger Agreement provides, among other things, that the Company will not, and will not permit any of its or its subsidiaries' officers, directors or employees, and will use its reasonable best efforts to cause all of its and its subsidiaries' attorneys, financial advisors, agents and other representatives not to, directly or indirectly, solicit, initiate or knowingly encourage (including by way of furnishing information) any Parent Takeover Proposal (as hereinafter defined) or engage in or continue discussions or negotiations relating thereto; provided that the Company may engage in discussions or negotiations with, or furnish information concerning it and its business, properties or assets to, any third party which makes a Parent Takeover Proposal if the Board of Directors of the Company determines, in its good faith judgment, that such third party may ultimately propose a Superior Parent Takeover Proposal (as hereinafter defined); provided, further, that nothing shall prevent the Company or its Board of Directors from taking, and disclosing to its stockholders, a position with regard to any Parent Takeover Proposal. As used in the Bozell Merger Agreement, (i) a "Parent Takeover Proposal" means any proposal or offer, for a tender or exchange offer, a merger, consolidation or other business combination involving the Company or any of its significant subsidiaries or any proposal to acquire in any manner a substantial equity interest in, or a substantial portion of the assets of, the Company or any of its significant subsidiaries; and (ii) "Superior Parent Takeover Proposal" means a bona fide proposal or offer made by a third party to acquire the Company pursuant to an exchange offer, a merger, consolidation or other business combination or sale of all or substantially all of the assets of the Company and its subsidiaries in which the sole consideration to be received by the stockholders of the Company (other than cash for fractional shares or other consideration which is non-material in amount) is the common stock of a widely-held public company which, immediately after the consummation of the transaction, will own (directly or indirectly) all or substantially all of the equity or assets of the Company on terms which a majority of the members of the Board of Directors of the Company, having received the advice of an independent financial advisor, determines in their good faith reasonable judgment to be more favorable to the Company's stockholders than the terms of the transactions contemplated by the Bozell Merger Agreement. Publicis believes that the definition of "Superior Parent Takeover Proposal" set forth in the Bozell Merger Agreement is not enforceable under applicable law and is seeking to invalidate that provision of the Bozell Merger Agreement. See Section 10. The Bozell Merger Agreement further provides that the Company or Bozell may terminate the agreement if (i) the stockholders of the Company do not approve an amendment to the Company's Restated Certificate of Incorporation increasing the number of authorized Shares from 50,000,000 to 90,000,000, the issuance of Shares in the Bozell Merger and the election of directors to the Company's Board of Directors or (ii) the Board of Directors of the Company has reasonably determined that a Parent Takeover Proposal constitutes a Superior Parent Takeover Proposal; provided that the Company may not terminate the Bozell Merger Agreement pursuant to this provision unless and until (A) five business days have elapsed following delivery to Bozell of a written notice of such determination by the Board of Directors of the Company or (B) a tender offer or exchange offer for 30% or more of the outstanding Shares is commenced and the Board of Directors of the Company fails within ten business days following such commencement to recommend against acceptance of such tender offer or exchange offer by its stockholders (including by taking no position with respect to the acceptance of such tender offer or exchange offer by its stockholders); provided, further, that the Company may not terminate the Bozell Merger Agreement pursuant to clause (A) or (B) above unless, simultaneously with such termination, the Company pays to Bozell $15,000,000. Section 5.7(c) of the Bozell Merger Agreement also provides for the payment by the Company to Bozell of a termination fee of $15,000,000 upon demand if (A) the Company terminates the Bozell Merger Agreement pursuant to clause (i) in the immediately preceding paragraph and within six months following 4 8 any such termination a Third Party Parent Acquisition Event (as hereinafter defined) occurs; (B) the Company terminates the Bozell Merger Agreement pursuant to clause (ii) in the immediately preceding paragraph; or (C) the Bozell Merger Agreement is terminated and prior thereto a Third Party Parent Acquisition Event occurred. As used in the Bozell Merger Agreement, a "Third Party Parent Acquisition Event" means any of the following events: (i) any person, corporation, partnership or other entity or group (such person, corporation, partnership or other entity or group being referred to hereinafter, singularly or collectively, as a "Person"), other than Bozell or its subsidiaries, acquires or becomes the beneficial owner of 30% or more of the outstanding Shares; (ii) any new group is formed which, at the time of formation, beneficially owns 30% or more of the outstanding shares (other than a group which includes or may reasonably be deemed to include Bozell or any of its subsidiaries); (iii) the Company enters into an agreement providing for a merger or other business combination involving the Company or the acquisition of a substantial interest in, or substantial portion of the assets, business or operations of, the Company and its subsidiaries (other than the Bozell Merger); or (iv) any Person (other than Bozell or its subsidiaries) is granted any option or right, conditional or otherwise, to acquire or otherwise become the beneficial owner of Shares that results or would result in such Person being the beneficial owner of 30% or more of the outstanding Shares. The Purchaser intends to continue to seek to negotiate with the Company with respect to the Proposed Publicis Combination. The Purchaser reserves the right to amend the Offer (including amending the number of Shares to be purchased, the purchase price and the consideration in the Proposed Publicis Combination) upon entry into an acquisition agreement or other agreement regarding a business combination with the Company or otherwise or to negotiate an acquisition agreement or other agreement regarding a business combination with the Company not involving a tender offer. See Section 14. THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR THE SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS. THE PURCHASER IS CURRENTLY SOLICITING REVOCATIONS AND CONDITIONAL PROXIES OF THE COMPANY'S STOCKHOLDERS IN OPPOSITION TO THE CONSUMMATION OF THE BOZELL MERGER AND RELATED PROPOSALS. SUCH SOLICITATION IS BEING MADE ONLY PURSUANT TO SEPARATE SOLICITATION MATERIALS, PRELIMINARY COPIES OF WHICH WERE FILED WITH THE COMMISSION ON DECEMBER 4, 1997, AND AMENDED ON DECEMBER 15, 1997, WHICH COMPLY WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. CERTAIN CONDITIONS TO THE OFFER The Offer is subject to the fulfillment of certain conditions, including the following: Minimum Condition. CONSUMMATION OF THE OFFER IS CONDITIONED (THE "MINIMUM CONDITION") UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) SHARES, TOGETHER WITH THE SHARES OWNED BY THE PURCHASER AND ITS AFFILIATES, REPRESENTING A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS (ASSUMING THE EXERCISE OR CONVERSION, AS APPLICABLE, OF ALL OUTSTANDING OPTIONS, RIGHTS AND CONVERTIBLE SECURITIES (IF ANY) AND THE ISSUANCE OF ALL SHARES THAT THE COMPANY IS OBLIGATED TO ISSUE). According to the Company's Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), on Form S-4 dated November 26, 1997 (the "Company S-4"), as of November 18, 1997, there were 25,271,533 Shares outstanding. In addition, according to the Company S-4, as of September 1, 1997, 3,227,278 Shares were reserved for issuance upon exercise of outstanding options. Publicis Communication owns 4,658,000 Shares. Substantially all of these Shares were acquired as newly issued Shares in January 1989 at the time that the parties formed their European joint venture. From time to time, Publicis Communication has acquired Shares, but no such acquisitions have occurred in the last two years. See Section 10. 5 9 Based on the foregoing and assuming no additional options or rights exercisable for, or securities convertible into, Shares have been issued since September 1, 1997 and no additional Shares have been issued since November 18, 1997 (other than Shares issued pursuant to the exercise of options issued on or before September 1, 1997), the Purchaser believes that the Minimum Condition would be satisfied if at least 9,619,904 Shares were validly tendered and not withdrawn prior to the Expiration Date. Definitive Agreement Condition. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE COMPANY ENTERING INTO A DEFINITIVE AGREEMENT WITH THE PURCHASER, PUBLICIS COMMUNICATION AND PUBLICIS WORLDWIDE THAT WOULD PROVIDE FOR THE PROPOSED PUBLICIS COMBINATION (THE "DEFINITIVE AGREEMENT CONDITION"). The Purchaser currently intends to extend the Offer from time to time until the Definitive Agreement Condition is satisfied or the Purchaser determines, in its sole discretion, that such condition is not reasonably likely to be satisfied under then current circumstances. The Purchaser may also determine, whether or not the Offer is then pending, to conduct a proxy contest in connection with the Company's 1998 annual meeting of stockholders seeking to remove the current members of the Board of Directors of the Company and elect a new slate of directors designated by the Purchaser. Rights Condition. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE RIGHTS HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY OR THE PURCHASER BEING SATISFIED THAT THE RIGHTS HAVE BEEN INVALIDATED OR OTHERWISE ARE INAPPLICABLE TO THE OFFER AND THE PROPOSED PUBLICIS COMBINATION (THE "RIGHTS CONDITION"). THE RIGHTS ARE DESCRIBED IN THE COMPANY'S REGISTRATION STATEMENT UNDER THE EXCHANGE ACT ON FORM 8-A DATED NOVEMBER 17, 1988 (THE "COMPANY 8-A"), AND SUCH DESCRIPTION IS SUMMARIZED IN SECTION 11. According to the Company 8-A, at any time prior to the tenth business day (subject to extension) after the Shares Acquisition Date (as defined in Section 11), the Company may redeem the Rights in whole, but not in part, at a redemption price of $.005 per Right (such price being the price as adjusted for a two-for-one stock split which was announced by the Company on February 17, 1995 (the "1995 Stock Split")). According to the Company 8-A, until the Distribution Date (as defined in Section 11), the Rights will be represented by and transferred with the associated Shares. According to the Company 8-A, until the Distribution Date (or earlier redemption of the Rights), the surrender for transfer of any certificates representing the Shares will constitute the transfer of the Rights associated with the Shares represented by such certificate. According to the Company 8-A, following the Distribution Date, the Rights become exercisable, and separate certificates evidencing the Rights ("Rights Certificates") will be mailed to the holders of record of the outstanding Shares. Based on publicly available information, the Purchaser believes that as of December 16, 1997, the Rights were not exercisable, Rights Certificates had not been issued and the Rights were evidenced by the Shares. The Purchaser believes that, as a result of the announcement by the Purchaser of the Initial Offer, the Distribution Date will be December 18, 1997, unless prior to such date the Company's Board of Directors redeems the Rights or takes action to delay the Distribution Date. The Distribution Date may also occur sooner. See Section 11. Section 203 Condition. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE PURCHASER BEING SATISFIED THAT SECTION 203 OF THE DELAWARE LAW HAS BEEN COMPLIED WITH IN CONNECTION WITH THE OFFER AND THE PROPOSED PUBLICIS COMBINATION OR IS INAPPLICABLE TO THE PURCHASER IN CONNECTION WITH THE OFFER AND THE PROPOSED PUBLICIS COMBINATION (THE "SECTION 203 CONDITION"). Section 203 of the Delaware Law provides that a Delaware corporation such as the Company may not engage in any "Business Combination" (defined to include a variety of transactions, including a merger) with any "Interested Stockholder" (defined generally as a person that directly or indirectly beneficially owns 15% or more of the corporation's outstanding voting stock), or any affiliate of an Interested Stockholder, for three 6 10 years after the date on which the Interested Stockholder became an Interested Stockholder, unless (i) prior to the date such Interested Stockholder became an Interested Stockholder, the board of directors of such corporation approved either the Business Combination or the transaction which resulted in the stockholder becoming an Interested Stockholder, (ii) upon consummation of the transaction which resulted in the stockholder becoming an Interested Stockholder, the Interested Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding for purposes of determining the number of shares outstanding those shares held by persons who are directors and also officers of the corporation and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer) or (iii) on or subsequent to the date the stockholder becomes an Interested Stockholder, the Business Combination is (a) approved by the board of directors of the corporation and (b) authorized at an annual or special meeting of stockholders by the affirmative vote of the holders of at least 66 2/3% of the outstanding voting stock of the corporation which is not owned by the Interested Stockholder. See Section 11. While the Purchaser believes that Section 203 of the Delaware Law may be inapplicable to the Offer and the Proposed Publicis Combination, the Purchaser is hereby requesting that the Company's Board of Directors adopt a resolution approving the Offer and the Proposed Publicis Combination for purposes of Section 203 of the Delaware Law. However, there can be no assurance that the Company's Board of Directors will do so. No Impediments Condition. CONSUMMATION OF THE OFFER IS CONDITIONED UPON THE BOZELL MERGER AGREEMENT HAVING BEEN TERMINATED WITHOUT ANY PAYMENTS BY OR PENALTIES TO THE COMPANY (OTHER THAN ANY APPLICABLE PAYMENTS PURSUANT TO SECTION 5.7(c) OF THE BOZELL MERGER AGREEMENT) AND THE COMPANY NOT HAVING ENTERED INTO OR EFFECTUATED ANY NEW OR AMENDED AGREEMENTS WITH BOZELL OR ANY OTHER PERSON OR ENTITY HAVING THE EFFECT OF IMPAIRING THE ABILITY OF THE PURCHASER TO CONSUMMATE THE OFFER OR THE PROPOSED PUBLICIS COMBINATION OR OTHERWISE DIMINISHING THE EXPECTED ECONOMIC VALUE TO THE PURCHASER OF THE SHARES PURCHASED IN THE OFFER OR THE PROPOSED PUBLICIS COMBINATION (THE "NO IMPEDIMENTS CONDITION"). Certain other conditions to the consummation of the Offer are described in Section 14. The Purchaser expressly reserves the right to waive any one or more of the conditions to the Offer. See Sections 14 and 15. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE TENDER OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and thereby purchase the Maximum Number of Shares validly tendered and not withdrawn in accordance with the procedures set forth in Section 4 on or prior to the Expiration Date (as hereinafter defined). The term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday, January 15, 1998, unless and until the Purchaser, in its sole discretion, shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the time and date at which the Offer, as so extended by the Purchaser, shall expire. Upon the terms and subject to the conditions of the Offer, if more than the Maximum Number of Shares shall be validly tendered and not withdrawn prior to the Expiration Date, the Purchaser will purchase the Maximum Number of Shares on a pro rata basis (with adjustments to avoid purchases of fractional Shares) based upon the number of Shares validly tendered and not withdrawn prior to the Expiration Date. Because of the difficulty of determining the precise number of Shares properly tendered and not withdrawn, if proration is required, the Purchaser may not be able to announce the final proration factor until approximately six NYSE trading days after the Expiration Date. Preliminary results of proration will be 7 11 announced by press release as promptly as practicable after the Expiration Date. Stockholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from brokers, dealers, commercial banks and trust companies. The Purchaser will not pay for any Shares accepted for payment pursuant to the Offer until the final proration factor is known. The Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, to extend the period during which the Offer is open for any reason, including the occurrence of any of the events specified in Section 14, by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer and subject to the right of a tendering stockholder to withdraw such stockholder's Shares. See Section 4. Subject to the applicable regulations of the Commission, the Purchaser also expressly reserves the right, in its sole discretion, at any time or from time to time, to (i) delay acceptance for payment of or, regardless of whether such Shares were theretofore accepted for payment, payment for any Shares pending receipt of any regulatory or governmental approvals specified in Section 15, (ii) terminate the Offer (whether or not any Shares have theretofore been accepted for payment) if any condition referred to in Section 14 has not been satisfied or upon the occurrence of any event specified in Section 14 and (iii) waive any condition or otherwise amend the Offer in any respect, in each case, by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and, other than in the case of any such waiver, by making a public announcement thereof. The Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires the Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) the Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the preceding sentence or if proration is required as described above), any Shares upon the occurrence of any event specified in Section 14 without extending the period of time during which the Offer is open. The rights reserved by the Purchaser in the preceding paragraph are in addition to the Purchaser's rights pursuant to Section 14. Any such extension, delay, termination or amendment will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Purchaser may choose to make any public announcement, subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to holders of Shares), the Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. If the Purchaser makes a material change in the terms of the Offer, or if it waives a material condition to the Offer, the Purchaser will extend the Offer and disseminate additional tender offer materials to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer, other than a change in price or a change in percentage of securities sought or a change in any dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality, of the changes. In the Commission's view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders, and, if material changes are made with respect to information that approaches the significance of price and the percentage of securities sought, a minimum of ten business days may be required to allow for adequate dissemination and investor response. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought or a change in any dealer's soliciting fee, a minimum ten business day period from the date of such change is generally required to allow for adequate dissemination to stockholders. The Purchaser reserves the right (but shall not be obligated) to accept for payment more than the Maximum Number of Shares pursuant to the Offer. The Purchaser has no present intention of exercising such right. If a number of additional Shares in excess of two percent of the outstanding Shares is to be accepted for payment, and, at the time notice of the Purchaser's decision to accept for payment such additional Shares is first published, sent or given to holders of Shares, the Offer is scheduled to expire at any time earlier than the tenth business day from the date that such notice is so published, sent or given, the Offer will be extended until the expiration of such period of ten business days. Additionally, if prior to the 8 12 Expiration Date, the Purchaser increases or decreases the number of Shares being sought, or increases or decreases the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from the date that notice of such increase or decrease is first published, sent or given to holders of Shares, the Offer will be extended at least until the expiration of such ten business day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. Unless and until the Purchaser declares that the Rights Condition is satisfied, stockholders will be required to tender one associated Right for each Share tendered to effect a valid tender of such Share. See Sections 3 and 11. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OF THE MINIMUM CONDITION, THE DEFINITIVE AGREEMENT CONDITION, THE RIGHTS CONDITION, THE SECTION 203 CONDITION AND THE NO IMPEDIMENTS CONDITION. SEE SECTION 14. The Purchaser reserves the right (but shall not be obligated), in accordance with applicable rules and regulations of the Commission, to waive any or all of such conditions. If, by the Expiration Date, any or all of such conditions have not been satisfied, the Purchaser may, in its sole discretion, elect to (i) extend the Offer and, subject to applicable withdrawal rights, retain all tendered Shares until the expiration of the Offer, as extended, subject to the terms of the Offer, (ii) waive all of the unsatisfied conditions and, subject to complying with applicable rules and regulations of the Commission, accept for payment all Shares so tendered and not extend the Offer or (iii) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders. In the event that the Purchaser waives any condition set forth in Section 14, the Commission may, if the waiver is deemed to constitute a material change to the information previously provided to the stockholders, require that the Offer remain open for an additional period of time and/or that the Purchaser disseminate information concerning such waiver. On November 19, 1997, Publicis made a request to the Company pursuant to the Delaware Law for the use of the Company's stockholder list, its list of holders of Rights and security position listings for the purpose of disseminating the Offer to holders of Shares. Upon compliance by the Company with such request, this Offer to Purchase and the related Letter of Transmittal and, if required, other relevant materials will be mailed to record holders of Shares and Rights and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list and list of holders of Rights, if applicable, or who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares and Rights. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the Offer as so extended or amended), the Purchaser will purchase, by accepting for payment, and will pay for, the Maximum Number of Shares validly tendered and not withdrawn (as permitted by Section 4) prior to the Expiration Date promptly after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions to the Offer set forth in Section 14. In addition, subject to applicable rules of the Commission, the Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory or governmental approvals specified in Section 15. For information with respect to approvals required to be obtained prior to the consummation of the Offer, including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the European Community Regulation 4064/89 (the "EC Merger Regulation"), see Section 15. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Share Certificates for such Shares and, if applicable, Rights Certificates for the associated Rights, or, in the case of Shares, timely confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such Shares and, if applicable, Rights into the Depositary's account at The Depository Trust Company or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof), 9 13 properly completed and duly executed, with any required signature guarantees, or, in the case of Shares, an Agent's Message (as defined below) in connection with a book-entry transfer and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares and, if applicable, the Rights which are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. Payment for the Shares accepted for payment pursuant to the Offer will be delayed in the event of proration due to the difficulty of determining the number of Shares validly tendered and not withdrawn. See Section 1. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to validly tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE PURCHASER. If any tendered Shares are not purchased pursuant to the Offer for any reason (including proration due to tenders of Shares pursuant to the Offer in excess of the Maximum Number of Shares), or if Share Certificates are submitted representing more Shares than are tendered, Share Certificates representing unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained within such Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. In the event separate Rights Certificates are issued, similar action will be taken with respect to unpurchased and untendered Rights. IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN CONSIDERATION. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of the Purchaser's subsidiaries or affiliates the right to purchase all or any portion of the Shares and Rights tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES AND RIGHTS. VALID TENDER OF SHARES AND RIGHTS Except as set forth below, in order for Shares and (prior to the Distribution Date) Rights to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of Shares, an Agent's Message in connection with a book-entry delivery of Shares and (prior to the Distribution Date) Rights, and any other documents required by the Letter of Transmittal must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date and either (i) Share Certificates and, if applicable, Rights Certificates representing tendered Shares and Rights must be received 10 14 by the Depositary, or such Shares and Rights must be tendered pursuant to the procedure for book-entry transfer set forth below and Book-Entry Confirmation must be received by the Depositary, in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedures set forth below must be complied with. IF THE PURCHASER DECLARES THAT THE RIGHTS CONDITION IS SATISFIED, THE PURCHASER WILL NOT REQUIRE DELIVERY OF RIGHTS, UNLESS AND UNTIL THE PURCHASER DECLARES THAT THE RIGHTS CONDITION IS SATISFIED, HOLDERS OF SHARES WILL BE REQUIRED TO TENDER ONE ASSOCIATED RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF APPLICABLE), THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. SEPARATE DELIVERY OF RIGHTS CERTIFICATES If the Distribution Date does not occur prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date occurs and Rights Certificates are distributed by the Company to holders of Shares prior to the time a holder's Shares are tendered pursuant to the Offer, in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary or, if available in the case of Rights, a Book-Entry Confirmation received by the Depositary with respect thereto. If the Distribution Date occurs and Rights Certificates are not distributed prior to the time Shares are tendered pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedure described below. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within three business days after the date Rights Certificates are distributed. The Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if available in the case of Rights, with respect to such Rights, prior to accepting the related Shares for payment pursuant to the Offer if the Distribution Date occurs prior to the Expiration Date. BOOK-ENTRY TRANSFER The Depositary will make a request to establish accounts with respect to the Shares at each of the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make Book-Entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be complied with. If the Distribution Date occurs, the Depositary will also make a request to establish an account with respect to the Rights at each of the Book-Entry Transfer Facilities, but no assurance can be given that book-entry delivery of Rights will be available. If book-entry delivery of Rights is available, the foregoing book-entry transfer procedures will also apply to Rights. Otherwise, if Rights Certificates have been issued, a tendering 11 15 stockholder will be required to tender Rights by means of physical delivery to the Depositary of Rights Certificates (in which event references in this Offer to Purchase to Book-Entry Confirmations with respect to Rights will be inapplicable) or pursuant to the guaranteed delivery procedure set forth below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES Signatures on all Letters of Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program (an "Eligible Institution"), unless the Shares and Rights tendered thereby are tendered (i) by a registered holder of Shares and Rights who has not completed either the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If the Share Certificates or Rights Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made to, or Share Certificates or Rights Certificates for unpurchased Shares or Rights are to be issued or returned to, a person other than the registered holder, then the tendered certificates must be endorsed or accompanied by appropriate stock powers, signed exactly as the name or names of the registered holder or holders appear on the certificates, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution as provided in the appropriate Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal. If the Share Certificates and Rights Certificates are forwarded separately to the Depositary, a properly completed and duly executed appropriate Letter of Transmittal (or facsimile thereof) must accompany each such delivery. GUARANTEED DELIVERY If a stockholder desires to tender Shares and Rights pursuant to the Offer and such stockholder's Share Certificates or, if applicable, Rights Certificates are not immediately available (including, if the Distribution Date has occurred, because Rights Certificates have not yet been distributed by the Company) or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date, or, in the case of Shares, the procedures for book-entry transfer cannot be completed on a timely basis, such Shares or Rights may nevertheless be tendered if all of the following guaranteed delivery procedures are duly complied with: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, is received by the Depositary, as provided below, on or prior to the Expiration Date; and (iii) the Share Certificates and Rights Certificates (or, in the case of book entry transfer of Shares and, if available, Rights, a Book-Entry Confirmation) representing all tendered Shares and Rights, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer of Shares and, if available, Rights, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within (x) in the case of Shares, three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery or (y) in the case of Rights, a period ending on the later of (1) three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery and (2) three business days after the date Rights Certificates are distributed to stockholders by the Company. 12 16 The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of Share Certificates for, or, in the case of Shares, of Book-Entry Confirmation with respect to, such Shares, and if the Distribution Date has occurred, Rights Certificates for, or a Book-Entry Confirmation, if available, with respect to, the associated Rights (unless the Purchaser elects, in its sole discretion, to make payment for such Shares pending receipt of the Rights Certificates for, or a Book-Entry Confirmation, if available, with respect to, such Rights), a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer of Shares or, if available, Rights, an Agent's Message) and any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering stockholders at the same time, and will depend upon when Share Certificates (or Rights Certificates) are received by the Depositary or Book-Entry Confirmations of the Shares (or Rights, if available) are received into the Depositary's account at a Book-Entry Transfer Facility. If the Rights Condition is satisfied, the guaranteed delivery procedure with respect to Rights Certificates and the requirement for the tender of Rights will no longer apply. BACKUP FEDERAL INCOME TAX WITHHOLDING UNDER THE BACKUP FEDERAL INCOME TAX WITHHOLDING APPLICABLE TO CERTAIN STOCKHOLDERS (OTHER THAN CERTAIN EXEMPT STOCKHOLDERS, INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS), THE DEPOSITARY MAY BE REQUIRED TO WITHHOLD 31% OF THE AMOUNT OF ANY PAYMENTS MADE TO SUCH STOCKHOLDERS PURSUANT TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. APPOINTMENT AS PROXY By executing the Letter of Transmittal, a tendering stockholder irrevocably appoints designees of the Purchaser, and each of them, as such stockholder's attorneys-in-fact and proxies, with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares and, if applicable, Rights tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or Rights and other securities or rights issued or issuable in respect of such Shares and Rights on or after the date of this Offer to Purchase. All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest in the tendered Shares and Rights. Such appointment will be effective upon the acceptance for payment of such Shares and Rights by the Purchaser in accordance with the terms of the Offer. Upon such acceptance for payment, all other powers of attorney and proxies given by such stockholder with respect to such Shares, Rights, and such other securities or rights prior to such payment will be revoked, without further action, and no subsequent powers of attorney and proxies may be given by such stockholder (and, if given, will not be deemed effective). The designees of the Purchaser will, with respect to the Shares and Rights and such other securities and rights for which such appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders, or any adjournment or postponement thereof, or by consent in lieu of any such meeting or otherwise. In order for Shares and Rights to be deemed validly tendered, immediately upon the acceptance for payment of such Shares and Rights, the Purchaser or its designee must be able to exercise full voting rights with respect to such Shares, Rights and other securities, including voting at any meeting of stockholders. 13 17 DETERMINATION OF VALIDITY All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares or Rights will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender of Shares or Rights of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Shares or Rights will be deemed to have been validly made until all defects and irregularities with respect to such tender have been cured or waived by the Purchaser. None of the Purchaser or any of its affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person or entity will be under any duty to give any notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's acceptance for payment of Shares and, if applicable, Rights tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares and Rights made pursuant to the Offer are irrevocable. Shares and Rights tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment as provided herein, may also be withdrawn at any time after February 13, 1998 (or such later date as may apply in case the Offer is extended). A withdrawal of Shares will also constitute a withdrawal of the associated Rights. Rights may not be withdrawn unless the associated Shares are also withdrawn. If, for any reason whatsoever, acceptance for payment of any Shares and Rights tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept for payment or pay for Shares and Rights tendered pursuant to the Offer, then, without prejudice to the Purchaser's rights set forth herein, the Depositary may, nevertheless, on behalf of the Purchaser and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Shares and Rights and such Shares and Rights may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in this Section 4. Any such delay will be by an extension of the Offer to the extent required by law. In order for a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares and Rights to be withdrawn, the number of Shares and Rights to be withdrawn, and (if Share Certificates and Rights Certificates have been tendered) the name of the registered holder of the Shares and Rights as set forth in the Share Certificate and Rights Certificate, if different from that of the person who tendered such Shares and Rights. If Share Certificates and Rights Certificates have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the tendering stockholder must submit the serial numbers shown on the particular certificates evidencing the Shares and Rights to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Shares and Rights tendered for the account of an Eligible Institution. If Shares and Rights have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and Rights, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. Withdrawals of Shares and Rights may not be rescinded. Any Shares and Rights properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3. 14 18 All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding. None of the Purchaser or any of its affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person or entity will be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN UNITED STATES TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer will be a taxable transaction for federal income tax purposes and may also be a taxable transaction under applicable state, local, foreign and other tax laws. For federal income tax purposes, each selling stockholder would generally recognize gain or loss equal to the difference between the amount of cash received and such stockholder's adjusted tax basis for the sold Shares (together with the Rights). Such gain or loss will be capital gain or loss (assuming the Shares are held as a capital asset) and any such capital gain or loss will be long term if, as of the date of sale, the Shares were held for more than one year or will be short term if, as of such date, the Shares were held for one year or less. For individuals and certain other non-corporate taxpayers, there is also a mid-term holding period of more than one year, but not more than 18 months. The Proposed Publicis Combination will be a reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). Under the Code and the Treasury Regulations promulgated thereunder (the "Treasury Regulations") currently in force, the Proposed Publicis Combination will not be a taxable transaction for the Company or its stockholders. For United States federal income tax purposes, it is unclear whether amounts received with respect to the redemption of Rights by the Company should be treated as additional consideration for the Shares or as a dividend or other ordinary income or as capital gain. The foregoing discussion may not be applicable to certain stockholders of the Company, including persons who acquired Shares pursuant to the exercise of employee stock options or otherwise as compensation, individuals who are not citizens or residents of the United States and foreign corporations, persons holding Shares in a straddle, hedging, or conversion transaction, and entities that are otherwise subject to special tax treatment (such as broker-dealers, insurance companies, tax-exempt organizations, financial institutions and passthrough entities). Unless a stockholder complies with certain reporting and/or certification procedures or is an exempt recipient under applicable provisions of the Code and Treasury Regulations, such stockholder may be subject to withholding tax of 31% with respect to any cash payments received pursuant to the Offer. Stockholders should consult their brokers or the Depositary to ensure compliance with such procedures. Foreign stockholders should consult with their own tax advisors regarding withholding taxes in general. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED ON THE CODE AND TREASURY REGULATIONS CURRENTLY IN FORCE WHICH MAY BE AMENDED AT ANY TIME, POSSIBLY WITH RETROACTIVE EFFECT. EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE OFFER AND PROPOSED PUBLICIS COMBINATION, INCLUDING FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES. 15 19 6. PRICE RANGE OF THE SHARES; DIVIDENDS. According to the Company S-4, the Shares are listed and traded on the NYSE under the symbol "TNO." The following table sets forth, for the periods indicated, the reported high and low sales prices for the Shares on the NYSE Composite Tape and the amount of cash dividends paid per Share, as reported in the Company S-4 with respect to periods occurring before the fourth quarter of 1997, and as reported by published financial sources with respect to the fourth quarter of 1997. TRUE NORTH COMMUNICATIONS INC.
CASH HIGH LOW DIVIDENDS ---- ---- --------- 1995 First Quarter.............................................. $ 21 13/16 $ 15 3/4 $ .15 Second Quarter............................................. 20 1/4 7 5/8 .15 Third Quarter.............................................. 20 1/2 19 .15 Fourth Quarter............................................. 20 5/8 18 .15 1996 First Quarter.............................................. 25 16 3/8 .15 Second Quarter............................................. 27 22 1/4 .15 Third Quarter.............................................. 23 3/4 16 3/4 .15 Fourth Quarter............................................. 24 19 1/2 .15 1997 First Quarter.............................................. 22 3/8 18 .15 Second Quarter............................................. 24 3/4 17 .15 Third Quarter.............................................. 26 3/4 22 1/4 .15 Fourth Quarter (through December 12, 1997)................. 26 7/8 22 9/16 .15
On July 30, 1997, the last trading day prior to the public announcement of the execution of the Bozell Merger Agreement, according to the Company S-4, the last reported sale price on the NYSE Composite Tape for the Shares was $23 1/16 per Share. On November 14, 1997, the last full day of trading prior to the announcement by Publicis of its opposition to the Bozell Merger and its proposal for a business combination with the Company at a value of $28 per Share, according to published financial sources, the last reported sale price on the NYSE Composite Tape for the Shares was $23 3/8 per Share. On December 3, 1997, the last full day of trading prior to the announcement of the Offer, according to published financial sources, the last reported sale price on the NYSE Composite Tape for the Shares was $25 1/8 per Share. On December 9, 1997, the last full day of trading prior to the issuance of the District Court's Preliminary Injunction Order enjoining the Initial Offer, according to published financial sources, the last reported sale price on the NYSE Composite Tape for the Shares was $26 5/16 per Share. On December 12, 1997, the last full day of trading before the Court of Appeals vacated the District Court's Preliminary Injunction Order enjoining the Initial Offer, according to published financial sources, the last reported sale price on the NYSE Composite Tape for the Shares was $24 15/16 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. The Purchaser believes, based upon publicly available information, that as of the date of this Offer to Purchase, the Rights are listed on the NYSE and all Rights are attached to the associated Shares and are not traded separately. As a result, the sale prices per Share set forth above are also the high and low sale prices per Share and associated Right during all such periods. Upon the occurrence of the Distribution Date, the Rights are to detach, and may trade separately, from the Shares. See Section 11. The Purchaser believes that, as a result of the announcement by the Purchaser of the Initial Offer, the Distribution Date will be December 18, 1997, unless prior to such date the Company's Board of Directors redeems the Rights or takes action to delay the Distribution Date. The Distribution Date may also occur sooner. See Section 11. IF THE DISTRIBUTION DATE OCCURS AND THE RIGHTS BEGIN TO TRADE SEPARATELY FROM THE SHARES, STOCKHOLDERS ARE ALSO URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE RIGHTS. 16 20 7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. The purchase of Shares pursuant to the Offer can also be expected to reduce the number of holders of Shares. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer price therefor. STOCK EXCHANGE LISTING According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the number of record holders of at least 100 Shares should fall below 1,200, the number of publicly held Shares (exclusive of holdings of officers, directors, their immediate families and other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall below 600,000 or the aggregate market value of publicly held Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000. The Purchaser believes that following the consummation of the Offer and the Proposed Publicis Combination, the Shares will continue to meet the requirements for listing on the NYSE. In the event, however, that the Shares were no longer listed or traded on the NYSE, it is possible that the Shares would trade on another securities exchange or in the over-the-counter market and that price quotations would be reported by such exchange, through the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or other sources. Such trading and the availability of such quotations would, however, depend upon the number of stockholders and/or the aggregate market value of the Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act as described below and other factors. EXCHANGE ACT REGISTRATION The Shares are currently registered under the Exchange Act. The Purchaser believes that following the consummation of the Offer and the Proposed Publicis Combination, the Shares will continue to be registered under the Exchange Act. Registration of the Shares, however, may be terminated upon application by the Company to the Commission if the Shares are not listed on a "national securities exchange" and there are fewer than 300 record holders of Shares. The Purchaser does not intend to cause the Company to make application to the Commission to deregister the Shares. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirements of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) or 14(c) and the related requirement of an annual report, no longer applicable to the Company. If the Shares are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions would no longer be applicable to the Company. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act may be impaired or, with respect to certain persons, eliminated. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or eligible for stock exchange listing or NASDAQ reporting. Based upon publicly available information, the Purchaser believes that, as of the date of this Offer to Purchase, the Rights are registered under the Exchange Act and are listed on the NYSE, but are attached to the Shares and are not separately transferable. The Purchaser believes that, as a result of the announcement 17 21 by the Purchaser of the Initial Offer, the Distribution Date will be December 18, 1997, unless prior to such date the Company's Board of Directors redeems the Rights or takes action to delay the Distribution Date. The Distribution Date may also occur sooner. See Section 11. According to the Company 8-A, following the Distribution Date, certificates evidencing the Rights will be sent to all holders of Rights and Rights will become transferable apart from the Shares. See Section 11. If the Distribution Date occurs and the Rights separate from the Shares, the foregoing discussion with respect to the effect of the Offer on the market for the Shares, stock exchange listings and Exchange Act registration would apply to the Rights in a similar manner. MARGIN REGULATIONS The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System, which have the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying or trading in securities. The Purchaser does not believe that the consummation of the Offer or the Proposed Publicis Combination will have any effect on the status of the Shares as "margin securities". 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a Delaware corporation with its principal executive offices located at 101 East Erie Street, Chicago, Illinois, 60611. The following description of the Company's business has been taken from the Company S-4: True North is a communications company which is the holding company for Foote, Cone & Belding, a global advertising agency network, and certain additional marketing services agencies or companies. True North's other operating units are TN Technologies Holdings, Inc. and True North Associated Communications Companies. TN Technologies Holdings, Inc. is a digital interactive marketing holding company for Modem Media Advertising Limited Partnership, RGA Interactive and Cf2GS. True North Associated Communications Companies are stand-alone companies specializing in marketing services. The companies include Wahlstrom, a yellow pages and directory agency network with six offices; Tierney & Partners, the largest advertising agency in Philadelphia; Borders, Perrin & Norrander, an advertising agency in the Pacific Northwest; and Market Growth Resources, a sales promotion agency with a niche in retail specific programs. The selected financial information of the Company and its consolidated subsidiaries set forth below has been excerpted and derived from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997. More comprehensive financial and other information is included in such reports (including management's discussion and analysis of results of operations and financial position) and in other reports and documents filed by the Company with the Commission and the financial information set forth below is qualified in its entirety by reference to such reports and documents filed with the Commission and all of the financial statements and related notes contained therein. These reports and other documents may be examined and copies thereof may be obtained in the manner set forth below. 18 22 SELECTED FINANCIAL DATA OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS NINE MONTHS ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996 1996 1995 1994 (UNAUDITED) (UNAUDITED) ------------ ------------ ------------ ------------- ------------- REVENUES.......................... $493,050 $439,053 $403,690 $ 444,551 $ 350,166 Costs and Expenses: Salaries and Employee Benefits..................... 318,539 280,619 248,955 286,321 230,623 Office and General Expenses..... 150,115 128,459 116,903 133,180 109,586 Other (Income) Expense, Net..... 5,182 15,224 1,836 6,686 2,162 -------- -------- -------- -------- -------- $473,836 $424,302 $367,694 $ 426,187 $ 342,371 -------- -------- -------- -------- -------- INCOME BEFORE PROVISION FOR INCOME TAXES........................... $ 19,214 $ 14,751 $ 35,996 $ 18,364 $ 7,795 Provision for Federal, Foreign and State Income Taxes.............. 9,697 3,705 16,068 8,778 3,914 -------- -------- -------- -------- -------- $ 9,517 $ 11,046 $ 19,928 $ 9,586 $ 3,881 Minority Interest Income (Expense)....................... 31 (558) 146 (786) 358 Equity in Earnings of Affiliated Companies....................... 18,286 9,165 10,203 5,423 7,121 -------- -------- -------- -------- -------- NET INCOME........................ $ 27,834 $ 19,653 $ 30,277 $ 14,223 $ 11,360 ======== ======== ======== ======== ======== Net Income Per Share.............. $ 1.20 $ .87 $ 1.34 $ .58 $ .49 ======== ======== ======== ======== ======== Weighted Average Number of Common and Common Equivalent Shares Outstanding..................... 23,254 22,542 22,678 24,397 23,228 ======== ======== ======== ======== ========
19 23 CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1997 1996 1995 (UNAUDITED) ------------ ------------ ------------- ASSETS Cash and Short-term Investments...................... $ 56,996 $ 56,981 $ 43,101 Accounts Receivable, Net............................. 402,786 333,038 481,226 Other Current Assets................................. 44,464 39,970 65,774 -------- -------- ---------- Total Current Assets................................. $504,246 $429,989 $ 590,101 Property and Equipment, Net.......................... 61,369 54,626 63,699 Goodwill............................................. 151,640 84,934 230,543 Investment in Affiliated Companies................... 202,397 187,456 163,135 Other Noncurrent Assets.............................. 13,008 9,097 19,492 -------- -------- ---------- Total Assets......................................... $932,660 $766,102 $ 1,066,970 ======== ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable and Accruals........................ $417,054 $371,767 $ 568,550 Short-term Bank Borrowings........................... 79,698 49,982 67,015 Liability for Federal and Foreign Taxes on Income.... 2,312 1,810 -- Current Portion of Long-term Debt.................... 270 199 1,524 Accrued Expenses..................................... 53,857 52,734 -- -------- -------- ---------- Total Current Liabilities............................ $553,191 $476,492 $ 637,089 -------- -------- ---------- Long-term Debt....................................... $ 31,513 $ 5,402 $ 65,885 Liability for Deferred Compensation.................. 44,501 36,538 41,837 Other Noncurrent Liabilities......................... 37,727 25,576 47,004 Obligation to Modem Media Partners................... 24,387 -- -- -------- -------- ---------- Total Noncurrent Liabilities......................... $138,128 $ 67,516 $ 154,726 -------- -------- ---------- Common Stock......................................... $ 7,957 $ 7,830 $ 8,480 Paid-in Capital...................................... 123,740 116,483 156,416 Retained Earnings.................................... 119,399 105,800 122,368 Less-Treasury Stock.................................. (4,553) (2,661) (5,155) Cumulative Translation Adjustment.................... (5,202) (5,358) (6,954) -------- -------- ---------- Total Stockholders' Equity........................... $241,341 $222,094 $ 275,155 -------- -------- ---------- Total Liabilities and Stockholders' Equity........... $932,660 $766,102 $ 1,066,970 ======== ======== ==========
The Company is subject to the information and reporting requirements of the Exchange Act and in accordance therewith is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Certain information, as of particular dates, concerning the Company's business, principal physical properties, capital structure, material pending legal proceedings, operating results, financial condition, directors and officers (including their remuneration and the stock options granted to them), the principal holders of the Company's securities, any material interests of such persons in transactions with the Company and certain other matters is required to be disclosed in proxy statements and annual reports distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information may be inspected and copied at the Commission's public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for inspection at the following regional offices of the Commission: 7 World Trade Center, New York, New York 10048; and 500 West Madison Street, Chicago, Illinois 60661-2511; and copies may be obtained by mail at prescribed rates from the principal office of the Commission at 450 Fifth Street, 20 24 N.W., Washington, D.C. 20549. The Commission maintains a Website on the Internet that contains reports, proxy statements and other information (http://www.sec.gov). Reports, proxy statements and other information concerning the Company also should be available for inspection at the NYSE, 20 Broad Street, New York, New York 10005. Although the Purchaser has no knowledge that any such information is untrue, the Purchaser takes no responsibility for the accuracy or completeness of information contained in this Offer to Purchase with respect to the Company or any of its subsidiaries or affiliates or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information. 9. CERTAIN INFORMATION CONCERNING THE PURCHASER. The Purchaser is a societe anonyme organized under the laws of France with its principal executive offices located at 133, Avenue des Champs Elysees, 75008 Paris, France. The Purchaser controls one of Europe's largest advertising networks, with offices in 58 countries and 99 cities. Publicis Communication and Publicis Worldwide are the holding companies for the Purchaser's advertising activities. Principal shareholdings of Publicis Communication and Publicis Worldwide include Publicis Conseil Group (umbrella unit for all agencies and specialized firms in France), Publicis FCB Europe Group (European agency network), Publicis/Bloom (US agency), Publicis Centre Media (media buying arm in France), and Publicis Consultants (new business strategy consultancy). The group of companies owned by Publicis Communication and Publicis Worldwide provide global advertising services in France and abroad. In addition to traditional advertising agency services, customers of Publicis are also provided a range of support services, including research, crisis management, public relations, financial advertising, design, in-house communications and recruitment advertising, direct marketing, sales promotion, and graphic and artwork services. The Purchaser is not subject to the information and reporting requirements of the Exchange Act and therefore does not file periodic reports or other information with the Commission relating to its business, financial condition or other matters. Set forth below is certain selected consolidated financial data with respect to the Purchaser and its subsidiaries excerpted or derived from audited consolidated financial statements and notes thereto published by the Purchaser for the three years ended December 31, 1996, 1995 and 1994 and from unaudited consolidated financial statements published by the Purchaser for the six-month periods ended June 30, 1997 and 1996 (collectively, the "Purchaser Financial Statements"). The following summary of the Purchaser Financial Statements is qualified in its entirety by reference to the full text of the Purchaser Financial Statements, copies of which are attached as exhibits to the Schedule 14D-1/13D Amendment of the Purchaser filed with the Commission in connection with the Offer (the "Schedule 14D-1") and are incorporated in this Offer to Purchase by reference and may be inspected in the same manner as set forth with respect to the Company in Section 8. The Purchaser Financial Statements are presented in French francs ("FFR") and are prepared in accordance with accounting principles generally accepted in France ("French GAAP") and not in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). French GAAP differs in certain respects from U.S. GAAP. A summary description of the principal differences between French GAAP and U.S. GAAP relevant to the Purchaser is set forth in Schedule II of this Offer to Purchase. On December 31, 1996, December 29, 1995, December 30, 1994, June 30, 1997 and June 28, 1996, respectively, the noon US dollar buying rate in New York City for cable transfers in FFR, as certified for customs purposes by the Federal Reserve Bank of New York, was US $1.0 per FFR 5.193, FFR 4.898, FFR 5.345, FFR 5.875 and FFR 5.144, respectively. 21 25 SELECTED FINANCIAL DATA OF THE PURCHASER AND ITS CONSOLIDATED SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (FFR IN THOUSANDS)
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1996 1996 1995 1994 (UNAUDITED) (UNAUDITED) ------------- ------------- ------------- ---------------- ---------------- French GAAP: REVENUES............ FFR 3,746,074 FFR 3,649,355 FFR 3,438,714 FFR 2,030,192 FFR 1,828,444 Payroll expenses.... (2,033,681) (1,992,398) (1,850,426) (1,157,791) (995,586) Administrative expenses.......... (1,096,932) (1,073,203) (1,006,654) (597,416) (528,429) Total expenses...... (3,130,613) (3,065,601) (2,857,080) (1,755,207) (1,524,015) Other operating income............ 62,492 77,003 76,389 29,755 32,521 EARNINGS BEFORE DEPRECIATION, INTEREST AND TAXES............. 677,953 660,757 658,023 304,740 336,950 Current income...... 461,053 453,876 427,541 148,690 148,977 Total net income.... 338,588 308,389 221,586 148,690 153,977 GROUP NET INCOME (EXCLUDING MINORITY INTERESTS)........ 185,531 152,726 120,456 92,935 78,611 US GAAP: GROUP NET INCOME (EXCLUDING MINORITY INTERESTS)........ 171,369 139,948 128,248 85,891 69,886
22 26 CONSOLIDATED BALANCE SHEETS (FFR IN THOUSANDS)
JUNE 30, DECEMBER 31, DECEMBER 31, 1997 1996 1995 (UNAUDITED) ------------- ------------- ------------- French GAAP: ASSETS Fixed assets................................ FFR 1,785,704 FFR 1,634,341 FFR 2,006,185 Intangible and tangible fixed assets, net... 1,224,908 1,284,452 1,568,457 Long-term investments, net.................. 560,796 349,889 437,728 Current assets.............................. 5,753,259 5,607,947 6,140,041 Prepaid expenses............................ 72,485 78,766 79,829 Total Assets................................ 7,611,448 7,321,054 8,226,055 LIABILITIES AND SHAREHOLDERS' EQUITY Consolidated shareholders' equity........... FFR 2,397,066 FFR 2,180,288 FFR 2,319,805 Shareholders' equity........................ 1,558,736 1,421,971 1,764,539 Minority interests.......................... 838,330 758,317 555,266 Loss and contingency provisions............. 363,334 395,108 395,029 Current liabilities......................... 4,753,894 4,654,365 5,320,938 Other accruals.............................. 97,154 91,293 190,283 Total liabilities........................... 7,611,448 7,321,054 8,226,055 US GAAP: Consolidated shareholders' equity........... 1,553,746 1,409,944 1,752,802
The largest shareholder of the Purchaser is Somarel, Societe Civile Familiale ("Somarel"), which is a family-held private company organized under the laws of France with its principal office located at 23, rue Alberic Majnard, 75016 Paris, France. Somarel is a company organized by the founder of Publicis and exists solely for the purpose of holding 3,095,640 shares of capital stock of the Purchaser, which shares represent 38.23% and 47.20% of the outstanding ownership and voting rights, respectively, of the Purchaser. The name, business address, citizenship, present principal occupation and employment history for the past five years of each of the directors and executive officers of the Purchaser and Somarel are set forth in Schedule I of this Offer to Purchase. In 1989, Publicis and the Company formed a joint venture in which the two companies combined certain of their European operations. As part of the formation of the joint venture, the parties became stockholders of one another. Publicis Communication became a 20% stockholder of the Company, and the Company became a 26% stockholder of Publicis Communication. With respect to the joint venture and the cross stockholders of Publicis Communication and the Company, the parties entered into, among other agreements, a Master Alliance Agreement and a Stockholders Agreement, each dated January 1, 1989 (together, the "Joint Venture Agreements"). As of the date of this Offer to Purchase, Publicis Communication, owns 4,658,000 Shares. Substantially all of these Shares were acquired as newly issued Shares in January 1989 at the time that the parties formed their European joint venture. From time to time, Publicis Communication has acquired Shares, but no such additional acquisitions have occurred in the last two years. In the years following the formation of the Publicis/Company joint venture, the parties had significant disagreements concerning the nature and scope of their joint efforts. In February 1997, the Company and Publicis announced a settlement of their disputes (the "February 1997 Settlement"), and on May 19, 1997, the parties signed a series of agreements which unwound their European joint venture (the "May 1997 Agreements"). After consummation of the transactions contemplated by the May 1997 Agreements, Publicis 23 27 Communication remained an 18.5% owner of the Company, and the Company became a 26.5% owner of Publicis Communication. The May 1997 Agreements contain certain provisions and understandings between the parties concerning their cross stockholdings and certain other matters of common interest. Pursuant to the May 1997 Agreements, Publicis transferred its ownership of certain agencies in France, the United Kingdom, Portugal and Greece to the Company. In exchange, the Company transferred its ownership of 49% of the parties' joint venture to Publicis for an additional equity stake in Publicis Communication, which raised its ownership of Publicis Communication to 26.5%. In addition, the Company transferred to Publicis its ownership of certain agencies in Germany, Australia and New Zealand and entered into certain other agreements with respect to agencies in India, Thailand and Argentina. The May 1997 Agreements also address other relationships between the parties, including, but not limited to: certain put, call and sale arrangements with respect to the Company's equity stake in Publicis Communication; the parties rights, under certain circumstances to maintain their percentage equity ownership of the other party; certain financial reporting requirements of each of the parties; the ownership and use of the respective companies' agency brand names; the servicing of clients of one party by the other in certain specified markets; and the rights of each party to have a member on the board of directors of the other party under certain circumstances. The May 1997 Agreements also required the Purchaser to deliver to the Company a customary "affiliate letter" with respect to pooling of interests accounting treatment for the Bozell Merger. On October 17, 1997, the Purchaser delivered its affiliate letter to the Company. The affiliate letter delivered by the Purchaser provides that, among other things, the Purchaser will not sell, transfer or otherwise dispose of, or reduce its risk with respect to, the Shares owned by it for a specified period prior to and following consummation of the Bozell Merger. The Purchaser may withdraw such letter if a majority vote of the outstanding Shares in favor of the Bozell Merger is not obtained within 60 days of November 26, 1997. If the Bozell Merger is not approved by January 25, 1998 or if the vote obtained at the Special Meeting of the stockholders of the Company to be held on December 30, 1997, and any adjournments and postponements thereof (the "Special Meeting"), is less than a majority of the outstanding Shares, the Purchaser currently intends to withdraw its affiliate letter. In the event the Bozell Merger is approved by less than a majority of the outstanding Shares and the Company nonetheless seeks to effect the Bozell Merger, the Purchaser will reassess its investment in the Company. Because the Purchaser believes that consummation of the Bozell Merger will diminish the value of the surviving company, the Purchaser may sell its Shares. Certain actions which the Purchaser might take in this regard could have the effect of precluding the use of "pooling-of-interests" accounting treatment for the Bozell Merger. Such actions include a sale, transfer or other disposition of, or other reduction of its risk with respect to, all or part of the Shares then owned by the Purchaser. If the Company is required to treat the Bozell Merger as a purchase for accounting purposes, the Purchaser believes that the resulting goodwill charge would substantially dilute the Company's earnings per Share even if the Company achieves the pro forma financial projections set forth in the Company Proxy. The foregoing summary of the Joint Venture Agreements, the February 1997 Settlement and the principal May 1997 Agreements is qualified in its entirety by reference to the text thereof, copies of which are filed as exhibits to the Schedule 14D-1 and are incorporated in this Offer to Purchase by reference and may be inspected in the manner as set forth with respect to the Company in Section 8. Except as set forth elsewhere in this Offer to Purchase: (i) neither the Purchaser nor Somarel nor, to the knowledge of the Purchaser, any of the persons or entities listed in Schedule I hereof or any associate or majority-owned subsidiary of the Purchaser or any of the persons so listed, beneficially owns or has a right to acquire any Shares or any other equity securities of the Company; (ii) neither the Purchaser nor Somarel nor, to the knowledge of the Purchaser, any of the persons or entities referred to in clause (i) above or any of their executive officers, directors or subsidiaries has effected any transaction in the Shares or any other equity securities of the Company during the past 60 days; (iii) neither the Purchaser nor Somarel nor, to the knowledge of the Purchaser, any of the persons or entities listed in Schedule I hereof, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, 24 28 guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations); (iv) since January 1, 1994, there have been no transactions which would require reporting under the rules and regulations of the Commission between the Purchaser or Somarel or any of their respective subsidiaries or, to the knowledge of the Purchaser, any of the persons or entities listed in Schedule I hereof, on the one hand, and the Company or any of its executive officers, directors or affiliates, on the other hand; and (v) since January 1, 1994, there have been no contacts, negotiations or transactions between the Purchaser or Somarel or any of their respective subsidiaries or, to the knowledge of the Purchaser, any of the persons or entities listed in Schedule I hereof, on the one hand, and the Company or any of its subsidiaries or affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. As described above, in 1989, Publicis and the Company formed a joint venture in which the two companies combined certain of their European operations. As part of the formation of the joint venture, the parties also became stockholders of one another. Publicis Communication became a 20% stockholder of the Company, and the Company became a 26% stockholder of Publicis Communication. In the years following the formation of the Publicis/Company joint venture, the parties had significant disagreements concerning the nature and scope of their joint efforts. During the period of September 1994 through May 1997, the Company and Publicis were involved in international arbitration proceedings concerning their European joint venture. The parties alleged that each had breached certain provisions of their agreements, and, in February 1995, Publicis rescinded the master agreement governing the parties' arrangements. Throughout the period of their dispute, directors and senior management of both Publicis and the Company met to discuss various aspects of the parties' disagreements and, in November 1995, Maurice Levy, the Chief Executive Officer of Publicis, presented to the Board of Directors of the Company a proposal to merge the two companies' advertising businesses. No substantive merger discussions between the parties followed that presentation. During 1996, Publicis and the Company at various times held discussions and exchanged correspondence concerning the parties' joint venture and the possibility of unwinding the parties' cross-stockholdings or merging the two companies. In February 1997, the Company and Publicis announced the settlement of their disputes and executed a binding Memorandum of Agreement which provided for the dissolution of the joint venture, the transfer of certain agencies to each of the parties and the cross-shareholdings which exist as of the date of this Offer to Purchase. That Memorandum of Agreement contemplated the negotiation and signing of definitive agreements, which were executed on May 19, 1997. Those agreements are referred to herein as the "May 1997 Agreements" and are described in "Certain Information Concerning the Purchaser." After consummation of the transactions contemplated by the May 1997 Agreements, Publicis Communication remained an 18.5% owner of the Company, and the Company became a 26.5% owner of Publicis Communication. On July 31, 1997, the Company announced that the Company and CAC had entered into the Bozell Merger Agreement. See "Introduction" for a description of certain terms of the Bozell Merger Agreement. The Company's largest stockholder, Publicis, was not consulted with respect to the Bozell Merger, and, since the July announcement, neither Publicis nor the other stockholders of the Company had been provided with detailed information with respect to the Bozell Merger until the dissemination of the Company Proxy on December 1, 1997. On November 10, 1997, Publicis sent the following letter to the Board of Directors of the Company: Board of Directors True North Communications 101 East Erie Street Chicago, IL 60611 USA 25 29 Members of the Board: Publicis was disappointed in August when we learned of True North's agreement to merge with Bozell. Publicis believes that True North's transaction with Bozell is contrary to the best interests of True North's stockholders, of which Publicis is by far the largest with 18.5% of True North's common stock. The acquisition does not solve True North's fundamental strategic weakness, which has been its failure to establish a global presence. Bozell is primarily a U.S.-based business with a weak international presence, and Publicis believes that its acquisition by True North will compound, rather than solve, True North's strategic weaknesses. As global marketers have increasingly demanded worldwide coverage, True North has continued to focus on its U.S. business and as a result, we believe that True North now finds itself at a significant competitive disadvantage. In short, True North's proposed acquisition of Bozell does nothing to solve these problems, and we believe (based on the limited information that has been made available to date) that the price to be paid for Bozell significantly exceeds the value of Bozell's business. For these reasons, Publicis intends to oppose and vote against the merger of Bozell and True North. As many of you know, Publicis has for some time believed that a combination of Publicis Communication's businesses with those of True North would create a powerful global presence with tremendous opportunities for growth. In November 1995, I made a presentation to the Board of True North in which the significant benefits of combining our two networks were clearly outlined. We at Publicis continue to believe that a merger between Publicis Communication and True North is in the best interests of both True North's and Publicis' stockholders and their respective clients and employees. Merging our two companies' networks would create a combined entity with a very strong and creative presence in most of the world's significant markets, enabling us to deliver a complete range of services to global clients. Combining Publicis Communication and True North solves True North's fundamental strategic weakness by adding a strong international network which is a market leader in Europe. Although our two companies have had disagreements in the past, the mutual interests of our respective stockholders require us to put those differences aside and to work together to maximize the values that can be achieved by combining True North's and Publicis Communication's businesses. After considering our options and reviewing the information that is available to us, we have concluded that the strategic advantages of a Publicis Communication/True North combination are too compelling for Publicis to ignore. Accordingly, I am writing to inform you that Publicis is prepared to propose a business combination between Publicis Communication and True North in which each outstanding share of True North would be valued at US$28. Publicis is prepared to discuss with True North and its representatives the details of our proposal, including the cash and stock components of our US$28 valuation. We are ready to meet with the Board and its advisors to present our plans and to discuss transaction structures which maximize value for both True North's and Publicis' stockholders. As I have repeatedly indicated to this Board and to senior management of True North, a combination of Publicis Communication and True North would be a strategically perfect fit. The two companies would represent a worldwide structure, better able to serve current clients and ideally positioned to offer the full range of services that today's global marketers expect. Publicis is prepared to discuss with you as soon as possible business combination transactions which would, we believe, create significantly greater short- and long-term value for True North's stockholders than your current merger with Bozell. We are prepared to leave our past disagreements behind us in order to pursue this opportunity, and we urge you to do the same for the benefit of the stockholders of both of our companies. We hope that you will view our proposal as we do -- a unique opportunity for the stockholders of True North to maximize the value of their shares. The strategic benefits of the combination are undeniable and, we believe, far superior to the Bozell transaction which ignores the strategic 26 30 imperatives of our respective businesses. We would be willing to meet with you and your advisors at your earliest convenience to discuss our proposal and to answer any questions you may have. Our preferred course would be to negotiate a transaction that can be presented to our respective stockholders and clients as the amicable and joint effort of Publicis, True North and each of the companies' Boards of Directors and senior management. I hope that each of you will give our proposal serious consideration, and I look forward to your reply. We stand ready to meet with the Board to present our plans. Very truly yours, Maurice Levy Publicis' proposal contemplates the consolidation of the Company and Publicis under one management. See "Purpose of the Offer and the Proposed Publicis Combination; Plans for the Company." In this way, the combined entity will have the tremendous advantage of a strong U.S. and international network, as today's market requires. This structure avoids, however, the difficulties inherent in the joint venture, which did not achieve its potential because it lacked a clear chain of command and a fully integrated structure. The Company did not disclose Publicis' letter or the prior Publicis overture to merge to the public. Instead, the Company -- perhaps recognizing that Publicis' opposition and counter-offer would seriously threaten the Bozell Merger - hastily set a record date for the Special Meeting (the date used to determine who is entitled to vote at the Special Meeting) without giving adequate prior notice to the stockholders of the Company. Without revealing to the NYSE or to the public the highly material information that it had received from Publicis, the Company set a record date of Tuesday, November 18, 1997. Because trades of securities take three business days to settle, every stockholder of the Company who purchased Shares after Thursday, November 13, 1997 -- including persons who purchased at higher prices that prevailed after the public announcement of Publicis' opposition and counter-proposal -- has been disenfranchised. The Board of Directors of the Company met on November 12, 1997 at a regularly scheduled meeting. The Board of Directors of the Company did not, however, respond to the Publicis letter and, instead, remained silent. After a week without any response to its offer, on November 17, 1997, Publicis publicly released the text of its November 10, 1997 letter. Also on November 17, 1997, the Company filed a complaint in the Delaware Court of Chancery against Publicis and issued the following press release: True North Files for Injunction Chicago, IL -- True North Communications Inc. (TNO) disclosed that it filed, in Delaware Chancery Court, a request for a preliminary injunction against Publicis Communication to provide customary historical financial documentation it is contractually obligated to give to True North under the terms of the settlement agreement, dated May 19, 1997, that dissolved the alliance between True North and Publicis. This financial documentation will be part of the historical information supplied to the SEC in regard to True North's intended acquisition of Bozell, Jacobs, Kenyon & Eckhardt. In the May 19, 1997 settlement agreement Publicis and True North contractually committed to cooperate with each other in such transactions. By its lawsuit, the Company sought to enjoin Publicis to instruct its accountants, Mazars & Guerard, to deliver to the Company all the documents, comments and information requested by the Company in order to obtain the Commission's approval of the Company Proxy. Publicis disputed both the underlying factual allegations of the lawsuit as well as the Company's claim to relief. Nonetheless, in order to defuse any 27 31 miscommunication, shortly after receiving the Company's papers containing this request, Publicis expedited the process of providing certain routine accounting information to the Company. During the course of the day on November 17, 1997, and in response to the Publicis announcement of its November 10, 1997 letter, the trading price of the Shares on the NYSE rose to $26 (from $23 3/8 per Share at the close of trading on November 16, 1997). After the close of trading on November 17, 1997, the Company issued the following response to Publicis' November 10, 1997 merger proposal: Mr. Maurice Levy Publicis 133 Champs-Elysees 75008 Paris France Dear Maurice: The Board of Directors of True North considered your unsolicited letter dated November 10, 1997 at our regularly scheduled board meeting held on November 12. Your letter was discussed at length and the Board had the benefit of counsel from its legal and financial advisors -- Sidley & Austin and Morgan Stanley. We have been asked by the Board to respond to your letter. The Board unanimously (with Ali Wambold, your Publicis designee, recusing himself and Mike Murphy absent due to illness) resolved to decline your invitation to meet to discuss the transaction which you are prepared to propose. Among other things: - The Board reaffirmed its desire to pursue the pending merger transaction with BJK&E (Bozell) because we feel it is in the best interests of our shareholders. - As best as the Board can understand the financial terms of your letter, they are not materially different from other strategic alternatives which the Board has explicitly considered and turned down in the past. - The Board believes it is unrealistic to ignore a decade of difficulties between our two companies, which (if they were to persist) would directly and adversely affect the value of any combination you propose, and further believes any such combination could cause significant fallout of key clients and key employees. - The Board concluded after being advised by counsel that your letter does not provide a basis which would allow us, in keeping with our contractual obligations to Bozell, to engage in discussions. - The Board has been advised that your letter stating that you are prepared to make a proposal would require significant discussion and time to define and execute, thereby significantly jeopardizing our timetable for other considerations. The Board remains committed to the Bozell deal and must point out that our progress in moving toward closing it is being delayed by lack of responsiveness from Publicis in providing the information it is contractually required to provide for our SEC filing. While Publicis is obviously free to vote in any manner it chooses, we urge that it carefully, fully and promptly comply with its obligations under the May 19, 1997 Agreement wherein it promised to take reasonably requested action in support of a True North acquisition. We believe that, when Publicis reviews the information contained in the proxy statement, it will ultimately conclude that the True North/Bozell transaction will benefit the existing stockholders. Very truly yours, Bruce Mason Rick Braddock 28 32 On November 18, 1997, Publicis issued the following press release: Publicis Responds to True North's Rejection of Its Proposal Paris, November 18, 1997 -- Publicis S.A. announced today that it was disappointed by the response it had received from the Board of Directors of True North Communications Inc. to Publicis' letter of November 10. Publicis continues to believe that its proposal for a business combination with True North, which would value each True North share at US$28, is financially and strategically superior to the pending Bozell transaction. Publicis reiterated its opposition to the Bozell merger and reaffirmed its intention to vote its True North shares against the transaction. In light of the True North's Board's summary rejection of the Publicis offer, Publicis is considering all options available to it to enable the stockholders of True North to realize the full value of their investment. On November 21, 1997, William D. Perez, the President and Chief Executive Officer of S.C. Johnson & Son, Inc. (a privately-held consumer products company and a client of both the Company and Publicis), wrote a letter to Maurice Levy concerning Publicis' November 10, 1997 proposal. In his letter, Mr. Perez expressed support for senior management of the Company and advised Mr. Levy that the S.C. Johnson account might not stay with the Company following a change of control of the Company. On November 26, 1997, Mr. Levy responded to Mr. Perez's letter by explaining the position that Publicis had taken with respect to the Bozell Merger and by setting forth the reasons for Publicis' November 10, 1997 proposal. On November 26, 1997, Publicis commenced a lawsuit against the Company and its directors in the District Court for breach of their fiduciary obligations: (i) by interfering with the stockholders' franchise in setting a premature record date for the Special Meeting; (ii) for the directors' failure to reasonably inform themselves and to maximize stockholder value; (iii) for the directors' failure to place the stockholders' interest ahead of their own; and (iv) for the Company's unreasonable and disproportional response to Publicis and Publicis' proposal to the Company. Publicis seeks preliminary and permanent injunction relief and damages. Publicis also has filed a motion for a preliminary injunction and expedited discovery. Discovery has commenced, but the District Court has not yet ruled on Publicis' motion. On December 3, 1997, Publicis received a letter from the Company requesting that, pursuant to the May 1997 Agreements, Publicis support the Bozell Merger and refrain from taking actions against it. Publicis does not believe that the May 1997 Agreements require Publicis to support the Bozell Merger or refrain from taking action against it. On December 3, 1997, the Company filed an answer to the complaint filed by the Purchaser in the District Court. In addition, the Company filed a counterclaim (the "Counterclaim") against the Purchaser, Publicis Communication and Maurice Levy, the President and Chief Executive Officer of the Purchaser. The Counterclaim alleges that the Purchaser's publication of its November 10, 1997 letter to the Company and the Purchaser's related comments are false and misleading in violation of the federal proxy rules. The Counterclaim states, among other things: "Publicis' supposed proposal to acquire the Company is nothing more than a ruse designed to interfere with the proposed Bozell acquisition and to mislead the stockholders of the Company. Publicis has indicated . . . that the 'combination' Publicis referred to in the November 10, 1997 letter was in actuality an acquisition of the Purchaser by [the Company]." The Counterclaim also alleges that Publicis Communication, the Purchaser and Mr. Levy tortiously interfered with the exercise by one or more of the Company's directors of their fiduciary duties, breached the May 1997 Agreements, and tortiously interfered with the current and expected business relationship between the Company and Bozell. The Counterclaim states: "Though Publicis has publicly stated that it is opposing the True North-Bozell transaction in the interests of shareholder value, its actions have not been consistent with the best interests of an open shareholder vote. Its real intention is to block the True North-Bozell transaction by any means . . . ." The Counterclaim seeks an order for corrective disclosures, injunctive relief, compensatory and punitive damages and reimbursement of court costs and attorneys' fees. 29 33 Also on December 3, 1997, the Board of Directors of Publicis approved the terms of the Initial Offer and the Proposed Publicis Combination. On the morning of December 4, 1997, Maurice Levy placed calls to each of Bruce Mason and Richard Braddock to inform them of the Initial Offer and the Proposed Publicis Combination. Also on December 4, 1997, Publicis sent the following letter to the Board of Directors of the Company: Board of Directors True North Communications Inc. 101 East Erie Street Chicago, Illinois 60611 USA Members of the Board: As you know, on November 10, 1997, I wrote to you to propose a business combination between Publicis and True North in which each outstanding share of True North would be valued at $28. We were therefore disappointed when True North notified us on November 17 that the Board had declined Publicis' invitation to discuss the transaction. Since that date, True North's Proxy Statement/Prospectus with respect to the pending merger with Bozell has been made public. The information set forth in that document confirms our strong conviction that the Bozell transaction is contrary to the interests of True North's stockholders. Publicis' view that the Bozell merger does nothing to address True North's strategic imperatives has only been compounded by your recent disclosure of the financial aspects of the Bozell deal. Not only does the acquisition magnify True North's international weaknesses, but it does so at a price that is far in excess of any reasonable valuations of Bozell's businesses. After an intensive review of True North, we have concluded that the financial and strategic imperatives of combining our two companies are too compelling to ignore. Accordingly, I am writing to inform you of Publicis' intention to commence an all-cash tender offer for 9,619,904 shares of True North stock at a price of $28 per share. We believe that this represents an exceptionally attractive opportunity for your share owners -- specifically, our all-cash offer represents a 20% premium over the price of the True North stock on the day prior to the announcement of our $28 proposal. After consummation of the tender offer, Publicis and its affiliates would be the beneficial owners of a majority of the issued and outstanding True North shares. Publicis would then consummate a business combination with True North in which Publicis' worldwide advertising network would be combined with True North's. In the combination of our two businesses, True North would become the owner of all of Publicis' advertising-related assets and the proposed transaction would effectively consolidate the True North and Publicis agency networks under True North's control. Following consummation of those transactions, the True North common stock would continue to be outstanding and listed on the New York Stock Exchange. In exchange for the transfer of Publicis' businesses to True North, True North would issue to Publicis additional shares. In the proposed transaction, Publicis' businesses would be transferred to True North at a valuation for such businesses which would yield an estimated post-transaction value of $28 per True North share. The transaction we propose represents a unique opportunity to build a combined enterprise capable of delivering the worldwide services that today's global marketers demand. Together, our businesses would have annual revenue of over $1.2 billion and would have operations in 77 countries around the world. The fit between our two companies is perfect, and we at Publicis have nothing but the highest respect for the senior agency personnel and 30 34 other creative staff at the True North agencies, the vast majority of whom we intend to retain following consummation of the transaction. Our offer is not subject to any financing contingencies. The offer is, of course, subject to the termination of the Bozell Merger Agreement in accordance with its terms. Publicis intends to solicit proxies against the Bozell merger and has today filed with the SEC preliminary proxy materials in opposition to your pending transaction. We are committed to maximizing the value of the stockholders' investment in True North. Therefore, even if you refuse to consider our offer, we intend to demand that the Board solicit competing proposals for the sale of True North. Publicis is prepared to participate in such an auction by making an offer for the company at least equal in value to our current proposal. If a competing bidder makes an offer for True North at better terms than those of our final bid, Publicis intends to support such an offer. Sincerely, Maurice Levy Also on December 4, 1997, the Purchaser and Publicis Communication filed preliminary solicitation materials with the Commission seeking revocations and conditional proxies from the stockholders of the Company in opposition to the Bozell Merger. On December 5, 1997, the Company moved for a temporary restraining order from the District Court enjoining the Purchaser from engaging in any conduct that is not in support of the Bozell Merger (other than voting against the Bozell Merger), including by commencing the Initial Offer and by soliciting the stockholders of the Company to vote against the Bozell Merger. On December 8, 1997, the Purchaser sent the following letter to the Company's Board of Directors: Board of Directors True North Communications Inc. 101 East Erie Street Chicago, Illinois 60611 USA Members of the Board: As you know, I wrote to the Board on November 10, 1997 to propose a business combination between Publicis and True North in which each outstanding share of True North would be valued at $28. After being notified by True North that the Board had declined our invitation to discuss the transaction and after analyzing the information set forth in True North's Proxy Statement/Prospectus relating to the pending Bozell merger, we decided to take our proposal directly to True North stockholders by announcing our intention to commence a tender offer for 9,619,904 True North shares at a price of $28 per share in cash and by opposing the pending Bozell merger at the special meeting of True North stockholders. Through the tender offer and the solicitation of revocations and conditional proxies in opposition to the Bozell merger, we are seeking to give True North stockholders the opportunity to decide for themselves whether they wish to receive a premium for their True North shares or pay a premium for Bozell. While Publicis has been going to great lengths to give True North stockholders this opportunity to evaluate and choose, True North has been going to even greater lengths to deny True North stockholders this choice. On December 5, 1997, True North publicly released a letter addressed to its stockholders that stated, in part, that "[y]our Board will carefully consider Publicis' offer and report its recommendation to True North stockholders" and that "you are urged not to act hastily with respect to your investment 31 35 in True North, but to await the findings and conclusions of your Board to ensure that your decision is fully informed." The letter concluded by stating that "[w]e will endeavor to keep you informed promptly of further significant developments in this matter." At the same time that it was publicly announcing its commitment to consider Publicis' offer and to keep its stockholders promptly informed, True North without disclosure to its stockholders was seeking on an expedited basis a Federal court order enjoining the Publicis tender offer and solicitation in opposition to the Bozell merger. Based upon the recent actions of True North management in seeking to deny its stockholders the opportunity to choose between the Publicis offer and the Bozell merger, we believe that a conflict of interest may exist between management members of the Board and True North stockholders. We therefore strongly feel that it is in the best interests of True North and its stockholders for a special committee of independent directors of True North (with separate legal and financial advisors) to be appointed and vested with the authority to negotiate with Publicis with respect to Publicis' proposal or with any other serious bidder for True North. As the largest stockholder of True North, Publicis believes that True North should immediately stop wasting corporate funds in its attempt to have Publicis enjoined from making its tender offer and solicitation in opposition to the Bozell merger without legitimate grounds. As you well know, the pooling provision at issue in the litigation was never intended to preclude Publicis from exercising its rights as a True North stockholder or from offering to purchase additional True North shares at a premium. As we have previously indicated, we stand ready to meet with you and your advisors at any time to discuss a combination of Publicis with True North. We are willing to discuss and negotiate all aspects of our offer, including price and structure. We also remain committed to maximizing True North stockholder value including, if necessary, through an auction of True North, in which we are prepared to participate. Sincerely, Maurice Levy The Company did not respond to the Purchaser's December 8, 1997 letter, and on December 9, 1997, the Purchaser sent the following letter to the Company's Board of Directors: Board of Directors True North Communications Inc. 101 East Erie Street Chicago, Illinois 60611 USA Members of the Board: I am writing to communicate directly to each of you Publicis' deep offense at your attorneys' argument in court yesterday that the pooling agreement gives True North a blank check to force Publicis to "support" the Bozell deal. It is ludicrous to believe or take the position that Publicis would commit itself to supporting a transaction that it has opposed since even before the February 1997 Memorandum of Understanding. As we have said for a long time, the deal fails to address True North's basic strategic weakness, which is its lack of any significant international presence, and comes at a very high price to True North. 32 36 If True North succeeds in denying its stockholders the opportunity to decide for themselves whether they wish to receive a premium for their True North shares or pay a premium for Bozell, we intend to make certain that the True North Board is held accountable for its breaches of fiduciary duty if, as we expect, the Bozell deal proves to be a very costly failure. Despite our past differences and the recent courtroom events, we continue to stand ready to meet with you and your advisors at any time to discuss a combination of Publicis with True North. As we stated in our December 8 letter to the Board, we are willing to discuss and negotiate all aspects of our offer, including price and structure, and remain committed to maximizing True North stockholder value including, if necessary, through an auction of True North, in which we are prepared to participate. Sincerely, Maurice Levy On December 10, 1997, the District Court ruled in favor of the Company on its motion for injunctive relief upon a finding that one of the May 1997 Agreements -- titled "Pooling Agreement" (the "Pooling Agreement") -- prohibits the Purchaser from taking actions that do not "support" the Bozell Merger (other than voting against the Bozell Merger) including making the Initial Offer and soliciting revocations and conditional proxies in opposition to the Bozell Merger. Accordingly, the District Court preliminarily enjoined Publicis, Mr. Levy and their respective officers, agents and employees from announcing, commencing or further proceeding with any tender offer for the Shares; soliciting, contacting or otherwise communicating in any way with any record or beneficial holder of the Shares, by means of soliciting proxies or otherwise, to urge stockholders to vote against the Bozell Merger or related proposals or to urge stockholders not to vote on the Bozell Merger; or inducing, assisting or encouraging third parties to take actions in opposition to the Bozell Merger. Also on December 10, 1997, the Purchaser issued the following press release: Publicis Announces Withdrawal of its Tender Offer for True North Shares Paris, December 10, 1997 -- Publicis S.A. announced today that, as result of today's order by U.S. District Judge Joan Gottschall enjoining it from making or continuing any tender offer for True North, it is withdrawing its previously announced tender offer for 9,619,904 shares of common stock of True North Communications Inc. Publicis stated that it intends to seek an emergency appeal and a stay of the preliminary injunction pending the appeal. A hearing on Publicis' motion to enjoin the proposed merger between True North and Bozell, Jacobs, Kenyon & Eckhardt has been scheduled for December 18, 1997. Publicis further stated that, pending the outcome of these court proceedings, it is considering all of its options in connection with its proposal for a business combination with True North. Also on December 10, 1997, the Company sent the following letter to the Purchaser: Mr. Maurice Levy Publicis S.A. and Publicis Communication 133, avenue des Champs-Elysees 75380 Paris Cedex 08 FRANCE Dear Maurice: By now you should be absorbing the full significance of our victory in obtaining a preliminary injunction. You are also, no doubt, contemplating whether or not you wish to continue to expend time, energy and money on trying to figure out how you might circumvent the judge's ruling, 33 37 appealing that ruling or (in the unlikely event that the ruling is overturned), pursuing your campaign of disruption. As you ponder these matters, you and your boards should know that: - The True North Board is fully united in its determination to publicly reject the offer described in your December 4 letter, when and if you are ever allowed to make it. This view is based upon our board's conclusions, after careful consideration in two separate meetings with the benefit of financial and legal advice, that -- We believe that the Bozell deal would yield more in value than the Publicis offer, and the acquisition of Bozell allows us to realize our long-standing strategic vision for a multi-brand architecture. -- We believe that a proper takeover premium for True North, even without Bozell, would yield more than $28 and have a written "inadequacy opinion" from Morgan Stanley to that effect. -- We believe that the offer you attempted to make is best understood as a conditional, partial offer for up to 38% of our stock followed by an indefinitely valued second step transaction in which no additional consideration will flow directly to our shareholders. Even before the second step is completed, True North's public shareholders would become minority holders of a Publicis subsidiary. We believe the "blended value" to our shareholders of these two steps would likely be less then $28. -- As fiduciaries, we have grave concerns about delivering control to Publicis of our company if it were to have a continuing public minority. - You are seriously mistaken in your belief that your relationship problems are limited to senior management at the holding company level. Your ten years of disruptive antics, which have reached a crescendo in the past few weeks, have alienated key people throughout the organization. Indeed, the seven-member board of FCB management, our principal operating subsidiary, fully supports the decision of True North Board to reject the offer you attempted to make. - We vehemently disagree with your assertion that True North lacks the global capacity to serve multinational clients. In short, we don't need Publicis for strategic reasons. - Our response to your contract breaches will not be limited to an injunction. We will press for a recovery of full compensatory damages -- as well as punitive damages. Further, to the extent that Publicis Communication, in which we are a 26.5% shareholder, bears any expense or loss, we will seek damages from PSA and personally from the Publicis Communication directors who are responsible for that loss. - In fact, you will put Publicis and its directors, individually, into greater financial risk if the Bozell deal doesn't go forward on account of your breaches before the judge ruled. In that instance, the measure of damages to True North and to Bozell would expand dramatically. Finally we wish to acknowledge receipt of additional correspondence from you dated December 8 and 9, 1997. At the present time, those letters seem moot. However, for the record, we should note that we disagree with your various assertions. Sincerely, Bruce Mason Richard S. Braddock 34 38 On December 11, 1997, Publicis was granted leave to file and filed a supplemental and amended complaint (the "Amended Complaint"), amending the complaint filed by Publicis in the District Court on November 26, 1997. In addition to restating the allegations in the initial complaint, the Amended Complaint asserts, among other things, misrepresentations and omissions in the Company Proxy. The Amended Complaint also seeks to force the Company to redeem the Rights Agreement or to amend the Rights Agreement so that it is not triggered by the Offer. The Amended Complaint alleges, among other things, that the Company Proxy does not provide information about certain offers received or combinations discussed that would allow the Company's stockholders to compare the Publicis proposals and the Bozell Merger with prior offers or proposed combinations. The Amended Complaint also alleges that the Company Proxy suggests that the "Other Interested Party's" proposed transaction was of less value to the Company's stockholders than the Bozell Merger by stating that the closing price of Shares on November 25, 1997, the day before the date of the Company Proxy, was above the "Other Interested Party's" final tentative offering price but fails to disclose to the Company's stockholders that "the price on November 25, 1997 reflected the $2.63 jump in the Company's share value on November 17, 1997, when Publicis disclosed its proposed offer." The Amended Complaint further alleges that a letter included in the Company Proxy dated December 2, 1997 originally directed to the Company's stockholders who are also the Company's employees "erroneously states that 'Publicis withh[eld] some obligatory financial documentation [from True North]' and blames Publicis for causing an alleged delay in obtaining SEC approval of the Company's proxy solicitation materials." According to the Amended Complaint, (i) the Company did not ask Publicis for "financial documentation," such as financial statements, but for a statement from its accountants as to which standards had been applied to certain financial statements of Publicis Communication, and (ii) Publicis did not withhold anything, but requested its accountants to comply. The Amended Complaint also alleges that any delay in the Commission declaring the Company Proxy effective was not caused by Publicis' purported delay in providing the accountants' statements requested by the Company. Finally, the Amended Complaint alleges that the Company has tried to mislead its stockholders into believing that the results of the proxy solicitation, and the Bozell Merger, are a forgone conclusion. In particular, the Amended Complaint complains of statements allegedly made by Bruce Mason, Chairman and Chief Executive Officer of the Company, on the CNBC network's "Power Lunch" program to the effect that the Company expected the Bozell Merger to be completed by December 31, 1997 (which would be possible only if the Company stockholders were to approve the Bozell Merger at the Special Meeting) and in an interview to the Paris daily newspaper Le Figaro, in which Mr. Mason allegedly predicted that the Bozell Merger was a near certainty, stating that the Company and Bozell "are going to constitute" a very powerful combination. Discovery has commenced with respect to the Counterclaim, but the District Court has not ruled on the matter. On December 15, 1997, the Court of Appeals vacated the District Court's Preliminary Injunction Order, holding that the Preliminary Injunction Order had been issued in violation of a provision of the Pooling Agreement that requires disputes concerning this agreement to be decided solely in courts located in Delaware. Also on December 16, 1997, Publicis amended its preliminary solicitation materials. The purpose of the solicitation is to oppose the Bozell Merger and facilitate the Offer and the Proposed Publicis Combination. The solicitation is being made only pursuant to such separate solicitation materials which comply with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. Also on December 16, 1997, the Purchaser commenced the Offer. 11. PURPOSE OF THE OFFER AND THE PROPOSED PUBLICIS COMBINATION; PLANS FOR THE COMPANY. PURPOSE OF THE OFFER AND THE PROPOSED PUBLICIS COMBINATION. Since the inception of the parties' joint venture in 1989, the Purchaser has believed that the combination of the Company and Publicis would represent a strong, dynamic and strategic force in the U.S. and international markets. In November 1995, Maurice Levy, the Chief Executive Officer of Publicis, made a presentation to the Company's Board of Directors in which he described in detail the significant benefits of 35 39 combining the two companies. The Purchaser continues to believe that a combination between the Company and Publicis is in the best interests of both the Company's and the Purchaser's stockholders and their respective clients and employees. Publicis' November 10, 1997 letter to the Company's Board of Directors sought to initiate discussions with respect to a business combination between Publicis and the Company (in a manner consistent with the provisions of the Bozell Merger Agreement). The Company's belated response was to decline to seriously consider the Publicis proposal or to meet with Publicis or its representatives. The purpose of the Offer is to acquire a majority of the total number of Shares outstanding on a fully diluted basis as the first step in consummating the Proposed Publicis Combination. The Purchaser intends, as soon as practicable following consummation of the Offer, to effect the Proposed Publicis Combination. The purpose of the Proposed Publicis Combination is to contribute to the Company all of the advertising-related businesses owned directly and indirectly by the Purchaser in exchange for the issuance of additional Shares to the Purchaser, creating a combined Company to be run by the most talented executives of Publicis and the Company with a powerful international presence. In order to effect the Proposed Publicis Combination, the Purchaser is seeking to negotiate the terms of a definitive agreement with the Company pursuant to which the Proposed Publicis Combination would be consummated as soon as practicable following consummation of the Offer. The Purchaser intends that in the Proposed Publicis Combination, (i) each Share that is issued and outstanding immediately prior to the effective time of the Proposed Publicis Combination would remain outstanding (other than the 4,658,000 Shares owned by Publicis Communication, which would become treasury shares of the Company and cease to be outstanding) and (ii) the issued and outstanding shares of capital stock of Publicis Communication and Publicis Worldwide (other than the shares of capital stock of Publicis Communication held by the Company, which shares shall be canceled by operation of the merger) would be converted into an estimated 26,587,937 Shares. Following consummation of the transactions contemplated by the Offer and the Proposed Publicis Combination, the Purchaser estimates that it would own approximately 71.8% of the outstanding Shares on a fully diluted basis, with the remaining 28.2% of the Shares being owned by the stockholders of the Company immediately prior to the effective time of the Proposed Publicis Combination. Following the consummation of the Proposed Publicis Combination, the Purchaser expects that the Shares would continue to be listed on the NYSE. Publicis Communication and Publicis Worldwide own all of the Purchaser's global advertising related businesses. See Section 9. The exchange ratio for the Shares to be issued to the Purchaser in the Proposed Publicis Combination has been set with the intention of yielding a post-merger common equity valuation of the Company of $28 per Share. The Purchaser has made certain assumptions as to the pro forma effect of the Offer and the Proposed Publicis Combination on the Company. Unaudited Pro Forma Combined Financial Information for the Company for 1996, 1997 and 1998 following the Offer and the Proposed Publicis Combination is set forth in Schedule III of this Offer to Purchase. Based on the Purchaser's estimates, the Proposed Publicis Combination would result in 1998 pro forma earnings per Share for the Company of approximately $1.70 on a fully diluted basis. In order for the post merger common equity valuation of the Company to trade at $28.00 or more per Share, the Company would need to trade at a stock price multiple of not less than 16.5 times 1998 earnings per Share. The comparable publicly traded companies selected by Morgan Stanley, as financial advisor to the Company, in connection with the fairness opinion it delivered to the Board of Directors of the Company relating to the Bozell Merger, include Grey Advertising, Interpublic Group, Ominicom and WPP Group PLC. These companies' stock prices are currently trading at multiples that range from 14.4 to 22.7 times 1998 estimated earnings per share (assuming Institutional Brokers Estimate System ("IBES") estimates), with a median of 21.3 times (IBES does not publish a 1998 estimate for Grey Advertising) and a midpoint of 19.5 times. The Purchaser believes that the Proposed Publicis Combination would enhance the Company's strategic position in the increasingly global advertising market, which should result in superior growth prospects and an increased trading multiple over the level at which the Shares currently trade (the Shares currently trade at a multiple of 15.5 times 1998 estimated earnings per Share (assuming IBES estimates)). If, following the Proposed Publicis Combination, the Company trades at a multiple of 1998 pro forma earnings per Share of the midpoint multiple of such comparable companies, the resultant Share price would exceed $28.00 per Share by a significant amount. 36 40 The strategic purpose of the Proposed Publicis Combination is to consolidate the Company's and Publicis' worldwide advertising agency networks within one corporate structure under the general control of one management. The agreement effecting the Proposed Publicis Combination is expected to provide that, upon consummation of the Offer, the Purchaser will be entitled to designate a majority of the directors on the Company's Board of Directors. Such agreement is also expected to provide that the Company will use its best efforts to cause the Purchaser's designees to be elected as directors of the Company, including increasing the size of the Company's Board of Directors or securing the resignations of incumbent directors, or both. Consummation of the Proposed Publicis Combination and the issuance of additional Shares to the Purchaser in connection therewith will require approval by the Board of Directors of the Company and the affirmative vote of the holders of a majority of the outstanding Shares. If the Purchaser purchases Shares pursuant to the Offer and the Minimum Condition is satisfied, the Purchaser would have a sufficient number of Shares to approve the Proposed Publicis Combination and the issuance of additional Shares to the Purchaser in connection therewith without the affirmative vote of any other holder of Shares and to elect directors as described above. Although the Purchaser would seek consummation of the Proposed Publicis Combination as soon as practicable following the purchase of the Shares pursuant to the Offer, the exact timing and details of the Proposed Publicis Combination will depend on a variety of factors and legal requirements, including, among others things, whether the conditions to the Offer have been satisfied or waived. The Offer is conditioned upon, among other things, the Company, the Purchaser, Publicis Communication and Publicis Worldwide entering into a definitive agreement to effect the Proposed Publicis Combination. Although the Purchaser has sought to enter into negotiations with the Company with respect to the Proposed Publicis Combination and continues to pursue such negotiations, there can be no assurance that such negotiations will occur or, if such negotiations occur, as to the outcome thereof. The Purchaser reserves the right to amend the Offer (including amending the number of Shares to be purchased, the purchase price and the consideration in the Proposed Publicis Combination) upon entry into an acquisition agreement or other agreement regarding a business combination with the Company or otherwise or to negotiate an acquisition agreement or other agreement regarding a business combination with the Company not involving a tender offer. See Section 14. In connection with the Offer and during its pendency, or in the event the Offer is terminated or not consummated, in accordance applicable law and subject to the terms of any acquisition or other agreement that it may enter into with the Company, the Purchaser may explore any and all options which may be available to it. In this regard, to facilitate the consummation of the Offer and the Proposed Publicis Combination, the Purchaser intends, through the solicitation of proxies, to oppose the consummation of the transactions contemplated by the Bozell Merger Agreement. Such solicitation will be made pursuant to separate proxy materials complying with the requirements of Section 14(a) of the Exchange Act, and the rules and regulations promulgated thereunder. The Purchaser may also determine, whether or not the Offer is then pending, to conduct a proxy contest in connection with the Company's 1998 annual meeting of stockholders seeking to remove the current members of the Board of Directors of the Company and elect a new slate of directors designated by the Purchaser. The making of the Offer will enable the Purchaser to commence the process of seeking regulatory approvals for its acquisition of the Company. See Section 15. In addition, by tendering Shares into the Offer, the Company's stockholders effectively will be given the opportunity to express to the Company's Board that they wish to be able to accept the Offer and to approve the Proposed Publicis Combination or a similar transaction with Parent. THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR THE SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS. THE PURCHASER IS CURRENTLY SOLICITING REVOCATIONS AND CONDITIONAL PROXIES OF THE COMPANY'S STOCKHOLDERS IN OPPOSITION TO THE CONSUMMATION OF THE BOZELL MERGER AND RELATED PROPOSALS. SUCH SOLICITATION IS BEING MADE ONLY PURSUANT TO SEPARATE SOLICITATION MATERIALS, PRELIMINARY COPIES OF WHICH WERE FILED 37 41 WITH THE COMMISSION, WHICH COMPLY WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. PLANS FOR THE COMPANY Following consummation of the Offer and the Proposed Publicis Combination, the Company would become the owner of all of Publicis' advertising-related assets. Publicis believes that the consolidation of Publicis' and the Company's agency networks under the Company's control will create a worldwide business better able to meet the demands of global marketers and one which has tremendous opportunities for growth around the world. Following consummation of the Offer and the Proposed Publicis Combination, the Purchaser intends to conduct a further review of the Company and its subsidiaries and their respective assets, businesses, corporate structure, capitalization, operations, properties, policies, management and personnel. After such review, the Purchaser will determine what actions or changes, if any, would be desirable in light of the circumstances which then exist, and reserves the right to effect such actions or changes. The Purchaser's decisions could be affected by information hereafter obtained, changes in general economic or market conditions or in the business of the Company or its subsidiaries, actions by the Company or its subsidiaries and other factors. Except as described in this Offer to Purchase, the Purchaser has no present plans or proposals that would relate to or would result in (i) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (ii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (iii) any change in the present Board of Directors or management of the Company, (iv) any material changes in the present capitalization or dividend policy of the Company, (v) any other material change in the Company's corporate structure or business, (vi) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association or (vii) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act. The Purchaser intends to consummate the Proposed Publicis Combination as soon as practicable following consummation of the Offer. STATUTORY REQUIREMENTS Delaware Business Combination Law. Section 203 of the Delaware Law provides that a Delaware corporation such as the Company may not engage in any "Business Combination" (defined to include a variety of transactions, including a merger) with any "Interested Stockholder" (defined generally as a person that directly or indirectly beneficially owns 15% or more of the corporation's outstanding voting stock), or any affiliate of an Interested Stockholder, for three years after the date on which the Interested Stockholder becomes an Interested Stockholder. The three-year prohibition on Business Combinations with Interested Stockholders (the "Business Combination Prohibition") does not apply if certain conditions, described below, are satisfied. Section 203 of the Delaware Law provides that a "beneficial owner" of voting stock includes any person who, individually or together with any of its affiliates or associates, has (i) the right to acquire voting stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options or otherwise, (ii) the right to vote such stock pursuant to any agreement, arrangement or understanding, or (iii) any agreement, arrangement or understanding for the purposes of acquiring, holding, voting or disposing of such stock with any other person that beneficially owns, directly or indirectly, such stock. The Business Combination Prohibition does not apply to a particular Business Combination between a corporation and a particular Interested Stockholder if (i) prior to the date such Interested Stockholder became an Interested Stockholder, the board of directors of such corporation approved either the Business Combination or the transaction which resulted in the stockholder becoming an Interested Stockholder, or (ii) upon consummation of the transaction which resulted in the stockholder becoming an Interested 38 42 Stockholder, the Interested Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares held by (x) persons who are directors and also officers of the corporation and (y) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or (iii) on or subsequent to the date the stockholder becomes an Interested Stockholder, the Business Combination is (a) approved by the board of directors of the corporation and (b) authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock of the corporation which is not owned by the Interested Stockholder. Although the Purchaser is an "Interested Stockholder" for purposes of Section 203 of the Delaware Law, in that it owns approximately 18.4% of the Company's outstanding Shares, as a consequence of the timing and manner of its acquisition of such Shares, the Purchaser believes that the Offer and the Proposed Publicis Combination are not subject to Section 203. Section 203(b)(6) of the Delaware Law provides that the restrictions contained in Section 203 of the Delaware Law do not apply to a Business Combination that is proposed prior to the consummation or abandonment of and following the announcement or notification of one of certain extraordinary transactions (including a merger) involving the corporation which transaction (i) is with or by a person who either was not an Interested Stockholder during the previous three years or who became an Interested Stockholder with the approval of the corporation's board of directors and (ii) has been approved or has not been opposed by a majority of the members of the board of directors then in office who were directors prior to any person becoming an Interested Stockholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. Accordingly, the Purchaser believes that, because the Offer and the Proposed Publicis Combination were proposed by the Purchaser following the announcement of the approval of the Bozell Merger Agreement by the Board of Directors of the Company, the restrictions on Business Combinations contained in Section 203 of the Delaware Law are inapplicable to the Proposed Publicis Combination pursuant to Section 203(b)(6). The foregoing summary of Section 203 of the Delaware Law does not purport to be complete and is qualified in its entirety by reference to the provisions of Section 203 of the Delaware Law. APPRAISAL RIGHTS Holders of Shares will not be entitled to statutory appraisal rights in connection with the Offer. Stockholders who will be entitled to receive statutory appraisal rights, if any, in connection with the Proposed Publicis Combination (or similar business combination) will receive additional information concerning available statutory appraisal rights and the procedures to be followed in connection therewith before such stockholders have to take any action relating thereto. THE RIGHTS According to the Company 8-A, on November 16, 1988, the Board declared a dividend of one Right for each outstanding Share of the Company. Each Right entitles the registered holder thereof until the earlier of November 28, 1998 and the redemption of the Rights to purchase from the Company one two-thousandth (1/2000) (such number being the number as adjusted pursuant to the 1995 Stock Split) of a share of Series A Junior Participating Preferred Stock, $1.00 par value (the "Series A Preferred Stock"), of the Company at a purchase price of $42.50 (such price being the price as adjusted pursuant to the 1995 Stock Split) (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement. According to the Company 8-A, the Rights will not be transferable apart from the Shares until the earlier of (i) the tenth business day after a public announcement that a person or group (other than a Company related entity, or Publicis Communication or any affiliate of Publicis Communication so long as Publicis Communication or any affiliate of Publicis Communication does not become the beneficial owner of 25% or more of the outstanding Shares of the Company), has become the beneficial owner of 20% or more of the Shares (an "Acquiring Person") or (ii) the tenth business day following the commencement of, or 39 43 announcement of an intention to commence, an offer, the consummation of which would result in a person or group (other than a Company related entity or Publicis Communication or any affiliate of Publicis Communication so long as Publicis Communication is not, or as a result of such offer shall not be, an Acquiring Person) beneficially owning 30% or more of the outstanding Shares (the earlier of the dates specified in clauses (i) and (ii) being the "Distribution Date"). According to the Company 8-A, until the Distribution Date (or earlier redemption of the Rights), the surrender for transfer of any certificates representing the Shares will constitute the transfer of the Rights associated with the Shares represented by such certificate. According to the Company 8-A, following the Distribution Date, the Rights become exercisable, and separate certificates evidencing the Rights will be mailed to the holders of record of the outstanding Shares. According to the Company 8-A, in the event that on or after the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such (the "Shares Acquisition Date"), the Company is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold in one or a series of transactions (other than the ordinary course of business), proper provision will be made so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one two-thousandths of a share of the Series A Preferred Stock for which a Right is then exercisable, the number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times such price. In the event that any person or group, together with its affiliates and associates, becomes the beneficial owner of 30% or more of the Shares then outstanding (unless such person or group becomes the owner of 85% or more of the outstanding Shares by a purchase pursuant to a cash tender offer for all of the outstanding Shares), or in the event that the Company is the surviving corporation in a merger with an Acquiring Person or any associate or affiliate thereof and the Shares are not changed or exchanged, or in the event that an Acquiring Person engages in certain self-dealing transactions specified in the Rights Agreement, proper provision will be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one two-thousandths of a share of the Series A Preferred Stock for which a Right is then exercisable, the number of Shares which at the time of such transaction will have a market value of two times such price. According to the Company 8-A, in the event a Person becomes an Acquiring Person, proper provisions shall be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise that number of Shares having a market value of two times the Purchase Price of the Right. According to the Company 8-A, at any time prior to the earlier to occur of (i) the tenth business day (subject to extension) after the Shares Acquisition Date or (ii) November 28, 1998, the Company may redeem the Rights in whole, but not in part, at a redemption price of $.005 (such price being the price as adjusted pursuant to the 1995 Stock Split) per Right (the "Redemption Price"). Promptly upon the action of the Board electing to redeem the Rights, the Company is to make announcement thereof, and from and after the date of such election by the Board of Directors of the Company to redeem the Rights, the right to exercise the Rights will terminate, and the only right of holders of Rights will be to receive the Redemption Price per Right. According to the Company 8-A, until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. According to the Company 8-A, the terms of the Rights may be amended by the Board of Directors of the Company in any manner (including to shorten and lengthen any time period such as the redemption period) at any time prior to the Distribution Date and thereafter by the Board of Directors of the Company in certain respects, including: (a) generally to shorten and lengthen any time period, provided that, the Rights Agreement cannot be amended to lengthen (i) any time period (other than a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable) unless (A) approved by a majority of the Disinterested Directors (as defined in the Rights Agreement) and (B) such lengthening is for 40 44 the benefit of the holders of the Rights. Notwithstanding the foregoing, prior to such time as a person or group becomes an Acquiring Person, the Board of Directors of the Company may (i) lower certain of the 20% and 30% thresholds as indicated to not less than 10%; (ii) raise the 25% threshold for Publicis Communication; or (iii) exclude other persons from the definition of Acquiring Person. Pursuant to the May 1997 Agreements, the Company may not lower the thresholds applicable to Publicis Communication or any affiliate of Publicis Communication to below 22%. The foregoing summary of the Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Company 8-A and the text of the Rights Agreement as set forth as an exhibit thereto, filed with the Commission, copies of which may be obtained in the manner set forth in Section 8. If the Rights Condition is not satisfied and the Purchaser elects, in its sole discretion, to waive the Rights Condition and consummate the Offer, and if there are outstanding Rights which have not been acquired by the Purchaser, the Purchaser will evaluate its alternatives. Such alternatives could include purchasing additional Rights in the open market, in privately negotiated transactions, in another tender or exchange offer or otherwise. Any such additional purchase of Rights could be for cash or other consideration. Under such circumstances, the Proposed Publicis Combination might be delayed or abandoned as impracticable. The form and amount of consideration to be received by the holders of Shares in the Proposed Publicis Combination, if consummated, might be subject to adjustment to compensate the Purchaser for, among other things, the costs of acquiring Rights and a portion of the potential dilution cost to the Purchaser of Rights not owned by the Purchaser and its wholly-owned subsidiaries at the time of the Proposed Publicis Combination. In such event, the consideration paid for Shares in the Proposed Publicis Combination could be substantially less than the consideration paid in the Offer. In addition, the Purchaser may elect under such circumstances not to consummate the Proposed Publicis Combination. UNLESS AND UNTIL THE PURCHASER DECLARES THAT THE RIGHTS CONDITION IS SATISFIED, STOCKHOLDERS WILL BE REQUIRED TO TENDER ONE ASSOCIATED RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. IF THE DISTRIBUTION DATE DOES NOT OCCUR PRIOR TO THE EXPIRATION DATE, A TENDER OF SHARES WILL ALSO CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS. SEE SECTIONS 1 AND 3. 12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to purchase Shares pursuant to the Offer and to pay related fees and expenses is estimated to be approximately $275,000,000. The Purchaser has not conditioned the Offer on obtaining financing. The Purchaser plans to obtain all funds needed for the Offer (i) from its general corporate funds and (ii) by borrowings under seven existing credit facilities dated various dates (the "Credit Facilities") between the Purchaser and each of Union De Credit Pour Le Development Regional ("Unicredit"), Banque Francaise Du Commerce Exterieur ("BFCE"), Banque National De Paris ("BNP"), Banque Paribas ("Paribas"), Credit Lyonnais ("Lyonnais"), Banque OBC ("OBC") and CIC-Paris ("CIC"). The Credit Facility with Unicredit provides for borrowings on an unsecured basis up to an aggregate of FFR 200,000,000 (subject to increase to FFR 500,000,000 upon satisfaction of certain conditions, including acceptance by the lenders). For drawdowns of less than one month, the loans bear interest at the average rate recorded for overnight transactions between banks in the French interbank market, as published by the Bank of France, plus a margin of 0.0625% per annum (increasing to 1.10% per annum upon increase of the credit line availability) and, for drawdowns of more than one month, the loans bear interest at the Paris interbank offering rate plus a margin of 0.0625% per annum (increasing to 0.10% per annum upon increase of the credit line availability). Borrowings under this Credit Facility are repayable (with a right to reborrow) on the last day of each interest period applicable thereto, and the Credit Facility has a term through May, 1998 (subject to annual evergreen extensions through May, 2000, when the Credit Facility must be repaid in full). The Purchaser is obligated to pay Unicredit a commitment fee of 0.0625% per annum on the amount of the credit under this Credit Facility. The Unicredit Credit Facility contains customary covenants by the Purchaser. The Credit Facility with BFCE provides for borrowings on an unsecured basis up to an aggregate of FFR 100,000,000 and the loans bear interest at the Paris interbank offered rate plus a margin of 0.10% per 41 45 annum (or, for borrowings in a foreign currency, at the London interbank offered rate plus a margin of 0.10% per annum). Borrowings under this Credit Facility are repayable (with a right to reborrow) on the last day of each interest period applicable thereto, and the Credit Facility has a term through May, 1998 (when the Credit Facility must be repaid in full). The Purchaser is obligated to pay BFCE a commitment fee of 0.0625% per annum on the amount of the credit under this Credit Facility. The BFCE Credit Facility contains customary covenants by the Purchaser. The Credit Facility with BNP provides for borrowings on an unsecured basis up to an aggregate of FFR 200,000,000 and the loans bear interest at the Paris interbank offered rate plus a margin of 0.125% per annum (or, for borrowings in a foreign currency, at the London interbank offered rate plus a margin of 0.125% per annum). Borrowings under this Credit Facility are repayable (with a right to reborrow) on the last day of each interest period applicable thereto, and the Credit Facility has a term through May, 1998 (when the Credit Facility must be repaid in full). The Purchaser is obligated to pay BNP a commitment fee of 0.0625% per annum on the amount of the credit under this Credit Facility. The BNP Credit Facility contains customary covenants by the Purchaser. The Credit Facility with Paribas provides for borrowings on an unsecured basis up to an aggregate of FFR 200,000,000 and the loans bear interest at the Paris interbank offered rate plus a margin of 0.10% per annum. Borrowings under this Credit Facility are repayable (with a right to reborrow) on the last day of each interest period applicable thereto, and the Credit Facility has a term through May, 1998 (when the Credit Facility must be repaid in full). The Purchaser is obligated to pay Paribas a commitment fee of 0.0625% per annum on the unused portion of the credit under this Credit Facility. The Paribas Credit Facility contains customary covenants by the Purchaser. The Credit Facility with Lyonnais provides for borrowings on an unsecured basis up to an aggregate of FFR 100,000,000 (subject to increase to FFR 200,000,000 by mutual acceptance of the parties in May, 1998), and the loans bear interest at the Paris interbank offered rate plus a margin of 0.125% per annum. Borrowings under this Credit Facility are repayable (with a right to reborrow) on the last day of each interest period applicable thereto, and the Credit Facility has a term through May, 1998 (subject to annual evergreen extensions by mutual agreement) when the Credit Facility must be repaid in full. The Purchaser is obligated to pay Lyonnais a commitment fee of 0.0625% per annum on the credit available under this Credit Facility. The Lyonnais Credit Facility contains customary covenants by the Purchaser. The Credit Facility with OBC provides for borrowings on an unsecured basis up to an aggregate of FFR 100,000,000 and the loans bear interest at the average rate recorded for overnight transactions between banks on the French interbank market plus a margin of 0.10% per annum. Borrowings under this Credit Facility are repayable in May, 1998 (when the Credit Facility must be repaid in full). The Purchaser is obligated to pay OBC a commitment fee of 0.0625% per annum on the authorized amount of the credit under this Credit Facility. The Credit Facility with CIC provides for borrowings on an unsecured basis up to an aggregate of FFR 100,000,000 and the loans bear interest at the Paris interbank offered rate plus a margin of 0.10% per annum. Borrowings under this Credit Facility are repayable (with a right to reborrow) on the last day of each interest period applicable thereto, and the Credit Facility has a term through April, 1998 (when the Credit Facility must be repaid in full). The Purchaser is obligated to pay CIC a commitment fee of 0.0625% per annum on the unused portion of the credit under this Credit Facility. As of December 12, 1997, the Purchaser had (i) approximately $101,000,000 in cash, cash equivalents and marketable securities and (ii) availability to borrow up to an additional $168,000,000 of loans under the Credit Facilities (such amount being the approximate US dollar equivalent of FFR 1,000,000,000 (the aggregate current credit availability under the Credit Facilities), using a rate of exchange of FFR 5.939 per US $1.0, which is the noon US dollar buying rate in New York City for cable transfers in FFR, as certified for customs purposes by the Federal Reserve Bank of New York on December 12, 1997). The Purchaser has made arrangements with certain of the lenders party to the Credit Facilities to provide financing in excess of the Purchaser's current credit availability to the extent needed or required in connection with the Offer and the Proposed Publicis Combination. 42 46 The foregoing summary of the source and amount of funds is qualified in its entirety by reference to the text of the Credit Facilities, copies of which are attached as exhibits to the Schedule 14D-1 and are incorporated in this Offer to Purchase by reference and may be inspected in the same manner as set forth with respect to the Company in Section 8. Although no definitive plans or arrangements for repayment of borrowings under the Credit Facilities have been made, the Purchaser anticipates such borrowings will be repaid with internally generated funds and from other sources which may include the proceeds of future bank refinancings or the public or private sale of debt or equity securities. No decision has been made concerning the method the Purchaser will use to repay the borrowings under the Credit Facilities. Such decision will be made based on the Purchaser's review from time to time of the advisability of particular actions, as well as prevailing interest rates, financial and other economic conditions and such other factors as the Purchaser may deem appropriate. 13. DIVIDENDS AND DISTRIBUTIONS. If, on or after September 1, 1997, the Company (i) splits, combines or otherwise changes the Shares or its capitalization, (ii) acquires Shares or otherwise causes a reduction in the number of Shares, (iii) issues or sells additional Shares (other than the issuance of Shares reserved for issuance as of September 1, 1997 under option and employee stock purchase plans in accordance with their terms as publicly disclosed as of September 1, 1997) or any shares of any other class of capital stock, other voting securities or any securities convertible into or exchangeable for, or rights (other than the Rights), warrants or options, conditional or otherwise, to acquire, any of the foregoing or (iv) discloses that it has taken such action, then, without prejudice to the Purchaser's rights under Section 14, the Purchaser, in its sole discretion, may make such adjustments in the purchase price and other terms of the Offer and the Proposed Publicis Combination as it deems appropriate to reflect such split, combination or other change or action, including, without limitation, the Minimum Condition or the number or type of securities offered to be purchased. If, on or after September 1, 1997, the Company declares or pays any dividend on the Shares (other than normal quarterly dividends declared and paid in a manner consistent with past practice) or any distribution (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights (other than the separation of the Rights from the Shares) for the purchase of any securities) with respect to the Shares or Rights (other than the Redemption Price) that is payable or distributable to stockholders of record on a date prior to the transfer into the name of the Purchaser or its nominees or transferees on the Company's stock transfer records of the Shares and Rights purchased pursuant to the Offer (except that if the Rights are redeemed by the Company's Board of Directors, tendering stockholders who are holders of record as of the applicable record date will be entitled to receive and retain the Redemption Price), and if Shares are purchased in the Offer, then, without prejudice to the Purchaser's rights under Section 14, (i) the purchase price per Share payable by the Purchaser pursuant to the Offer shall be reduced by the amount of any such cash dividend or cash distribution and (ii) any such non-cash dividend, distribution, issuance, proceeds or rights to be received by the tendering stockholders shall (a) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer or (b) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution, issuance, proceeds or rights and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after expiration or termination of the Offer), to pay for any Shares tendered, and may postpone the acceptance for payment or, subject to the restriction referred to above, payment for any Shares tendered, and may amend or terminate the Offer if (i) any condition to consummation of the Offer set forth in the Introduction to this Offer to Purchase (relating to the Minimum 43 47 Condition, the Definitive Agreement Condition, the Rights Condition, the Section 203 Condition or the No Impediments Condition) has not been satisfied or (ii) at any time on or after December 16, 1997 and before acceptance for payment of, or payment for, such Shares any of the following events shall occur or shall be deemed by the Purchaser to have occurred or the Purchaser shall have learned about any such events applicable to or affecting the Company or any of its affiliates which shall not have been previously publicly disclosed by the Company: (a) there shall have been threatened, instituted or pending any action, proceeding, application, claim or counterclaim by or before any court, government or governmental, regulatory or administrative agency, authority or tribunal, domestic, foreign or supranational (whether brought by the Company, an affiliate of the Company or any other person or entity), which (i) challenges or seeks to challenge the acquisition by the Purchaser of the Shares or Rights (or any of them), restrains, prohibits or delays or seeks to restrain, prohibit or delay the making or consummation of the Offer or the Proposed Publicis Combination or any other merger or business combination involving the Purchaser or any of its affiliates and the Company or any of its subsidiaries, restrains or prohibits or seeks to restrain or prohibit the performance of any of the contracts or other agreements or arrangements entered into by the Purchaser or any of its affiliates in connection with the acquisition of the Company or the Shares or Rights (or any of them), or seeks to obtain any damages in connection with any of the foregoing, (ii) makes or seeks to make the purchase of or payment for, some or all of the Shares or Rights pursuant to the Offer, the Proposed Publicis Combination or otherwise illegal, or results in or may result in a delay in the ability of the Purchaser to accept for payment or pay for some or all of the Shares or Rights or to consummate the Proposed Publicis Combination, (iii) imposes or seeks to impose limitations on the ability of the Purchaser or the Company or any of their respective affiliates or subsidiaries effectively to acquire or hold, or requiring the Purchaser, the Company or any of their respective affiliates or subsidiaries to dispose of or hold separate, any portion of the assets or the business of the Purchaser, the Company or any of their respective affiliates or subsidiaries or imposes or seeks to impose limitations on the ability of the Purchaser, the Company or any of their respective affiliates or subsidiaries to continue to conduct, own or operate all or any portion of their businesses and assets as heretofore conducted, owned or operated, (iv) imposes or seeks to impose or results in or may result in material limitations on the ability of the Purchaser or any of its affiliates to exercise full rights of ownership of the Shares or Rights purchased by them, including, but not limited to, the right to vote the Shares purchased by them on all matters properly presented to the stockholders of the Company, or the right to vote any shares of capital stock of any subsidiary directly or indirectly owned by the Company, (v) results in or may result in a material limitation or diminution in the benefits expected to be derived by the Purchaser as a result of the transactions contemplated by the Offer and the Proposed Publicis Combination, (vi) imposes or seeks to impose voting, procedural, price or other requirements in addition to those under the Delaware Law and federal securities laws (each as in effect on the date of this Offer to Purchase) in connection with the transactions contemplated by the Offer and the Proposed Publicis Combination or any material condition to the Offer that is unacceptable to the Purchaser or (vii) otherwise directly or indirectly relates to the Offer, the Proposed Publicis Combination or any other business combination with the Company or which otherwise, in the sole judgment of the Purchaser, might adversely affect the Company or any of its subsidiaries or the Purchaser or any of its affiliates, or the value of the Shares; or (b) other than the application of any waiting periods under the HSR Act, the determination or deemed determination pursuant to the EC Merger Regulation and the necessity for approvals and other actions by any domestic, foreign or supranational governmental, administrative or regulatory agency, authority or tribunal described in paragraph (k) below, any statute, rule, regulation, judgment, decree, order or injunction shall have been proposed, sought, promulgated, enacted, entered, enforced or deemed applicable to the Offer or the Proposed Publicis Combination or other business combination between the Purchaser or any of its affiliates and the Company, or any other action shall have been taken, by any domestic, foreign or supranational government or any governmental, administrative or regulatory authority or agency or by any court or tribunal, domestic, foreign or supranational, that might, directly or indirectly, result in any of the consequences referred to in clauses (i) through (vii) of paragraph (a) above; or 44 48 (c) any change (or any condition, event or development involving a prospective change) shall have occurred or be threatened in the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses, franchises, results of operations or prospects of the Company or any of its subsidiaries, or in general political, market, economic or financial conditions in the United States or abroad, which, in the sole judgment of the Purchaser, is or may be materially adverse to the Company or any of its subsidiaries or its stockholders, or the market price of, or trading in, the Shares, or the Purchaser shall have become aware of any facts which are or may be materially adverse with respect to the value of the Company or any of its subsidiaries or the value of the Shares to the Purchaser or any of its affiliates; or (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter securities market in the United States or France or quotations for shares traded thereon, (ii) the declaration of any banking moratorium or any suspension of payments in respect of banks in the United States or France, (iii) any material adverse change (or any existing or threatened condition, event or development involving a prospective material adverse change) in the United States or France or any other currency exchange rates or a suspension of, or a limitation on, the markets therefor, (iv) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States or France, (v) any limitations (whether or not mandatory) imposed by any governmental authority on, or any event which might have material adverse significance with respect to, the nature or extension of credit or further extension of credit by banks or other lending institutions, (vi) any significant adverse change in the market price of the Shares or in securities or financial markets in the United States or abroad, including, without limitation, a decline of at least 15% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from that existing at the close of business on December 4, 1997 or (vii) in the case of any of the foregoing, a material acceleration or worsening thereof; or (e) the Company or any of its subsidiaries shall have (i) issued, distributed, pledged or sold, or authorized, proposed or announced the issuance, distribution, pledge or sale of (A) any shares of capital stock of any class (including, without limitation, the Shares), or securities convertible into or exchangeable for any such shares, or any rights (other than the Rights), warrants, or options to acquire any such shares or convertible or exchangeable securities, other than the issuance of Shares reserved for issuance on September 1, 1997 pursuant to the exercise of then outstanding stock options or any employee stock purchase plan of the Company (in each case in accordance with the publicly disclosed terms thereof on such date) or (B) any other securities or rights in respect of, in lieu of, or in substitution for, capital stock of the Company, (ii) purchased or otherwise acquired or caused a reduction in, or proposed or offered to purchase or otherwise acquire, any Shares or other securities of the Company (except for redemption of the Rights in accordance with the terms of the Rights Agreement), (iii) declared or paid, or proposed to be declared or paid, any dividend or distribution on any shares of capital stock (other than a distribution of the Rights Certificates in accordance with the terms of the Rights Agreement and, in the event the Rights are redeemed, the Redemption Price), or issued, or authorized, recommended or proposed the issuance of, any other distribution in respect of any shares of capital stock, whether payable in cash, securities or other property, or altered or proposed to alter any material term of any outstanding security, (iv) issued, distributed or sold, or authorized, announced or proposed the issuance, distribution or sale of, any debt securities or any securities convertible into or exchangeable for debt securities or any rights, warrants or options entitling the holder thereof to purchase or otherwise acquire any debt securities, or incurred, or authorized or proposed the incurrence of, any debt other than in the ordinary course of business and consistent with past practice, or any debt containing burdensome covenants, (v) entered into any agreement for, or authorized, recommended, proposed, effected or publicly announced its intention to authorize, recommend, propose, enter into or cause (A) any merger, consolidation, liquidation, dissolution, business combination (other than the Proposed Publicis Combination), joint venture, acquisition of assets or securities (other than a redemption of the Rights in accordance with the Rights Agreement) or disposition of assets or securities other than in the ordinary course of business, (B) any material change in its capitalization, (C) any release or relinquishment of any material contract rights or (D) any comparable event not in the ordinary course of business, (vi) entered into any agreement for, or 45 49 authorized, recommended, proposed, effected or announced its intention to authorize, recommend, propose, enter into or cause, any transaction or arrangement which could adversely affect the value of the Shares, (vii) proposed, adopted or authorized or announced its intention to propose, adopt or authorize any amendment to the Company's Certificate of Incorporation or By-Laws or similar organization documents or (other than any amendment which delays the Distribution Date) the Rights Agreement or (viii) agreed in writing or otherwise to take any of the foregoing actions; or (f) a tender or exchange offer for some portion or all of any outstanding securities of the Company or any of its subsidiaries (including the Shares or Rights) shall have been publicly proposed to be made or shall have been made by another person (including the Company or any of its subsidiaries or affiliates), or it shall have been publicly disclosed or the Purchaser shall have learned that (i) any person (including the Company or any of its subsidiaries or affiliates), entity or "group" (as defined in Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire more than 5% of any class or series of capital stock of the Company (including the Shares or Rights) or its subsidiaries or shall have been granted any option or right to acquire more than 5% of any class or series of capital stock of the Company (including the Shares or Rights) or its subsidiaries, other than acquisitions of Shares for bona fide arbitrage positions, or (ii) any such person, entity or group which has publicly disclosed any such ownership of or right to acquire more than 5% of any class or series of capital stock of the Company (including the Shares or Rights) or its subsidiaries prior to December 16, 1997 shall have acquired or proposed to acquire additional shares of any class or series of capital stock of the Company (including the Shares or Rights) or its subsidiaries constituting more than 1% of such class or series or shall have been granted any option or right to acquire more than 1% of such class or series of capital stock of the Company (including the Shares or Rights) or its subsidiaries, (iii) any group shall have been formed which beneficially owns more than 5% of any class or series of capital stock of the Company (including the Shares or Rights) or its subsidiaries, (iv) any person, entity or group shall have entered into a definitive agreement or an agreement in principle or made a proposal with respect to a tender offer or exchange offer for the Shares or Rights or a merger, consolidation or other business combination with or involving the Company or its subsidiaries or (v) any person, entity or group shall have filed a Premerger Notification and Report Form under the HSR Act in order to, or made a public announcement reflecting an intent to, acquire the Company or assets or securities of the Company or its subsidiaries; or (g)(i) the Company and the Purchaser shall have reached an agreement or understanding that the Offer be terminated or amended or the purchase or payment for Shares be postponed pursuant thereto or (ii) the Purchaser or any of its affiliates shall have entered into a definitive agreement or announced an agreement in principle with respect to the Proposed Publicis Combination or any other business combination with the Company or any of its affiliates or the purchase of any material portion of the securities or assets of the Company or any of its subsidiaries; or (h) the Company or any of its subsidiaries shall have entered into any employment, severance or similar agreement, arrangement or plan with or for the benefit of any of its employees or entered into or amended any agreements, arrangements or plans so as to provide for increased or accelerated compensation or payment or funding of the benefits to any such employees as a result of or in connection with the transactions contemplated by the Offer or the Proposed Publicis Combination or any other business combination involving the Company or any of its subsidiaries or otherwise amended any such agreement, arrangement or plan to make the same more favorable to any such employee; or (i) the Purchaser shall become aware (i) that any material contractual right of the Company or any of its subsidiaries shall be impaired or otherwise adversely affected or that any material amount of indebtedness of the Company or any of its subsidiaries (other than indebtedness pursuant to term or revolving credit arrangements provided by banks) shall become accelerated or otherwise become due or become subject to acceleration prior to its stated due date, in any case with or without notice or the lapse of time or both as a result of or in connection with the transactions contemplated by the Offer or the Proposed Publicis Combination or any other business combination involving the Company, (ii) of any covenant, term or condition in any of the Company's or any of its subsidiaries' instruments or agreements that has or may have (whether considered alone or in the aggregate with other covenants, terms or 46 50 conditions), a material adverse effect on (x) the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses, franchises, results of operations or prospects of the Company or any of its subsidiaries (including, but not limited to, any event of default that may result from the consummation of the Offer, the acquisition of control of the Company or any of its subsidiaries or the Proposed Publicis Combination or any other business combination involving the Company) or (y) the value of the Shares in the hands of the Purchaser or any of its affiliates or (z) the consummation by the Purchaser or any of its affiliates of the Proposed Publicis Combination or any other business combination involving the Company or (iii) that any report, document, instrument, financial statement or schedule of the Company or any of its subsidiaries filed with the Commission contained, when filed, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; or (j) except as may be required by law, the Company or any of its subsidiaries shall have taken any action to terminate or amend any employee benefit plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Company or any of its subsidiaries; or (k) any waiting periods under the HSR Act applicable to the purchase of the Shares pursuant to the Offer shall not have expired or been terminated, there shall not have been a determination or a deemed determination pursuant to the EC Merger Regulation that the purchase of the Shares pursuant to the Offer is compatible with the common market, or any other approval, permit, authorization, consent or other action of any domestic, foreign or supranational governmental, administrative or regulatory agency, authority or tribunal (including those described in Section 15) shall not have been obtained on terms satisfactory to the Purchaser. The foregoing conditions are for the sole benefit of the Purchaser and its affiliates and may be asserted by the Purchaser regardless of the circumstances (including, without limitation, any action or inaction by the Purchaser or any of its affiliates) giving rise to any such condition or may be waived by the Purchaser, in whole or in part, from time to time in its sole discretion. The failure by the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such rights and each such right shall be deemed an ongoing right and may be asserted at any time and from time to time. Any determination by the Purchaser concerning any of the events described in this Section 14 shall be final and binding. A public announcement may be made of a material change in, or waiver of, such conditions and the Offer may, in certain circumstances, be extended in connection with any such change or waiver. The Purchaser acknowledges that the Commission believes that (a) if the Purchaser is delayed in accepting the Shares it must either extend the Offer or terminate the Offer and promptly return the Shares and (b) the circumstances in which a delay in payment is permitted are limited and do not include unsatisfied conditions of the Offer, except with respect to any approval required under the HSR Act and most other regulatory approvals. 15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS. Except as set forth in this Offer to Purchase, based on its review of publicly available filings by the Company with the Commission and other publicly available information regarding the Company, the Purchaser is not aware of any licenses or regulatory permits that appear to be material to the business of the Company and its subsidiaries, taken as a whole, and that might be adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein, or any filings, approvals or other actions by or with any domestic, foreign or supranational governmental authority or administrative or regulatory agency that would be required for the acquisition or ownership of the Shares (or the indirect acquisition of the stock of the Company's subsidiaries) by the Purchaser pursuant to the Offer as contemplated herein. Should any such approval or other action be required, it is presently contemplated that such approval or action would be sought except as described below under "State Takeover Laws." Should any such approval or other action be required, there can be no assurance that any such approval or action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the Company's or its subsidiaries' businesses, or that certain parts of the Company's, the Purchaser's or any of their respective subsidiaries' 47 51 businesses might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or action or in the event that such approvals were not obtained or such actions were not taken. The Purchaser's obligation to purchase and pay for Shares is subject to certain conditions, including conditions with respect to litigation and governmental actions. See the Introduction and Section 14 for a description thereof. State Takeover Laws. A number of states (including Delaware, where the Company is incorporated) have adopted takeover laws and regulations which purport, to varying degrees, to be applicable to attempts to acquire securities of corporations which are incorporated in such states or which have substantial assets, stockholders, principal executive offices or principal places of business therein. To the extent that certain provisions of certain of these state takeover statutes purport to apply to the Offer or the Proposed Publicis Combination, the Purchaser believes that such laws conflict with federal law and constitute an unconstitutional burden on interstate commerce. In 1982, the Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds the Illinois Business Takeovers Statute, which as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult, and the reasoning in such decision is likely to apply to certain other state takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could, as a matter of corporate law and, in particular, those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a Federal district court in Florida held in Grand Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated Transactions Act and Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. The Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer or the Proposed Publicis Combination. The Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer or the Proposed Publicis Combination and nothing in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of that right. In the event that it is asserted that one or more takeover statutes apply to the Offer or the Proposed Publicis Combination, and it is not determined by an appropriate court that such statute or statutes do not apply or are invalid as applied to the Offer or the Proposed Publicis Combination, as applicable, the Purchaser may be required to file certain documents with, or receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or purchase Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer. In such case, the Purchaser may not be obligated to accept for purchase, or pay for, any Shares tendered. See Section 14. Antitrust. Under the HSR Act, and the rules and regulations that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated until certain information and documentary material has been furnished for review by the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares pursuant to the Offer and the Proposed Publicis Combination is subject to such requirements. Under the provisions of the HSR Act applicable to the Offer and the Proposed Publicis Combination, the purchase of Shares pursuant to the Offer and the Proposed Publicis Combination may not be consummated until the expiration of a 15-calendar-day waiting period following the filing of certain required information and documentary material with respect to the Offer with the FTC and the Antitrust Division, unless such waiting period is earlier terminated by the FTC and the Antitrust Division. The Purchaser expects to file a Premerger Notification and Report Form with the Antitrust Division and the FTC in connection with the purchase of 48 52 Shares pursuant to the Offer and the Proposed Publicis Combination under the HSR Act on December 17, 1997, and, in such event, the required waiting period with respect to the Offer and the Proposed Publicis Combination will expire at 11:59 p.m., New York City time, on January 1, 1998, unless earlier terminated by the Antitrust Division or the FTC or the Purchaser receives a request for additional information or documentary material prior thereto. If, within such 15-calendar-day waiting period, either the FTC or the Antitrust Division were to request additional information or documentary material from the Purchaser, the waiting period with respect to the Offer and the Proposed Publicis Combination would be extended for an additional period of 10 calendar days following the date of substantial compliance with such request by the Purchaser. Only one extension of the waiting period pursuant to a request for additional information is authorized by the rules promulgated under the HSR Act. Thereafter, the waiting period could be extended only by court order or with the consent of the Purchaser. The additional 10-calendar-day waiting period may be terminated sooner by the FTC or the Antitrust Division. Although the Company is required to file certain information and documentary material with the Antitrust Division and the FTC in connection with the Offer, neither the Company's failure to make such filings nor a request made to the Company from the Antitrust Division or the FTC for additional information or documentary material will extend the waiting period with respect to the purchase of Shares pursuant to the Offer and the Proposed Publicis Combination. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares by the Purchaser pursuant to the Offer and the Proposed Publicis Combination. At any time before or after the Purchaser's purchase of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as either deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer and the Proposed Publicis Combination, the divestiture of Shares purchased pursuant to the Offer or the divestiture of substantial assets of the Purchaser, the Company or any of their respective subsidiaries or affiliates. Private parties as well as state attorneys general may also bring legal actions under the antitrust laws under certain circumstances. See Section 14. Based upon an examination of publicly available information relating to the businesses in which the Company is engaged, the Purchaser believes that the acquisition of Shares pursuant to the Offer and the Proposed Publicis Combination should not violate the applicable antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer and the Proposed Publicis Combination on antitrust grounds will not be made, or, if such challenge is made, what the result will be. See Section 14. EC Merger Regulation. According to publicly available information, the Company may conduct substantial operations within the European Community (the "EC") and certain of the individual member states of the EC. The EC Merger Regulation requires that notices of concentrations with a "community dimension" be provided to the EC Commission for review and approval prior to being put into effect. The Offer would be deemed to have a "community dimension" if the combined aggregate worldwide annual revenues of both the Company and the Purchaser exceeds ECU 5 billion, if the community-wide annual revenues of each of the Company and the Purchaser exceed ECU 250 million and if both the Company and the Purchaser do not receive more than two-thirds of their respective community-wide revenues from one and the same member state. Based upon publicly available information, the Purchaser believes that the Offer would not be considered to have a "community dimension." Depending on certain information concerning the Company that is not publicly available, the Proposed Publicis Combination may be considered to have a "community dimension." If the Proposed Publicis Combination falls within the EC Merger Regulation, the EC Commission, as opposed to individual member states, has exclusive jurisdiction to review it, subject to certain exceptions. Under the EC Merger Regulation, a concentration that meets the foregoing guidelines requires the filing of a notice in a prescribed form with the EC Commission. This filing must normally be made within seven days of the earlier of the announcement of a public bid, the conclusion of the relevant agreement or the acquisition of a controlling interest, although extensions of time are sometimes granted. Transactions subject to the filing requirements of the EC Merger Regulation are suspended automatically until three weeks after receipt of the notice. The EC Commission may extend the suspension period for such period as it finds necessary to make a final decision on the legality of the transaction. In the case of a public bid, the bidder may 49 53 acquire shares of the target company during the suspension period, but may not vote such shares until after the end of the period unless the EC Commission grants permission to do so in order to maintain the full value of the bidder's investment. The EC Commission must decide whether to initiate proceedings within one month after the receipt of the notice, subject to certain extensions for EC holidays or if an individual member state has requested a referral of the transaction. If proceedings are initiated, the EC Commission must reach a decision in the proceedings within four months of the commencement of the proceedings. If the EC Commission fails to reach a decision within either of these time periods the transaction will be deemed to be compatible with the common market. If the EC Commission declares the Proposed Publicis Combination to be not compatible with the common market, it may prevent the consummation of the transaction, order a divestiture if the transaction has already been consummated or impose conditions or other obligations. In the event that the transaction is found not to be subject to the EC Merger Regulation, various national merger control regimes of the member states may apply, resulting in the possibility that approvals may be necessary from the various national authorities. There can be no assurance that a challenge to the Proposed Publicis Combination will not be made pursuant to the EC Merger Regulation or, alternatively, pursuant to the merger regulations of one or more of the various member states, or, if such a challenge is made, what the outcome will be. See Section 14. Other Foreign Approvals. According to publicly available information, the Company also owns property and conducts business in a number of other foreign countries and jurisdictions. In connection with the acquisition of the Shares pursuant to the Offer or the Proposed Publicis Combination, the laws of certain of those foreign countries and jurisdictions may require the filing of information with, or the obtaining of the approval of, governmental authorities in such countries and jurisdictions. The governments in such countries and jurisdictions might attempt to impose additional conditions on the Company's operations conducted in such countries and jurisdictions as a result of the acquisition of the Shares pursuant to the Offer or the Proposed Publicis Combination. There can be no assurance that the Purchaser will be able to cause the Company or its subsidiaries to satisfy or comply with such laws or that compliance or noncompliance will not have adverse consequences for the Company or any subsidiary after purchase of the Shares pursuant to the Offer or the Proposed Publicis Combination. 16. CERTAIN FEES AND EXPENSES. Lazard Freres & Co. LLC ("Lazard") is acting as Dealer Manager in connection with the Offer and as financial advisor to the Purchaser in connection with the proposed acquisition of the Company. The Purchaser has paid and is obligated to pay to Lazard a quarterly financial advisory fee of FFR 500,000, which increased to FFR 1,000,000 commencing in October, 1997. In addition, the Purchaser has agreed to reimburse Lazard for its reasonable expenses, including reasonable fees and disbursements of its counsel, incurred in rendering its services under its engagement agreement with the Purchaser and has agreed to indemnify Lazard against certain liabilities and expenses in connection with the Offer and the Proposed Publicis Combination, including certain liabilities under the federal securities laws. Lazard from time to time renders various investment banking services to the Purchaser and its affiliates for which it is paid customary fees. MacKenzie Partners, Inc. has been retained by the Purchaser as Information Agent in connection with the Offer. The Information Agent may contact holders of Shares and Rights by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward material relating to the Offer to beneficial owners of Shares and Rights. The Purchaser will pay the Information Agent reasonable and customary compensation for all such services in addition to reimbursing the Information Agent for reasonable out-of-pocket expenses in connection therewith. The Purchaser has agreed to indemnify the Information Agent against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. In addition, IBJ Schroder Bank & Trust Company has been retained as the Depositary. The Purchaser will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, will reimburse the Depositary for its reasonable out-of-pocket expenses in connection therewith and will 50 54 indemnify the Depositary against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Except as set forth above, the Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Information Agent and the Dealer Manager) for soliciting tenders of Shares and Rights pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by the Purchaser for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers. 17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares or Rights residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, the Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. Certain statements contained in this Offer to Purchase, including any forecasts, projections and descriptions of anticipated synergies referred to therein, including any statements contained herein regarding the development or possible assumed future results of operations of Publicis' businesses, the markets for Publicis' services and products, anticipated expenditures, regulatory developments and the effects of the Offer and the Proposed Publicis Combination, any statements preceded by, followed by or that include the words "believes," "expects," "anticipates," or similar expressions, and other statements contained or incorporated by reference herein regarding matters that are not historical facts, are or may constitute forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Purchaser or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth or referred to above in this paragraph. Stockholders are cautioned not to place undue reliance on such statements, which speak only as of the date hereof. The Purchaser undertakes no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurence of unanticipated events. The Purchaser has filed with the Commission a Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. Such Schedule 14D-1 and any amendments thereto, including exhibits, may be examined and copies may be obtained from the office of the Commission in the same manner as described in Section 8 with respect to information concerning the Company, except that they will not be available at the regional offices of the Commission. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Neither the delivery of the Offer to Purchase nor any purchase pursuant to the Offer shall, under any circumstances, create any implication that there has been no change in the affairs of the Purchaser, the Company or any of their respective subsidiaries since the date as of which information is furnished or the date of this Offer to Purchase. PUBLICIS S.A. December 16, 1997 51 55 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER Set forth below are the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years of each director and executive officer of the Purchaser. Except as otherwise indicated below, the business address of each such person is 133, Avenue des Champs Elysees, 75008 Paris, France, and each such person is a citizen of France. In addition, each director and executive officer of the Purchaser has been employed in his or her present principal occupation listed below during the last five years. Ms. Badinter and Ms. Bleustein-Blanchet are the only directors, executive officers or controlling persons of Somarel.
PRINCIPAL OCCUPATION AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR NAME AND BUSINESS ADDRESS EMPLOYMENTS FOR THE PAST FIVE YEARS - ------------------------------------------ ------------------------------------------------- Elisabeth Badinter........................ Chairman, Supervisory Board (Publicis S.A.) Manager (Somarel, Societe Civile Familiale) Maitre de Conferences (L'Ecole Polytechnique) Writer Claude Marcus............................. Vice Chairman, Supervisory Board (Publicis S.A.) Member, Management Board (Publicis Communication) Robert Badinter........................... Member, Supervisory Board (Publicis S.A.) Michele Bleustein-Blanchet................ Member, Supervisory Board (Publicis S.A.) Michel David-Weill........................ Chairman of Lazard Freres & Co. LLC since c/o Lazard Freres & Co. LLC May 1, 1995, when Lazard Freres & Co., of which 30 Rockefeller Plaza he had been Senior Partner since 1977, New York, New York 10020 converted from a general partnership to a limited liability company and changed its name. General Partner of Lazard Freres et Cie., 121 Boulevard, Haussman, 75382 Paris, France. Deputy Chairman of Lazard Brothers & Co., Limited, 21 Moorefields, London EC2P2HT, England. Lazard Freres and its affiliates are engaged in banking and investment banking. Member, Supervisory Board (Publicis S.A.) Henri-Calixte Suadeau..................... Member, Supervisory Board (Publicis S.A.) Maurice Levy.............................. Chairman, Management Board, and Chief Executive Officer (Publicis S.A.) Chairman, Management Board (Publicis Communication) President and General Director (Publicis Conseil; Societe de Gestion et d'Informatique Publicis; TV 6) Member of the Board (Publicis Eureka, Singapore; Publicis Romero, Mexico; Basic et Asia Link, Philippines) Administrator (Societe des Petroles Shell; Publicis Centre Media; Publicis BCP, Canada) Permanent Representative of Publicis Communication (Groupe Publicis Services)
52 56
PRINCIPAL OCCUPATION AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR NAME AND BUSINESS ADDRESS EMPLOYMENTS FOR THE PAST FIVE YEARS - ------------------------------------------ ------------------------------------------------- Permanent Representative of Publicis Conseil (Extension; Media System) Bruno Desbarats-Bollet.................... Member, Management Board (Publicis S.A.) Chairman of the Board of Directors (Medias & Regies Europe S.A.) Gerard Pedraglio.......................... Member, Management Board (Publicis S.A.) Member, Management Board (Publicis Communication) Jean-Paul Morin........................... General Secretary and Chief Financial Officer (Publicis S.A.)
53 57 SCHEDULE II SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING POLICIES GENERALLY ACCEPTED IN THE UNITED STATES AND FRANCE A. The audited consolidated financial statements of the Purchaser have been prepared in accordance with French accounting principles which differ in certain respects from generally accepted accounting principles in the United States. The principal differences between French GAAP and U.S. GAAP as they relate to the Purchaser are discussed in further detail below and in the final Note to the audited Purchaser Financial Statements, copies of which are attached as exhibits to the Schedule 14D-1 and which may be inspected in the same manner as set forth with respect to the Company in Section 8. 1. GOODWILL The Purchaser does not systematically amortize goodwill, but subjects the asset to annual review of its market value, with a provision for loss being recorded if the market value is less than the acquisition cost for more than three years. Further, the utilization of tax loss carryforwards of acquired companies is accounted for as a reduction of tax expense. Under U.S. GAAP, the amount of goodwill would be reduced by the amount of acquired deferred tax assets and would be amortized on a straight-line basis over the estimated useful life of the asset, which the Purchaser has determined to be within a range of 10 to 40 years, depending on the type of entity acquired. 2. POST-RETIREMENT BENEFITS As described in Note 3.11 to the audited Purchaser Financial Statements, the Purchaser's French employees are entitled to certain lump-sum payments upon retirement. Under French GAAP, through December 31, 1995, the Purchaser reported expense based on contributions due, and disclosed the estimated full obligation in the footnotes to the Financial Statements. Beginning December 31, 1996, the liability was recorded on the balance sheet, with the accumulated effect as of January 1, 1996 being recorded as a direct adjustment to shareholders' equity. Under U.S. GAAP, the full actuarially defined obligation would be recorded on the balance sheet for all periods presented and the increases to the reserve would be recorded as a charge in the income statement. Further, the Purchaser calculates its post-retirement benefit obligation for French personnel only for employees over 50 years old. U.S. GAAP requires that the estimation take into consideration all employees, with the estimated turnover and interest rate being used. 3. RESTRUCTURING PROVISION In 1994, the Purchaser recorded for French accounting purposes a FFR 40,000,000 provision for the restructuring of its Italian operations. This provision did not meet the requirements as set forth in EITF 94-3 and so would not have been recorded until 1995 under U.S. GAAP. 4. NET EXTRAORDINARY PROFIT In 1996, the Purchaser recognized a capital gain on the sale of a retail leasehold and an expense related to a settlement paid to a newspaper. The net gain arising from these two transactions has been characterized as "extraordinary" under French accounting principles. As neither transaction meets the U.S. GAAP criteria of being "unusual and infrequent," both would be classified elements of "net income from ordinary operations." 54 58 The approximate effects of these differences on net income and shareholders' equity are as follows:
YEAR ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 (IN THOUSANDS, EXCEPT PER SHARE DATA) FFR FFR FFR ------------------------------------------ --------- --------- --------- NET INCOME AS REPORTED IN THE CONSOLIDATED STATEMENT OF INCOME..................... 185,331 152,726 120,456 Adjustments to conform to U.S. GAAP Amortization of goodwill................ (239) (6,136) (4,147) Provision for post-retirement benefit obligation........................... 1,402 (2,238) (5,228) Restructuring provision................. 0 (8,080) 16,160 Deferred taxes acquired in business combinations......................... (14,611) (108) 4,651 Tax on the above adjustments............ (514) 3,784 (3,644) ------- ------- ------- NET INCOME AS ADJUSTED FOR U.S. GAAP...... 171,369 139,948 128,248 ------- ------- ------- EARNINGS PER SHARE AS ADJUSTED FOR U.S. GAAP.................................... 20.52 16.90 15.38 ======= ======= =======
AT DECEMBER 31, ------------------------------------- 1996 1995 1994 (IN THOUSANDS) FFR FFR FFR ------------------------------------------ --------- --------- --------- SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEET.............. 1,558,736 1,421,971 1,332,593 Adjustments to conform to U.S. GAAP Amortization of goodwill................ (36,480) (36,241) (30,105) Provision for post-retirement benefit obligation........................... 13,845 (16,859) (14,621) Restructuring provision................. 8,080 8,080 16,160 Deferred taxes.......................... 17,605 29,774 29,268 Tax on the above adjustments.............. (8,040) 3,219 (513) --------- --------- --------- SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S. GAAP.................................... 1,553,746 1,409,944 1,332,782 ========= ========= =========
5. CONSOLIDATION OF SUBSIDIARIES THAT ARE LESS THAN MAJORITY-OWNED The principles covering the scope of consolidation under French GAAP are set forth in Note 2.2 to the audited Purchaser Financial Statements. Under this policy, certain companies in which the Purchaser owns 49% or 50% and exercises control over significant financial operating policies are consolidated. For U.S. GAAP purposes, only majority-owned companies, based on voting rights directly or indirectly held, are fully consolidated, and less than majority-owned companies over which the Purchaser exercises significant influence (generally 20% or more owned), would be included in the consolidated financial statements using the equity method. This difference in accounting policy has no effect on either net income or shareholders' equity. The approximate effects on the consolidated balance sheet at December 31, 1996, 1995 and 1994 would be to decrease minority interest by FFR 141,124,000, FFR 123,216,000 and FFR 116,708,000, respectively, and to record on one line the investment in companies accounted for using the equity method of FFR 145,540,000, FFR 133,744,000 and FFR 116,708,000, respectively. The impact on working capital on 55 59 all periods is not material. The principal income statement line items, if such investments were accounted for using the equity method rather than being consolidated, would be decreased by the following amounts:
YEAR ENDED DECEMBER 31, ---------------------------------------- 1996 1995 1994 (IN THOUSANDS) FFR FFR FFR --------------------------------------- ---------- ---------- ---------- Sales.................................. 1,933,403 1,937,557 1,985,027 Cost of sales.......................... (1,422,718) (1,446,466) (1,490,894) Revenues............................... 510,685 491,091 494,133 Current income......................... 115,354 125,242 134,839 ========= ========= =========
B. The unaudited consolidated interim financial statements of the Purchaser have been prepared in accordance with French accounting principles which differ in certain respects from generally accepted accounting principles in the United States. The principal differences between French GAAP and U.S. GAAP as they relate to the Purchaser are discussed in further detail in Item A above. The approximate effects of these differences on net income and shareholders' equity are as follows:
SIX MONTHS ENDED JUNE 30, ----------------- 1997 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA) FFR FFR --------------------------------------------------------- ------ ------ NET INCOME AS REPORTED IN THE CONSOLIDATED STATEMENT OF INCOME................................................. 92,935 78,611 Adjustments to conform to U.S. GAAP Amortization of goodwill............................... (7,791) (3,084) Provision for post-retirement benefit obligation....... (2,228) 701 Deferred taxes acquired in business combinations....... 2,158 (6,085) Tax on the above adjustments........................... 817 (257) ------ ------ NET INCOME AS ADJUSTED FOR U.S. GAAP..................... 85,891 69,886 ====== ====== EARNINGS PER SHARE AS ADJUSTED FOR U.S. GAAP............. 10.18 8.39 ====== ======
AT JUNE 30, 1997 (IN THOUSANDS) FFR ------------------------------------------------------------ --------- SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEET..................................................... 1,764,539 Adjustments to conform to U.S. GAAP Amortization of goodwill.................................. (44,271) Provision for post-retirement benefit obligation.......... 11,617 Restructuring provision................................... 8,080 Deferred taxes acquired in business combinations.......... 20,060 Tax on the above adjustments.............................. (7,223) --------- SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S. GAAP.............. 1,752,802 =========
56 60 The principal income statement line items, if less than majority-held investments were accounted for using the equity method rather than being consolidated, would be decreased by the following amounts:
SIX MONTHS ENDED JUNE 30, ---------------------- 1997 1996 (IN THOUSANDS) FFR FFR ---------------------------------------------------- --------- -------- Sales............................................... 876,716 1,017,289 Cost of sales....................................... (655,811) (762,279) Revenues............................................ 220,905 254,410 Current income...................................... 50,261 66,002 ======== ========
57 61 SCHEDULE III UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following Unaudited Pro Forma Combined Balance Sheet information as of June 30, 1997 combines the historical balance sheet information of Publicis Communication and Publicis Worldwide and the Company as if the combination had been effective on June 30, 1997, after giving effect to certain pro forma adjustments described in the accompanying notes. The following Unaudited Pro Forma Combined Income Statements are presented as if the combination had been effective January 1, 1996, based on the Company's current capital structure. The Unaudited Pro Forma Combined Financial Information and notes thereto reflect the accounting for the combination as an exchange of assets by entities under the common control of the Purchaser. Under this method of accounting, the recorded assets, liabilities, income and expenses of Publicis Communication, Publicis Worldwide and the Company are combined and recorded at their historical cost amounts in a manner similar to a pooling-of-interests. The Purchaser expects that the Company will record a material pre-tax charge following the combination to cover the direct costs of the failed merger with Bozell, including a $15 million break-up fee. This charge, adjusted to reflect taxes, is estimated to total approximately $19 million and has been charged to Retained Earnings in the Unaudited Pro Forma Combined Balance Sheet information at June 30, 1997. The Unaudited Pro Forma Combined Financial Information included herein is not necessarily indicative of the consolidated financial position or results of future operations of the combined entity or the actual results that would have been achieved had the combination been consummated at the beginning of the periods indicated. Historical information on Publicis Communication and Publicis Worldwide is based on actual results. Projections are based on Management's best currently available estimates. Historical information on the Company is based on the Company's Annual Report on Form 10-K, dated March 28, 1997, except that the earnings per Share figure is adjusted to reflect the number of Shares outstanding as of November 18, 1997 plus 3,227,278 additional Shares reserved for issuance upon the exercise of outstanding stock options as at September 1, 1997. Projections are based on Merrill Lynch estimates, except that the earnings per Share calculations are adjusted in the same manner as the historical earnings per Share figure. The following Unaudited Pro Forma Combined Financial Information and notes thereto were not prepared with a view to complying with published guidelines of the American Institute of Certified Public Accountants or the Commission regarding projections and forecasts and have not been reviewed by the Purchaser's independent auditors. In addition, because such information is based upon a variety of estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the control of the Purchaser, and upon assumptions with respect to future business decisions which are subject to change, there can be no assurance that they will be realized, and actual results may vary materially from those projected. 58 62
PRO-FORMA FINANCIAL INFORMATION - 1996 ----------------------------------------------------- PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED -------- ---------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUES...................................... $669,046 $493,050 $1,162,096 ------- ------- --------- COSTS AND EXPENSES Salaries and Benefits......................... 378,459 318,539 696,998 Office and General............................ 224,830 150,740 (20,000)(3) 355,570 Unusual Transactions.......................... 1,189 1,356 2,545 Interest (Income)/Expense..................... (5,151) 8,585 (2,190)(3) 1,244 Other (Income)................................ (1,403) (5,384) (6,787) ------- ------- ------- --------- 597,924 473,836 (22,190) 1,049,570 ------- ------- ------- --------- INCOME BEFORE TAXES........................... 71,121 19,214 22,190 112,525 ------- ------- ------- --------- Provision for Taxes........................... (30,216) (9,697) (11,095)(4) (51,008) INCOME AFTER TAXES............................ 40,905 9,517 11,095 61,517 ------- ------- ------- --------- Minority Interest Provision................... (16,941) 31 0 (16,910) Equity in Net Earnings of Affiliated Companies................................... 8,493 18,286 (24,243)(2) 2,536 ------- ------- ------- --------- NET INCOME.................................... 32,457 27,834 (13,148) 47,143 ======= ======= ======= ========= FULLY DILUTED NET INCOME PER SHARE............ $0.98 $0.93 ======= ========= Fully Diluted weighted average number of Common and Common Equivalent Shares outstanding................................. 28,499 21,930(5) 50,429
PRO-FORMA FINANCIAL INFORMATION -- 1997 ------------------------------------------------------ PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED -------- ---------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUES..................................... $605,742 $639,700 $1,245,442 COSTS AND EXPENSES Salaries and Benefits........................ 344,105 389,600 733,705 Office and General........................... 199,844 190,200 (20,000)(3) 370,044 Unusual Transactions......................... 841 0 841 Interest (Income)/Expense.................... (5,764) 0 (2,190)(3) (7,954) Other (Income)............................... (4,177) 7,200 3,023 ------- ------- ------- --------- 534,848 587,000 (22,190) 1,099,658 ------- ------- ------- --------- INCOME BEFORE TAXES.......................... 70,894 52,700 22,190 145,784 ------- ------- ------- --------- Provision for Taxes.......................... (29,418) (26,300) (11,095)(4) (66,813) INCOME AFTER TAXES........................... 41,476 26,400 11,095 78,971 ------- ------- ------- --------- Minority Interest Provision.................. (7,293) (2,700) 0 (9,993) Equity in Net Earnings of Affiliated Companies.................................. 9,953 11,000 (20,394)(2) 559 ------- ------- ------- --------- NET INCOME................................... 44,136 34,700 (9,299) 69,537 ======= ======= ======= ========= FULLY DILUTED NET INCOME PER SHARE........... $1.22 $1.38 ======= ========= Fully Diluted weighted average number of Common and Common Equivalent Shares outstanding................................ 28,499 21,930(5) 50,429
59 63
PRO-FORMA FINANCIAL INFORMATION -- 1998 ------------------------------------------------------ PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED -------- ---------- ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUES..................................... $644,444 $709,900 $1,354,344 ------- ------- --------- COSTS AND EXPENSES Salaries and Benefits........................ 360,995 432,500 793,495 Office and General........................... 199,489 207,300 (20,000)(3) 386,789 Unusual Transactions......................... 105 0 105 Interest (Income)/Expense.................... (4,696) 0 (2,190)(3) (6,886) Other (Income)............................... (2,269) 7,500 5,231 ------- ------- ------- --------- 553,623 647,300 (22,190) 1,178,733 ------- ------- ------- --------- INCOME BEFORE TAXES.......................... 90,821 62,600 22,190 175,611 ------- ------- ------- --------- Provision for Taxes.......................... (37,450) (30,700) (11,095)(4) (79,245) INCOME AFTER TAXES........................... 53,371 31,900 11,095 96,366 ------- ------- ------- --------- Minority Interest Provision.................. (8,554) (3,000) 0 (11,554) Equity in Net Earnings of Affiliated Companies.................................. 11,453 12,300 (23,069)(2) 684 ------- ------- ------- --------- NET INCOME................................... 56,271 41,200 (11,974) 85,497 ======= ======= ======= ========= FULLY DILUTED NET INCOME PER SHARE........... $1.45 $1.70 ======= ========= Fully Diluted weighted average number of Common and Common Equivalent Shares outstanding................................ 28,499 21,930(5) 50,429
60 64
PRO-FORMA TRUE NORTH BALANCE SHEET AS AT 30TH JUNE 1997 ----------------------------------------------------------- PUBLICIS TRUE NORTH ADJUSTMENTS COMBINED -------- ---------- ----------- -------- (DOLLARS IN THOUSANDS) Cash and Marketable securities......... $123,296 $ 60,847 $ (19,000)(3) $165,143 Short Term debt........................ 80,652 104,829 185,481 Long Term debt......................... 0 65,959 65,959 Shareholder's Equity................... 282,196 268,564 (216,656)(3)(4) 334,104
61 65 NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION 1. BASIS OF PRESENTATION For accounting purposes, the contribution to the Company of all the advertising-related businesses owned directly and indirectly by the Purchaser (Publicis Communication and Publicis Worldwide) will be treated as an exchange of assets by entities under common control. Accordingly, the accompanying unaudited pro forma historical and forecasted financial information reflects the transfer of Publicis Communication and Publicis Worldwide at their historical net book values, as measured in accordance with accounting principles generally accepted in the United States. The financial information of Publicis Communication and Publicis Worldwide expressed in U.S. dollars is translated from French francs at the following rates:
FFR=$1.00 --------- Year ended December 31, 1996...................... 5.12 Year ended December 31, 1997...................... 5.8267 Year ended December 31, 1998...................... 5.85 At June 30, 1997.................................. 5.88
2. ADJUSTMENT TO ELIMINATE THE EFFECT OF CROSS-SHAREHOLDINGS Publicis Communication owns approximately 18.4% of the Company and accounts for its investment using the equity method. The Company owns approximately 26.5% of Publicis Communication and accounts for its investment using the equity method. An adjustment has been recorded in the accompanying Unaudited Pro Forma Combined Financial Information to eliminate the equity in net earnings of affiliated companies recognized by each company in such investments. 3. ADJUSTMENTS TO RECORD CHARGES AND COST-SAVINGS RELATED TO THE COMBINATION The Purchaser expects that the Company will record a material pre-tax charge following the combination to cover the direct costs of the failed merger with Bozell, including a $15 million break-up fee. This charge, adjusted to reflect taxes, is estimated to total approximately $19 million and has been charged to Retained Earnings in the Unaudited Pro Forma Combined Balance Sheet Information at June 30, 1997. Publicis Communication and Publicis Worldwide expect to realize pre-tax cost-savings following the combination with the Company, principally from two sources: synergies arising from the combination of the two complementary management structures and reduced interest expense from the assumed repayment of debt. The assumed repayment of debt would be financed from the proceeds to be realized from the assumed exercise of all outstanding stock options (see Note 5) less the cash payments to be made for the Company's estimated transaction costs, as described above. In addition, the Purchaser expects that the Company would record a material pre-tax charge following the combination. 4. INCOME TAXES Estimated provisions for income taxes related to pro forma adjustments are based on an assumed effective tax rate of approximately 50%. 5. NET INCOME PER SHARE The unaudited pro forma combined per common share data has been computed based on the current number of Shares outstanding of the Company as of November 18, 1997, increased by 3,227,278 additional Shares reserved for issuance upon the exercise of outstanding stock options outstanding as of September 1, 1997, all of which have been assumed to be exercised for purposes of this calculation. The pro forma adjustments reflect the increase by the estimated 26,587,937 new Shares of the Company to be issued in exchange for the assets of Publicis Communication and Publicis Worldwide, less the 4,658,000 Shares of the Company owned by Publicis Communication which would become treasury shares of the Company and cease to be outstanding. 62 66 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and Rights and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below: The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY By Mail: By Facsimile: By Hand or Overnight Delivery: P.O. Box 84 (for eligible financial One State Street Bowling Green Station institutions only): New York, New York 10004 New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing Attn: Reorganization Department Window, Sub-cellar One
Confirm Facsimile by Telephone: (212) 858-2103 Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below, and will be furnished promptly at the Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [MacKenzie Partners, Inc. LOGO] 156 FIFTH AVENUE NEW YORK, NEW YORK 10010 (212) 929-5500 The Dealer Manager for the Offer is: LAZARD FRERES & CO. LLC 30 ROCKEFELLER PLAZA NEW YORK, NEW YORK 10020 (212) 632-6000 EX-99.A2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 16, 1997 BY PUBLICIS S.A. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED THE DEPOSITARY FOR THE OFFER IS: IBJ SCHRODER BANK & TRUST COMPANY By Mail: By Facsimile: By Hand or Overnight Delivery: P.O. Box 84 (for eligible financial One State Street Bowling Green Station institutions only): New York, New York 10004 New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing Attn: Reorganization Department Window, Sub-cellar One
Confirm Facsimile by Telephone: (212) 858-2103 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. 2 This Letter of Transmittal is to be completed by stockholders of True North Communications Inc. if certificates evidencing Shares and/or Rights (each as defined in the Offer to Purchase, dated December 16, 1997 (the "Offer to Purchase")), are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if tenders of Shares and/or Rights are to be made by book-entry transfer to an account maintained by IBJ Schroder Bank & Trust Company (the "Depositary") at The Depository Trust Company ("DTC") or Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively referred to as the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Stockholders who tender Shares or Rights by book-entry transfer are referred to herein as "Book-Entry Stockholders." UNLESS AND UNTIL PUBLICIS S.A., A SOCIETE ANONYME ORGANIZED UNDER THE LAWS OF FRANCE (THE "PURCHASER"), DECLARES THAT THE RIGHTS CONDITION (AS DEFINED IN THE OFFER TO PURCHASE) IS SATISFIED, HOLDERS OF SHARES WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. If the Distribution Date (as defined in the Offer to Purchase) does not occur prior to the Expiration Date (as defined in the Offer to Purchase), a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date occurs and the certificates evidencing Rights ("Rights Certificates") are distributed by True North Communications Inc., a Delaware corporation, to holders of Shares prior to the time a holder's Shares are tendered pursuant to the Offer (as defined in the Offer to Purchase), in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary or, if available, a Book-Entry Confirmation (as defined in the Offer to Purchase) received by the Depositary with respect thereto. If the Distribution Date occurs and Rights Certificates are not distributed prior to the time Shares are tendered pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedure described below. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within three business days after the date Rights Certificates are distributed. The Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if available, with respect to such Rights, prior to accepting the related Shares for payment pursuant to the Offer if the Distribution Date occurs prior to the Expiration Date. See Section 3 of the Offer to Purchase. The Purchaser will not pay any additional consideration for any Rights tendered pursuant to the Offer. Holders of Shares and Rights whose certificates for such Shares (the "Share Certificates") and, if applicable, Rights Certificates, are not immediately available (including, if the Distribution Date has occurred, but Rights Certificates have not yet been distributed) or who cannot deliver their Share Certificates or, if applicable, their Rights Certificates, and all other required documents to the Depositary on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares and Rights according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. - -------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND (PLEASE FILL IN, IF BLANK, EXACTLY AS SHARE(S) TENDERED NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) ------------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES SHARE REPRESENTED BY NUMBER CERTIFICATE SHARE OF SHARES NUMBER(S)* CERTIFICATE(S) TENDERED** --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Total Shares ------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Stockholders. ** Unless otherwise indicated, it will be assumed that all Shares represented by Certificates delivered to the Depositary are being tendered. See Instruction 4. - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- DESCRIPTION OF RIGHTS TENDERED* - ------------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) RIGHTS CERTIFICATE(S) AND (PLEASE FILL IN, IF BLANK, EXACTLY AS RIGHTS TENDERED NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) ------------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF RIGHTS RIGHTS REPRESENTED BY NUMBER CERTIFICATE RIGHTS OF RIGHTS NUMBER(S)** CERTIFICATE(S)** TENDERED*** --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Total Rights ------------------------------------------------------------------------------------------------------------------------------
* If the tendered Rights are represented by separate certificates, complete the certificate numbers of such Rights Certificates. Stockholders tendering Rights which are not represented by separate certificates should retain a copy of this Letter of Transmittal in order to accurately complete a Letter of Transmittal if Rights Certificates are received. ** Need not be completed by Book-Entry Stockholders. *** Unless otherwise indicated, it will be assumed that all Rights represented by certificates delivered to the Depositary are being tendered. See Instruction 4. - -------------------------------------------------------------------------------- 4 [ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ----------------------------------------------------------------------------- Check Box of Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number: ----------------------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------------------------------- [ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): ----------------------------------------------------------------------------- Window Ticket Number (if any): ----------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------------------------------------------------- Name of Institution which Guaranteed Delivery: ------------------------------------------------------------------------ If Delivery by Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number: ----------------------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------------------------------- [ ] CHECK HERE IF RIGHTS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER (IF AVAILABLE) MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ----------------------------------------------------------------------------- Check Box of Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number: ----------------------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------------------------------- [ ] CHECK HERE IF RIGHTS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): ----------------------------------------------------------------------------- Window Ticket Number (if any): ----------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------------------------------------------------- Name of Institution which Guaranteed Delivery: ------------------------------------------------------------------------ If Delivery by Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number: ----------------------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------------------------------- 5 Ladies and Gentlemen: The undersigned hereby tenders to Publicis S.A., a societe anonyme organized under the laws of France (the "Purchaser"), the above described shares of Common Stock, par value $.33 1/3 per share (the "Shares"), of True North Communications Inc., a Delaware corporation (the "Company"), and (unless and until the Purchaser declares that the Rights Condition (as defined in the Offer to Purchase) has been satisfied) the associated Series A Junior Participating Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as of November 16, 1988 between the Company and Harris Trust and Savings Bank, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $28 per Share (and associated Right), net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 16, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Unless the context otherwise requires, all references to Shares shall include the associated Rights and all references to the Rights shall include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement. The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its subsidiaries or affiliates the right to purchase all or any portion of the Shares and Rights tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of and payment for the Shares and Rights tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns, and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares and Rights that are being tendered hereby and any and all dividends on the Shares or any distribution (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares or Rights (other than the Redemption Price (as defined in the Offer to Purchase)) that is declared or paid by the Company on or after September 1, 1997 and is payable or distributable to stockholders of record on a date prior to the transfer into the name of the Purchaser or its nominees or transferees on the Company's stock transfer records of the Shares and Rights purchased pursuant to the Offer (except that if the Rights are redeemed by the Company's Board of Directors, tendering stockholders who are holders of record as of the applicable record date will be entitled to receive and retain the Redemption Price) (a "Distribution"), and constitutes and irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact and proxy of the undersigned to the full extent of the undersigned's rights with respect to such Shares and Rights (and any Distributions) with full power of substitution (such power of attorney and proxy being deemed to be an irrevocable power coupled with an interest), to (a) deliver Share Certificates and Rights Certificates (as defined in the Offer to Purchase) (and any Distributions), or transfer ownership of such Shares or Rights on the account books maintained by the Book-Entry Transfer Facilities together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price, (b) present such Shares and Rights (and any Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and Rights (and any Distribution), all in accordance with the terms and subject to the conditions of the Offer. The undersigned understands that if the Distribution Date (as defined in the Offer to Purchase) has occurred and Rights Certificates have been distributed by the Company to holders of the Shares prior to the time the Shares are tendered herewith, in order for the Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares being tendered herewith must be delivered to the Depositary or, if available, a Book-Entry Confirmation (as defined in Instruction 2) must be received by the Depositary with respect thereto. If the Distribution Date has occurred and Rights Certificates have not been distributed prior to the time the Shares are tendered herewith, the undersigned agrees to deliver the Rights Certificates representing a number of Rights equal to the number of Shares tendered herewith to the Depositary within three business days after the date such Rights Certificates are distributed. The undersigned understands that if the Rights Condition is not satisfied, the Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if 6 available, with respect to such Rights prior to accepting the related Shares for payment, if the Distribution Date occurs prior to the Expiration Date. In that event, payment for the Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of, among other things, such Rights Certificates. The undersigned hereby irrevocably appoints Maurice Levy and Jean-Paul Morin, and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, deem proper, and otherwise act (including pursuant to written consent) with respect to all of the Shares and Rights tendered hereby which have been accepted for payment by the Purchaser prior to the time of such vote or action (and any Distributions) which the undersigned is entitled to vote at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of the Company, or by written consent in lieu of such meeting, or otherwise. This power of attorney and proxy is coupled with an interest in the Company and in the Shares and Rights and is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares and Rights by the Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke, without further action, any other power of attorney or proxy granted by the undersigned at any time with respect to such Shares and Rights (and any Distributions) and no subsequent powers of attorney or proxies will be given (and if given will be deemed not to be effective) with respect thereto by the undersigned. The undersigned understands that the Purchaser reserves the right to require that, in order for the Shares and the Rights to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares and Rights, the Purchaser or its designees is able to exercise full voting rights with respect to such Shares, Rights and other securities, including voting at any meeting of stockholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares and the Rights tendered hereby (and any Distributions) and that, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares and Rights tendered hereby (and any Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all other Distributions in respect of the Shares and the Rights tendered hereby, accompanied by appropriate documentation of transfer and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions, and may withhold the entire purchase price or deduct from the purchase price of Shares and Rights tendered hereby the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority herein conferred or herein agreed to be conferred shall not be affected by, and shall survive, the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, legal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable, provided that the Shares and Rights tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment as provided in the Offer to Purchase, may also be withdrawn at any time after February 13, 1998 (or such later date as may apply in case the Offer is extended). The undersigned understands that tenders of Shares and Rights pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. 7 Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any Share Certificates or Rights Certificates not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Share Certificates or Rights Certificates not tendered or accepted for payment (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature. In the event that both the "Special Delivery Instructions" and the "Special Payment Instructions" are completed, please issue the check for the purchase price and/or return any Share Certificates or Rights Certificates not tendered or accepted for payment in the name(s) of, and deliver said check and/or return certificates to, the person or persons so indicated. Stockholders tendering Shares or Rights by book-entry transfer may request that any Shares or Rights not accepted for payment be returned by crediting such account maintained at such Book-Entry Transfer Facility as such stockholder may designate by making an appropriate entry under "Special Payment Instructions." The undersigned recognizes that the Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares and Rights from the name of the registered holder thereof if the Purchaser does not accept for payment any of such Shares and Rights. 8 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Share Certificates and/or Rights Certificates not tendered or not purchased and/or the check for the purchase price of Shares and/or Rights purchased are to be issued in the name of someone other than the undersigned, or if Shares and/or Rights tendered by book-entry transfer which are not purchased are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than that designated on the front cover. Issue check and/or certificates to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON BACK COVER) [ ] Credit unpurchased Shares and/or Rights tendered by book-entry transfer to the Book-Entry Transfer Facility account set forth below: [ ] DTC [ ] PDTC ------------------------------------------------------------ (ACCOUNT NUMBER) ============================================================ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Share Certificates and/or Rights Certificates not tendered or not purchased and/or the check for the purchase price of Shares and/or Rights purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown on the front cover. Mail check and/or certificates to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.) - ------------------------------------------------------------ 9 - -------------------------------------------------------------------------------- SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE) -------------------------------------------------------------------------- -------------------------------------------------------------------------- SIGNATURE(S) OF OWNER(S) Dated: ------------------------------ (Must be signed by the registered holder(s) exactly as name(s) appear(s) on the Share Certificate(s) or Rights Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the necessary information. See Instruction 5.) Name(s): -------------------------------------------------------------------------- -------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title): -------------------------------------------------------------------------- Address: -------------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: -------------------------------------------------------------------------- Tax Identification or Social Security No.: -------------------------------------------------------------------------- (SEE SUBSTITUTE W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature: -------------------------------------------------------------------------- Name: -------------------------------------------------------------------------- Name of Firm: -------------------------------------------------------------------------- Address: -------------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: ------------------------------------ Dated: ------------------------------ - -------------------------------------------------------------------------------- 10 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required (i) if this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares or Rights) of the Shares and the Rights tendered herewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the inside front cover hereof or (ii) if such Shares or Rights are tendered for the account of a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program (an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates. This Letter of Transmittal is to be used either if Share Certificates or Rights Certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in Section 3 of the Offer of Purchase. Share Certificates, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date and, unless and until the Purchaser declares that the Rights Condition (as defined in the Offer to Purchase) is satisfied, Rights Certificates, or Book-Entry Confirmation of a transfer of Rights into the Depositary's account at a Book-Entry Transfer Facility, if available (together with, if Rights are forwarded separately from Shares, a properly completed and duly executed Letter of Transmittal (or a facsimile hereof) with any required signature guarantees, or an Agent's Message in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal), must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date or, if later, within three business days after the date such Rights Certificates are distributed. Stockholders whose Share Certificates or Rights Certificates are not immediately available (including, if the Distribution Date has occurred, but Rights Certificates have not yet been distributed by the Company) or who cannot deliver their Share Certificates or Rights Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedures for delivery by book-entry transfer on a timely basis may tender their Shares and Rights by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary on or prior to the Expiration Date; and (iii) the Share Certificates or Rights Certificates (or a Book-Entry Confirmation) representing all tendered Shares or Rights, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (or a facsimile hereof), with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within (x) in the case of Shares, three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery or (y) in the case of Rights, a period ending on the later of (1) three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery and (2) three business days after the date Rights Certificates are distributed to stockholders by the Company, all as provided in Section 3 of the Offer to Purchase. If Share Certificates and Rights Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or facsimile hereof) must accompany each such delivery. 11 THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF APPLICABLE), THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares or Rights will be purchased. All tendering stockholders, by execution of this Letter of Transmittal or facsimile hereof, waive any right to receive any notice of the acceptance of their Shares and Rights for payment. 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares and Rights and any other required information should be listed on a separate schedule attached hereto and separately signed on each page thereof in the same manner as this Letter of Transmittal is signed. 4. Partial Tenders (Not Applicable to Book-Entry Stockholders). If fewer than all the Shares or Rights evidenced by any certificate submitted are to be tendered, fill in the number of Shares or Rights which are to be tendered in the box entitled "Number of Shares Tendered" or "Number of Rights Tendered" as appropriate. In such case, new certificate(s) for the remainder of the Shares or Rights that were evidenced by your old certificate(s) will be sent to you, unless otherwise provided in the appropriate box marked "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares and Rights represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares and Rights tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares or Rights tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares or Rights are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares or Rights listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to or certificates for Shares or Rights not tendered or purchased are to be issued in the name of a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Shares or Rights listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner(s) appear(s) on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 12 6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares and Rights to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares and Rights not tendered or purchased are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of and/or certificates for unpurchased Shares or Rights are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown on the front cover hereof, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares or Rights by book-entry transfer may request that Shares or Rights not purchased be credited to such account maintained at such Book-Entry Transfer Facility as such stockholder may designate hereon. If no such instructions are given, such Shares or Rights not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. See Instruction 1. 8. Requests for Assistance or Additional Copies. Requests for assistance may be directed to the Information Agent at its addresses set forth below. Requests for additional copies of the Offer to Purchase and this Letter of Transmittal may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. 9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income tax law, a stockholder whose tendered Shares or Rights are accepted for payment is required to provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Depositary is not provided with the correct TIN, the Internal Revenue Service may subject the stockholder or other payee to a $50 penalty. In addition, payments that are made to such stockholder or other payee with respect to Shares or Rights purchased pursuant to the Offer may be subject to 31% backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. 13 The stockholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the Shares or Rights or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares or Rights. If the Shares or Rights are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 10. Lost, Destroyed or Stolen Certificates. If any certificate(s) representing Shares or Rights has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. 11. Waiver of Conditions. The Conditions to the Offer may be waived, in whole or in part, by the Purchaser in its sole discretion, at any time and from time to time, in the case of any Shares or Rights tendered. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN AGENT'S MESSAGE TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. 14 TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS (SEE INSTRUCTION 9) - -------------------------------------------------------------------------------- PAYER'S NAME: - --------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER OR DEPARTMENT OF THE TREASURY EMPLOYER ID NUMBER INTERNAL REVENUE SERVICE ---------------------------- PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") - ---------------------------------------------------------------------------------------------------------
PART 2 -- CERTIFICATES -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). ------------------------------------------------------------------------------ SIGNATURE ------------------------------------ DATE ------------------------------ PART 3 AWAITING TIN [ ]
- -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 15 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature: - ------------------------------------------------------------------------ Date: - --------------------- FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND RIGHTS AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW: The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY By Mail: By Facsimile: By Hand or Overnight P.O. Box 84 (for eligible financial Delivery: Bowling Green Station institutions only): One State Street New York, New York (212) 858-2611 New York, New York 10004 10274-0084 Attn: Securities Processing Attn: Reorganization Window, Sub-cellar One Department
Confirm Facsimile by Telephone: (212) 858-2103 Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of the Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below, and will be furnished promptly at the Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [MacKenzie Partners, Inc. LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 The Dealer Manager for the Offer is: LAZARD FRERES & CO. LLC 30 Rockefeller Plaza New York, New York 10020 (212) 632-6000 EX-99.A3 4 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. This Notice of Guaranteed Delivery or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates representing shares of Common Stock, par value $.33 1/3 per share (the "Shares"), of True North Communications Inc., a Delaware corporation (the "Company"), or, if applicable, certificates ("Rights Certificates") for the associated Series A Junior Participating Preferred Stock purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as of November 16, 1988 between the Company and Harris Trust and Savings Bank, as Rights Agent (as the same may be amended, the "Rights Agreement"), are not immediately available (including, if a Distribution Date (as defined in the Offer to Purchase (as defined below)) has occurred, but Rights Certificates have not yet been distributed by the Company) or time will not permit all required documents to reach IBJ Schroder Bank & Trust Company (the "Depositary") on or prior to the Expiration Date (as defined in the Offer to Purchase), or the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission or mail to the Depositary. See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: IBJ SCHRODER BANK & TRUST COMPANY By Mail: By Facsimile: By Hand or Overnight Delivery: P.O. Box 84 (for eligible financial One State Street Bowling Green Station institutions only): New York, New York 10004 New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing Attn: Reorganization Department Window, Sub-cellar One
Confirm Facsimile by Telephone: (212) 858-2103 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. LADIES AND GENTLEMEN: The undersigned hereby tenders to Publicis S.A., a societe anonyme organized under the laws of France (the "Purchaser"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 16, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares and the number of Rights indicated below pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. 2 Number of Shares: ------------------------ Shares Name(s) of Record Holder(s): ------------------------- Number of Rights: _________________________ Rights ------------------------------------------------ Certificate No(s). (if available): - ------------------------------------------------- Address(es): ------------------------------------------------ - ------------------------------------------------- ------------------------------------------------ - ------------------------------------------------- ------------------------------------------------ If Share(s) or Right(s) will be tendered by book- Area Code and Telephone Number(s): ------------------------------------------------ entry transfer, check one box. [ ] The Depository Trust Company ------------------------------------------------ [ ] Philadelphia Depository Trust Company Signature(s): ------------------------------------------------ Account Number: - ------------------------------------------------- ------------------------------------------------ Date: - ------------------------------------------------- ------------------------------------------------
THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program, hereby (a) represents that the tender of Shares and/or Rights effected hereby complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and (b) guarantees to deliver to the Depositary, at one of its addresses set forth above, the certificates representing all tendered Shares and/or Rights, in proper form for transfer, or, in the case of book-entry delivery of Shares and, if available, Rights, a Book-Entry Confirmation (as defined in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of book-entry delivery of Shares and, if available, Rights, an Agent's Message (as defined in the Offer to Purchase), and any other documents required by the Letter of Transmittal within (a) in the case of Shares, three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of this Notice of Guaranteed Delivery or (b) in the case of Rights, a period ending on the later of (i) three NYSE trading days after the date of execution of this Notice of Guaranteed Delivery and (ii) three business days after the date Rights Certificates are distributed to holders of Shares by the Company. Name of Firm: - ------------------------------------------------ ------------------------------------------------- (Authorized Signature) Address: Title: - ------------------------------------------------ ------------------------------------------------- Name: ------------------------------------------------- - ------------------------------------------------ Area Code and ------------------------------------------------- (Please type or print) Telephone Number: - ------------------------------------------------ Date: -------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR RIGHTS WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES OR RIGHTS SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A4 5 LETTER TO BROKERS, DEALERS 1 Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10020 OFFER TO PURCHASE FOR CASH 9,619,904 SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. AT $28 NET PER SHARE BY PUBLICIS S.A. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED DECEMBER 16, 1997 TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES: We have been appointed by Publicis S.A., a societe anonyme organized under the laws of France (the "Purchaser"), to act as financial advisor and Dealer Manager in connection with the Purchaser's offer to purchase 9,619,904 shares of Common Stock, par value $.33 1/3 per share (the "Shares"), of True North Communications Inc., a Delaware corporation (the "Company"), and (unless and until the Purchaser declares that the Rights Condition (as defined below) has been satisfied) the associated Series A Junior Participating Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as of November 16, 1988 between the Company and Harris Trust and Savings Bank, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $28 per Share (and associated Right), net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 16, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") enclosed herewith. Unless and until the Purchaser declares that the Rights Condition is satisfied, holders of Shares will be required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. If the Distribution Date (as defined in the Offer to Purchase) does not occur prior to the Expiration Date (as defined in the Offer to Purchase), a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date occurs and Rights Certificates (as defined in the Offer to Purchase) are distributed by the Company to holders of Shares prior to the time a holder's Shares are tendered pursuant to the Offer, in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary (as defined below) or, if available, a Book-Entry Confirmation (as defined in the Offer to Purchase) received by the Depositary with respect thereto. If the Distribution Date occurs and Rights Certificates are not distributed prior to the time Shares are tendered pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within three business days after the date Rights Certificates are distributed. The Purchaser reserves the right to require that the Depositary receive Rights Certificates, or a Book-Entry Confirmation, if available, with respect to such Rights, prior to accepting the related Shares for payment pursuant to the Offer if the Distribution Date occurs prior to the Expiration Date. Holders of Shares and Rights whose certificates for such Shares (the "Share Certificates") and, if applicable, Rights Certificates, are not immediately available (including, if the Distribution Date has occurred, but Rights 2 Certificates have not yet been distributed by the Company), or who cannot deliver their Share Certificates or, if applicable, their Rights Certificates, and all other required documents to the Depositary on or prior to the Expiration Date, or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares and Rights according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Unless the context otherwise requires, all references to Shares shall include the associated Rights and all references to the Rights shall include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares or, if applicable, Rights registered in your name or in the name of your nominee. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which, when added to the number of Shares beneficially owned by the Purchaser and its affiliates, constitutes a majority of the total number of outstanding Shares on a fully diluted basis (assuming the exercise or conversion, as applicable, of all outstanding options, rights and convertible securities (if any) and the issuance of all Shares that the Company is obligated to issue), (2) the Company having entered into a definitive agreement with the Purchaser, Publicis Communication and Publicis Worldwide B.V. (both of which are subsidiaries of the Purchaser) to effect the Proposed Publicis Combination (as defined in the Offer to Purchase), (3) the Rights having been redeemed by the Board of Directors of the Company or the Purchaser being satisfied that the Rights have been invalidated or otherwise are inapplicable to the Offer and the Proposed Publicis Combination (the "Rights Condition"), (4) the Purchaser being satisfied that Section 203 of the Delaware General Corporation Law has been complied with in connection with the Offer and the Proposed Publicis Combination or is inapplicable to the Purchaser in connection with the Offer and the Proposed Publicis Combination and (5) the Agreement and Plan of Merger, dated as of July 30, 1997 (the "Bozell Merger Agreement"), among the Company, Cherokee Acquisition Corporation and Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell") having been terminated without any payments by or penalties to the Company (other than any applicable payments pursuant to Section 5.7(c) of the Bozell Merger Agreement) and the Company not having entered into or effectuated any new or amended agreements with Bozell or any other person or entity having the effect of impairing the ability of the Purchaser to consummate the Offer or the Proposed Publicis Combination or otherwise diminishing the expected economic value to the Purchaser of the Shares purchased in the Offer or the Proposed Publicis Combination. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See the Introduction and Sections 1, 14 and 15 of the Offer to Purchase. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase, dated December 16, 1997. 2. Letter of Transmittal to tender Shares and Rights for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares and Rights. 3. The Notice of Guaranteed Delivery for Shares and Rights to be used to accept the Offer if certificates for Shares or Rights are not immediately available or if such certificates and all other required documents cannot be delivered to IBJ Schroder Bank & Trust Company (the "Depositary") by the Expiration Date or if, in the case of the Shares, the procedure for book-entry transfer cannot be completed by the Expiration Date. 4. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 6. A return envelope addressed to the Depositary. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998, UNLESS THE OFFER IS EXTENDED. 3 In order to accept the Offer, an appropriate duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares or, if available, the associated Rights, and any other required documents should be sent to the Depositary and either Share Certificates representing the tendered Shares (and, if applicable, Rights Certificates representing the associated tendered Rights) should be delivered to the Depositary, or, in the case of Shares, such Shares (and, if applicable, associated tendered Rights) should be tendered by book-entry transfer into the Depositary's account maintained at one of the Book Entry Transfer Facilities (as described in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their Share Certificates or, if applicable, Rights Certificates, or other required documents on or prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. The Purchaser will not pay any commissions or fees to any broker, dealer or other person (other than the Dealer Manager and the Information Agent, as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed material may be obtained from, the Dealer Manager or the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Very truly yours, LAZARD FRERES & CO. LLC NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE DEALER MANAGER, THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.A5 6 LETTER TO CLIENTS 1 OFFER TO PURCHASE FOR CASH 9,619,904 SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. AT $28 NET PER SHARE BY PUBLICIS S.A. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 15, 1998 UNLESS THE OFFER IS EXTENDED To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated December 16, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments thereto, collectively constitute the "Offer") relating to the offer by Publicis S.A., a societe anonyme organized under the laws of France (the "Purchaser"), to purchase 9,619,904 shares of Common Stock, par value $.33 1/3 per share (the "Shares"), of True North Communications Inc., a Delaware corporation (the "Company"), and (unless and until the Purchaser declares that the Rights Condition (as defined below) has been satisfied) the associated Series A Junior Participating Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as of November 16, 1988 between the Company and Harris Trust and Savings Bank, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $28 per Share (and associated Right), net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal enclosed herewith. Unless and until the Purchaser declares that the Rights Condition is satisfied, holders of Shares will be required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. If the Distribution Date (as defined in the Offer to Purchase) does not occur prior to the Expiration Date (as defined in the Offer to Purchase), a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date occurs and Rights Certificates (as defined in the Offer to Purchase) are distributed by the Company to holders of Shares prior to the time a holder's Shares are tendered pursuant to the Offer, in order for Rights (and the corresponding Shares) to be validly tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary (as defined below) or, if available, a Book-Entry Confirmation (as defined in the Offer to Purchase) received by the Depositary with respect thereto. If the Distribution Date occurs and Rights Certificates are not distributed prior to the time Shares are tendered pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within three business days after the date Rights Certificates are distributed. The Purchaser reserves the right to require that the Depositary receive Rights 2 Certificates, or a Book-Entry Confirmation, if available, with respect to such Rights, prior to accepting the related Shares for payment pursuant to the Offer if the Distribution Date occurs prior to the Expiration Date. Holders of Shares and Rights whose certificates for such Shares (the "Share Certificates") and, if applicable, Rights Certificates, are not immediately available (including, if the Distribution Date has occurred, but Rights Certificates have not yet been distributed by the Company), or who cannot deliver their Share Certificates or, if applicable, their Rights Certificates, and all other required documents to the Depositary on or prior to the Expiration Date, or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares and Rights according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Unless the context otherwise requires, all references to Shares shall include the associated Rights and all references to the Rights shall include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement. WE ARE THE HOLDER OF RECORD OF SHARES AND RIGHTS HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES AND RIGHTS CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES AND RIGHTS HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to have us tender on your behalf any or all Shares and Rights held by us for your account pursuant to the terms and conditions set forth in the Offer. Please note the following: 1. The tender price is $28 per Share, including the associated Right, net to you in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer. 2. The Offer is being made for at least a majority of all outstanding Shares. 3. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which, when added to the number of Shares beneficially owned by the Purchaser and its affiliates, constitutes a majority of the total number of outstanding Shares on a fully diluted basis (assuming the exercise or conversion, as applicable, of all outstanding options, rights and convertible securities (if any) and the issuance of all Shares that the Company is obligated to issue), (2) the Company having entered into a definitive agreement with the Purchaser, Publicis Communication and Publicis Worldwide B.V. (each of which are subsidiaries of the Purchaser) to effect the Proposed Publicis Combination (as defined in the Offer to Purchase), (3) the Rights having been redeemed by the Board of Directors of the Company or the Purchaser being satisfied that the Rights have been invalidated or otherwise are inapplicable to the Offer and the Proposed Publicis Combination (the "Rights Condition"), (4) the Purchaser being satisfied that Section 203 of the Delaware General Corporation Law has been complied with in connection with the Offer and the Proposed Publicis Combination or is inapplicable to the Purchaser in connection with the Offer and the Proposed Publicis Combination and (5) the Agreement and Plan of Merger, dated as of July 30, 1997 (the "Bozell Merger Agreement"), among the Company, Cherokee Acquisition Corporation and Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell") having been terminated without any payments by or penalties to the Company (other than any applicable payments pursuant to Section 5.7(c) of the Bozell Merger Agreement) and the Company not having entered into or effectuated any new or amended agreements with Bozell or any other person or entity having the effect of impairing the ability of the Purchaser to consummate the Offer or the Proposed Publicis Combination or otherwise diminishing the expected economic value to the Purchaser of the Shares purchased in the Offer or the Proposed Publicis Combination. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See the Introduction and Sections 1, 14 and 15 of the Offer to Purchase. 4. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares or Rights by the Purchaser pursuant to the Offer. 5. The Offer, proration period and withdrawal rights will expire at 12:00 midnight, New York City time, on Thursday, January 15, 1998, unless the Offer is extended. 3 6. Payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by IBJ Schroder Bank & Trust Company (the "Depositary") of (a) Share Certificates and, if applicable, associated Rights Certificates or, in the case of Shares, timely confirmation of the book-entry transfer of such Shares and, if available, Rights into the account maintained by the Depositary at The Depository Trust Company or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), in connection with a book-entry delivery, and (c) any other documents required by the appropriate Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when certificates for or, in the case of Shares, confirmations of book-entry transfer of such Shares (or associated Rights, if available) into the Depositary's account at a Book-Entry Transfer Facility are actually received by the Depositary. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form set forth on the back page of this letter. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the back page of this letter. An envelope to return your instructions to us is enclosed. Your authorization to tender Shares shall be deemed authorization to tender the associated Rights regardless of whether they separate from the Shares. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares or Rights residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, the Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser by Lazard Freres & Co. LLC, the Dealer Manager for the Offer, or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH 9,619,904 SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF TRUE NORTH COMMUNICATIONS INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated December 16, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments thereto, collectively constitute the "Offer") in connection with the offer by Publicis S.A., a societe anonyme organized under the laws of France (the "Purchaser"), to purchase 9,619,904 shares of Common Stock, par value $.33 1/3 per share (the "Shares"), of True North Communications Inc., a Delaware corporation (the "Company"), and (unless and until the Purchaser declares that the Rights Condition (as defined in the Offer to Purchase) has been satisfied) the associated Series A Junior Participating Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as of November 16, 1988 between the Company and Harris Trust and Savings Bank, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $28 per Share (and associated Right), net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase. 4 This will instruct you to tender to the Purchaser the number of Shares and the number of Rights indicated below (or if no number is indicated below, all Shares and Rights) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to Be Number of Rights to Be Tendered: Tendered: ________ Shares ________ Rights
Unless and until the Purchaser declares that the Rights Condition is satisfied, holders of Shares are required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. If certificates representing Rights ("Rights Certificates") have been distributed by the Company to holders of Shares, such holders will be required to validly tender Rights Certificates representing a number of Rights equal to the number of Shares being tendered in order to effect a valid tender of such Shares. If Rights Certificates have not been distributed by the Company to holders of Shares, a tender of Shares will also constitute a tender of the associated Rights and only the line with respect to "Number of Shares to Be Tendered" should be filled in. See Section 3 of the Offer to Purchase. Unless otherwise indicated, it will be assumed that you instruct us to tender all Shares and Rights held by us for your account and that you instruct us to tender all Rights associated with Shares you have instructed us to tender. SIGN HERE Signature(s) - -------------------------------------------------------------------------------- (Print Name(s)) - -------------------------------------------------------------------------------- (Print Address(es)) - -------------------------------------------------------------------------------- (Area Code and Telephone Number(s)) - --------------------------------------------------------------------- (Taxpayer Identification or Social Security Number(s)) - ----------------------------------------------------- EX-99.A6 7 TAX GUIDELINES 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
------------------------------------------------------------ GIVE THE TAXPAYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor (Uniform The minor(2) Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent person(3) minor, or incompetent person 7. a. The usual revocable savings trust The grantor- account (grantor is also trustee) trustee(1) b. So-called trust account that is not The actual owner(1) a legal or valid trust under State law 8. Sole proprietorship account The owner(4) ------------------------------------------------------------ GIVE THE TAXPAYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF - ------------------------------------------------------------ 9. A valid trust, estate or pension trust The Legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or educational The organization organization account 12. Partnership account held in the name The partnership of the business 13. Association, club, or other tax-exempt The organization organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
============================================================ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 20% on any portion of an underpayment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- if you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.B1 8 CREDIT AGREEMENT 1 Exhibit b(1) OPENING OF A CREDIT IN FRANCS BETWEEN THE UNDERSIGNED 1) CREDIT LYONNAIS, a Business Corporation with capital of FRF 9,389,925,000 and registered offices in Lyon (Rhone), 18 rue de la Republique, and main office in PARIS (2eme), 19 Bd des Italiens, registered with the Register of Corporations and Companies of LYON, at No. 8 954 409 741, represented by Mrs. Claudie MARINI, Director of Champs Elysees Corporate Marketing Management Office - - Paris West HEREINAFTER "CREDIT LYONNAIS" ON THE ONE HAND 2) PUBLICIS S.A., a Business Corporation with a Board of Directors and Oversight Committee, with capital of FRF 201,528,125, and registered offices in PARIS 8eme at 133 avenue des Champs Elysees, registered with the Register of Corporations and Companies of PARIS at no. 8 542 080 601, represented by Mr. Jean-Paul MORIN, General Secretary, duly authorized by virtue of the powers conferred on him by the Board of Directors on April 7, 1997 HEREINAFTER "THE BORROWER" ON THE OTHER THE FOLLOWING HAS BEEN AGREED AND STIPULATED: 2 //revenue stamp - FRENCH REPUBLIC 17 F // -2- I - DEFINITIONS The terms and words beginning with a capital letter shall, the purposes of these presents, the meaning resulting from the following definitions: NOTIFICATION OF DRAWDOWN: designates an original notification in accordance with the model in Attachment No. 1 to the Contract. CASE OF EARLY REPAYABILITY: designates any event or total default by the Borrower as set forth in Article XI of the Contract. CONDITIONS PRECEDENT TO THE DRAWDOWNS: designates the conditions precedent to any Drawdown stipulated in Article 3.2 of the Contract. CONTRACT: designates the present credit opening contract and its attachments, its introductory part and, where applicable, its addenda which are and which shall be an integral part thereof. CREDIT: designates the opening of a FRF 100,000,000 (ONE HUNDRED MILLION FRENCH FRANCS), available in French francs which CREDIT LYONNAIS undertakes to make available to the Borrower pursuant to the terms and conditions of the Contract and the repayment of which shall occur in accordance with the provisions of Article 2.3 of the Contract. EFFECTIVE DATE: designates the date of May 2, 1997. BUSINESS DAY: designates any full day on which the interbanking market is operating and on which banks are open the entire day in PARIS. DRAWDOWNS: designate the use of the Credit made by the Borrower in accordance with the provisions of Article III of the Contract. 3 //revenue stamp - FRENCH REPUBLIC 17 F // -3- II - CHARACTERISTICS OF THE CREDIT 2.1 CREDIT AMOUNT CREDIT LYONNAIS grants the Borrower, which accepts, in accordance with the following terms and conditions, an opening of credit in French francs, available through Drawdowns, of a maximum amount of FRF 100,000,000 (ONE HUNDRED MILLION FRENCH FRANCS). This amount can be increased to FRF 200,000,000 (TWO HUNDRED MILLION FRENCH FRANCS) at the time of the first extension of the Credit, in accordance with Article 2.3, below. 2.2 INTENDED PURPOSE OF THE CREDIT The Credit is intended to finance the Borrower's investments and its cash flow needs. 2.3 TERM OF THE CREDIT The Credit is granted reckoned from the Effective Date up to May 2, 1998 (the "Maturity Date") and may be extended thereafter for successive periods of one year, following mutual agreement between the parties. In order to formalize its agreement regarding any extension, CREDIT LYONNAIS shall send Borrower, one month prior to expiration of the Maturity Date, a letter notifying it of its decision. It is now and henceforth stipulated that the first extension intended to extend the Maturity Date of May 2, 1998 to May 2, 1999 shall be accompanied by a statement of the credit amount of FRF 100,000,000 (ONE HUNDRED MILLION FRENCH FRANCS) to FRF 200,000,000 (TWO HUNDRED MILLION FRENCH FRANCS). 4 //revenue stamp - FRENCH REPUBLIC 17 F // -4- In the absence of agreement between the parties, the Borrower shall proceed to repayment of the Credit on the Maturity Date. III - TERMS AND CONDITIONS OF USE 3.1 Within the limits on the amount and term as defined hereinbefore, the Borrower shall use the Credit as it sees fit, by Drawdowns, to the extent and in accordance with its needs in the specific conditions set forth in the following. The total amount of the Drawdowns may not exceed the Credit amount available. Deemed available shall be the amount equal to the difference between: - on the one hand, the maximum amount of the Credit on the dates and for the amounts stipulated in Article II, above, - on the other, the sum of the amount of the Drawdowns in French francs outstanding. 3.2 Moreover, all Drawdowns shall be subject to the following conditions: - that there be no default with respect to any of the commitments assumed by Borrower under the Contract, except where such default shall have been remedied within the time periods set forth in Article XI, Clause 2; - that no Case of Early Repayability, as defined in Article XI of the Contract, has occurred; - that the cumulative amount of the Drawdowns requested by the Borrower on the date of the Drawdown does not exceed the maximum amount of the Credit on the dates and for the amounts set forth in Article II, above; 5 //revenue stamp - FRENCH REPUBLIC 17 F // -5- - that the Borrower has sent to CREDIT LYONNAIS, within the time periods prescribed, a Notification of Drawdown. 3.3 DRAWDOWNS Each of the Drawdowns shall be made for an amount at least equal to FRF 10,000,000 and above said amount by a full multiple of FRF 1,000,000. The term of each of the Drawdowns shall be 1, 3 or 6 months, all other terms being excluded. Each Drawdown shall be made on a Business Day and be the subject of a Notification of Drawdown pursuant to the model shown in Attachment No. 1, duly signed by Borrower. The Notification of Drawdown shall be sent to CREDIT LYONNAIS no later than two Business Days before the day on which the Borrower wishes to dispose of the funds. The Notification of Drawdown shall irrevocably bind the Borrower which shall be required to accept the depositing of the funds corresponding to said Drawdown, in accordance with the conditions shown on the corresponding Notification of Drawdown and with the terms and conditions of the Contract. 3.4 The transactions resulting from the operation of the Credit are excluded from all current accounts which the Borrower may have and may come to have with CREDIT LYONNAIS. The accounts maintained at CREDIT LYONNAIS for purposes of retracing the transactions performed thereon in execution of the Credit, shall consist of simple accounting instruments and shall not occasion the legal effects attaching to current accounts. 6 //revenue stamp - FRENCH REPUBLIC 17 F // -6- IV - FEES 4.1 FEES A usage fee of 6.25 basis points (0.0625%) per annum, calculated on the available amount of the credit as defined in Article III, based on a 360-day year, shall be charged quarterly at the end of each calendar quarter by CREDIT LYONNAIS to the Borrower's current account and for the first time on June 30, 1997. 4.2 DRAWDOWNS 4.2.1 - INTEREST The interest applicable to each of the Drawdowns shall be calculated based on the number of exact days referenced to a 365-day year. They shall be charged upon maturity, at the end of the period, on the date of maturity of each of the Drawdowns, at the rate determined below. The rate applicable to each of the Drawdowns shall be equal to the PIBOR-FRANC (TIOP) rate for the duration of said Drawdown, increased by 12.5 basis points (0.125%) per annum. The TIOP of the term of the Drawdown designates the average rate, stated at an annual rate, published by TELERATE under the auspices of the Association Francaise des Banques (French Association of Banks, AFB) at which deposits, payable in French francs for the same period and the same amount as said Drawdown, are offered on the PARIS interbanking market at 11:00 a.m. of the business day preceding the Drawdown date. The rate thus determined the day preceding the day of the Drawdown shall be fixed over the entire term of the latter. 7 //revenue stamp - FRENCH REPUBLIC 17 F // -7- 4.2.2 - MARKET DISTURBANCE In Paris, the spread, as displayed on the TELERATE screen, between the rate offered and the rate asked for the French francs over the TIOP quotation periods, is generally, for each reference bank, 1/8%. There shall be market disturbance whenever the spread ascertained by CREDIT LYONNAIS as well as by two banks (which, the parties agree shall be the Banque Nationale de Paris and Banque de la Societe Generale) is, over the term of the Drawdown requested and the rate fixing day, at 10:00 a.m., more than quadruple the spread generally ascertained, that is, greater than 0.5%. In the event of market disturbance, CREDIT LYONNAIS shall immediately notify the Borrower via all means. CREDIT LYONNAIS and Borrower shall then negotiate, within the shortest period of time, in order to agree, based on a different fixing method, to an appropriate rate in function of the new situation. Failing an agreement between the Borrower and CREDIT LYONNAIS, the rate then applicable to the Drawdown shall be equal to the average of the two highest rates of the eight rates taken into consideration for fixing of the TIOP for the term of the Drawdown, the business day preceding the Drawdown having been taken into consideration, increased by 12.5 basis points (0.125%) per annum. 4.2.3 NON-PUBLICATION OF THE TIOP 8 //revenue stamp - FRENCH REPUBLIC 17 F // -8- If the TIOP, as calculated and published by the AFB, should cease, for any reason whatsoever, to be published, CREDIT LYONNAIS shall immediately notify the Borrower via all means and the following provisions shall apply: - - in the event a rate replacing the TIOP is published under the auspices of the AFB, said rate shall be immediately applicable to the new Drawdowns, the interest rates being equal to this new rate increased by 12.5 basis points (0.125%) per annum. - - in the contrary case, CREDIT LYONNAIS and Borrower shall negotiate, within the shortest period of time, in order to agree, based on a different fixing method, to an appropriate rate. During this negotiation period, Borrower shall not be able to effect any new Drawdown and the total amount of the Drawdowns outstanding shall be repaid on the maturity date of each thereof. V - AGGREGATE ACTUAL RATE In order to comply with legal provisions governing interest rates, it is stipulated that only use of the Credit shall permit determination of the aggregate actual rate. By way of example, the aggregate actual rate of the Credit applicable on April 18, 1997, for total use of the Credit, would amount to 3.59% per annum, taking into consideration a TIOP at 6 months of 3.46484%, the rate for the period being 1.795%, the duration of the period, 6 months. 9 //revenue stamp - FRENCH REPUBLIC 17 F // -9- VI - UNFORESEEN OCCURRENCE OF NEW CIRCUMSTANCES If, as the result of new legislative or regulatory provision or an EC directive or change in the structure of the banking system or for any other reason, a new tax or charge or a new assessment or fee be directly applicable to the present Contract or to repayments of the principal or interest or fee payments, or other amounts due by virtue of the performance of the Contract, or if the taxes, charges, assessments (with the exception of the tax on the bank's aggregate net revenue) or fees currently directly applicable to these repayments and payment were to be increased, the following provisions shall apply: (1) CREDIT LYONNAIS shall notify Borrower of the unforeseen occurrence of this event via registered letter with return receipt and shall inform same of the additional cost which CREDIT LYONNAIS will incur as a result of this event, which additional cost shall be fully debited the Borrower. (2) In the event Borrower should not agree to bear the entire amount of this cost, the Borrower shall inform CREDIT LYONNAIS via registered letter with return receipt within 8 calendar days, reckoned from Borrower's receipt of said notification. (3) If in agreement regarding the foregoing changes at the end of said negotiation period, Borrower shall not be able to make further Drawdowns under this Contract and the total amount of the Drawdowns outstanding at the end of the negotiation period must be repaid in advance within a one month period. In the event of early repayment of the Credit by virtue of the unforeseen occurrence of new circumstances, CREDIT LYONNAIS shall be paid an indemnification corresponding to the 10 //revenue stamp - FRENCH REPUBLIC 17 F // -10- amount resulting from the difference between the rate applicable to each of the Drawdowns repaid in advance and the reference rate in effect on this date on the amount of each of the Drawdowns repaid for the term of said Drawdown as yet unlapsed. Reference rate shall be understood to mean the PIBOR Franc (TIOP) rate, for a term equivalent to the term of each of the Drawdowns still to lapse, rounded off, if necessary, to the next higher number of months; the rate shall be published by Telerate the business day preceding the day of early repayment of said Drawdown. VII - EARLY WAIVER The Borrower may, at any time, waive all or part of portion of the Credit not used, subject to one month's prior notice. All waivers shall be for an amount at least equal to FRF 10,000,000 (TEN MILLION FRENCH FRANCS) and above said amount by a full multiple of FRF 1,000,000. This waiver shall be irrevocable in nature and shall reduce definitively and proportionately the limit of CREDIT LYONNAIS obligations. VIII -- EARLY REPAYMENT The Borrower shall be entitled to make early repayment of one or more Drawdowns. All early repayment of the Credit shall be for an amount at least equal to FRF 10,000,000. Early repayments shall be the subject of a notification sent to CREDIT LYONNAIS ten business days in advance of such repayment via registered letter and shall give rise, where applicable, to the payment of an indemnification corresponding to the amount resulting from the difference between 11 //revenue stamp - FRENCH REPUBLIC 17 F // -11- the rate applicable to each of the Drawdowns repaid in advance and the reference rate in effect the date governing the amount of each of the Drawdowns repaid for the term of said Drawdown as yet unlapsed. The reference rate shall be understood to be the rate defined in Article VI, subparagraph 3. IX - REPRESENTATIONS The Borrower represents and warrants to CREDIT LYONNAIS that, as of the date of signature of these presents, that: (1) it is a corporation organized in accordance with the law, enjoying the incorporation possessing full legal capacity to conclude the Contract and to execute and comply with its terms and conditions. (2) that the signing and execution of the Contract have been legally authorized, if necessary, by its corporate bodies and require no authorization from any competent authority not already obtained. (3) that the signing of the Contract and execution of the obligations resulting thereinunder do not contravene either its articles of incorporation or any commitment to which it may be bound nor does such signing and execution violate in any manner whatsoever the laws or regulations which are applicable to it. (4) no suit, action, case or administrative proceedings are pending or, to its knowledge, are not about to be brought or filed, to prevent or prohibit the signing or the execution of the Contract. 12 //revenue stamp - FRENCH REPUBLIC 17 F // -12- (5) that no event capable of seriously affecting the extent or worth of its assets or of appreciably increasing the volume of its commitments has occurred since the close of its last financial year and that as of this date nothing exists which could constitute a case of early repayment, as defined in Article XI. (6) that the financial documents submitted to CREDIT LYONNAIS were compiled in accordance with generally accepted accounting principles, are proper, in order and genuine and give a faithful image of its net worth financial assets and its profits and losses. X - BORROWER'S OBLIGATIONS For such time as the Borrower shall be deemed a debtor by virtue of the Contract, the Borrower undertakes: a) to send CREDIT LYONNAIS, following their approval by the competent corporate bodies, on the dates and within the time periods prescribed by law and the articles of incorporation, certified true copies of its annual financial sheets, final accounts and attached documents, of the Auditors' General Report. After each ordinary or extraordinary meeting, CREDIT LYONNAIS shall obtain, upon written request by it, the minutes of said meeting once said minutes have been prepared; b) to inform, with due diligence, CREDIT LYONNAIS by providing it with all substantiating documentation necessary, of all changes to its articles of incorporation except those exclusively necessitated in order to comply with changes to laws governing business corporations, and of all 13 //revenue stamp - FRENCH REPUBLIC 17 F // -13- facts capable of seriously affecting the extent or worth of its assets or of appreciably increasing the volume of its commitments; c) to apply for all authorizations of the competent authorities which may possibly be required after Contract signing for execution by the Borrower of its obligations pursuant to the terms and conditions thereof; d) to notify, with due diligence, the unforeseen occurrence of any event constituting a case of early repayability, as defined in Article XI of the Contract, and to describe the facts relating to this event; e) to comply, within the framework of its activities, with all legal and regulatory provisions in effect; f) to authorize, as security for any loan debt, present or future, or as security for all guarantees of said debt, no real security of any nature whatsoever without causing CREDIT LYONNAIS to benefit therefrom pari passu, with the exception of securities authorized to allow financing the acquisition of all capital assets to the extent the security authorized relates exclusively to the assets in question and guarantees only the payment or the financing of this asset. CREDIT LYONNAIS shall be able to authorize the Borrower to waive this clause if it deems that its debt is not compromised or if, where applicable, the Borrower offers it an equivalent security. XI - EARLY REPAYABILITY In the event of court-ordered liquidation or the Borrower's ceasing to do business, all the amounts deposited in the execution of the Credit, as well as all interest, fees and ancillary and 14 //revenue stamp - FRENCH REPUBLIC 17 F // -14- related charges, shall be legally repayable in advance and the Borrower shall not be able to make any other Drawdown. The same shall apply in the event of total cessation of business activities within the scope of joint proceedings. Moreover, the above-indicated amounts shall, at CREDIT LYONNAIS' discretion, become legally repayable in advance and the Borrower shall not be able to make any other Drawdown in any of the following cases: 1) In the event of non-payment, at its maturity, of any sum whatsoever which has become repayable under the Contract if such case has not been remedied within a time period of ten calendar days following receipt of formal notice sent by CREDIT LYONNAIS via registered letter with return receipt. 2) Non-performance, for any reason whatsoever, by the Borrower of any one of its obligations referred to in Article X of the Contract and if such default has not been remedied within a time period of ten calendar days following receipt of said notification, via registered letter with return receipt, to Borrower by CREDIT LYONNAIS, requesting such remedy. 3) In the event of inaccuracies, except for those resulting from a simple material error or those not of a nature to substantially distort the evaluation of an important aspect of the Borrower's situation, default on any of the representations made pursuant to Article IX of the Contract, unless the inaccuracies, capable of resulting from a situation not in conformity with the representations, have ceased to exist. 15 //revenue stamp - FRENCH REPUBLIC 17 F // -15- 4) In the event the Borrower undertakes any transaction relating to merger, absorption, splitting or partial contribution of assets necessarily having an unfavorable effect on its financial situation and jeopardizing its ability to meet its financial obligations under the present Contract. 5) Failure by the Borrower to pay any debt in an amount exceeding or equal to FRF20 million within a period of 10 days, reckoned from receipt by Borrower of formal notice sent by the creditor, unless the Borrower has challenged in good faith the repayability of this debt and has requested the court for a ruling on this challenge. If any of these hypothetical situations should materialize, CREDIT LYONNAIS shall be able to demand the payment of all amounts owed it and this eight calendar days following remittance of a simple notification sent, via registered mail with return receipt to the Borrower, to the domicile elected hereinafter. This letter shall indicate that CREDIT LYONNAIS intends to exercise the right pursuant to this Article. CREDIT LYONNAIS shall not be required to satisfy any other formality nor to have the expiration of the deadline announced by the court. Payments or settlements subsequent to this notice shall not be an impediment to such repayability. XII - INTEREST IN ARREARS All sums not repaid at their normal maturity date shall bear legal interest with the limits authorized by Law, from the day of the maturity date and up to its complete repayment, at the Weighted 16 //revenue stamp - FRENCH REPUBLIC 17 F // -16- Average Rate of day-to-day transactions between banks, published by the Bank of France, the next business day, increased by 200 basis points (2%) per annum. The same shall apply for all expenses and expenditures advanced by CREDIT LYONNAIS in connection with the Credit for any reasons whatsoever. This provision shall not prejudice repayability without advance notification and, consequently, shall not be deemed to constitute a deferred payment agreement. Interest shall be capitalized, if they are owed, over an entire year, as provided for by Article 1154 of the Civil Code. XIII - TAXES AND CHARGES All fees, taxes, charges, present and future, of any nature whatsoever and, generally, all costs legally justified and related to the Contract or which may be the result or the consequence thereof shall be payable by the Borrower and, consequently, paid by it and reimbursed by it to CREDIT LYONNAIS in the event of their advance by the latter and shall be definitively borne by the Borrower. XIV - PAYMENT 14.1 All payments in principal, interest, fees and ancillary charges for CREDIT LYONNAIS' benefit shall be made by the Borrower, with good value date, to CREDIT LYONNAIS - DIRECTION DE MARCHE ENTREPRISES PARIS OUEST - 55 avenue des Champs Elysees -75008 PARIS. To this effect, Borrower irrevocably authorizes CREDIT LYONNAIS to debit current account No. 572 / 2,180 E, opened in its name in the ledgers of the Corporate Marketing Management - 17 //revenue stamp - FRENCH REPUBLIC 17 F // -17- PARIS WEST of CREDIT LYONNAIS, 55 avenue des Champs Elysees -75008, of all sums owed and payable by virtue of the Contract and undertakes, to this effect, to provide sufficient cover, in advance and available, for this account. 14.2 Borrower is expressly prohibited from off-setting or allowing an off-set to be made between any sum payable by it under the Contract and any claim it might otherwise have vis-a-vis CREDIT LYONNAIS. Borrower is likewise prohibited from making a payment by subjecting it to any condition or reservation to assert any demurrer or counterclaim whatsoever foreign to the Contract. 14.3 All payments shall be made on a Business Day. In the case where the repayability date of any sum whatsoever due by virtue of the Contract should not fall on a Business Day, the corresponding payment shall be carried over to the following Business Day. Consideration shall be made for adjustments in the calculations of interest and fees. XV - ABSENCE OF WAIVER No delay nor omission on the part of CREDIT LYONNAIS in the exercise of any one of its rights pursuant to the terms of the Contract shall affect said right or be deemed as implying, on its part, a waiver to avail itself of this right. The rights and recourses stipulated in these presents are cumulative and non-exclusionary of any other right or recourse CREDIT LYONNAIS might otherwise have. 18 //revenue stamp - FRENCH REPUBLIC 17 F // -18- XVI - APPLICABLE LAW - DOMICILE - CORRESPONDENCE 16.1 All correspondence relating to this agreement shall be sent: - by the Borrower: at its corporate headquarters, 133 avenue des Champs Elysees, Paris 8eme. - by CREDIT LYONNAIS, at its Corporate Marketing Management Office - PARIS WEST, 55 avenue des Champs Elysees - Paris 8eme. 16.2 Borrower states that the Notifications of Drawdown signed and transmitted via telecopier, including those sent by encoded telex, shall be just as binding on it as an original signature, the Borrower releasing CREDIT LYONNAIS from all liability which might result from the consequences of erroneous, abusive or fraudulent use of these transmission media by Borrower. 16.3 The present Contract is subject to French law. In the event of disputes, the Commercial Court of Paris shall have exclusive jurisdiction. Executed in Paris, 4/30/97 In two copies //signature// //signature// CREDIT LYONNAIS THE BORROWER 19 [Revenue stamp, 17 francs] ANNEX 1 NOTICE OF DRAWDOWN IN FRENCH FRANCS TO: CREDIT LYONNAIS/UB Commitments CHAMPS ELYSEES 11, rue d'Argenson 75008 PARIS To the attention of Ms. SICOT/Fax No. 01.49.24.54.99 DATE: COMPANY: RE.: Credit Line Agreement for -------- French francs dated --/--/-- This Drawdown Notice is being sent to you in accordance with the provisions of Article III of the abovecaptioned Agreement. You are hereby notified that, in accordance with the provisions of Article III of the abovecaptioned Agreement, we wish to draw down the amount listed below as follows: AMOUNT DRAWN DOWN: ------------------- French francs 20 -20- DATE OF THE DRAWDOWN: --/--/-- DURATION OF THE DRAWDOWN: Please credit the amount drawn down to account No. ---------- at your Bank. We hereby repeat the representations made in Article IX of the abovecaptioned Agreement and we confirm that none of the conditions for early repayment have occurred. Signed [signature] EX-99.B2 9 CREDIT FACILITY 1 Exhibit b(2) OPENING OF A CREDIT FACILITY Between the undersigned: BANQUE PARIBAS, a Corporation with Board of Directors and Supervisory Council, with capital of 5,651,454,100 French francs, whose registered address is in PARIS at 3, rue d'Antin, RCS PARIS B 662 047 885, represented by Mr. Gerard Chatelain and Mr. Francois Hervey, acting, respectively, as Director and as Director of Corporate Customers of the Neuilly Business Center, Hereinafter referred to as "the Bank "; of the first part AND The Corporation with Board of Directors and Supervisory Council PUBLICIS, with capital of 202,453,525 French francs, whose registered address is in PARIS 75008 at 133, avenue des Champs-Elysees, RCS PARIS B 542 080 601, 2 -2- represented by Mr. Jean Paul Morin, General Secretary of the PUBLICIS Group, by virtue of authority conferred upon him by a decision of the Board of Directors assembled on April 7, 1997, a certified copy of which is annexed hereto, Hereinafter referred to as "the Borrower," of the second part IT HAS BEEN AGREED AND COVENANTED AS FOLLOWS: ARTICLE 1: TERMS FOR OPENING THE FACILITY Amount of credit: 200,000,000 French francs (Two hundred million French francs) Object of the facility: Opening of this credit facility is intended for financing of the Borrower's general needs. Period of the credit: This Agreement comes into force as of the date of execution of this instrument. 3 -3- The credit facility opened herein shall be extended for a duration of 364 days. ARTICLE 2: DELAYING CONDITIONS The credit facility opened herein shall only be placed at the Borrower's disposal after the Borrower has tendered to the Bank the following documents and papers: - by-laws - "k-bis" statement dated within the past three months - signer's authority in a form declared satisfactory by the Bank. Should all of the above-stated conditions not be satisfied by June 10, 1997 at the latest, the Agreement herein shall be legally void. ARTICLE 3: TERMS FOR USAGE The credit facility opened herein is usable by means of discounting of promissory notes signed by the Borrower to the order of the Bank, with a term of 1, 2, 3, 4, 5, or 6 months. 4 -4- The said discounted amounts shall be credited to the Borrower's current account opened on the books of the Bank [under number ...] ...A 560547 V. These drawdowns, a sample of which is attached to this document, shall be in units of a minimum amount of 10,000,000 francs. They must be remitted to the bank no later than one day before the discount date. These notes shall bear the words "free of fees" and made for value in consideration of this credit facility. Their execution and renewal shall not give rise to novation. They shall be domiciled at the Bank and renewable within the limits authorized herein. They may not be demanded by the Borrower prior to their due date. Should the expiration of the term hereof occur, the Bank is authorized to transform the notes into sight drafts. The Borrower gives notice that the person authorized to sign the notes is Mr. Jean-Paul Morin and undertakes to inform the Bank of any change which occurs in the names of the 5 -5- authorized signatories before any renewal of the said notes. ARTICLE 4: REDUCTION OF THE AUTHORIZATION The facility opened herein shall terminate at the close of 364 days from the date of signing of this document, and all usage thereunder must be completely paid out as of that date. ARTICLE 5: INTEREST Interest shall be calculated at the TIOP(1) (or PIBOR) in use, augmented by 0.10 point, with calculation to be performed in the exact number of days the credit is available, based on a year of 360 days. This interest shall be charged at the due date of each promissory note, unless such notes are for a term greater than three months, in which case, interest shall be charged at the end of each quarter of the civil calendar within the term, and charged for the last time on the - ---------- (1) TIOP (Interbank rate offered at Paris) or PIBOR (Paris Interbank Offered Rate) TIOP or PIBOR is the average interbank rate offered in Paris at 11 a.m. (Paris time) by a selected group of banks called the reference banks on the business day preceding the drawing date (or on the day of the advance or the first day of interest calculation) for deposits in French francs (or in ECUS) and for a term equal to that of the drawdown (or of the advance or the period of interest calculation) in question. It is broadcast daily on the TELERATE screen (presently on page 20041) on the business day preceding the date of the drawdown (or of the advance or the period of interest calculation) under the auspices of the French Association of Banks for periods of 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, and 12 months and is available at the Bank. The TIOP (or PIBOR) in francs for periods of one month and three months is published daily with the official rate of the Society of French Securities Exchanges (under the title "PIBOR"). 6 -6- due date of the note by debiting the current account of the Borrower. MARKET DISTURBANCES The spread on the Paris market on extremes of the rates bid and asked at 11 a.m. for the French franc for the TIOP rate determination periods by the reference banks (as they are displayed on the TELERATE screen) is generally 1/8% [0.125%] per year. A market disturbance shall be deemed to have occurred once the spread between highest and lowest offered rates over the period of the drawdown in question shall be greater than _% [0.5%] per year at 11 a.m. on the date of setting of the reference rate (TIOP). In case of market disturbance, the Bank shall advise the Borrower immediately by all means. The Bank and the Borrower shall then negotiate to arrive at different manner of setting a reference rate in light of the new situation. In the absence of agreement between the Borrower and the Bank, the reference rate then applicable to the drawdown shall be equal to the arithmetic mean of the four highest rates used in setting the TIOP for the period in question of the business day prior to the day the funds were made available (or the first day of the period for calculating interest). 7 -7- Non-Publication of the TIOP If the TIOP, in the form calculated and published by the French Association of Banks, should cease for any reason to be published (for example, because of operating conditions in the interbank market or lack of response from several reference banks not allowing its determination in the manner prescribed under the set rules), the Bank shall advise the Borrower immediately by all means, and the following provisions shall apply: - in case an index substituted for the TIOP shall be published under auspices of the French Association of Banks (or of any other organization, insofar as the Bank shall be placed in the sampling of reference institutions), that index shall be immediately applicable to further drawdowns (or to the drawdown in question); - otherwise, the Bank and the Borrower shall negotiate in order to arrive at a new reference rate; - failing agreement, the reference index shall be equal to the arithmetic mean (rounded off, if necessary, to the next highest one-sixteenth of a percent (1/16%)) of the rates offered, which shall have been communicated to the Bank by the following four banks: Caisse Nationale du Credit Agricole, Banque Nationale de Paris, Credit Lyonnais, and Societe Generale. In case of non-response from one or more of these four institutions ([illegible] TIOP reference banks) for transactions denominated in francs [and in] an 8 -8- amount equal to the amount of the drawdown in question for the same duration, as of the day the funds were made available (or the first day of the period for calculating interest). ARTICLE 6: COMMISSION From the date of execution of this document, a commission for non-use shall be due, calculated upon the portion of this facility authorized but not used at the rate of 0.0625 per year. This commission shall be payable at the end of each quarter by debiting the current account of the Borrower based on sums not utilized during the period in question, and calculated upon the exact number of days as a proportion of a year of 360 days. It shall be definitively earned by the Bank even in case of premature renunciation of this facility. ARTICLE 7: EFFECTIVE OVERALL RATE Pursuant to Article I. 313-1 of the Consumers' Code (formerly Law No. 66-1010 of December 28, 1966) and to Decree No. 85.944 of September 4, 1985, it is stated as an indication that in case of a complete drawdown of the amount authorized in this credit 9 -9- facility at the rate of one promissory note every three months, and given the three-month TIOP rate in effect on February 27, 1997 set at 3.3437% per year, the effective overall interest rate on the credit herein is 3.49% per year as of this date, with the rate for the period in question being 0.8729%. ARTICLE 8: PREMATURE RENUNCIATION The Borrower shall have the power to decline to draw funds on any note for all or part of the credit herein, on condition that it notify the Bank by registered letter, return receipt requested, 30 days prior to the effective date of such renunciation. The renunciation shall be irrevocable, and shall not be less than 50,000,000 francs, and, beyond that sum, shall be in full multiples of 10,000,000 francs. If renunciation is total, the Borrower shall thenceforth not make a claim for any further utilization hereunder. Partial renunciation shall reduce the authorized credit by the amount declined. The total amount of commissions provided for in this Agreement and payable on the due date shall remain earned by the Bank. No penalty shall attach by reason of a renunciation. 10 -10- Sums used which exceed the reduced authorized amount must be repaid on their due date. ARTICLE 9: TAXES, CHARGES, AND COSTS Any payment of principal, interest, commissions, or ancillary charges in favor of the Bank shall be made free of all taxes and official charges of any kind, present or future, collected or withheld in France, which might affect such sums, whatever their mode of payment. In particular, the Borrower shall reimburse to the Bank: 1) All present and future taxes, charges, and official fees attaching to these transactions, except for corporate income tax, 2) All costs and duties of any kind to which this Agreement might give rise; in particular those relating to its registration and execution, 3) All registration charges and other costs and professional fees of any kind which may be payable in case the Bank should be obliged to contemplate or resort to judicial means to obtain payment of the amounts or sums which may be due, as well as any premiums, deposit fees, and travel or other expenses. 11 -11- ARTICLE 10: CHANGED CIRCUMSTANCES If the costs of using the credit facility are increased for the Bank in consequence of a new legislative or regulatory scheme, or of a new directive or mandate from a competent Authority, or of a change in any law, regulation, or directive (such as, for example, mandatory reserves or deposits, penalties for surpassing statutory credit exposure limits, coefficients of retained earnings or fixed assets, or liquidity, or any other thing, or any tax, charge, duty, or other levy except for general company income tax), the Bank shall notify the Borrower thereof and state its intention to raise the rate of interest on the credit facility it has granted by the percentage necessary to maintain its profit margin. In case the Borrower and the Bank do not reach agreement on the new terms to be applied to the transaction in the sixty days following such notice as to the occurrence of changed circumstances, all the Borrower's drawdowns shall become due and owing, and the furnishing of this facility shall be fully rescinded. ARTICLE 11: DELAYED INTEREST In case of default by the Borrower, the amounts which become due and owing to the Bank 12 -12- shall yield delayed interest at WAR [TMP](2) increased by two points until complete reimbursement. ARTICLE 12: DECLARATIONS OF THE BORROWER The Borrower declares, and its declarations are deemed to be repeated during each use of this facility, unless the Borrower expressly notifies the Bank to the contrary: - - that the present document is in conformity with French law and that it does not contravene the articles of incorporation or by-laws of the Borrower in any respect. - - that the signatory of this Agreement is duly authorized to sign the present document and can validly bind the corporation. - - that all financial statements it has provided to the Bank are correct, and that they were prepared in accordance with accounting principles generally applied in France, and that they provide an accurate image of the profit and loss for each fiscal year. - - that it is not a party to, or threatened with, any lawsuit which might be susceptible of - ---------- (2) WAR [TMP] is the weighted average daily interest rate [taux moyen pondere] of the interbank market against pensions, set each day by the Banque de France. It is published daily, in particular in the Official Rates of the Society of French Securities Exchanges, and is available at the Bank. 13 -13- preventing it from meeting its obligations hereunder, and that it is not the subject of any proceedings. - - that since the closing date of its most recent fiscal year, no event has occurred which could prevent it from fulfilling the obligations imposed by this Agreement. - - that none of the provisions of the Article entitled "Accelerated Demand" are applicable to it. - - that its obligations under this Credit Agreement are equal in priority with those of the same kind into which it has entered with other credit institutions. - - that it is not the subject of proceedings whose final outcome would be the payment of certain creditors, that it has not entered into a composition with creditors, nor is it in a state of suspension of payments, and that it is not the object of any proceeding for creditors of any kind whatsoever. - - that it is not in arrears in payment of its taxes, duties, or other official charges. 14 -14- ARTICLE 13: UNDERTAKINGS OF THE BORROWER So long as the Borrower shall be debtor hereunder, it undertakes: - - not to create, or allow to remain in being, real securities guaranteeing any of its present or future obligations of payment as a borrower under a facility of the same kind without making the Bank a beneficiary of a security which it deems to be equivalent thereto. - - to deliver to the Bank all documents which the Bank shall deem useful to it at any time, and to give to the Bank minutes of its ordinary and extraordinary shareholders meetings as soon as they are prepared, and, no more than six months after the end of any fiscal year, conformed certified copies of its annual balance sheets, accounts, and profit and loss statements, and all documents required by law to be appended thereto, accompanied by the auditors' reports. - - to notify the Bank as soon as possible of any event which might constitute a case of accelerated demand. - - to provide written notice to the Bank of any important transformation affecting its juridical form, nature, or capacity (in particular, changes of name, change of registered address, voluntary winding-up, judicial reorganization or liquidation, or dissolution). 15 -15- ARTICLE 14: ACCELERATED DEMAND Independently of [ ... ] causes for accelerated demand, the opening of this facility shall be fully rescinded immediately, with the Borrower unable to claim any further utilization, with those already made becoming immediately due and owing, in the following cases: - -default in making timely payment of any sum due hereunder. - - failure to perform any of the obligations arising hereunder, in particular failure in respect of any undertaking provided for in this Agreement. - - falsity of any statement made by the Borrower, or provision of inadequate information. - - dissolution, voluntary winding-up, judicial reorganization or liquidation, or ceasing to do business. - - default in timely payment of any sum due from the Borrower to anyone, particularly inclusive of official contributions, taxes, and allocations. The same will apply in case of accelerated demand under any credit facility accorded to the Borrower under another contract, whether equal priority be granted by the Bank or a third party, unless the 16 -16- Borrower has not disputed the validity of said debt in good faith, and such dispute is before a court of competent jurisdiction, in which case the payment of such debt shall not constitute a case for accelerated demand to the extent that the dispute is not settled. - - merger (unless the Borrower is the acquiring company), splitting up, or transformation into another kind of company. - - judicial or banking interdiction of the Borrower. The end of the term hereof shall be fully accorded to the Bank 30 days after notification of default in performance of this Agreement by registered letter with return receipt requested. ARTICLE 15: MISCELLANEOUS CLAUSES It is formally stated that the Bank may at any time avail itself of the causes for demand provided herein without the non-exercise of its rights implying renunciation of any of those rights. Delays in payment shall never be interpreted as equivalent to the Bank's consent to allow such delays. 17 -17- Assessment of delayed interest shall not be interpreted as the Bank's agreement to any kind of moratorium. The Borrower shall not assign rights or delegate obligations arising from this Agreement without prior written consent of the Bank. The Bank reserves the right to transfer all or part of the commitments arising hereunder, on condition that it inform the Borrower thereof in such form as the laws or regulations may require. Pursuant to the provisions of Article 36 of Law No. 88-1201 of December 23, 1988 relating to organizations for collective investment in real estate, and on creation of mutual funds of securities, as modified by Law No. 93-1444 of December 31, 1993, the Bank may assign the collection of debts engendered by this Agreement. Any modification of this contract shall be made by written agreement. ARTICLE 16: APPLICABLE LAW This Agreement is subject to French law for its validity, its interpretation, and its performance. 18 -18- ARTICLE 17: JURISDICTION The Commercial Court of Paris shall have sole jurisdiction to adjudge any dispute relating to this Agreement. ARTICLE 18: CHOICE OF DOMICILE The parties elect as domicile for the performance of this Agreement and its consequences the addresses given at the beginning of this document. Signed at Neuilly-sur-Seine, May 2, 1997 in as many originals as there are parties [handwritten] Read and approved /s/ /s/ the Borrower(3) the Bank PUBLICIS SA - ---------- (3) Signature preceded by the handwritten notation "Read and Approved" and accompanied by the Borrower's seal. 19 -19- SAMPLE PROMISSORY NOTE Against this BOR notation PROMISSORY NOTE if required stated to be exempt from fees we will pay the amount indicated below to [place] [date] Amount for verification Date of making Due date BOR only Amount FF Maker's reference Maker's account information Address instit. code teller code Account no. R.I.B. key Tax stamp and signature Dated Name and address of signer Good for guarantee at Do not write below this line. EX-99.B3 10 AGREEMENT, DATED MAY 2, 1997 1 Exhibit b(3) AGREEMENT Between the undersigned: 1. BANQUE NATIONALE DE PARIS (hereinafter referred to as the BANK), joint stock company with capital of FF 5,185,874,825, having its headquarters at 16, boulevard des Italiens, Paris 9eme, and entered in the Corporate Register under no. B 662 042 499, represented by Mr. Yves Lebidois, acting as Department Director, and Mrs. Dominique Potier-Bassoulet, acting as Under-Director, and 2. PUBLICIS company (hereinafter referred to as the BORROWER), joint stock with capital of FF 201,528,125, having its headquarters at 133, avenue des Champs Elysees, Paris 8eme, and entered in the Corporate Register under no. B 542 080 604, represented by Mr. Jean-Paul Morin, acting as Secretary General, which have stated and agreed to the following: ARTICLE 1 - CREDIT LINE - AMOUNT - DURATION 2 -2- To provide partial financing for BORROWER's operating requirements, the BANK is willing to grant to Publicis SA a credit line to be utilized in French francs, pounds sterling, German marks, United States dollars, Swiss francs, and ECU's, in the maximum amount of the exchange value in French francs of FF 200,000,000 (two hundred million French francs), hereinafter referred to as the Total Authorized Amount. The credit line is granted for a period of 364 days beginning with the date on which this Agreement is signed. ARTICLE 2 - DETAILS OF UTILIZATION The funds shall be provided on BORROWER's current accounts at BNP Champs Elysees, upon request by BORROWER by means of a drawing notice in accordance with the sample contained in Annex 1, subject to the proviso that it is for a minimum unit amount equivalent to the exchange value of FF 10 million. Said drawing notice shall reach the BANK at the latest at 10:00 a.m. two working days before the funds are provided. 3 -3- BORROWER undertakes to comply with the principle that the total utilizations of the line shall at no time exceed the Total Authorized Amount of the credit line. In case of renewal in a currency other than that chosen for the preceding period, BORROWER shall reimburse the drawing in the preceding currency. Operations resulting from the functioning of this Agreement shall be recorded in the special accounts comprising simple accounting tables, which shall not result in the legal effects related to current accounts. ARTICLE 3 - UNAVAILABILITY OF THE CURRENCY If the BANK realizes, either at the time of any utilization or at the time of a new interest period, that one or several currencies are unavailable on the Paris interbank market, it shall so advise BORROWER as soon as possible. BORROWER and the BANK shall consult in order to reach an agreement on the replacement currency or a possible return to the French franc. If an agreement is not reached within ten days, the current drawing shall be automatically considered to be payable, and BORROWER shall reimburse it, including principal, 4 -4- interest, expenses, and any incidentals or costs incurred by the BANK due to the unavailability of the currency used. The amount in French francs that is to be reimbursed shall be determined as a function of the most recent exchange rate for the currency in which the drawing was then denominated. ARTICLE 4 - INTEREST For drawings in French francs, the applicable rate shall be the TIOP for the selected period displayed by the AFB at noon on the day before the date for provision of the funds, to which 0.125% is added. The interest shall be calculated according to the product method on the basis of one calendar year according to the exact number of days. For drawings in other currencies, the applicable rate shall be the rate two days before the date for provision of the funds, based on the LIBOR rate for the selected period published at 11:00 a.m. (London time) on the market for the currency concerned, to which 0.125% is added. The interest shall be payable in the currency of the drawing and calculated on the exact number of days for the period of utilization with a divisor of 365 for the pound sterling and 360 for the other currencies. 5 -5- The interest period shall be 1, 2, 3, or 6 months, as chosen by BORROWER. The interest shall be paid at the end of said period. ARTICLE 5 - MARKET DISRUPTION If the market is disrupted (a gap greater than 0.5% between the offered rate and the requested rate, non-publication or unavailability of the LIBOR/PIBOR), BANK and BORROWER shall negotiate as quickly as possible in order to reach an agreement on a solution appropriate for the new situation. ARTICLE 6 - ANNUALIZED PERCENTAGE RATE In accordance with Article 1 313-2 of the Consumer Code, it is hereby specified for information only that, based on the credit rate indexed on the TIOP and the expenses related to that credit, the annualized percentage rate, assuming total utilization and based on an actuarial rate for the period of .....%, the ..... would be .....% per year. 6 -6- ARTICLE 7 - COMMITMENT FEE The operation shall result in a commitment fee being charged in French francs at a rate of 0.0625% per year on the Total Authorized Amount. That fee, which shall be due from the date of signature until this Agreement expires, shall be payable quarterly in advance. It shall be calculated on the basis of the real number of days that have elapsed and a year containing 360 days. The commission shall remain completely and definitively acquired by the BANK. ARTICLE 8 - EARLY REIMBURSEMENT / RELINQUISHMENT BORROWER may relinquish the unused line of credit, either in whole or in part. The early relinquishment or reimbursement shall take effect one month after notification thereof by certified mail. ARTICLE 9 - EARLY PAYABILITY In any of the following cases, the amounts referred to above shall be payable and no further utilization may be claimed: 7 -7- - Liquidation or court-ordered recovery, or cessation of operation by BORROWER - Failure by BORROWER to fulfill any of the commitments it has entered into in this Agreement, particularly under Article 9 ("Commitments by Borrower") - Non-payment when due of a sum that has become payable pursuant to this Agreement - Merger, demerger, dissolution, or a change in the activity of BORROWER If any of the above cases occurs, BANK may demand payment of all amounts due to it eight days after notification by sending a certified letter to BORROWER. ARTICLE 10 - COMMITMENTS OF BORROWER BORROWER undertakes to do the following: - Immediately inform the BANK of any events that could significantly reduce its assets or significantly increase the volume of its obligations 8 -8- - Immediately inform the BANK of any events or circumstances that are liable to comprise or become one of the cases specified in Article 8 ("Early Payability"). ARTICLE 11 - NEW CIRCUMSTANCES The conditions for reimbursement of the BANKS for this credit line have been established in accordance with statutory requirements as of the date this Agreement was signed. If a measure is imposed on the BANK or if a court ruling results in an additional charge that would reduce the compensation due to it, BORROWER and the BANK shall consult as soon as possible in order to reach an agreement on a solution that will enable any difficulties encountered to be resolved. ARTICLE 12 - APPLICABLE LAW - SETTLEMENT OF DISPUTES This Agreement shall be subject to French law; interpretation or performance of the Agreement shall fall exclusively within the jurisdiction of the courts of Paris. 9 -9- ARTICLE 13 - DECLARATION BORROWER declares that it is a duly constituted company that is fully entitled to enter into this Agreement and to perform the activities corresponding to its corporate purpose. ARTICLE 14 - SELECTION OF ADDRESS The following addresses have been selected for performance of this Agreement and the consequences thereof: - For the BANQUE NATIONALE DE PARIS, its Champs Elysees branch located at 37, avenue des Champs Elysees, 75008 Paris - For PUBLICIS SA, its headquarters at the address indicated above ARTICLE 15 - TAXES AND EXPENSES 10 -10- All present and future taxes and duties of any kind on the interest and principal of the amounts that may be payable by BORROWER shall be paid by it, including those that may be legally owed by the BANK. BORROWER shall pay all expenses, charges, and fees applicable to the provision of securities and their renewal and, in general, any of them that may relate to this Agreement or that may be the result or consequence thereof, including any advances for the expenses of preserving the securities that have been provided. Signed in Paris on May 2, 1997, in two copies /s/ Signature of Publicis /s/ Signature of the BANK 11 Annex 1 DRAWNDOWN NOTICE FORM TO: BANQUE NATIONALE DE PARIS (Department) (Address) To the attention of M...... Telex .... Fax .... RE: Credit Line Agreement for 364 days in the amount of 200,000,000 French francs dated .............. Gentlemen: In accordance with Article 2 -- METHOD OF UTILIZATION of the abovecaptioned Agreement, please be advised that we wish to draw down the amount listed below as follows: - - Date: ... 12 -2- - - Currency: ... - - Amount: ... - - Duration: .... - - Interest period selected: ... - - Account which should be credited (and other required instructions) We confirm that the representations made in Article 9 -- BORROWER'S COMMITMENTS are still valid and correct and that no change has occurred which could have a materially adverse effect on the financial position of the BORROWER, nor has any change taken place which could result in the filing required under Article 356-1 of the Law of July 24, 1996 on commercial companies. Very truly yours. AUTHORIZED REPRESENTATIVE OF THE BORROWER [initials] EX-99.B4 11 CREDIT AGREEMENT 1 Exhibit b(4) CREDIT AGREEMENT BETWEEN THE UNDERSIGNED: The company PUBLICIS SA, a joint stock corporation having a board of directors and of supervision, and a share capital of FF 201,528,125, entered in the Commercial and Company Register of PARIS under No. 542 080 601 and whose head office is in PARIS, 133 Champs Elysees, represented by Mr. Jean-Paul MORIN in his capacity as secretary general [company secretary] acting by virtue of the powers conferred on him on April 7, 1997 (a certified copy of which is attached to the present agreement) (hereinafter referred to as the "Borrower") OF THE ONE PART BANQUE FRANCAISE DU COMMERCE EXTERIEUR, a company having a share capital of FF 2.1 billion and its head office in Paris 75009, 21 Boulevard Haussmann, represented by Mr. Claude KLEIN, Manager of the Communications and Culture Section, and Mr. Vincent 1 2 LAURAS, duly authorized representative, acting by virtue of the powers conferred on him by the resolution of January 10, 1997 and following the deliberations of the Board of Directors of February 26, 1996 (hereinafter referred to as "BFCE") OF THE OTHER THE FOLLOWING IS CONCLUDED AND AGREED: ARTICLE 1 - EXTENSION OF CREDIT: BFCE, upon application from the Borrower, has agreed to place at his disposal, under the following conditions, a loan (hereinafter referred to as the "Loan") for a maximum amount of FF 100,000,000 (one hundred million French francs) or its countervalue in foreign currency. ARTICLE 2 - TERM OF THE CREDIT: The Loan is granted for a term of 364 days from the date of execution of the present agreement. 2 3 ARTICLE 3 - APPLICATIONS OF FUNDS The Loan constituting the subject of the present agreement may be used in tranche drawdown amounts in French Francs or in foreign currency within the limit of the amount available. Each tranche shall be subject to prior notice to BFCE, 2 working days before drawdown date if in French Francs 3 working days before drawdown date if in foreign currency. Such prior notice shall include: - - intended drawdown date - - desired term for tranche - - currency (French Francs or foreign currency) selected - - amount of tranche. Each tranche shall be for an amount between FF 10,000,000 and FF 100,000,000 or its countervalue in foreign currency, and for a duration of 1, 2, 3 or 6 months. The first and last day of any tranche must be working days for the French [currency] market for tranches in French Francs and for both the French market and that of the selected currency in the 3 4 event of a foreign currency tranche. No tranche may have a maturity date beyond the final maturity date of the Loan. Drawdowns shall be repaid at their respective maturities in the same currency (French Francs or foreign currency) in which they were [originally] denominated. Any foreign currency amount not repaid at its normal or early maturity shall be converted to French Francs at the exchange rate for the relevant currency on the date of conversion. Conditions precedent for each utilization: The Borrower may not request utilization in any of the following cases: - - occurrence of any event likely to result in an early maturity of the Loan; - - occurrence of any material event having an unfavorable determining effect on the Borrower - - if any of the statements made by the Borrower in these presents should prove inaccurate. ARTICLE 4 - REPAYMENT - AMOUNT AVAILABLE: 4 5 The present credit shall be repaid in its entirety at the time of its maturity at latest 364 days after execution of the present agreement. ARTICLE 5: INTEREST: The drawdowns made by the Borrower in utilization of the present Loan commitment shall bear interest at the Borrower's choice in accordance with one of the following options: French Franc Tranches: Interest shall be calculated prorata temporis on the basis of PIBOR (Paris InterBank Offered Rate) (French acronym: TIOP) reserved for the term of the tranche such as published on the working day prior to the drawdown at 11:00 a.m. and increased by 0.1% per annum. Interest shall be payable on the last day of the term of the tranche for terms of less than 90 days, at the end of each civil [calendar] quarter and on the last date of the term of the tranche for those with maturities over 90 days. Foreign currency tranches Foreign currency tranches shall bear interest prorata temporis on the basis of LIBOR (London InterBank Offered Rate) reserved for the term of the tranche and in the selected currency 2 5 6 working days before the date of the drawdown increased by a margin of 0.10% per annum. BFCE shall define the rate thus applicable and immediately inform the Borrower thereof. Once accepted, such rate shall be final and mandatory for the latter. Interest shall be payable in the currency of the tranche in question at its maturity except for tranches having a term of over 90 days in which case it shall be paid at the end of each civil [calendar] quarter and on the last date of the term of the tranche in question. Market dysfunctions - unavailability of foreign currency If, by reason of a dysfunction of the international interbank market before the date of availability or rollover of a tranche BFCE should not have been able to determine an interest rate or to obtain on the said market deposits in the relevant currency for the period of the term, BFCE shall immediately advise the Borrower of such occurrence. The parties shall then engage in negotiation in order to achieve agreement on a procedure to overcome the difficulties encountered. Such negotiation shall take place at the latest on the 30th day following the date in question. No drawdowns in the relevant currency may be made during the term of the negotiation, nor 6 7 thereafter if the negotiation should not succeed. In that event, the Borrower shall compensate BFCE, on the basis of its vouchers and documentation, for any costs or losses it should have suffered as a result. Joint provisions for drawdowns in French Francs and foreign currency-Regulations - - Global Effective Rate - - For any tranche term, interest shall be calculated on the basis of the exact number of days elapsed and of a 360 day year (365 days in the case of Pound Sterling tranches). - - Each tranche rollover shall be considered to be a new tranche and the declarations made by the Borrower in these presents shall be considered to have been reiterated upon the occasion of each new drawdown or rollover. - - The conditions for BFCE's remuneration are set as a function of the regulations in effect on the date of execution of these presents. In the event that these regulations should undergo any change having a direct or indirect unfavorable incidence on BFCE's remuneration, the latter shall immediately advise the Borrower of such event. BFCE and the Borrower shall then engage in negotiation with a view to concluding, within thirty days following the advice sent by BFCE, an arrangement regarding an approach to the new situation. Notwithstanding any provisions to the contrary in the agreement, no new funds shall be available 7 8 from BFCE during the term of the negotiation, nor thereafter if the negotiation should not succeed. In the latter case the Borrower shall repay all tranches outstanding at the time and pay at the same time, on the basis of documentation, the sum necessary in order fully to compensate the reduction in net remuneration suffered by BFCE. - - Any payment in favor of BFCE shall be made net of all taxes, duties or fees. In the event that any legal or regulatory instruments shall oblige the Borrower to deduct taxes, duties or any fees from the sums due BFCE, the Borrower shall increase the amounts due to BFCE so that the latter shall receive in toto and on the correct date the sum it would have received in the absence of such withholding. - - Taking into account the characteristics of the methodology used for the calculation of interest in the present Loan, it is not possible to determine the Effective Global Rate at this time. However, as an example, in order to conform with the provisions of Law No. 66.1010 of December 28, 1966, and with decree No. 85944 of September 4, 1985, it is hereby indicated that taking into account a commitment fee calculated as described hereinafter on the amount of FF 100,000,000: - for a fixed rate drawdown of FF 100,000,000 for the period from 02/19/97 to 8 9 03/19/97 the rate for the Borrower would increase to 3.4125% per annum, resulting in an Effective Global Rate for the present Loan, all interest, fees and commissions included to 3.59% per annum. - for a fixed rate drawdown in USD for the countervalue of FF 100,000,000 for the period from 02/19/97 to 03/19/97 the rate for the Borrower would increase to 5.475% per annum, resulting in an Effective Global Rate for the present Loan, all interest, fees and commissions included to 5.78% per annum. ARTICLE 6 - COMMITMENT FEE - FLAT FEE For the entire duration of the present agreement, as of the date of its execution, BFCE shall receive a commitment fee of 0.0625% per annum, calculated on the basis of a 360 day year, i.e. FF 62,500. For its closing fees in the present agreement the Bank shall receive, upon execution, a flat fee of FF 10,000. ARTICLE 7 - LATE PAYMENT INTEREST - CAPITALIZATION Any sums not paid at their normal or early maturity shall accrue interest by law at the average weighted money market rate on a day to day basis increased by 1.5% per annum starting from the 9 10 said due date. The same shall apply to all expenses and disbursement advanced by BFCE on the occasion of the present transaction for any reason or purpose whatsoever. Interest shall be converted to principal if due and outstanding for an entire year in accordance with article 1154 of the Civil Code. ARTICLE 8 - COMMUNICATIONS FROM THE BORROWER For as long as the Borrower shall be a debtor of BFCE or may be so by virtue of the present agreement, he shall: - - send BFCE, each year, a certified copy of his latest financial statements (balance sheet and profit and loss statements) finally approved and certified as well as the minutes of his Ordinary and Extraordinary General Meetings of Shareholders as well as of all auditor's reports; - - inform BFCE within a period of fifteen days of any fact that may seriously affect the amount or value of its assets or significantly increase the value of its liabilities; - - inform BFCE within a period of fifteen days of any changes of more than 10% in the distribution of its stock. 10 11 ARTICLE 9 - COVENANTS The Borrower hereby declares: - - that it is a company duly incorporated; - - that as of the date of execution of these presents there is no event of acceleration or threat thereof in the sense of the present agreement; - - that there is not now nor has there ever been an event of suspension of payments, of reorganization or liquidation; - - that there is no litigation or claim pending against it or, to its knowledge, any threat of litigation or claim that could result in a substantial deterioration of its financial situation; - - that it is not currently late in the payment of any sum due for direct or indirect taxes, equalization taxes or any other sum due to social services organizations for any reason whatsoever; ARTICLE 10 - ACCELERATION In case of the occurrence of any of the following events: - - the Borrower does not make a payment due under the present agreement on the due date; - - interest and commissions on the present Loan become subject to taxes or duties of any kind to which they are not currently subject, unless the Borrower should settle such new 11 12 fiscal charge so that BFCE is not exposed to any detriment in this respect; - - the Borrower does not fulfil any of his other obligations or does not respect any of the other provisions of the present agreement and such default is not cured within ten days after remittance by BFCE of a notification by certified mail with return receipt to the Customer; - - the Borrower has made an incomplete or inaccurate statement; - - any other borrowing or loan granted to the Borrower by BFCE or any of its other creditors becomes immediately due and payable; - - all or part of the Borrower's real estate property becomes the subject of an attachment or of the registration of a judicial lien; - - the Borrower becomes the subject of a judgment decreeing a general assignment of its business or pronouncing its liquidation; - - total cessation of business; dissolution; merger; divestment; partial capital injection by the Borrower; - - arrival in the capital of PUBLICIS SA of a shareholder other than its current shareholders or those of its affiliate companies, obtaining a substantial minority position such as to block decisions; BFCE may, by certified mail, demand, if it so wishes, the early repayment of the Loan which will then become immediately due and payable by law in principal and interest without any further formality or court judgment. 12 13 ARTICLE 11 - APPLICABLE LAW AND JURISDICTION All litigation resulting from these presents shall be brought before the Paris Courts. For its execution and interpretation, the present agreement is subject to French law. Made in Paris, on May 2, 1997 in two authentic copies (signed) (signed) The Borrower BFCE Banque Francaise du Commerce Exterieur EX-99.B5 12 CONTRACT, DATED MAY 2, 1997 1 Exhibit b(5) CONTRACT FOR THE OPENING OF A SHORT-TERM LINE OF CREDIT Between the undersigned: 1: UNION DE CREDIT POUR LE DEVELOPPEMENT REGIONAL "UNICREDIT", a banking corporation with capital of F 1,797,691,750 and with its registered office at 128-130 Boulevard Raspail, Paris 6, Entered in the Paris Register of Commerce and Companies under No. 712,057,322 B. Represented by acting on the authority of the powers of attorney conferred upon him on ....... by ....... Hereinafter referred to as "the Lender" (unless otherwise designated), party of the first part and 2: PUBLICIS, a corporation with capital of FRF 201,528,125.00 and with its registered office at 133 Champs-Elysees, Paris 8, Entered in the Paris Register of Commerce and Companies under No. B 542,080,601 2 -2- Represented by Jean Paul Morin acting on the authority of the powers of attorney conferred upon him on April 7 by the Board of Directors, appended hereto, Hereinafter referred to as "the Borrower" (unless otherwise designated), party of the second part THE FOLLOWING HAS BEEN AGREED: Subject to the clauses and conditions hereinafter, the Lender grants to the Borrower, which accepts, the opening of a line of credit hereinafter referred to as "the Line" in a maximum amount of 200,000,000.00 francs (two hundred million French francs). The line may be increased to FRF 500,000,000.00 (five hundred million French francs) subject to the conditions set forth in Article II.5 of the Special Conditions. DEFINITIONS For the purposes of the agreement: Notice of Drawdown: refers to an irrevocable request for a Drawdown made by the Borrower to the Lender in accordance with the model in Annex 1 Reference Banks: Caisse Nationale de Credit Agricole - Banque Nationale de Paris 3 -3- Agreement: refers to this contract and its annexes Due Date: refers in theory to the last day of a Drawdown Period. However, in the event the Due Date of any amount due under the Agreement does not fall on a Business Day, it shall be carried forward to the following Business Day. If as a result thereof the Due Date falls in the following calendar month, the Due Date will be the Business Day preceding the theoretical Due Date. Last Repayment Date: refers to the last Business Day before the 3rd anniversary of the date of signing the Agreement. Business Day: refers to any full day on which the interbank market is open for business and on which the banks are open all day in Paris. Line: refers to the credit that the Lender agrees to make available to the Borrower in accordance with the terms of the Agreement up to the amount of FRF 200,000,000.00; the Line may be increased by FRF 300,000,000.00 to a maximum of FRF 500,000,000.00 as of the last Business day before the 1st anniversary of signing the Agreement, subject to the conditions set forth in Article II.5 of the Agreement. 4 -4- Available Amount: refers at a given date to the amount of the Line on that date, less the accumulated principal amount of the Drawdowns outstanding and not repaid and of the Drawdowns requested and not paid out. Drawdown Period: refers in the case of any Drawdown to the period of less than 1 month or of 1, 3 or 6 months indicated in the Notice of Drawdown. T.I.O.P.: Paris Interbank Offering Rate in francs resulting from the arithmetic mean of the rates offered on franc deposits for each maturity of 1 to 12 months to 1st class French signatories by credit institutions approved by the A.F.B. after eliminating the four highest and lowest figures. It is expressed as an annual rate and published at 11:30 AM by Telerate or Reuters under the aegis of the A.F.B. Drawdown: refers to any principal amount made available to the Borrower under the Line for a Drawdown Period. T.M.P.: The weighted Average Rate refers to the average rate recorded for overnight transactions between Banks on the French interbank market weighted by the volume handled. This rate is published by the Bank of France the day after the Business Day in question. 5 -5- CHAPTER I GENERAL CONDITIONS ARTICLE I.1 IMPLEMENTATION The transactions resulting from operation of the Line are excluded from any current account that the Borrower has or may have in the future with the Lender. The special account opened by the Lender for the purpose of recording the transactions carried out under the Line shall not in any circumstances have the legal effects appertaining to a current account. The proof of drawing on the Line and of repayment thereof shall be set forth in the Lender's records, which shall be deemed authentic by both parties. ARTICLE I.2 - REPAYMENT The borrower shall pay all costs as well as those pertaining to this instrument or which are a consequence thereof, including all advances for the costs of preserving same. The Borrower agrees to repay the Line in terms of principal, interest, costs, fees and incidentals in accordance with the procedures defined in the special conditions. On the due date of an amount that has become due and payable, the Borrower authorizes the Lender to withdraw from the account or accounts then available and open on the Lender's books such funds as are necessary to settle said amount. 6 -6- Any payment made by the Borrower and received by the Lender must be allocated in the following order of priority: (i) to payment of the fees due and payable hereunder, (ii) to payment of any interest due and payable hereunder, (iii) to payment of any principal due and payable hereunder, (iv) to payment of all other amounts due and payable hereunder. ARTICLE I.3 - COMMITMENTS OF THE BORROWER Throughout the term of the Agreement, the Borrower agrees: i. to provide the Lender with: a) each year, at the latest six months after the date of the settlement of accounts, all corporate and similar accounting documents relating to the situation of the company (balance sheets, statements of income, annexes, auditors' report certifying the financial statements) and each year, at the latest 6 months from the date of the settlement of accounts, the documents referred to in 1.3.i.a draw up on a consolidated basis, ii. to notify the Lender immediately: a) of any change in the legal status or situation of the company, 7 -7- b) of any change in the person of its legal representative, c) of any merger, spinoff, absorption, partial contribution of assets, dissolution or discontinuance of operations, d) of any event that is likely to significantly and adversely affect the value of its net worth or appreciably increase the amount of its commitments, e) of any event likely to entail the premature repayability of the Line. iv. to observe, within the framework of its activities, all statutory and regulatory provisions in force. v. Throughout the term of the Agreement, the Borrower may not, without the prior consent of the Lender: - pledge its assets as collateral, to the benefit of other creditors, without first offering the Lender, as a guarantee of the Line, the same security with a stipulation of equality of ranking, it being understood that the Borrower may, however, freely consent, with respect to any assets it may acquire subsequent to signing the Agreement, to any surety securing the loan it contracts to finance the cost of acquiring such asset, 8 -8- - dispose of its assets except for assets connected with its current operations, up to a total of 100,000,000.00 francs per fiscal year. ARTICLE I.4 - OCCURRENCE OF NEW CIRCUMSTANCES I.4.1. The conditions for repayment of the Line to the Lender have been set on the basis of the regulations applicable as of the date the Agreement is signed. If as a result of new legislative or regulatory provisions or a new interpretation by an authority with jurisdiction the Lender becomes subject to any tax, monetary, financial or banking measure entailing an increase in the cost of its participation in the Line which has the effect of reducing its share of the proceeds, the following provisions shall apply: - the Lender shall notify the Borrower in writing, and at the initiative of the Lender they shall meet as expeditiously as possible and negotiate for a period of not more than 30 calendar days as of the date of such notice, with a view to reaching a solution that will make it possible to deal with the difficulties that have arisen, in the spirit of cooperation that existed at the signing of the Agreement. At the end of such period of conferral, the following provisions shall apply: The Borrower shall have the choice, within not more than seven calendar days following the last day of said 30-day period: 9 -9- - either of asking the Lender to continue the Line, while undertaking to take responsibility in its entirety, as of the date the Lender incurs it, for the additional cost the Lender would have to pay, - or to terminate its commitment by making an early repayment in full of all Drawdowns in principal, interest and fees, plus, as the case may be, all costs and charges incurred by the Lender as a result of such early repayment on the basis of substantiating documents furnished by the Lender. I.4.2. In the event of a change in the conditions or data referred to above or in their interpretation by any authority with jurisdiction, or for any other reason, which results, in particular: a) in all or part of the provisions of the Agreement becoming illegal; b) in it becoming impossible for either of the parties to fulfill any of the obligations as established in the Agreement c) in the participation of the parties in the Agreement becoming illegal the following provisions shall apply: 10 -10- 1. the interested party shall inform the other party in writing as expeditiously as possible. The parties to the Agreement shall meet with a view to reaching an amicable solution that will make it possible for the Agreement to continue. 3. If no solution can be found within 10 (ten) days following receipt by the interested party of the abovementioned notice, the Borrower must permanently waive any further Drawdown and immediately repay all amounts due under the Drawdown(s) outstanding in principal, interest, costs and incidentals, as well as any additional costs that, through the repayment Date, the Lender might have to pay as a result of the new circumstances. ARTICLE I.5 - EARLY REPAYABILITY In the event of an amicable or court-ordered liquidation or sale of the company within the framework of class proceedings by the Borrower, all amounts due in principal, interest, fees, costs and incidentals shall immediately and automatically become payable and no request may be made to the Lender for any further drawdown. Moreover, the Lender may not be asked for any additional drawdown in the event of receivership. The right to draw down funds may be cancelled and repayment of the Line may be demanded by the Lender eight calendar days after notice is served on the Borrower by 11 -11- registered letter with return receipt requested, without any other judicial formality being necessary, in the following cases: i. in the event of an inaccurate declaration by the Borrower. ii. in the case of failure to perform or of violation of any of the commitments undertaken by the Borrower under the Agreement. iii. in the event of nonpayment on the normal or early due date of any amount payable to any bank or financial institution by the Borrower, such as in the case of it being downgraded by the Bank of France. iv. in the event other support granted to the Borrower by the Lender or any other Lender becomes repayable in advance. v. in the event of a partial contribution of assets, merger, spinoff, dissolution or discontinuance of the Borrower's operations. vi. in the event of a significant change in the distribution of the Borrower's capital and/or voting rights compared with the situation prevailing as of the date hereof. vii. in the event the Borrower's stockholders' equity falls to less than half the share capital. 12 -12- viii.in the event of seriously reprehensible behavior on the part of the Borrower, such as, if its situation were to be irremediably compromised within the meaning of Article 60 paragraph 2 of the Law of January 24, 1984. ix. in the event of an occurrence that would have a severely unfavorable effect on the Borrower's activities, net worth or financial situation. ARTICLE I.6 - PENALTY INTEREST - INDEMNIFICATION Any amount that is unpaid on its normal or early due date shall automatically accrue interest at the Weighted Average Rate ("TMP"), plus one percent per year (one hundred basis points), from the said due date until full repayment. The same shall apply for all costs and disbursements advanced by the Lender for any reason whatsoever. This stipulation shall not affect repayability and consequently shall not constitute an agreement as to the settlement period. Interest shall be capitalized if it is due for a full year, pursuant to Article 1154 of the Civil Code. As is customary, such interest shall be in addition to any tax that may be payable thereon in the future. If the Lender has to take action in or out of court, the Borrower must pay it an indemnification covering all the costs it incurs in this connection, on the basis of a substantiating document that will be submitted to it by the Lender. ARTICLE I.7 - NON WAIVER 13 -13- Failure by the Lender to exercise any right stemming from this Agreement, or lateness in doing so, shall not constitute a waiver of the right in question. Similarly, the partial exercise of such right shall not be an impediment to the subsequent exercise of rights that have not yet been fully exercised. The rights referred to in this paragraph are cumulative with all rights arising under the law. ARTICLE I.8 - REPRESENTATIONS I.8.1 - The borrower has forwarded to the Lender prior to signing these presents: - a certified true copy of its Bylaws - a K-Bis extract from the Register of Commerce and Companies less than three months old - substantiation of the powers of attorney as a signatory. I.8.2 - The Borrower represents: - that it has taken all steps necessary to authorize the signature and execution of this contract, - that its balance sheets and financial statements as of December 31, 1995 are true and complete; that they were drawn up in accordance with the 14 -14- accounting principles in force in France; that they were certified by its Auditors, as the case may be, as presenting a true picture of its financial position at that date as well as the results of its operations for the fiscal year in question; that there has been no change since January 1, 1996 that would adversely affect its financial position for the current year or its future prospects. - that there is no litigation under way, nor does the threat of any litigation exist, that is likely to significantly or adversely affect its position. - that no event currently in existence constitutes a case of early repayability. - that it has not been the subject of any proceedings for amicable settlement within the meaning of the Law of March 1, 1984. ARTICLE I.9 - PLACE OF PAYMENT All payments to be made by the Borrower shall be made at the registered office of Unicredit. CHAPTER II SPECIAL CONDITIONS ARTICLE II.1 - AMOUNT 15 -15- The Line granted by the Lender to the Borrower is for a maximum of 200,000,000.00 francs (Two hundred million French francs). The Line may be increased by FRF 300,000,000.00 to a maximum of 500,000,000.00 (Five hundred million French francs), subject to the conditions set forth in Article II.5 below. ARTICLE II.2 - PURPOSE OF THE LINE OF CREDIT The Line shall be used, as stated by the Borrower, for its general requirements. ARTICLE II.3 - TERM The Line is concluded for a period of one year as of the signing of this Agreement, and may be extended for periods of one year beginning on the last Business Day following the 1st anniversary of the signing of the Agreement. In any event, the Line must be repaid in its entirety as to principal, interest, fees, costs and incidentals by the Last Repayment Date, i.e. the last business day before the 3rd anniversary of the date of signing the Agreement. ARTICLE II.4 - ANNUAL REVIEW OF THE FINANCIAL TERMS OF THE AUTHORIZED LINE OF FRF 200,000,000.00 15 calendar days before the end of each annual period, the first period beginning on the last Business Day following the 1st anniversary of the signing of the Agreement, the 16 -16- Lender shall send to the Borrower by registered letter with return receipt requested a proposal containing the financial terms for using the Line during the coming year. The Borrower shall notify the Lender of its agreement or refusal by no later than 10 AM on the business day before the expiration of the period of 15 calendar days following the date of the acknowledgement of receipt of the Lender's proposal. In the event the Borrower accepts the terms proposed by the Lender, the letter shall constitute a rider to the Agreement or to the preceding proposal. In the event the Borrower or the Lender are unable to reach an agreement on the new terms proposed by the Lender, the Borrower shall waive requesting any further Drawdown and the Line shall automatically be cancelled pursuant to Article II - 9 of the Agreement. The Borrower agrees to repay all amounts due in principal, interest, fees, costs and incidentals under the Line. ARTICLE II.5 - CONDITIONS FOR INCREASING THE LINE The Line may be increased by FRF 300,000,000.00 to a maximum of FRF 500,000,000.00 (five hundred million French francs), subject to the Borrower having made a request therefor in writing to the Lender 15 calendar days before the last Business Day following the first anniversary of the signing of the Agreement and after acceptance by the Lender. 17 -17- After acceptance by the Lender, the Drawdowns made on the increased portion of the Line, i.e. FRF 300,000,000.00, shall accrue interest as follows: - For Drawdown Periods of less than 1 month and a minimum of 10 days: - TMP plus a margin of 1.10% per annum, for a total, on the basis of the TMP as of 1/17/97, nominal annual rate of 3.4125%. - For Drawdown Periods of more than one month: - TIOP for the Drawdown Period published on the business day preceding the Drawdown, plus a margin of 0.10% per annum, for a total, on the basis of the 3-month TIOP as of 1/17/97, nominal annual rate of 3.4125%. - Payment of interest The interest computed on the basis of the exact number of days according to the method of 360 days at the rate defined above on the amount of the Drawdown, shall be payable by the Borrower on the Due Date of the Drawdown. - Payment of commitment fee 18 -18- In the event of the application of this Article, the commitment fee as defined in Article II.7.2 shall be computed on the new authorized amount of the Line, whether used or not. ARTICLE II.6 - USE OF THE LINE Subject to performance by the Borrower of the obligations arising from the Agreement, the Line may be used by means of one or more Drawdowns, up to the limit of the Available Amount. The Notice of Drawdown, in accordance with the model attached hereto in Annex 1, shall be sent to the Lender and received by it no later than two Business Days before each Drawdown. The Notice of Drawdown shall, in any event, indicate the amount of the Drawdown, which shall be equal to at least 25,000,000.00 francs, and beyond this amount, to a whole multiple of 25,000,000.00 francs. It shall also indicate the Drawdown Period, which, at the discretion of the Borrower, shall be equal to a number of days of less than 1 month or of 1, 3 or 6 months. The Notice of Drawdown shall be irrevocable. The Borrower agrees to repay the amount in principal and interest of any Drawdown at its Due Date. No Drawdown may have a Due Date subsequent to the Last Repayment Date. The Line shall be implemented by debiting special account No. 250 214 10 700. 19 -19- ARTICLE II.7 - FINANCIAL CONDITIONS Subject to the application of Article II.4 of the Agreement, the financial conditions are established as follows: II.7.1 - Interest II.7.1.1 - Rate Drawdowns made under the Line shall accrue interest at the rate determined as follows: - for Drawdown Periods of less than one month and a minimum of 10 days: on the amount of the Line up to FRF 200,000,000.00: - TMP plus a margin of 0.0625% per annum, for a total, on the basis of the TMP at 1/17/97, nominal annual rate of 3.3750%. - for Drawdown Periods of more than one month: on the amount of the Line up to FRF 200,000,000.00: - TIOP for the Drawdown Period published on the business day before the Drawdown, plus a margin of 0.0625% per annum, for a total, on the basis of the 3-month TIOP at 1/17/97, nominal annual rate of 3.3750%. 20 -20- II.7.1.2 - Payment of interest The interest computed on the basis of the exact number of days according to the 360-day method at the rate defined above on the amount of the Drawdown shall be payable by the Borrower on the Due Date of the Drawdown. II.7.1.3 - Non publication of the TIOP If the TIOP as computed and disseminated by the AFB were not to be published for any reason, the Lender shall immediately notify the Borrower by all available means and the following provisions shall apply: a) if an index replacing the TIOP is published under the aegis of the AFB, it shall apply immediately to any new Drawdowns; this index will be increased by the margin indicated in Article II.5 and/or II.7.1. b) otherwise, the Lender and the Borrower shall negotiate a new reference rate. In the absence of an agreement, the Borrower may not proceed with any new Drawdown and the Drawdowns outstanding shall be repaid on their Due Date. II.7.1.4 - Market disturbance On the Paris market, the spread as posted on TELERATE screens between the buying and selling rate of the French franc for all periods is generally 1/8%. 21 -21- Disturbance of the market is deemed to exist when the spread for the period of the requested Drawdown as posted by the Lender and by the Reference Banks is more than 1/2% at 10 AM on the day the rate is set. In the event there is a disturbance of the market, the Lender shall use all available means to notify the Borrower without delay. The Lender and the Borrower shall then negotiate a different method of setting a rate that is appropriate given the new situation. In the absence of an agreement between the Borrower and the Lender, the rate that will then be applicable to the requested Drawdown shall be equal to the average of the highest two rates of the eight rates used to set the TIOP for the Drawdown Period in question, on the day before the day the funds are made available, plus the margin indicated in Article II.5 and/or II.7.1. ARTICLE II.7.2 - COMMITMENT FEE Throughout the term of the Agreement, the Borrower shall pay to the Lender a commitment fee of 0.0625% per annum, computed on the amount of the Line, whether it is used or not, on the basis of the exact number of days on a 360-day year. This fee shall be payable quarterly in advance, as of the date of signing the Agreement. The collected fee shall remain the property of the Lender, even if there is a voluntary early reduction in the Line under the conditions set forth in Article II.8. 22 -22- In the event Article II.5 applies, the commitment fee shall be computed on the new authorized amount of the Line, whether it is used or not. ARTICLE II.8 - VOLUNTARY EARLY REDUCTION OF THE LINE The Borrower shall be empowered to permanently waive in advance all or part of the Available Amount. Such request, which shall be sent to the Lender by Registered Letter with Return Receipt Requested, shall not take effect until expiration of a period of five Business Days as of the receipt of the request by the Lender. In this situation, the commitment fee shall cease to be payable by the Borrower on the amount it has waived. However, the amount of the commitment fee already paid by the Borrower for the current quarter, at the date the waiver takes effect, shall remain the property of the Lender. ARTICLE II.9 - CANCELLATION OF THE AGREEMENT This Agreement may be cancelled by either party subject to a notice of 30 calendar days sent by registered letter with return receipt requested. Cancellation of this Agreement by the Borrower shall not take effect until after total and final repayment of the Drawdowns outstanding in principal, interest, fees, costs and incidentals. 23 -23- No new Drawdown may be requested by the Borrower during the 30-day notice period. ARTICLE II.10 - EARLY REPAYMENT Subject to the express prior agreement of the Lender, the Borrower may repay one or more Drawdowns prematurely. Any early repayment must be the subject of a written request to the Lender at least 5 business days before the date of early repayment. If the Drawdown Period pertaining to the Drawdown that is repaid early is equal to or more than one month, the Borrower shall pay the Lender compensation equal to the amount resulting from the difference between the rate applicable to the Drawdown that is repaid early and the reference rate in force on that date on the amount of the Drawdown in question for the remaining term of said Drawdown, plus the margin. Reference rate is understood to mean the TIOP with a duration equivalent to the remaining term of the Drawdown in question, rounded out, if necessary, to the next higher number of months as published by Telerate on the business day before the early repayment. ARTICLE II.11 - EFFECTIVE TOTAL RATE In accordance with Article L 313-1 of Law No. 93-949 of July 26, 1993, the effective total rate of the credit, computed according to the proportional method, starting with; 24 -24- on FRF 200,000,000.00 a quarterly actuarial rate of 0.86093%, amounts to 3.44371% per annum. In computing the above rate, which is given by way of example, account was taken of: - the nominal rate of the credit on the basis of the 3-month TIOP index at 1/17/97, amounting to 3.3125% plus 0.0625% - the costs devolving on the Borrower in the total amount of 544.00 francs - the commitment fee of 0.0625%. - the use of the entire Line during the total term of the credit. on FRF 300,000,000.00 a quarterly actuarial rate of 0.87305%, amounts to 3.49219% per annum. In computing the above rate, which is given by way of example, account was taken of: - the nominal rate of the credit on the basis of the 3-month TIOP index at 1/17/97, amounting to 3.3125% plus 0.10% - the expenses devolving on the Borrower in the total amount of 544.00 francs - the commitment fee of 0.0625% - the use of the entire Line for a period of 2 years. 25 -25- CHAPTER III MISCELLANEOUS PROVISIONS ARTICLE II.1 - ELECTION OF DOMICILE - JURISDICTION For the performance of these presents and their sequels, domicile is elected: - for UNICREDIT at its registered office at 128-130 Bld Raspail, 75006 Paris - for the Borrower, at its address first hereinabove indicated The jurisdiction of the Courts of Paris is expressly recognized for all instances and proceedings. ARTICLE III.2 - APPLICABLE LAW The Agreement is subject to French Law. The Borrower requires registration of this instrument, execution of this formality being left to the good offices of the Lender. DONE in Paris on May 2, 1997 in 2 copies. SIGNATURES: BORROWER (1) UNICREDIT 26 -26- Read and approved; valid for the sum of two hundred million francs (200,000,000 F) in principal, plus interest fees, costs and incidentals (signature) (1) Before the signature, write in handwriting: "Read and approved; valid for the sum of ......................... (in words and figures), in principal, plus interest, costs and incidentals" and affix the corporate seal. 27 -27- ANNEX I DRAWDOWN NOTICE FORM MUST BE RECEIVED BY UNICREDIT TWO (2) BUSINESS DAYS PRIOR TO THE DRAWDOWN DATE BORROWER'S LETTERHEAD TO THE ATTENTION OF: UNICREDIT Ms. LOLLI TEL.: 01 43 23 25 62 FAX: 01 43 23 59 96 Ms TERRASSON TEL.: 01 43 23 25 17 FAX: 01 43 23 59 96 DATE: RE.: - LINE OF CREDIT AGREEMENT DATED .............. - DRAWDOWN NOTICE This Drawdown Notice is being sent to you in accordance with Article II.6 of the Agreement. Please be advised that we wish to draw down the amount listed below, as follows: - Amount of the Drawdown in French francs: (French Francs) from .................... to .................... 28 -28- Please credit the amount of this drawdown to Account No. ................. at your bank. We confirm that as of the abovementioned date the commitments undertaken under the Agreement are being fulfilled and that no event which could result in a request for early repayment of the loan is pending. The terms defined in the Agreement have the same meaning in this Drawdown Notice. SIGNATURE (NAME AND CAPACITY OF THE AUTHORIZED SIGNATORY) 29 UNICREDIT ANNEX II PUBLICIS SA OFFER Gentlemen: In accordance with Article II.4 of the Agreement dated , we offer you the following financial terms which, if accepted by you, will apply for the period from until . - Drawdown margin: Please express your acceptance or refusal by returning this Offer to us, duly filled in and signed by an authorized person, within 10 hours after the expiration of the deadline of 15 calendar days, counting from the date of the notice of receipt of this Offer. If you accept the foregoing terms, please note that this Offer will serve as a Rider to the Agreement to or to the previous Offer. 30 -30- Very truly yours - ----------------------------- ACCEPTED REFUSED - ----------------------------- Date: ............................. Signature - ----------------------------- EX-99.B6 13 LINE OF CREDIT 1 Exhibit b(6) THE UNDERSIGNED: - Banque OBC - Odier Bungener Courvoisier, a corporation with a capital of 211,277,160.00 francs and registered office at 57 Avenue d'Iena, Paris 16th, represented by Mr. Bernard PEIGNOUX, Manager, and Ms. Liliane de VANSSAY, Joint manager, hereinafter referred to as the Bank, on the one hand, and - PUBLICIS, a corporation with a Board of Directors and a Supervisory Committee, capital of 202,453,525.00 francs and registered office at 133 Avenue des Champs Elysees, Paris 8th, entered in the Paris RCS under No. B 542 080 601, represented by Jean-Paul MORIN, Corporate Secretary, hereinafter referred to as the Customer, on the other, HAVE AGREED AS FOLLOWS: ARTICLE I -- LINE OF CREDIT At the request of the Customer, the Bank grants the Customer, who accepts, a Line of Credit in the amount of 100,000,000.00 francs (ONE HUNDRED MILLION FRANCS), 2 which will be used as partial financing for investment carried out under a program of growth through acquisitions. This Line of Credit shall be used by means of drawdowns charged to a special account opened at the Bank in the name of the Customer. It is expressly understood that said special Customer account shall be kept separate from the other checking account maintained by the Customer at the Bank. The abovementioned special account represents merely an accounting tool and will not produce the legal effects normally attached to checking accounts. ARTICLE 2 -- DURATION AND REPAYMENT This Credit Line is granted for 1 year (ONE YEAR), counting from the signing of this agreement. This credit line will be repaid at the end of the period. ARTICLE 3 -- EARLY CANCELLATION 3 The Customer may cancel without penalty the entire Line of Credit or a portion thereof, the minimum amount being 20,000,000.00 francs (TWENTY MILLION FRANCS), unless the available balance is less. Any such cancellation will be final and the Customer shall have no right to any further drawdown. ARTICLE 4 -- INTEREST -- OVERALL EFFECTIVE RATE The amounts actually owed by the Customer to the Bank will accrue interest at a rate determined by adding 10 basis points to the Weighted Average Rate (at present 3.1875% per annum), for a total of 3.2875%. This rate will fluctuate in accordance with the Weighted Average Rate. Interest will be deducted at the end of each calendar quarter. If the composition and/or definition of the Weighted Average Rate referred to herein should change, or if said rate should disappear and be replaced with another one which is similar in nature or is equivalent to it and if there should be any change in the organization that publishes it or in the fashion in which it is published, particularly in the event of a 4 switch to a single European currency, the rate resulting from the abovementioned change or replacement shall be applied automatically. In addition to the interest discussed above, the Customer shall owe the Bank a commitment fee payable quarterly in advance, computed at a rate of 6.25 basis points per annum on the authorized credit amount. If the Customer cancels all or part of the line of credit, the Bank shall retain the commitment fees it has received. The Bank shall deduct the amounts owed by the Customer under this Agreement from a checking account in which the Customer will maintain sufficient funds to meet these obligations, as required. All amounts unpaid on the due date will accrue interest at the rate set forth above, plus 200 basis points. If interest is owed for a full year, it will also accrue interest at the same rate. The overall effective rate of this Agreement pursuant to the provisions of Articles L 313-1 and following of the Consumer Code (Law 93-949 of July 26, 1993) cannot be determined due to the financial terms of the Agreement. 5 However, in order to comply with the abovementioned statute and taking into account the stipulated amount and deadline, the total of interest, costs and fees owed to the Bank is equivalent to a rate of 3.35% per annum. Therefore, the overall effective rate of this Agreement pursuant to the Law of July 26, 1993, determined in accordance with the provisions of said law, is estimated at 3.3923% per annum. It does not take into account the following: - Various indemnities, late interest or other interest agreed to hereunder and charged in accordance with the Agreement if the Customer fails to perform its obligations, which charges become due and payable only in the event of default by the Customer. - OCCURRENCE OF NEW DEVELOPMENTS This Credit Agreement is concluded on the basis of the legislation currently in force and especially the provisions governing the determination of conservative ratios and the required reserve ratios. 6 If a new law or regulation is enacted or if the current regulatory and tax provisions are amended in a fashion that alters the financial terms of this transaction in a manner that is detrimental to the Bank, the Bank shall inform the Customer accordingly and will propose an increase in the interest rate of the credit, in order to reestablish the financial terms of the original contractual relationship. If the Bank and the Customer fail to reach an agreement within 60 days from the date of the notice of the new credit terms, the parties shall meet and attempt to find a solution to their differences. ARTICLE 5 -- COSTS PAYABLE BY THE CUSTOMER The Customer shall bear, and agrees to pay, the following costs: - - All costs, charges and fees, even if not taxable, stemming from this instrument and its extensions, including those of any legal action which the Bank may have to undertake. - - All taxes, present and future, which may be payable as a result of this instrument and its extensions. - - In general, all amounts which the Bank pay has to pay as a result of this credit. 7 ARTICLE 6 -- REQUEST FOR EARLY REPAYMENT Should the Bank deem it appropriate, all the amounts owed by the Customer to the Bank as a result of this Credit Agreement shall become automatically payable, without any need for judicial formalities, ten days after the date of the notice given by simple registered letter, return receipt requested, sent either by the Clerk of the Court or by the Bank, at the Bank's sole discretion, in any of the following cases: a) if the Customer is in receivership or liquidation; b) if the Customer has failed to pay the interest and/or fees related to this credit, irrespective of any partial payment made after notice of default has been given; c) dissolution or amicable liquidation of the Customer; d) failure to perform any of the obligations set forth in this Agreement; e) utilization of the credit for a purpose that is not consistent with the Customer's corporate purpose; 8 f) inaccuracy of the representations made in this Agreement; g) closure or significant downsizing of the Customer's operations, whether or not this is the result of a transfer of business resulting from a merger or divestiture; h) exclusion of the Customer's signature by the Bank of France; i) appointment of a receiver or if the Customer is the beneficiary of a composition with creditors. The Bank shall have the right to resort at any time to the collection clauses listed above, but the failure to exercise these rights shall not entail the waiver of any such rights. ARTICLE 7 -- MISCELLANEOUS PROVISIONS The Commercial Court of Paris shall have sole jurisdiction with regard to any dispute regarding this Agreement or its extensions, irrespective of which party is the defendant. For the execution of this Agreement and its extensions, the parties elect their domiciles at their respective registered offices, as set forth in this Agreement. 9 Done in Paris on May 2, 1997. Mandatory handwritten statement: The signatory must enter the following handwritten statement before signing: "READ AND APPROVED, GOOD FOR BORROWINGS UP TO 100,000,000.00 FRANCS (ONE HUNDRED MILLION FRANCS) IN ACCORDANCE WITH THE TERMS LISTED ABOVE." [Handwritten: Read and approved, good for borrowings up to 100,000,000.00 francs (ONE HUNDRED MILLION FRANCS) in accordance with the terms listed above.] [signature] EX-99.B7 14 LINE OF CREDIT 1 EXHIBIT b(7) Letterhead of CIC -- PARIS Large Corporate Customers Department UB Head Office Branch -- Sector G - DF/JB/OP Telephone: 45.96.90.16 PUBLICIS Mr. Jean-Paul MORIN 133, Champs Elysees 75008 PARIS April 9, 1997 Dear Sir: We confirm that our institution makes available to PUBLICIS a credit line with the following conditions: - - Amount: 100,000,000 francs (one hundred million francs). - - Duration: 364 days, i.e. from April 10, 1997 until April 9, 1998. - - Method of utilization: The credit will be used up to the amount and for the duration set forth above by means of renewable advances with a duration ranging between 10 days and 3 months. It must be repaid by April 9, 1998. 2 Each request for an advance must specify the date when the funds must be available; the amount of the advance, which must be a multiple of 5,000,000 francs; and the duration of the advance. The request must be sent by fax to CIC, UB Head Office Branch, 57 rue de la Victoire, 75009 PARIS, to the attention of Ms. CLOUARD (Fax No.: 01.45.96.90.59), not later than 10 AM on the business day prior to the date when the funds must be available, which must also be a business day. - - Non-utilization fee: A non-utilization fee of 0.0625% per annum will be charged on the unused portion of the credit. This fee will be payable quarterly, the first one being due on July 10, 1997 and the last one on April 9, 1998. - - Interest: interest on the amounts utilized will be computed as follows: For drawdowns lasting one, two and three months on the basis of the Franc PIBOR in force during the utilization period, plus a margin of 0.10% per annum. 3 For drawdowns lasting less than one month, more than one month but less than two months or more than two months not less than three months, on the basis of the asked rate of C.I.C. Paris plus a margin of 0.10% per annum. All due dates which do not fall on a business day will be moved to the next business day. In all cases, interest will be payable at the end of each period and will be computed on the actual number of days, based on a year of 360 days. Interest and fees will be collected by means of charges to account No. UB 13.085-58 opened by PUBLICIS S.A. at our Bank. Should you wish to have available a new line of credit upon expiration of this one, please submit your request to us this December or at the beginning of March 1998. We shall do our best to let you have our reply as soon as possible. If you accept the terms of this letter, please return a copy to us with your approval. We wish to express our satisfaction for having had an opportunity to contribute to your Group's future development. 4 Very truly yours, [signature] [signature] [signature] Olivier PERNOD Denis FOURNIER EX-99.C1 15 MASTER ALLIANCE AGREEMENT 1 EXHIBIT C(1) MASTER ALLIANCE AGREEMENT between PUBLICIS COMMUNICATION and FOOTE, CONE & BELDING COMMUNICATIONS, INC. Dated as of January 1, 1989 2 TABLE OF CONTENTS MASTER ALLIANCE AGREEMENT
Page ---- 1. ALLIANCE RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Operating Principles . . . . . . . . . . . . . . . . . . . . . 1.2 Preferred Partners . . . . . . . . . . . . . . . . . . . . . . 1.3 International Committee . . . . . . . . . . . . . . . . . . . 1.4 Dispute Resolution Committee . . . . . . . . . . . . . . . . . 2. FORMATION OF ALLIANCE . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Transfer of Business from Publicis . . . . . . . . . . . . . . 2.2 Issuance of Communication Shares . . . . . . . . . . . . . . . 2.3 Communication Shareholders Agreement . . . . . . . . . . . . . 2.4 Issuance of FCB Stock . . . . . . . . . . . . . . . . . . . . 2.5 FCB Stockholders Agreement . . . . . . . . . . . . . . . . . . 2.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 Third Party Consents . . . . . . . . . . . . . . . . . . . . . 3. FORMATION OF PUBLICIS FCB B.V.; CONSEIL SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Intermarco . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Subscription to PBV Capital . . . . . . . . . . . . . . . . . 3.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Conseil Shares . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Control of Conseil . . . . . . . . . . . . . . . . . . . . . . 3.6 Ownership of FCB International . . . . . . . . . . . . . . . . 3.7 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 PBV Shareholders Agreement . . . . . . . . . . . . . . . . . . 3.9 Publicis Undertaking . . . . . . . . . . . . . . . . . . . . . 4. CONDUCT OF OPERATIONS PRIOR TO CLOSING . . . . . . . . . . . . . . . . 4.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . 4.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. WARRANTIES OF FCB . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Capitalization of FCB . . . . . . . . . . . . . . . . . . . . 5.3 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Authority of FCB and FCB International . . . . . . . . . . . . 5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . 5.6 Operation in Ordinary Course . . . . . . . . . . . . . . . . . 5.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 5.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . 5.10 Contracts of FCB Subsidiaries . . . . . . . . . . . . . . . . 5.11 Conflicts of Interest . . . . . . . . . . . . . . . . . . . . 6. WARRANTIES OF COMMUNICATION . . . . . . . . . . . . . . . . . . . . .
3 6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Capitalization of Publicis and the Parents . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Authority of the Parents . . . . . . . . . . . . . . . . . . . 6.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . 6.6 Operation in Ordinary Course . . . . . . . . . . . . . . . . . 6.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 6.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . 6.10 Contracts of Communication Subsidiaries . . . . . . . . . . . 6.11 Conflicts of Interest . . . . . . . . . . . . . . . . . . . . 7. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Other Agreements and Actions . . . . . . . . . . . . . . . . . 7.2 Representations and Covenants . . . . . . . . . . . . . . . . 7.3 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Satisfaction of Counsel . . . . . . . . . . . . . . . . . . . 7.5 Government Action . . . . . . . . . . . . . . . . . . . . . . 7.6 No Restraint or Litigation . . . . . . . . . . . . . . . . . . 8. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 At the Closing . . . . . . . . . . . . . . . . . . . . . . . . 8.3 Additional Conseil Shares . . . . . . . . . . . . . . . . . . 9. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 Public Announcements . . . . . . . . . . . . . . . . . . . . . 9.2 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . 9.3 Government Reviews; Enforceability . . . . . . . . . . . . . . 9.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 9.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 Modifications . . . . . . . . . . . . . . . . . . . . . . . . 9.7 Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.11 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 9.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .
-3- 4 LIST OF APPENDICES 1. Communication Shareholders Agreement 2. Intentionally Left Blank 3. FCB Stockholders Agreement 4. PBV Articles of Association 5. PBV Shareholders Agreement 6. Publicis Undertaking 7. Multiparty Arbitration Agreement LIST OF SCHEDULES Schedule 1 FCB Subsidiaries - Sections 5.1, 5.3 Schedule 2 Government Consents - Section 5.4(c) Schedule 3 Litigation - Section 5.8 Schedule 4 Contracts - Section 5.10 Schedule 5 Conflicts of Interest - Section 5.11 Schedule 6 Communication Subsidiaries - Sections 6.1, 6.3 Schedule 7 Government Consents - Section 6.4(c) Schedule 8 Litigation - Section 6.8 Schedule 9 Contracts - Section 6.10 Schedule 10 Conflicts of Interest - Section 6.11 Schedule 11 Opinions - Section 7.3 Schedule 12 Opinions - Section 7.3 -4- 5 MASTER ALLIANCE AGREEMENT This Master Alliance Agreement dated as of January 1, 1989 (the "Master Alliance Agreement") is entered into between Publicis Communication ("Communication"), a societe anonyme having its principal office at 133, avenue des Champs-Elysees, 75008 Paris and a wholly owned subsidiary of Publicis S.A. ("Publicis"), a societe anonyme, on its own behalf and on behalf of its subsidiaries Intermarco Algemene Publiceits Unie B.V., a Dutch B.V. ("Intermarco"), and Publicis Conseil, a societe anonyme ("Conseil"), and Foote, Cone & Belding Communications, Inc. ("FCB"), a Delaware corporation having its principal office at 101 E. Erie St., Chicago, Illinois 60611, on its own behalf and on behalf of its subsidiary FCB International, Inc. ("FCB International"), a Delaware corporation. Wherever actions under this agreement are required to be performed by a subsidiary of FCB or Communication (including their respective subsidiaries described in Schedules 1 and 6 hereto), the respective parent corporation will cause such actions to be taken and cause such subsidiaries to be bound by the covenants of this agreement as fully as though they were signatories hereto and hereby guarantees ("se porte fort") performance of their respective subsidiaries. The term "Parties" shall be deemed to refer to Communication and FCB. WHEREAS, THE Parties have determined (i) to effect a worldwide alliance as further described herein, (ii) to provide for reciprocal investments in each of their respective domestic corporations, and (iii) to create a joint venture -5- 6 company, Publicis FCB B.V. ("PBV") to do business in Europe (as defined in Section 1.02 of the PBV Shareholders Agreement, attached as Appendix 6, the "Venture Territory") in the field of advertising and related businesses (as defined in Section 1.01 of the PBV Shareholders Agreement, the "Venture Scope") (the foregoing relationships being called the "Master Alliance"); NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth and other good and valuable consideration, the parties hereto agree as follows: 1. ALLIANCE RELATIONSHIPS 1.1 Operating Principles. The Parties agree that they will abide by the following principles in all matters relating to their Master Alliance: (a) The Parties will be closely associated with each respective Party having a primary sphere of influence and a responsibility for leadership in geographic regions, as follows: FCB -- North America, including the United States (except for Publicis New York) and Canada, Latin America, Asia/Pacific and South Africa. It is recognized that FCB, in its operational responsibility over the Asia/Pacific region, may establish a partnership with -6- 7 an Asian group. Any such action would follow full consultation with Communication and, following FCB's best efforts to do so, might include Communication participation in the venture. Communication -- Europe, the Middle East and Africa (except South Africa). (b) Operational responsibility for the agency network in Europe, including the Middle East and Africa shall be with Communication. Operational responsibility for the agency network in North America, Latin America and Asia/Pacific shall be with FCB. (c) Consistency and quality of multi-national client handling is the responsibility of the operational management located closest to the headquarters of the parent company of that client. (d) The regional operational management will be responsible for agency operations, and for setting and controlling performance and results. (e) Matters affecting multi-national client relationships which transcend the respective spheres of influence will be coordinated by an International Committee (as provided for in Section 1.3). (f) Consistency of philosophy and uniformity of action to these principles are the shared responsibility of the Parties. -7- 8 1.2 Preferred Partners. Each of the Parties agrees to provide any advertising-related services which are within the Venture Scope in the Venture Territory only through PBV, except as set forth in Section 1.01 of the PBV Shareholders Agreement. In addition to the formation and operation of PBV as contemplated by this Agreement and in view of the worldwide scope of significant multi-national clients of each Party and their respective investments in one another, the Parties agree on the following additional cooperation: (a) Each Party shall be free to make business combinations in its own sphere of influence so long as such business combinations do not compete with, or otherwise have a material adverse effect on, the conduct of business by the other Party in its own sphere of influence; such Party must inform the other Party of its intentions prior to effecting such combinations. (b) On mutually acceptable terms to be defined, FCB, through the FCB/Leber Katz office or other offices, will cooperate in the development of the office of Communication in New York. Communication will be able to make ensions of that office or small alliances in the United States, which do not compete with, or have a major operating impact on, an existing FCB operation. (c) Except as described in Section 1.2(b), Communication will secure approval from FCB before establishing any -8- 9 operating entity or alliance within North America, Latin America, Asia/Pacific and South Africa. (d) Communication will use its best efforts to direct Communication controlled multi-national clients of Communication to FCB local affiliates in North America. Latin America or Asia/Pacific, and FCB will use its best efforts to service those clients. If the Parties are unable to agree on the servicing of those clients within a reasonable time, Communication may make other arrangements to service those clients. FCB will consider name recognition for Communication in offices where a significant portion of the revenues are from Communication-controlled multi-national clients. 1.3 International Committee. FCB and Communication shall create a committee (the "International Committee") which shall consist of five (5) to seven (7) members. Initial composition of the International Committee shall include the chief executive officers of FCB and Communication, respectively, and not less than one representative from Europe, North America and the Latin America - Asia/pacific regions. After consultation with Communication, FCB will appoint the chairman of the Committee (initially Maurice Levy), and in addition to its respective chief executive officer, FCB shall have the power to appoint and remove the representative -9- 10 from North America and Latin America-Asia/Pacific. In addition to its respective chief executive officer, Communication shall have the power to appoint and remove the representative from Europe, provided so long as Craig Wiggins is Chief Executive Officer of PBV prior to July 1, 1990, he shall be the representative from Europe. The function of the International Committee will be to coordinate all Parties in the development of multi-national client relationships, including determination of general policies as appropriate for servicing multi-national client accounts, establishing priorities for multi-national clients and prospects and resolving client conflict "right of way" matters. All matters involving multi-national clients which transcend regional spheres of influence shall be submitted to the International Committee for resolution in accordance with procedures and policies to be established by the Committee. If, however, the chief executive officer of FCB or Communication does not agree with the Committee decision on any client matter judged by either of them to be of fundamental importance or of great sensitivity, the Committee decision shall not be implemented and the chief executive officers shall attempt to negotiate a resolution with respect to any such matter. If the chief executive officers shall fail to reach a resolution, the status quo shall prevail and no change in client assignments shall be undertaken. -10- 11 1.4 Dispute Resolution Committee. From time to time, as necessary to resolve disputes in accordance with Section 9.2, the chief executive officers of FCB and Communication shall create a committee (the "Dispute Resolution Committee") which shall consist of an equal number of members to be appointed by each chief executive officer. Any member of the Dispute Resolution Committee may be removed or replaced by the chief executive officer (or successor) by whom such member was appointed. All disputes regarding the application of this Master Alliance Agreement and the Related Agreements (as defined in Section 6.4(b)) shall be submitted to the Dispute Resolution Committee for resolution in accordance with procedures and policies to be established by the Committee and with the provisions of Section 9.2. 2. FORMATION OF ALLIANCE 2.1 Transfer of Business from Publicis. Publicis has previously transferred to Communication all of its shareholdings in Conseil and Intermarco and has caused to be transferred to Intermarco all shareholdings of the subsidiaries of Farner Holding A.G., a Swiss corporation ("Farner"). Communication and Publicis have also caused the Consolidated Net Tangible Assets (as defined in a separate memorandum executed by the chief financial officers of the Parties) of Communication at December 31, 1988 to be approximately .77 times the Consolidated Net Tangible Assets of FCB at such date, based -11- 12 upon an exchange ratio of 6 to 1 French francs per U.S. dollar. 2.2 Issuance of Communication Shares. On the Closing Date (as defined in Section 8.1), FCB will subscribe to common shares of Communication as provided in Section 2.4 so that the share capital of Communication shall be owned after the Closing 74% by Publicis and 26% by FCB, consisting of a single class of shares with 74% of the Total Voting Power held by Publicis and 26% of the Total Voting Power held by FCB, such shares having the characteristics described in the "statuts" of Communication. The Communication common shares, when issued as contemplated herein, shall be fully paid and non-assessable. FCB and Communication will each use its best efforts to secure any necessary approvals of the French government in connection with FCB's acquisition of such shares. 2.3 Communication Shareholders Agreement. On the Closing Date, FCB, Communication and Publicis shall enter into the Publicis Communication Shareholders Agreement in the form set forth in Appendix 1 hereto. 2.4 Issuance of FCB Stock. (a) On the Closing Date, Communication will acquire by subscription for 322,000,000 French francs 2,110,000 shares of Common Stock, 33-1/3 cents par value per share, of FCB (the "Common Stock"), representing approximately 19.9% of the Total Voting Power of FCB and will, in consideration therefor, issue a demand note -12- 13 payable only by offset with an amount not more than that which FCB will be required to pay in its subscription to increase of capital of Communication described in 2.4(b). Transfer of title of the FCB shares so acquired by Communication will be deferred until such offset occurs. If such offset does not take place on the Closing Date, the subscription will be cancelled. (b) FCB shall pay for its subscription provided for in Section 2.2 by (i) offset with the amount owed by Communication to FCB pursuant to Section 2.4(a) and (ii) payment to Communication in cash of 28,000,000 FF. (c) The FCB Common Stock, when issued as contemplated herein, shall be fully paid and non-assessable. 2.5 FCB Stockholders Agreement. On the Closing Date, FCB and Communication shall enter into the FCB Stockholders Agreement in the form set forth in Appendix 3 hereto. 2.6 Directors. (a) Communication shall be entitled to have a representative serve as a Director of FCB and FCB shall be entitled to have a representative serve as a Director of Communication. Each Party shall use its best efforts to cause the other Party's representative to be elected by its stockholders as a Director. If for any reason either Party shall be unable to cause the other's representative to be so elected, the first Party shall procure -13- 14 the resignation of its representative on the Board of Directors of the other. (b) Each Party undertakes to consider fully the addition to its Board of Directors of additional representatives of the other. Such consideration shall take into account the proportion of ownership the other Party holds in it and the significance of the alliance with the other to the first Party's overall business operations. (c) The director elected as provided in paragraph (a) shall also be selected to serve as a voting or nonvoting member of one or more board committees. In selecting appropriate committee memberships, each Party will take into account the proportion of ownership which the other holds in it and the significance of the alliance with the other to the first Party's overall business operations. Initially, Maurice Levy shall be appointed to serve on FCB's Management Council and on the International Committee and shall serve as chairman of the latter. Jean-Paul Morin shall also initially serve as an invited nonvoting member of FCB's Audit and Finance Committees whenever appropriate agenda items are to be considered. 2.7 Third Party Consents. Each Party will use its best efforts prior to the Closing to obtain all consents of third parties required on its behalf to carry out the transactions contemplated hereby and shall promptly notify the other Party if such consents cannot be obtained. -14- 15 3. FORMATION OF PUBLICIS FCB B.V.; CONSEIL SHARES 3.1 Intermarco. Communication will cause Intermarco to adopt amendments to its articles of association whereby its name is changed to Publicis FCB B.V. ("PBV") and its articles of association are otherwise amended to read in substance as set forth in Appendix 4 hereto, which shall be consistent with the PBV Shareholders Agreement. 3.2 Subscription to PBV Capital. (a) At the Closing FCB International will (i) pay in cash to PBV an amount of approximately FF (ii) execute a subscription for further amounts of cash (approximately FF) necessary in connection with the purchase by PBV of a 20% interest in Conseil as provided in Section 3.4, and (iii) cause to be transferred to PBV all its business in the Venture Scope within the Venture Territory, except the Mazda, Cora, Auraco and Modico accounts in Belgium and the Mazda and other existing accounts of FCB's Rotterdam agency (van Lieshout), by causing FCB International to transfer to PBV all the shares held by it in the FCB Subsidiaries set forth on Schedule 1 hereto. At the Closing, PBV will issue to FCB International 49% of the share capital and Total Voting Power of PBV in accordance with this Article and thereafter Communication will own 51% of the share capital and Total Voting Power of PBV. (b) The Parties have determined the consideration to be paid by FCB International in exchange for its 49% -15- 16 interest as set forth in a separate memorandum executed by their respective chief financial officers. 3.3 Indemnity. FCB and Communication shall each indemnify and hold PBV harmless from and against any liability or obligation, known or unknown, absolute or contingent, or any loss, (i) arising from the conduct of their respective businesses (including the business of their Subsidiaries) prior to December 31, 1988 to the extent such liabilities or obligations were not reflected on the balance sheets of their respective subsidiaries used for purposes of determining the values contributed by both parties to PBV, whether or not such liabilities were required to be reflected as of December 31, 1988 in accordance with applicable generally accepted accounting principles, (ii) arising from the inclusion of assets on the balance sheet at values higher than permitted under applicable generally accepted accounting principles, or (iii) to the extent the respective consolidated allowances for bad debts at December 31, 1988 of either Party's Subsidiaries which become part of PBV are insufficient to reflect actual collections by December 31, 1989 (taking into account reasonable allowance at such date for amounts being actively pursued for collection). All claims with regard to indemnities hereunder shall be filed in writing with the Parties not later than December 31, 1989, except that claims for taxes shall be made within 30 days of the expiration of applicable statutes of limitation. Any payment by a Party in respect of such indemnity shall be net of any offsetting tax benefits and any insurance recoveries utilized by PBV with -16- 17 respect to such liability. A Party shall be obliged to make a payment under this Section 3.3 only after and to the extent that the aggregate net amounts due by such Party exceed $500,000 for all such claims. A Party's indemnification obligation shall be satisfied by the contribution of cash to PBV. 3.4 Conseil Shares. (a) Communication agrees that on or before February 28, 1989 PBV will acquire by subscription 20% of the share capital and Total Voting Power of Conseil (as measured after such acquisition) and on or before March 31, 1990 shall acquire by subscription an additional 10% of the share capital (as measured after such acquisition) of Conseil. Such acquisition shall be made by increase of capital of Conseil. PBV's cost of acquisition of the 30% interest shall be determined as provided in a separate memorandum executed by the respective chief financial officers of the Parties. (b) FCB International shall provide 49% of the costs of the Conseil shares and Communication shall provide 51%, in both cases by loan or contribution to equity of PBV as the Parties may agree. 3.5 Control of Conseil. Until December 31, 2008 and so long as FCB shall own at least 10% of the share capital and Total Voting Power of Communication, Communication agrees that it will not, without the consent of FCB, dispose of -17- 18 shares of Conseil (or cause its shareholdings to be diluted by issuance of shares to others) such that it does not retain, directly or indirectly, control of at least 51% of the Total Voting Power of Conseil. 3.6 Ownership of FCB International. FCB agrees that as long as FCB International holds shares of capital stock of PBV, FCB or another wholly-owned subsidiary of FCB will own at least 90% of the capital stock of FCB International. 3.7 Guarantees. PCB or Publicis may have entered into certain media or other guarantees with regard to the business to be operated by PBV. To the extent feasible, the Parties will use their best efforts to release such guarantees on or prior to the Closing. Neither FCB nor Communication shall be required to provide PBV with media or other guarantees in the future without their express consent. 3.8 PBV Shareholders Agreement. On the Closing Date, FCB International and Communication will enter into the PBV Shareholders Agreement attached hereto as Appendix 5. 3.9 Publicis Undertaking. On the Closing Date, Publicis will enter into the Publicis Undertaking attached hereto as Appendix 6. 4. CONDUCT OF OPERATIONS PRIOR TO CLOSING -18- 19 4.1 Ordinary Course. Prior to the Closing, each Party will conduct its operations in the ordinary course of business, use reasonable efforts to preserve intact its present business organizations, preserve its relationships with clients, and maintain its international network intact, provided neither Party shall acquire any additional businesses or dispose of any existing businesses in the Venture Scope within the Venture Territory without the consent of the other. 4.2 Access. The Parties will afford to each other, their accountants and attorneys, full and complete access at reasonable times and upon reasonable notice to their books, records, files and documents and those of their Subsidiaries, provided each Party and its accountants and attorneys shall hold in confidence any information received from the other; and shall instruct its respective officers, employees and representatives having access to such information of such obligation of confidentiality; provided, however, that the foregoing restriction shall not prevent the use or disclosure of information by a Party which is in the public domain, by publication or otherwise, through no fault of such Party's officers, employees or representatives. 5. WARRANTIES OF FCB FCB hereby represents and warrants to Communication and its Subsidiaries as follows: -19- 20 5.1 Organization. Each of FCB, FCB International and each subsidiary of FCB International set forth on Schedule 1 hereto (including FCB International, the "FCB Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is qualified to transact business as a foreign corporation in any other jurisdiction where the failure to so qualify might have a material adverse effect on the conduct of its operations or expose it to material liabilities. Each of FCB and the FCB Subsidiaries has full power and authority to own or lease and operate its properties and to carry on its business as now conducted. True and complete copies of the articles of incorporation and by-laws of FCB and FCB International, including all amendments thereto, have heretofore or will be delivered to Publicis. No portion of FCB's European operations which fall within the Venture Scope or Venture Territory are conducted otherwise than through the FCB Subsidiaries (except as provided in Section 3.2(a)). 5.2 Capitalization of FCB. On December 31, 1988 the authorized capital stock of FCB consisted solely of (a) 100,000 shares of Preferred Stock, $1.00 par value per share, none of which is issued and outstanding, of which 30,000 shares are reserved for issuance pursuant to the shareholders' rights plan (the "Rights Plan") a copy of which has been delivered to Communication and (b) 15,000,000 shares of Common Stock, 33- 1/3 (cent) par value, of which 8,541,007 shares have been issued and are outstanding as of December 31, 1988 and 80.364 of which were held by FCB as treasury shares at such date and -20- 21 353,827 of which are reserved for issuance pursuant to outstanding employee stock option plans. All of the issued and outstanding shares of capital stock of FCB are validly issued, fully paid and non-assessable, none have been issued in violation of any preemptive or subscription rights of others and none is subject to any restrictions with respect to transferability other than those imposed by federal securities laws. Except pursuant to employee stock option plans, no options, warrants or other rights to acquire, as a result of purchase, subscription, conversion, exchange or otherwise, or agreements or commitments to issue or sell, shares of capital stock of FCB, are outstanding as of the date hereof except for approximately 145,000 shares which are expected to be issued under agreements in connection with FCB acquisitions prior to December 31, 1988. Except as contemplated herein, there are no agreements or commitments pursuant to which FCB is or may become obligated to purchase, retire or redeem any shares of its capital stock. Since December 31, 1988, FCB has not issued any shares of capital stock except pursuant to the above employee stock options in an amount not greater than 10,000 shares. 5.3 Shares. (a) FCB has, and will have at the Closing Date, with respect to FCB International, and FCB International (or another FCB Subsidiary) has, and will have at the Closing Date, with respect to the other Subsidiaries good and marketable title to the respective number of shares (the "FCB Subsidiary Shares") set forth on Schedule 1 hereto, free and clear of all liens, security interests, claims -21- 22 encumbrances and restrictions of any kind whatsoever, and there are no other outstanding shares of such FCB Subsidiaries except as indicated on Schedule 1. Such ownership constitutes 100% of the outstanding capital stock of each contributed FCB Subsidiary except as indicated on Schedule 1. The delivery as of the Closing Date of the certificates representing the FCB Subsidiary Shares indicated as owned by FCB International to PBV in exchange for PBV shares to be issued as provided in Article 3 will transfer and convey to PBV good and marketable title to such FCB Subsidiary Shares, free clear of all liens, security interests, claims, encumbrances and restrictions of any kind whatsoever. No option, right of first refusal or other right of any kind to purchase, or right to convert into or other right to acquire any such shares or any other shares of FCB Subsidiaries not directly owned by FCB International exists in favor of any other person except as noted on Schedule 1. (b) At the Closing, the FCB Common Stock to be issued to Communication hereunder will be duly authorized pursuant to resolution of the Board of Directors of FCB and when issued and delivered to Communication in accordance with the terms hereof will constitute validly issued, fully paid and non-assessable shares of FCB Common Stock. 5.4 Authority of FCB and FCB International. (a) FCB and FCB International have, and will have at the Closing Date, full power and authority to enter into this Master Alliance Agreement and the other agreements contained in the Ap- -22- 23 pendices hereto to which one or both of them is a party; to issue, sell, assign, transfer and deliver the FCB Common Stock in the case of FCB and the FCB Subsidiary Shares in the case of FCB International as contemplated pursuant to this Master Alliance Agreement and to do and perform all acts and things required to be done by them under the Master Alliance Agreement and the other agreements contained in the Appendices hereto to which one or more of them is a party by the transactions contemplated hereby or thereby. (b) The execution, delivery and performance of this Master Alliance Agreement and the other agreements contained in the Appendices hereto to which one or both of them is a party (the "Related Agreements") by FCB and FCB International, have been duly authorized by each of them who are parties thereto and this Master Alliance Agreement is, and each of the Related Agreements, when executed and delivered by parties thereto as contemplated hereby, will be their respective legal, valid and binding agreements enforceable in accordance with their respective terms, except to the extent limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights. (c) Neither the execution and delivery of this Master Alliance Agreement by FCB or of any of the Related Agreements by such of them who are parties thereto, nor the consummation of the transactions contemplated herein or therein, nor compliance with or fulfillment of the terms, con- -23- 24 ditions and provisions herein or therein, will (i) result in the breach of any of the terms and provisions of, constitute a default under, or result in the creation or imposition of any encumbrance or adverse interest upon, any of the FCB Common Stock or the FCB Subsidiary Shares, the articles of incorporation or by-laws or FCB or FCB International, any instrument, agreement, mortgage, judgment, order, award, decree or other restriction to which FCB or FCB International is a party or either of their properties is subject or by which either of them is bound or any statute or regulatory provision affecting either of them, (ii) require the approval, consent or authorization of, or the making of any declaration, filing or registration with, any third person, except as set forth on Schedule 2 hereto, or (iii) cause Communication or any other person to become an "Acquiring Person," (so long as Communication and its affiliates and associates do not acquire beneficial ownership of 25% or more of FCB's Common Stock) cause the "Stock Acquisition Date" to occur, cause the issuance of "Rights" or entitle holders of Rights to be able to exercise such Rights, all as contemplated in the Rights Plan. 5.5 Financial Statements. (a) (i) The consolidated balance sheets of FCB as of December 31, 1986 and December 31, 1987, and the related consolidated statements of income, stockholders' equity and changes in financial position for the twelve months then ended, respectively, together with the notes to such financial statements, incorporated by reference in the Annual Report of FCB on Form 10-K for the -24- 25 year ended December 31, 1987, and (ii) the consolidated balance sheet of FCB as of June 30, 1988, and the related consolidated statements of income, stockholder's equity and changes in financial position for the period then ended, together with the notes thereto contained in the Quarterly Report on Form 10-Q for the period then ended, have each been prepared in conformity with United States generally accepted accounting principles consistently applied and fairly present the consolidated financial position of FCB as of such dates and the results of its consolidated operations and changes in its financial position for the periods indicated. (b) The balance sheets of the FCB Subsidiaries as of June 30, 1988 and the statements of income of the FCB Subsidiaries for 1987 and the first six months of 1988, previously furnished to Communication, are the statements upon the basis of which the consolidated financial statements of FCB have been prepared, and have been prepared in accordance with generally accepted United States accounting principles consistently applied in all material respects. 5.6 Operation in Ordinary Course. Since June 30, 1988, each of FCB, FCB International and the FCB Subsidiaries has operated its business and assets solely in the ordinary course (except as contemplated by this Master Alliance Agreement) and there has been no material adverse change in the assets, liabilities, business or prospects of, or in the condition (financial or otherwise) of, FCB International or the FCB Subsidiaries, not disclosed to Publicis, and, to the -25- 26 best of the knowledge of FCB, no fact or condition exists or is contemplated or threatened which might cause such a change in the future. 5.7 No Undisclosed Liabilities. Neither FCB nor the FCB Subsidiaries are subject to any material liability which is not shown or which is materially in excess of amounts shown or reserved for in the latest balance sheets referred to in Section 5.5 or otherwise disclosed in this Master Alliance Agreement or in the Schedules hereto, other than liabilities of the same nature as those set forth in such balance sheets and reasonably incurred in the ordinary course of its business after the date of such balance sheets. 5.8 Litigation. Except as set forth in Schedule 3, there are no lawsuits, proceedings, claims or governmental investigations pending or, to the best of the knowledge of FCB, threatened by or against FCB or any of its Subsidiaries or their properties or business, which might reasonably be expected to result in liability to FCB or any of the FCB Subsidiaries in excess of $500,000, and there is no lawsuit, proceeding, claim or governmental investigation pending or, to the best of the knowledge of FCB threatened, which questions the legality, validity or propriety of the transactions contemplated by this Master Alliance Agreement. 5.9 Tax Liabilities. FCB and each of the FCB Subsidiaries has filed all tax returns which are required to be filed up to and including the date hereof and has paid all -26- 27 taxed (including any interest and penalties thereon) and all installments of estimated taxes which have become due pursuant to such returns, or pursuant to any assessment which has become payable. Each such return and the returns to be filed by such parties with respect to any period after the date hereof through the Closing Date will be true and correct, and the amounts of all installments of estimated taxes have been or will be properly computed. 5.10 Contracts of FCB Subsidiaries. Except as set forth in Schedule 4 or any other Schedule or Exhibit hereto, none of the FCB Subsidiaries is a party to (i) any contract for the purchase or sale of property or for the furnishing or receipt of services (excluding agreements or commitments in the ordinary course of business to purchase media on behalf of clients) which involves over $1,000,000, (ii) any contract with any stockholder, officer, director or employee, past or present, who will be employed by PBV, the non-cancellable terms of which calls for aggregate payments in excess of $1,000,000 or (iii) any other contract, whether or not made in the ordinary course of business, which is material to the business or assets of such Subsidiaries taken as a whole and will become an obligation of PBV. No FCB Subsidiary is in default under the terms of any such contract, nor is it in default in the payment of any principal or interest on any indebtedness for borrowed money. 5.11 Conflicts of Interest. Except as may be set forth in Schedule 5, (i) as of the date hereof there are no -27- 28 material situations involving the personal interests of any officer or director of any FCB Subsidiary, or any member of their family, which may be generally characterized as a "conflict of interest," including, but not limited to, the leasing of property to or from any FCB Subsidiary or direct or indirect interests of such officers or directors in the business of competitors, suppliers or customers of any FCB Subsidiary and (ii) as of the date hereof there are, and for the past three years there have been, no situations involving illegal payments or payments of doubtful legality to government officials or others which may be generally characterized as "sensitive payments." 6. WARRANTIES OF COMMUNICATION Communication hereby represents and warrants to FCB and its Subsidiaries as follows: 6.1 Organization. Each of Publicis, Communication, Conseil and Intermarco and each subsidiary thereof set forth on Schedule 6 hereto (the "Communication Subsidiaries") is a limited liability entity similar to a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and Communication, Conseil and Intermarco (the "Parents") are each qualified to transact business as a foreign corporation in any other jurisdiction where the failure to so qualify might have a material adverse effect on the conduct of its operations or expose it to material liabilities. Each of the Parents and -28- 29 the Communication Subsidiaries has full power and authority to own or lease and operate its properties and to carry on its business as now conducted (or, in the case of Communication, as presently contemplated to be conducted). True and complete copies of the articles of association of Communication, Intermarco and Conseil, including all amendments thereto, have heretofore been or will be delivered to FCB. Publicis has validly and effectively caused to be transferred to (i) Intermarco the entire ownership of the subsidiaries of Farner and (ii) Communication the entire ownership of Conseil and Intermarco so that the entire advertising business previously conducted by Publicis and its various subsidiaries is owned and will be henceforth conducted by Communication and the Communication Subsidiaries. No portion of the operations of Publicis and its subsidiaries which falls within the Venture Scope or Venture Territory is conducted otherwise than through Intermarco and its Subsidiaries designated on Schedule 6 hereto. 6.2 Capitalization of the Parents. On the date hereof, the authorized capital stock of the Parents consists solely of the following: Conseil: 150,000 shares, par value 100 FF, all of which are outstanding; Intermarco: 2,500 shares, par value 250 guilders, 1510 of which were outstanding; -29- 30 Communication: 1,000,000 shares, par value 100 FF, 1,000,000 of which are outstanding; All of the issued and outstanding shares of capital stock of the Parents and the Communication Subsidiaries are validly issued, fully paid and non-assessable, have not and will not have been issued in violation of any preemptive or subscription rights of others and are subject to no restrictions with respect to transferability. No options, warrants or other rights to acquire, as a result of purchase, subscription, conversion, exchange or otherwise, or agreements or commitments to issue or sell, shares of the capital stock of the Parents or the Communication Subsidiaries, are outstanding as of the date hereof. There are no agreements or commitments pursuant to which the Parents or the Communication Subsidiaries are or may become obligated to purchase, retire or redeem any shares of their capital stock. 6.3 Shares. (a) Communication has with respect to Conseil and Intermarco, and the respective Parent has with respect to the other Communication Subsidiaries (and in each case will have at the Closing Date) good and marketable title to the respective number of shares (the "Communication Subsidiary Shares") set forth on Schedule 6 hereto, free and clear of all liens, security interests, claims, encumbrances and restrictions of any kind whatsoever. Such ownership constitutes 100% of the outstanding capital stock of each contributed Communication Subsidiary except as indicated on Schedule 6. -30- 31 (b) At the Closing, the common shares to be issued to FCB by Communication hereunder will be duly authorized pursuant to action of the extraordinary general meeting of shareholders and when issued and delivered to FCB in accordance with the terms hereof will constitute validly issued, fully paid and non-assessable Common Shares. (c) At the Closing and upon the subsequent transfer of additional shares pursuant to Section 8.3, the common shares of Conseil issued to PBV by Conseil will constitute validly issued, fully paid and non-assessable shares of Conseil, representing 20% (and 30% after the 1990 transfer) of the Total Voting Power and share capital of Conseil after completion of the respective issuances. 6.4 Authority of the Parents. (a) The Parents have, and will have at the Closing Date, full power and authority to enter into this Master Alliance Agreement and the other agreements contained in the Appendices hereto to which any of them is a party; to cause Communication to issue, sell, assign, transfer and deliver to FCB its common shares and to PBV the Conseil Shares as contemplated pursuant to this Master Alliance Agreement and to do and perform all acts and things required to be done by them under this Master Alliance Agreement and the other agreements contained in the Appendices hereto to which one or more of them are a party and by the transactions contemplated hereby or thereby and Publicis will -31- 32 have full power and authority to enter into, and perform its obligations under, the Publicis Undertaking. (b) The execution, delivery and performance of the Publicis Undertaking by Publicis and of this Master Alliance Agreement and the other agreements contained in the Appendices hereto to which one or more of the Parents is a party (the "Related Agreements") by any of them have been duly authorized by any of them who are parties thereto and the Publicis Undertaking and this Master Alliance Agreement are, and each of the Related Agreements, when executed and delivered by parties thereto as contemplated hereby, will be, the respective legal, valid and binding agreements of Publicis or the Parents which executed such agreements as the case may be enforceable in accordance with their respective terms, except to the extent limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights. (c) Neither the execution and delivery of the Publicis Undertaking by Publicis or of this Master Agreement by Communication or of any of the Related Agreements by such of them who are parties thereto, nor the consummation of the transactions contemplated herein or therein, nor compliance with or fulfillment of the terms, conditions and provisions herein or therein, will (i) result in the breach of any of the terms and provisions of, constitute a default under, or result in the creation or imposition of any encumbrance or adverse interest upon, any of the Communication Subsidiary Shares, the -32- 33 articles of association of Publicis or the Parents, any instrument, agreement, mortgage, judgment, order, award, decree or other restriction to which Publicis or any Parent is a party or any of their properties is subject or by which any of them is bound or any statute or regulatory provision affecting any of them, or (ii) require the approval, consent or authorization of, or the making of any declaration, filing or registration with, any third person, except as set forth on Schedule 7 hereto. 6.5 Financial Statements. The separate consolidated balance sheets of each of Conseil, Intermarco and Farner as of December 31, 1987 and June 30, 1988 and the related consolidated statements of income, stockholders' equity and changes in financial position for the periods then ended, respectively, together with the notes to such financial statements, copies of which have been previously furnished to FCB, have each been prepared in conformity with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of the respective entity as of its date and the result of its consolidated operations and changes in its financial position for the periods indicated. 6.6 Operation in Ordinary Course. Since June 30, 1988, each of the Parents and the Communication Subsidiaries has operated its business and assets solely in the ordinary course (except as contemplated by this Master Alliance Agreement) and there has been no material adverse change in the -33- 34 assets, liabilities, business or prospect of, or in the condition (financial or otherwise) of, the Parents or the Communication Subsidiaries, not disclosed to FCB, and, to the best of the knowledge of Communication, no fact or condition exists or is contemplated or threatened which might cause such a change in the future. 6.7 No Undisclosed Liabilities. None of the Parents or the Communication Subsidiaries is subject to any material liability which is not shown or which is materially in excess of amounts shown or reserved for in the latest balance sheets referred to in Section 6.5 or otherwise disclosed in this Master Alliance Agreement or in the Schedules hereto, other than liabilities of the same nature as those set forth in such balance sheets and reasonably incurred in the ordinary course of its business after the date of such balance sheets. 6.8 Litigation. Except as set forth in Schedule 8, there are no lawsuits, proceedings, claims or governmental investigations pending or, to the best of the knowledge of Communication, threatened by or against Publicis, Communication or any of the Communication Subsidiaries or their properties or business, which might reasonably be expected to result in liability to the Parents or any of the Communication Subsidiaries in excess of $500,000, and there is no lawsuit, proceeding, claim or governmental investigation pending or, to the best of the knowledge of Communication threatened, which -34- 35 questions the legality, validity or propriety of the transactions contemplated by this Master Alliance Agreement. 6.9 Tax Liabilities. The Parents and each of the Communication Subsidiaries have each filed all tax returns which are required to be filed up to and including the date hereof and have each paid all taxes (including any interest and penalties thereon) and all installments of estimated taxes which have become due pursuant to such returns, or pursuant to any assessment which has become payable. Each such return and the returns to be filed by such parties with respect to any period after the date hereof through the Closing Date will be true and correct, and the amounts of all installments of estimated taxes have been or will be properly computed. 6.10 Contracts of Communication Subsidiaries. Except as set forth in Schedule 9 of any other Schedule or Exhibit hereto, neither Communication nor any of the Communication Subsidiaries is a party to (i) any contract for the purchase or sale of property or for the furnishing or receipt of services (excluding agreements or commitments in the ordinary course of business to purchase media on behalf of clients) which involves over $1,000,000, (ii) any contract with any stockholder, officer, director or employee, past or present, who will be employed by PBV, the non-cancellable term of which calls for aggregate payments in excess of $1,000,000, or (iii) any other contract, whether or not made in the ordinary course of business, which is material to the businesses or assets of Communication Subsidiaries taken as a -35- 36 whole and will become an obligation of PBV. Neither Communication nor any Communication Subsidiary is in default under the terms of any such contract, nor is it in default in the payment of any principal or interest on any indebtedness for borrowed money. 6.11 Conflicts of Interest. Except as may be set forth in Schedule 10, (i) as of the date hereof there are no material situations involving the personal interests of any officer or director of Communication or any Communication Subsidiary, or any member of his family, which may be generally characterized as a "conflict of interest," including, but not limited to, the leasing of property to or from Communication or any Communication Subsidiary or direct or indirect interests of such officers or directors in the business of competitors, suppliers or customers of Communication or any Communication Subsidiary and (ii) as of the date hereof there are, and for the past three years there have been, no situations involving illegal payments or payments of doubtful legality to government officials or others which may be generally characterized as "sensitive payments." 7. CLOSING CONDITIONS The respective obligations of each Party to consummate the transactions contemplated by this Master Alliance Agreement shall be subject to the following conditions (to be satisfied as contemplated in Section 8): -36- 37 7.1 Other Agreements and Actions. The other Party thereto (and its Subsidiaries) shall have executed and delivered on the Closing Date the agreements referred to herein in the form attached hereto as Appendices with such changes therein as the Parties executing the same may agree. 7.2 Representations and Covenants. The representations and warranties of the other Party (and its Subsidiaries) shall be true in all material respects as of and at the Closing Date as though made at the Closing Date with the same effect as though made at such date as evidenced by a certificate to that effect by such other Party delivered at the Closing and such other Party (and its Subsidiaries) shall have performed in all material respects all obligations required by this Master Alliance Agreement to be performed on or prior to the Closing Date. 7.3 Opinions. (a) FCB shall have received favorable opinions dated as of the Closing Date from Bredin, Prat & Saint-Esteben and Nauta Van Haersolte, as to the matters set forth in Schedule 11 hereto. (b) Publicis shall have received a favorable opinion dated as of the Closing Date from Sidley & Austin as to the matters set forth in Schedule 12 hereto. 7.4 Satisfaction of Counsel. The delivery of such other documents, certificates and consents as shall be reasonably requested by counsel. -37- 38 7.5 Government Action. (a) On or prior to the Closing Date, each Party shall have obtained all necessary consents and approvals of any Governmental Authority having jurisdiction over such Party or the transactions contemplated herein which must approve the effectiveness and consummation of the transactions contemplated by this Master Alliance Agreement and the Appendices hereto. (b) The Master Alliance and appropriate related agreements shall have been properly notified to the European Economic Community. (c) The waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder shall have expired or have been granted early termination on or prior to the Closing Date. 7.6 No Restraint or Litigation. On or prior to the Closing Date, no action, suit, investigation or proceeding shall be pending by any Governmental Authority having jurisdiction over a Party to enjoin, restrain, prohibit or otherwise challenge the legality or validity of this Master Alliance Agreement or any of the agreements included in the Appendices hereto or the transactions contemplated hereby and thereby and no order shall have been issued and remain pending by any court or Governmental Authority having jurisdiction over a Party which enjoins, restrains or prohibits -38- 39 consummation of the transaction contemplated hereby and thereby. 8. CLOSING 8.1 General. Subject to the terms and conditions hereof, the closing (the "Closing") of the transactions contemplated hereby shall commence on January 24, 1989 (the "Closing Date") in the offices of Communication, in Paris, France, or at such other time and place as the Parties may agree. In view of various administrative formalities which must be completed, the Parties recognize that not all steps constituting the Closing may occur in the same place or at the same time. Section 8.2 describes the order and approximate time and place at which the Parties anticipate the major steps will be completed. Notwithstanding the foregoing, the Parties agree that (i) all steps shall be deemed to occur simultaneously and (ii) all the transfers contemplated hereunder will be deemed to be effective as of January 1, 1989. 8.2 The Closing Steps: (a) On January 24, 1989: (i) FCS shall (x) subscribe for common shares of Communications as provided in Section 2.2 and make payment therefor as provided in Section 2.4 in exchange for issuance -39- 40 of such shares and (y) issue and deliver to Communication a certificate for 2,110,000 shares of FCB Common Stock; (ii) Communication shall (x) subscribe for FCB Common Stock and make payment therefor as provided in Section 2.4 and (y) issue the common shares of Communication pursuant to Section 2.2 to FCS to be evidenced by an appropriate officer's certificate evidencing the FCB is the registered holder of such shares; and (iii) The appropriate parties shall execute and deliver the FCB Stockholders Agreement, the Publicis Undertaking, the Publicis Communication Shareholders Agreement, the Registration Rights Agreement and the Multi-Party Arbitration Agreement. (b) At a date on or before February 28, 1989. (i) FCB International, Communication and PBV will execute and deliver the PBV Shareholders Agreement; (ii) Intermarco shall commence the actions to change its name to PBV and otherwise amend its articles of association (subject to approval of appropriate Dutch authorities) and appoint a new Board of Management as required by the PBV Agreement; (iii) FCB International shall cause to be assigned and transferred to PBV all the FCB Subsidiary Shares -40- 41 referred to in Section 3.2 hereof and make the additional cash payment required by Section 3.2; and (iv) PBV shall issue to FCB International 49% of the share capital and Total Voting Power of PBV in accordance with Article 3. (c) At a date on or before February 28, 1989. (i) Conseil shall issue its common shares to PBV and PBV shall make payment therefor as provided in Section 3.4; and (ii) FCB shall pay to PBV any unpaid balance of its subscription to 49% of the shares of PBV as contemplated by Section 3.2. 8.3 Additional Conseil Shares: On or before March 31, 1990, Conseil shall issue to PBV an additional 10% of the share capital of Conseil and FCB International and Communication shall provide PBV any funds required therefor as provided in Section 3.4. 9. GENERAL 9.1 Public Announcements. The parties will use their best efforts to coordinate publicity initiatives regarding the subject matter of this Master Alliance Agreement. -41- 42 9.2 Dispute Resolution. (a) This Master Alliance Agreement shall be governed as provided in Section 9.4. (b) All disputes arising under this Master Alliance Agreement and the Related Agreements shall be referred in the first instance by written notice given in accordance with Section 9.9 to the Dispute Resolution Committee, and if not received by such Committee within thirty calendar days after the giving of notice, may be referred by either Party by written notice to the Chief Executive Officers or Chief Operating Officers of FCB and Communication. (c) Disputes which are not resolved within thirty calendar days after the giving of notice to the Chief Executive or Chief Operating Officers referred to in clause (b) hereof shall be settled in accordance with the Multi-Party Arbitration Agreement attached as Appendix 7 hereto, provided, nothing in this Section 9.2 shall prevent any party to the arbitration from seeking provisional or injunctive relief in any court having jurisdiction over the parties pending resolution of such dispute by the processes contemplated herein. 9.3 Government Reviews; Enforceability. The Parties and their respective Subsidiaries will cooperate in the event of any review by a Governmental Authority of the transactions contemplated hereby or by any of the other agreements attached as Appendices hereto, including furnishing information sought by the reviewing authority. This Master -42- 43 Alliance Agreement and the agreements contained in the Appendices may be discussed with, shown to, and filed with any Governmental Authority or official as determined to be appropriate by a Party. If, as a result of such presentation or otherwise, any provision of any such agreement is or becomes or is deemed invalid, illegal or unenforceable under the applicable laws or regulations of any jurisdiction, or is stricken or materially amended by the action of any Governmental Authority or any change or modification of any such provision is required or recommended by any Governmental Authority or any other appropriate authority, the Parties shall negotiate in good faith with respect to either an alternative or modified provision or the striking of such provision from such agreement. After 60 calendar days from the commencement of such negotiations, any Party may submit the subject of such disagreement to arbitration in accordance with the Multi-Party Arbitration Agreement for reformation or termination of all or portions of this Agreement and the Related Agreements, all as deemed appropriate by the arbitrators. 9.4 Governing Law. This Agreement shall be governed by the laws of France applicable to agreements executed and delivered and to be performed in France, except that the agreements attached hereto as appendices may be governed by other law if so stated. 9.5 Assignment. Neither of the Parties hereto shall, without the written consent of the other Party, assign -43- 44 or transfer this Master Alliance Agreement or any rights or obligations hereunder. 9.6 Modifications. Neither this Master Alliance Agreement nor any agreement contained in the Appendices shall be modified, altered, changed or amended in any respect unless in writing by a duly authorized representative of each of the parties to such agreement. 9.7 Non-Waiver. Failure by any Party to enforce any provision of this Master Alliance Agreement or of any agreement contained in the Appendices shall not constitute a waiver or affect its right to require the performance thereof by the parties thereto or their Subsidiaries or affect the validity of any other provision thereof. 9.8 Titles. Section titles used in this Master Alliance Agreement and in the agreements are used for convenience only and shall in no event be used for interpretation purposes. 9.9 Notices. Any notices, requests or demands to or upon the respective Parties hereto shall be in writing (including telex and telecopy communication followed by registered mail with return receipt requested) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or when telexed (answer-back received) or telecopied (with receipt acknowledged), addressed to the Party for whom intended as -44- 45 provided below (or as hereafter specified by such Party by notice hereunder): If to Communication to: 133, avenue des Champs-Elysees Paris 75008 France Attn: President Directeur General If to FCB to: 101 East Erie Street Chicago, Illinois 60611 U.S.A. Attn: Chief Executive Officer 9.10 Expenses. Except as the Parties may otherwise agree, all fees, commissions and expenses incurred by FCB or Communication in connection with the negotiation of this Master Alliance Agreement and the agreements contained in the Appendices shall be borne by the Party incurring such expenses. 9.11 Definitions. The following terms used herein shall mean as follows: "Governmental Authority": - appropriate entities of the European Economic Community and any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government having jurisdiction over a Party. -45- 46 "Subsidiary" - a corporation or other legal entity shall be deemed a Subsidiary of a company if the company owns or controls, directly or indirectly, not less than 50% of the Total Voting Power entitled to be cast in the election of directors of such corporation or other legal entity, but only as long as such ownership or control continues. "Total Voting Power": - "Total Voting Power" meaning the total number of votes which may be cast in the election of directors at any meeting of stockholders if all securities entitled to vote in the election of directors of a company, other than votes that may be cast only upon the happening of a contingency, were present and voted at such meeting. "Venture Scope": - see section 1.01 of PBV Shareholders Agreement. "Venture Territory": - see section 1.02 of PBV Shareholders Agreement. 9.12 Entire Agreement. This Master Alliance Agreement and the other agreements referred to herein or in the Appendices set forth the entire agreement and understanding between the Parties as to the subject matter hereof and thereof and merge all prior discussions and writings between or among them, and neither of the Parties shall be bound with respect to such subject matter except as provided herein or therein. -46- 47 9.13 Counterparts. This Master Alliance Agreement may be executed in two full sets, each of which may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the Parties and delivered to the other Party hereto. IN WITNESS WHEREOF, the Parties have caused this agreement to be executed and delivered on their behalf on January 23, 1989 to be effective as of the date first above written. This agreement is executed in two full sets, one for each Party. PUBLICIS COMMUNICATION By ---------------------------------------- President-Directeur General FOOTE, CONE & BELDING COMMUNICATIONS, INC. By ---------------------------------------- Chairman, Chief Executive Officer -47- EX-99.C2 16 MEMORANDUM OF AGREEMENT 1 EXHIBIT C(2) FCB STOCKHOLDERS AGREEMENT Dated as of January 1, 1989 between Publicis Communication and Foote, Cone & Belding Communications, Inc. 2 FCB STOCKHOLDERS AGREEMENT TABLE OF CONTENTS
Page ---- ARTICLE I COVENANTS OF PC . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Limitation on Ownership of Voting Stock . . . . . . . . . . . . . . . . . 1.2 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Voting Trust, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 Acts in Concert with Others . . . . . . . . . . . . . . . . . . . . . . . 1.6 Restrictions on Transfer of FCB Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . 2. ARTICLE II PC'S RIGHT TO PURCHASE ADDITIONAL FCB SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Right to Purchase Additional Shares . . . . . . . . . . . . . . . . . . . 2.2 Notice of Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Purchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Available Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Purchase by FCB of Its Common Stock . . . . . . . . . . . . . . . . . . . ARTICLE III FCB'S RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . 3. 3.1 Transfer Sale or Public Offering . . . . . . . . . . . . . . . . . . . . . 3.2 Tender Offer Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Repurchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Delivery of FCB's PC Voting Stock . . . . . . . . . . . . . . . . . . . . ARTICLE IV OPTION OF FCB TO REPURCHASE PC'S FCB VOTING STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 4.1 Right of Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Notice of Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Repurchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Delivery of FCB's PC Voting Stock . . . . . . . . . . . . . . . . . . . . ARTICLE V OPTION OF PSA TO REPURCHASE FCB'S PC COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 5.1 Right to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Notice of Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Repurchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Delivery of PC's FCB Voting Stock . . . . . . . . . . . . . . . . . . . . 5.6 Transfer of PSA's Rights . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 6. 6.1 Election of Director . . . . . . . . . . . . . . . . . . . . . . . . . . .
-ii- 3
Page ---- 6.2 Equity Method Accounting . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Notice by FCB of Acquisitions . . . . . . . . . . . . . . . . . . . . . . ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 7.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Governing Law; Dispute Resolution . . . . . . . . . . . . . . . . . . . . 7.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . 7.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 Government Reviews; Enforceability . . . . . . . . . . . . . . . . . . . . 7.8 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.9 Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.12 PC Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBITS A Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . .
-3- 4 FCB STOCKHOLDERS AGREEMENT THIS FCB STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered into as of this 1st day of January, 1989, by and between Foote, Cone & Belding Communications, Inc., a Delaware corporation ("FCB"), and Publicis Communication, a societe anonyme ("PC"). WHEREAS, FCB and PC have executed and delivered that certain Master Alliance Agreement, dated as of January 1, 1989 (the "Master Alliance Agreement"), the representations and warranties of each party in Sections 5 and 6 to each other being incorporated herein by reference as fully as though set forth herein; WHEREAS, pursuant to the Master Alliance Agreement, FCB has issued to PC 2,110,000 shares of FCB's Common Stock, par value 33-1/3 cents per share (the "FCB Common Stock"); and PC has issued to FCB 350,000 common shares of PC's capital stock (the "PC Common Shares"); WHEREAS, the execution and delivery of this Agreement by PC and FCB is a condition to the obligations of the parties to the Master Alliance Agreement to consummate the transactions contemplated thereby; and -4- 5 WHEREAS, each of FCB and PC have determined that it is in their best interests and the best interest of their respective shareholders to enter into this Agreement in order, among other things, to permit the consummation of the transactions contemplated by the Master Alliance Agreement and to regulate certain aspects of the relationship of the parties being created by such Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and undertakings herein set forth and other good in valuable considerations, the parties hereto agree as follows: 1. ARTICLE I Covenants of PC Until the termination of this Agreement in accordance with Section 7.2 hereof or of the particular covenant or provision, as the case may be, or the occurrence of a Change of Control of FCB, and subject to the provisions of this Agreement: Section 1.1 Limitation of Ownership of Voting Stock. PC agrees not to and agrees to cause its Affiliates (excluding any member of PC's Board of Directors designated by FCB) (the "PC Affiliates") not to acquire record or beneficial ownership of any FCB Voting Stock (except, in any case, by way of stock splits of FCB or stock dividends or distributions by FCB to PC) without the prior written consent of FCB, if the -5- 6 effect of such acquisition would be to increase the Voting Power of all FCB Voting Stock then owned by PC and the PC Affiliates to more than 20.5% of the Total Voting Power of FCB at such time; provided that: (i) PC may acquire FCB Voting Stock if it is publicly disclosed or FCB notifies PC in writing that another person or group (other than the Foote, Cone & Belding Communications, Inc. Stock Purchase and Stock Ownership Trust or similar employee stock ownership plan established by FCB (the "Trust")) has acquired any FCB Voting Stock which results in such person or group owning or having the right to acquire FCB Voting Stock with aggregate Voting Power having a percentage of the Total Voting Power of FCB then in effect which is more than that percentage of the Total Voting Power of FCB then in effect then owned by PC and the PC Affiliates less 5 percent of the Total voting Power of FCB then in effect; provided PC may only acquire up to that amount of FCB Voting Stock which when added to the FCB Voting Stock then owned by PC and PC Affiliates does not exceed the percentage interest in Total Voting Power of FCB acquired by such other person or group plus 5 percentage points of the Total Voting Power of FCB then in effect; (ii) PC may acquire FCB Voting Stock without regard to the limitations in this Section 1.1 if a tender offer or exchange offer is made, as evidenced by the filing with the Securities and Exchange Commission (the "SEC") -6- 7 of a Schedule 14D-1 (or any successor schedule or form promulgated or adopted for such purpose by the SEC) by a person or group (not including PC or any PC Affiliate) to purchase or exchange for cash or other consideration any FCB Voting Stock which, if successful, would result in such person or group making the offer owning or having the right to acquire shares of FCB Voting Stock with aggregate Voting Power of at least 30% of the Total Voting Power of FCB then in effect; (iii) In the event FCB at any time Controls more than 26.5% of the Total Voting Power of PC, PC may (during the period in which FCB Controls such excess voting power) acquire FCB Voting Stock which when added to the FCB Voting Stock then owned by PC and the PC Affiliates has aggregate Voting Power of more than 20.5% (or a greater percentage if permitted hereunder) of the Total Voting Power of FCB then in effect but only up to that percentage of FCB Voting Stock at which the proportion of FCB Voting Stock owned of record or beneficially by PC and the PC Affiliates compared to the proportion of PC Voting Stock owned of record or beneficially by FCB and its Affiliates (excluding any member of FCB's Board of Directors designated by PC) does not exceed 1:1.3; (iv) In the event and during any period when the person designated by Publicis to serve on the Board of Directors of FCB in accordance with Section 6.1 hereof is not elected to serve (or such person's successor is not -7- 8 so elected in accordance with Section 6.1) so long as the person designated by FCB has been duly elected to service on the Board of Directors of PC, PC may (during the period when no such person serves as a director of FCB) acquire FCB Voting Stock which when added to the FCB Voting Stock then owned by PC and the PC Affiliates has aggregate Voting Power in excess of 20.5% of the Total Voting Power of FCB then in effect (or any greater percentage permitted hereunder) and shall not be required to dispose of any such shares in the event its designee is subsequently elected; (v) Notwithstanding the foregoing but subject to Section 4.1(b), neither PC nor any of its Affiliates shall be obligated to dispose of any shares of FCB Voting Stock to the extent that their aggregate percentage ownership is increased as a result of a recapitalization of FCB or a repurchase of securities by FCB or any other action taken by FCB to reduce the Total Voting Power of FCB then in effect. Section 1.2 Voting. PC shall take such action as may be required so that all shares of FCB Voting Stock owned by PC are voted for the nominees to the Board of Directors of FCB recommended by FCB's Board of Directors to FCB's stockholders consistent with Section 6.1 hereof. Further, PC shall take such action as may be required so that all shares of FCB Voting Stock owned by PC are voted with management on all other matters to be voted on by holders of FCB Voting -8- 9 Stock; provided, that FCB Voting Stock owned by PC may be voted as PC determines in its sole discretion on any Significant Event presented to the holders of Voting Stock for a vote. PC, as the holder of shares of FCB Voting Stock, shall be present, in person or by proxy, at all meetings of stockholders of FCB so that all shares of FCB Voting Stock owned by PC may be counted for the purpose of determining the presence of a quorum at such meetings. Section 1.3 Voting Trust, etc. PC shall not deposit any shares of FCB Voting Stock in a voting trust or, except as otherwise provided herein, subject any shares of FCB Voting Stock to any arrangement or agreement with respect to the voting of such FCB Voting Stock. Section 1.4 Solicitation of Proxies. Without FCB's prior written consent, PC shall not solicit proxies with respect to any FCB Voting Stock, nor shall it become a "participant" in any "election contest", as such terms are used in Rule 14a-11 of Regulation 14A (or any successor rule or regulation) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to the election of directors of FCB; provided, however, that PC shall not be deemed to be a "participant" by reason of the membership of its designee on the FCB's Board of Directors pursuant to Section 6.1; and, provided, further, however, that the prohibition contained in this Section 1.4 shall not apply in the event such designee is not included in the management -9- 10 slate for election to the Board of Directors in accordance with Section 6.1. Section 1.5 Acts in Concert with Others. Except as contemplated herein with regard to permissible sales of, or the use of a broker to facilitate permissible acquisitions of, FCB Voting Stock, PC shall not join a partnership, limited partnership, syndicate or other group, or otherwise act in concert with any third person, for the purpose of acquiring, holding, or disposing of FCB Voting Stock. Section 1.6 Restrictions on Transfer of FCB Voting Stock. PC shall not, directly or indirectly, sell, transfer, assign, pledge, encumber, or otherwise suffer any lien or security interest to attach to any of its FCB Voting Stock except (i) to FCB or any person or group approved of in advance and in writing by FCB in its sole discretion; or (ii) to a Controlled Corporation of PC, so long as prior to such transfer such Controlled Corporation executes and delivers to FCB a written instrument, in form and substance reasonably acceptable to FCB (x) evidencing its agreement to hold such FCB Voting Stock subject to all the provisions and restrictions of this Agreement as if it were a party hereto, including this Section 1.6, and the rights of FCB with respect to such FCB Voting Stock, and to transfer such FCB Voting Stock to PC or other Controlled Corporation of PC if it ceases to be a Controlled Corporation of PC, and (y) setting forth its address for purposes of receiving notices in connection with this Agreement; or (iii) subject to FCB's right of first -10- 11 refusal as set forth in Article III hereof, pursuant to a bona fide public offering (which shall be structured to distribute such FCB Voting Stock through an underwriter or otherwise in such a manner as should not result in a sale or sales of beneficial ownership of FCB Voting Stock with aggregate Voting Power of 5% or more of the Total Voting Power of FCB then in effect to a single person or group) registered under the Securities Act of 1933, as amended (the "Securities Act"), of FCB Voting Stock; or (iv) subject to FCB's Right of first refusal as set forth in Article III hereof, in transactions involving receipt by PC of cash payment for its FCB Voting Stock not otherwise described herein so long as such transactions do not, directly or indirectly, in a manner PC knows or should know, result in any single person or group owning or having the right to acquire FCB Voting Stock with aggregate Voting Power of 5% or more of the Total Voting Power of FCB then in effect; or (v) in response to (1) an offer to purchase or exchange for cash or other consideration any FCB Voting Stock (a) which is made by or on behalf of FCB or its Affiliates, or (b) which is made by another person or group and is not opposed by the Board of Directors of FCB within the time such Board is required, pursuant to the regulations then in effect under the Exchange Act or any successor federal statute, to advise FCB's stockholders of such Board's position on such offer, or (2) subject to FCB's right of first refusal as set forth in Article III, any other offer made by a person or group (not including PC or any PC Affiliate) to purchase or exchange for cash or other consideration any FCB Voting Stock which, if successful, would result in such person or group -11- 12 owning or having the right to acquire FCB Voting Stock with aggregate Voting Power of more than 30% of the Total Voting Power of FCB then in effect; or (vi) pursuant to a bona fide pledge to a bank or other institutional lender (the "Pledgee") so long as, prior to such pledge, the Pledgee executes and delivers to FCB a written instrument, in form and substance reasonably acceptable to FCB evidencing its agreement (x) to provide FCB a right of first refusal in connection with any sale or transfer of such FCB Voting Stock by the Pledgee on the same terms as provided herein, (y) to exercise all voting rights with respect to such FCB Voting Stock in a manner consistent with FCB's rights under this Agreement and (z) otherwise to exercise any rights it may have with respect to such FCB Voting Stock in a manner consistent with FCB's rights under the Agreement. Section 1.7 Confidential Information. Notwithstanding any Change of Control of FCB, FCB will from time to time pursuant to and in connection with this Agreement or the Master Alliance Agreement and related agreements, disclose to PC and its representatives, including PC's designee to the Board of Directors of FCB, certain business information which FCB deems to be confidential (for example, financial information or business plans). PC shall not disclose such information to third parties until the earliest of (i) the date upon which such information becomes public knowledge through no fault of PC, (ii) the date upon which FCB discloses such fault of PC, (ii) the date upon which FCB discloses such information to a third party on an unrestricted -12- 13 basis, or (iii) the fifth anniversary of the date of disclosure to PC. 2. ARTICLE II PC's Right to Purchase Additional FCB Shares Section 2.1 Right to Purchase Additional Shares. (a) Subject to the provisions of this Agreement and so long as no Change of Control of FCB shall have occurred, in the event that PC (and the PC Affiliates) shall at any time after January 24, 1989 have beneficial ownership of less that 19.9% of the Total Voting Power of FCB then in effect and desires to acquire additional FCB Voting Stock up to such 19.9% and all or a part of such FCB Voting Stock is not likely to be available for purchase in the market over a period of 60 days for less than 115% of the Market Price (as defined in Section 7.1(j)) thereof determined as of the date of its notice to FCB under the section (a "Section 2.1 Notice"), PC may elect to purchase directly from FCB, and FCB shall sell to PC, such amount of FCB Common Stock for a cash payment equal to the Market Price thereof; provided, that in the event FCB shall be required to obtain shareholder approval for such sale in accordance with its New York Stock Exchange listing agreement otherwise by law, FCB shall not be obligated to issue such shares prior to obtaining such approval, which it shall use its best efforts to secure. If FCB shall seek and fail to obtain such shareholder approval, FCB shall offer to sell to PSA (so long as no Change of Control of PC shall have occurred) sufficient shares of PC Voting Stock so that the ratio of Total Voting Power of PC then owned by FCB to the -13- 14 Total Voting Power of FCB then owned by PC does not exceed 1.3 to 1. Such PC Voting Stock shall be offered at the Market Price thereof as valued on the date of the FCB meeting of stockholders at which shareholder approval is sought but not obtained. PC may conclusively establish that it is not likely to be able to acquire such FCB Voting Stock in the market on the conditions mentioned above by providing FCB with a letter to such effect from a nationally recognized investment bank firm. Section 2.2 Notice of Purchase. In order to exercise its rights to purchase FCB Common Stock pursuant to Section 2.1 hereof, PC shall deliver to FCB the Section 2.1 Notice, setting forth the FCB Voting Stock owned by PC and the PC Affiliates on the date of the Section 2.1 Notice, the number of shares of FCB Common Stock it wishes to purchase, the basis under Section 2.1 entitling it to acquire such Common Stock and the date on which PC wishes to purchase such Common Stock, which date shall not be less than 30 days following PC's delivery of such notice or as soon thereafter as may be permitted under applicable laws (the "Purchase Date"). Section 2.3 Purchase of Stock. Unless the parties agree otherwise, any purchase of FCB Common Stock pursuant to the Article II shall take place at the corporate offices of FCB on the Purchase Date. -14- 15 Section 2.4 Available Shares. FCB shall at all times keep available as authorized but unissued or as treasury shares a sufficient number of shares of Common Stock to satisfy its obligations under this Article II. Section 2.5 Purchase by FCB of Its Common Stock. In order to enable PC to maintain its proportionate interest in FCB despite the exercise of employee stock options, so long as there is no stock option plan of PC in existence, FCB will purchase within a reasonable period of the end of each quarter sufficient amounts of its Common Stock so that its total outstanding Common Stock is not increased by the exercise of employee stock options. 3. ARTICLE III FCB'S Right of First Refusal Section 3.1 Transfer Sale or Public Offering. So long as no Change of Control of FCB shall have occurred, prior to making any public offering or sale or transfer of FCB Voting Stock pursuant to Sections 1.6(iii) or (iv), PC shall give FCB the opportunity to purchase such FCB Voting Stock in the following manner: (i) PC shall give notice ( the "Transfer Notice" or "Section 3.1 Notice") to FCB in writing of such intention specifying the approximate number of the proposed purchasers or transferees, the amount of FCB Voting Stock proposed to be sold or transferred, the proposed cash price per share therefor (the "Transfer Price") in the -15- 16 case of a proposed sale under Section 1.6(iv) or the proposed underwriters in the case of a proposed public offering, and the other material terms upon which any such disposition is proposed to be made (to the extent known). (ii) FCB shall have the right, exercisable by written notice given by FCB to PC within thirty calendar days after receipt of such Transfer Notice, to purchase all but not part of the FCB Voting Stock specified in such Transfer Notice for a price per share equal, in the case of a proposed sale under Section 1.6(iv), to the Transfer Price or, in the case of a proposed public offering, to the Market Price on the date of the Section 3.1 Notice, payable (in FCB's discretion) in cash and/or FCB's PC Common Shares in accordance with the Section 3.5 valued at the Market Price thereof. (iii) If FCB exercises its right of first refusal hereunder, the closing of the purchase of the FCB Voting Stock with respect to which such right has been exercised shall take place within sixty calendar days after FCB gives the Section 3.1 Notice; provided, if at any time prior to such closing, an offer to purchase or exchange FCB Common Stock described in Section 1.6(v) is made by any person, PC may revoke its Transfer Notice and sell or exchange its FCB Voting Stock in responses to such offer, subject to FCB's right of first refusal set forth in Section 3.2 and, if the offer is made by FCB, to FCB's right -16- 17 to pay its purchase price in FCB's PC Common Shares in accordance with Section 3.5 valued at the Market Price thereof. (iv) If FCB does not exercise its right of first refusal hereunder with respect to any Transfer Notice within the time specified hereunder for such exercise, PC shall be free, only during the period of ninety calendar days following the expiration of such time of exercise, to sell the FCB Voting Stock specified in such Transfer Notice (x) in the case of a proposed transfer under Section 1.6(iv) on terms no less favorable to PC than the terms specified in such Transfer Notice and (y) in the case of a proposed public offering, in accordance with Section 1.6(iii). Section 3.2 Tender Offer Sale. So long as no Change of Control of FCB shall have occurred, prior to making any sale or exchange of FCB Voting Stock pursuant to Section 1.6(v)(2) in response to a tender or exchange offer, PC shall give FCB the opportunity to purchase such FCB Voting Stock in the following manner: (i) PC shall give notice (the "Tender Notice" or "Section 3.2 Notice") to FCB in writing of such intention no later than ten calendar days prior to the latest time by which FCB Voting Stock must be tendered in order to be accepted pursuant to such offer or to qualify for any proration applicable to such offer (the "Tender Date"), -17- 18 specifying the amount of FCB Voting Stock proposed to be tendered. For purposes hereof, a tender offer to purchase or exchange FCB Voting Stock shall be deemed to be an offer at the price specified therein, without regard to any provisions thereof with respect to proration or condition as to the offeror's obligation to purchase (assuming the performance of such conditions is not impossible when the offer is made, without giving effect to FCB's right of first refusal). (ii) If the Tender Notice is given, FCB shall have the right, exercisable by giving notice to PC (the "Tender Repurchase Notice") at least two business days prior to the Tender Date, to purchase all but not part of the FCB Voting Stock specified in the Tender Notice for a price consisting (in FCB's discretion) of cash and/or FCB's PC Common Shares in accordance with Section 3.5 valued at the Market Price thereof. If FCB exercises such right by giving such notice, the closing of the purchase of such FCB Voting Stock shall take place not later than one business day prior to the Tender Date; provided, however, that (x) PC shall be authorized to withdraw its Tender Notice if, prior to closing hereunder, another offer described in Section 1.6(v) is made and (y) if the purchase price specified in the tender or exchange offer includes any property other than cash, the value of any property included in the purchase price shall be jointly determined by a nationally recognized investment banking firm selected by each party -18- 19 or, in the event such firms are unable to agree, a third nationally recognized investment banking firm to be selected by such two firms. For this purpose: (x) In each instance in which such tender offer is made, the parties shall use their best efforts to cause any determination of the value of any securities included in the purchase price to be made within three business days after the date of delivery of the related Tender Notice even if FCB shall not have then informed PC of its decision to exercise its right to purchase its right to purchase the applicable FCB Voting Stock. If the firms selected by PC and FCB are unable to agree upon the value of any such securities within such three-day period, the firms shall promptly select a third firm whose determination shall be made promptly and shall be conclusive. (y) The parties shall use their best efforts to cause any determination of the value of property other than securities to be made within four business days after the date of delivery of the Tender Notice. If the firms selected by PC and FCB are unable to agree upon a value within such four-day period, the firms shall promptly select a third firm whose determination shall be made promptly and shall be conclusive. The purchase price to be paid by FCB or its designee pursuant to this Section 3.2 shall be (x) if such tender -19- 20 or exchange offer is consummated, the purchase price that PC would have received if it has tendered the FCB Voting Stock purchased by FCB and all such Voting Stock had been purchased in such tender or exchange offer, including any increases in the price paid by the tender offeror after exercise by FCB of its right of first refusal hereunder, or (y) if such tender or exchange offer is not consummated, the highest price offered pursuant thereto, in each case with property, if any, to be valued as aforesaid. Each party shall bear the cost of its own investment bank firm and the parties shall share the cost of any third firm selected hereunder. (iii) If PCB does not exercise such right by giving such notice, then PC shall be free to accept the tender or exchange offer with respect to which the Tender Notice was given. Section 3.3 Assignment of Rights. In the event that FCB elect to exercise a right of first refusal under this Article III, FCB may specify prior to closing such purchase another person as its designee to purchase the FCB Voting Stock to which such right relates. If FCB shall designate another person as the purchases pursuant to this Article III, the giving of notice of acceptance of the right of first refusal by FCB shall constitute a legally binding obligation of FCB to complete such purchase if such person shall fail to do so. -20- 21 Section 3.4 Repurchase of Stock. Unless the Parties agree otherwise, any repurchase of FCB Voting Stock pursuant to this Article III shall take place at the corporate offices of FCB. Section 3.5 Delivery of FCB's PC Voting Stock. FCB may elect to deliver its PC Voting Stock in connection with payment of the purchase price of FCB Voting Stock pursuant to this Article III and PC shall cause a person which it designates to purchase for cash from FCB as much PC Voting Stock (to the extent of FCB's holding of PC Voting Stock) as equals the Market Price of the FCB Voting Stock to be purchased by FCB and FCB shall use such cash in the payment to PC of the purchase price for such FCB Voting Stock. Such PC Common Shares shall be valued at the Market Price thereof on the date the Section 3.1 or 3.2 Notice is given hereunder as determined hereunder. 4. ARTICLE IV Option of FCB to Repurchase PC's FCB Voting Stock Section 4.1 Right to Repurchase Shares. (a) In the event of a Change of Control of PC or the existence of an FCB Event, FCB shall have the right to repurchase from PC or any PC Controlled Corporation then owning such shares all but not part of the FCB Voting Stock then owned by PC or such Controlled Corporation for a payment equal to the Market Price thereof consisting (in FCB's discretion) of cash and/or FCB's PC Common Shares in accordance with Section 4.5. PC hereby agrees to inform FCB immediately following the commencement of -21- 22 any Change of Control of PC or any FCB Event. FCB's rights hereunder shall expire unless FCB gives notice of exercise within twelve months after receipt by FCB of such notice from PC. (b) Should the FCB Voting Stock owned by PC and the PC Affiliates exceed the percentage limitations set forth in this Agreement in violation of the terms of this Agreement, or should the aggregate number of outstanding shares of FCB Voting Stock be reduced for any reason whatsoever, and such reduction results in PC and the PC Affiliates owning a greater percentage of the Total Voting Power of FCB then in effect than in permitted by the terms of this Agreement (without regard to Section 21.1(v)), in addition to any other remedies or rights hereunder, FCB shall have the right to repurchase from PC a sufficient number of shares of FCB Voting Stock for a payment equal to the Market Price thereof consisting (in FCB's discretion) of cash and/or FCB's PC Common Shares in accordance with Section 4.5 (so long as no Change of Control of PC shall have occurred) to meet the foregoing percentage limitation. PC shall notify FCB promptly after it becomes aware of any fact in light of which FCB shall be entitled to effect such repurchase. Section 4.2 Notice of Repurchase. In order to exercise its right to repurchase shares of FCB Voting Stock pursuant to Section 4.1 hereof, FCB shall deliver to PC a notice (the "Section 4.1 Notice") setting forth the basis under Section 4.1 entitling it to repurchase such FCB Voting -22- 23 Stock and the date on which FCB wishes to purchase such FCB Voting Stock, which date shall not be less than 60 days following FCB's delivery of such notice or as soon thereafter as may be permitted under applicable laws (the "Repurchase Date"). Section 4.3 Repurchase of Stock. Unless the parties agree otherwise, any repurchase of FCB Voting Stock pursuant to this Article IV shall take place at the corporate offices of FCB on the Repurchase Date. Section 4.4 Assignment of Rights. In the event that FCB elects to exercise its right to repurchase under this Article IV, FCB may specify in the Section 4.1 Notice another person as its designee to purchase the FCB Voting Stock to which such Notice relates, provided that if such person shall fail to do so, FCB shall be obligated to purchase such FCB Voting Stock on the day following the Repurchase Date. Section 4.5 Delivery of FCB's PC Voting Stock. Whenever FCB shall elect to deliver its PC Voting Stock in connection with payment of the purchase price of FCB Voting Stock pursuant to this Article, PSA (or any person which it designates who is reasonably acceptable to FCB) shall purchase for cash from FCB as much PC Voting Stock (to the extent of FCB's holdings of PC Voting Stock) as equals the Market Price -23- 24 of the FCB Voting Stock to be purchased by FCB and FCB shall use such cash in the payment to PC of the purchase price for such FCB Voting Stock. Such PC Voting Stock shall be valued at the Market Price thereof on the date the Section 4.1 Notice is given hereunder as determined hereunder. FCB's rights to deliver PC Voting Stock to PSA pursuant to this Section 4.5 shall terminate if FCB shall not exercise its right to repurchase FCB Voting Stock within sixty days after receipt by FCB form PC of notice of a Change of Control of PC; provided, PSA may at any time prior thereto assign its obligations under this Section 4.5 to any other person who shall be reasonably satisfactory to FCB in which event PSA shall have no further obligation under this section. 5. ARTICLE V Option of PSA to Repurchase FCB's PC Common Shares Section 5.1 Right to Repurchase Shares. (a) In the event of a Change of Control of FCB or the existence of a PC Event, so long as no Change of Control of PC shall have occurred, PSA shall have the right to repurchase from FCB or any FCB Controlled Corporation then owning such shares all but no part of the shares of capital stock of PC then owned by FCB or such Controlled Corporation for a payment equal to the Market Price thereof consisting (in PSA's discretion) of cash and/or PC's FCB Voting Stock in accordance with Section 5.5. FCB hereby agrees to inform PSA and PC immediately following the commencement of any Change of Control of FCB or any PC Event. PSA's rights hereunder shall expire twelve months after the receipt by PSA of such notice from FCB. -24- 25 (b) Should the PC Voting Stock owned by FCB and the FCB Affiliates exceed the percentage limitations set forth in the Publicis Communication Shareholders Agreement, dated as of the date hereof, among FCB, PC and Publicis (the "PC Shareholders Agreement"), in violation of the terms of such Agreement, or should the aggregate number of outstanding shares of PC Voting Stock be reduced for any reason whatsoever, and such reduction results in FCB and the FCB Affiliates owning a greater percentage of the Total Voting Power of PC then in effect than is permitted by the terms of the PC Shareholders Agreement (without regard to Section 1.1(v) of the PC Shareholders Agreement) in addition to any other remedies or rights thereunder, so long as no Change of Control of PC shall have occurred, PSA shall have the right to repurchase form FCB a sufficient number of shares of PC Voting Stock for a payment equal to the Market Price thereof consisting (in PSA's discretion) of cash and/or PC's FCB Voting Stock (in accordance with Section 5.5) to meet the foregoing percentage limitation. FCB shall notify PSA and PC promptly after it becomes aware of any facts in light of which PSA shall be entitled to effect such repurchase. Section 5.2 Notice of Repurchase. In order to exercise its right to repurchase shares of PC Voting Stock pursuant to Section 5.1 hereof, PSA shall deliver to FCB a notice (the "Section 5.1 Notice") setting forth the basis under Section 5.1 entitling it to repurchase such PC Voting Stock and the date on which PSA wishes to purchase such PC -25- 26 Voting Stock, which date shall not be less than 60 days following PSA's delivery of such notice or as soon thereafter as may be permitted under applicable laws (the "Repurchase Date"). Section 5.3 Repurchase of Stock. Unless the parties agree otherwise, any repurchase of securities pursuant to this Article V shall take place at the corporate offices of FCB on the Repurchase Date. Section 5.4 Assignment of Rights. In the event that PSA elects to exercise its right to repurchase under this Article V, PSA may specify in the Section 5.1 Notice another person as its designee to purchase the PC Voting Stock to which such notice relates, provided that if such person shall fail to do so, PSA shall be obligated to purchase such PC Voting Stock on the day following the Repurchase Date. Section 5.5 Delivery of PC's FCB Voting Stock. Whenever PSA shall elect (with PC's consent) that the purchase price of PC Common Shares pursuant to this Article shall be payable in whole or in part by delivery of PC's FCB Voting Stock to FCB, the transaction may be structured as a purchase by PSA for cash of PC Common Shares in which case FCB shall accept a put from PC of so much of PC's FCB Voting Stock as equals the cash acquired by FCB as proceeds of the purchase by PSA and FCB shall pay PC such acquired cash in exchange for the FCB Voting Stock to be received upon the exercise of such put. In such case, such FCB Voting Stock shall be valued at -26- 27 the Market Price thereof on the date of Section 5.1 Notice is given hereunder as determined hereunder. Section 5.6 Transfer of PSA's Rights. Notwithstanding the foregoing, the option granted PSA hereunder shall apply only so long as PSA Controls a majority of the Voting Stock of PC. In the event PSA does not Control a majority of the Voting Stock of PC, PC shall have the right to designate the party, if any, which shall be entitled to exercise such rights, which party shall be reasonably acceptable to FCB. FCB and PC shall cooperate to establish appropriate new arrangements in this regard. 6. ARTICLE VI Additional Agreements Section 6.1 Election of Director. (a) At the first meeting of the Board of Directors of FCB occurring following the closing of the transactions contemplated by the Master Alliance Agreement, FCB shall cause Maurice Levy to be elected to FCB's Board of Directors who shall serve until his successor is duly elected and qualified. Commencing on the date hereof and thereafter during the term of this Agreement so long as PC shall beneficially own at least 10% of the outstanding Voting Stock of FCB and FCB's designee shall be elected to serve on PC's Board of Directors in compliance with Section 6.1 of the PC Shareholders Agreement. FCB's management shall recommend to the Nominating Committee of the Board of Directors of FCB to be included in the slate of nominees recommended by FCB's Board of Directors to -27- 28 stockholders for election as directors at each annual meeting of stockholders of FCB, commencing with the annual meeting of stockholders next following the date hereof, one person designated by PC and, assuming such person is included by such committee in such recommended slate, shall use its best efforts to cause the shares for which FCB's management or Board of Directors holds proxies or is otherwise entitled to vote to be voted in favor of the election of such designee. In the event that any such designee shall cease to serve as a director for any reason between any annual meetings of FCB's stockholders, so long as this section shall be applicable, FCB's management shall recommend to the Nominating Committee to recommend to the Board of Directors that such vacancy be filled with a person designated by PC. If PC's designee is unable to attend any meeting of the Board, he shall be entitled to send a non-voting observer in his place. Moreover, if PC's designee is not elected to FCB's Board of Directors, PC shall be entitled to have a non- voting observer who shall be a senior officer of PC present at all meetings of the Board. (b) The director elected as provided in paragraph (a) shall also be selected to serve as a voting or nonvoting member of one or more board committees. In selecting appropriate committee memberships, FCB will take into account the proportion of ownership which PC holds in it and the significance of the alliance with PC to FCB's overall business operations. Initially, Maurice Levy shall be appointed to service on FCB's Management Council and on the International -28- 29 Committee and shall serve as chairman of the latter. Jean-Paul Morin shall also initially serve as an invited nonvoting member of FCB's Audit and Finance Committees whenever appropriate agenda items are to be considered. Section 6.2 Equity Method Accounting. FCB shall furnish to PC at FCB's expense all information requested by PC that is required by French generally accepted accounting principles to enable PC to account for its investment in FCB pursuant to French equity accounting principles, or otherwise to comply with any reporting requirements under applicable French securities and tax laws and regulations. FCB shall provide at the expense of PC such additional information regarding FCB, to the extent reasonably available, to, and otherwise cooperate with, PC so as to enable PC or Publicis to prepare its financial statements and meet management reporting requirements. In cas information is not available, FCB will use its best efforts to produce such information as soon as feasible. Section 6.3 Securities Laws. PC hereby represents and warrants to FCB that it is not acquiring any of its PC Common Stock on the date hereof and neither PC nor PSA will be acquiring from FCB any other shares of the capital stock of FCB pursuant to this Agreement with a view to the public distribution thereof. Further, PC acknowledges that none of such shares and none of such other shares when issued to PC will be registered under the Securities Act or under any state securities or "blue sky" laws and agrees not transfer any such -29- 30 shares unless they are registered under such Act and laws or unless an exemption from such registration is available, as evidence by an opinion of United States counsel to PC addressed to FCB reasonably acceptable to FCB and its United States counsel. FCB agrees to comply with the provisions regarding registration rights attached in the Registration Agreement attached as Exhibit A hereto. PC agrees that until any shares of capital stock issued to it or PSA by FCB are so registered, the certificates representing such shares shall bear a legend to the effect that such shares are "restricted securities" for securities laws purposes and are subject to this Agreement. 6.4 Notice by FCB of Acquisitions. FCB shall use its best efforts to give PC prompt notice of the receipt by FCB of (i) any written notice from any person or group couched in such terms as to put FCB reasonably on notice of the likelihood that such person or group has acquired or is proposing to acquire any shares of FCB Voting Stock which results in, or, if successful, would result in, such person or group owning or having the right to acquire more than 5% of the shares of FCB Voting Stock then outstanding, (ii) any notice under the Hart-Scott- Rodino Antitrust Improvements Act of 1976 and (iii) any Statement on Schedule 13D or 14D-1 under the Exchange Act. 7. ARTICLE VII Miscellaneous -30- 31 Section 7.1 Certain Definitions. As used in this Agreement: (a) The term "Affiliate" means, with respect to any person, any other person which directly or indirectly Controls, is Controlled by or is under common Control with such person. (b) "Bleustein-Blanchet Family" means any of Marcel Bleustein-Blanchet, Sophie Vaillant or their descendants or any combination of them. (bb) The term "business day" shall mean a day which is not a legal holiday for banks in Chicago, Illinois. (c) A "Change of Control" with respect to FCB shall be deemed to have occurred (i) if any person or group (other than (A) the Trust, (B) any officer or director of FCB who had been such an officer or director for at least one year prior thereto, (C) any person whose shares of Voting Stock are treated as "beneficially owned", as defined in Rule 13d-3, of the Exchange Act, as in effect on the date hereof, by such an officer or director of FCB, (D) PC, Publicis or any Affiliate of PC or Publicis or (E) a person or group approved by PC and FCB which approval may be conditioned upon no further increase of shareholding or other designated conduct by such person or group) Controls more than 33-1/3% of the Total Voting Power of FCB then in effect or (ii) if during any period of two consecutive years, individuals who at the beginning of any -31- 32 such period constitute the directors of FCB cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by FCB's stockholders, of each director of FCB first elected during such period was approved by a vote of at least two-thirds of the directors of FCB then still in office who were directors of FCB at the beginning of any such period, (iii) if FCB shall be merged into or consolidated with another corporation and FCB shall not be the surviving corporation or FCB shall sell all or substantially all its assets to another person. (d) A "Change of Control" with respect to PC shall be deemed to have occurred as follows: (1) Family Control. A "Change of Control" with respect to PC shall not be deemed to have occurred so long as a majority of the Voting Stock of PC is Controlled by members of the Bleustein- Blanchet Family either directly or by Control of a majority of the Voting Stock of PSA so long as PSA shall Control a majority of the Voting Stock of PC. (2) No Family Control. At any time a majority of the Voting Stock of PC is not Controlled by the Bleustein-Blanchet Family as provided above, a "Change of Control" shall be deemed to have occurred if either of the following occurs: -32- 33 (A) PC Level. During any period in which PC is listed on the Cote Officielle, Second Marche or Marche hors-cote or PSA Controls less than 40% of the Total Voting Power of PC (i) for any period of two consecutive years, individuals who at the beginning of any such period constitute the members of the conseil d'administration, i.e., the administrateurs, of PC or of the conseil de surveillance if such form shall be adopted) cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by PC's stockholders, of each administrateur of PC first elected during such period was approved (by written consent or vote) by at least two-thirds of the administrateurs of PC then still in office who were administrators of PC at the beginning of any such period; provided on Change of Control shall be deem to have occurred pursuant to this clause (i) if it is established to the satisfaction of the arbitrators in proceedings pursuant of the Multi-Party Arbitration Agreement that the Bleustein- Blanchet Family continues as a matter of fact to possess the power to control (despite its failure to own directly or indirectly a majority of the Total Voting Power of PC) the election of a majority of the administrateurs, or (ii) any other person or group Controls more than 33-1/3% of the Total Voting Power of PC then in effect without the consent of FCB and PC (which -33- 34 consent may be conditioned upon no further increases of shareholding or other designated conduct by such person or group); or (B) PSA Level. During any period in which PSA Controls at least 40% of the Total Voting Power of PC (i) for any period of two consecutive years, individuals who at the beginning of any such period constitute the members of the conseil de surveillance of PSA cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by PSA's stockholders, of each such member first elected during such period was approved (by written consent or vote) by at least two-thirds of such members then still in office who were members at the beginning of any such period; provided no Change of Control shall be deemed to have occurred pursuant to this clause (i) if it is established to the satisfaction of the arbitrators in proceedings pursuant to the Multi-Party Arbitration Agreement that the Bleustein-Blanchet Family continues as a matter of fact to possess the power to control (despite its failure to own directly or indirectly a majority of the Total Voting Power of PSA ) the election of a majority of the members of the conseil de surveillance, or (ii) any other person or group Controls more than 33-1/3% of the Total Voting Power of PSA then in effect without the consent of FCB and PC -34- 35 (which consent may be conditioned upon no further increases in shareholding or other designated conduct by such person or group) unless members of the Bleustein-Blanchet Family shall continue to Control at all time thereafter a percentage of the Total Voting Power of PSA which is at least equal to the sum of the total Voting Power of PSA held by such other person or group plus 5% of the Total Voting Power of PSA. (3) Merger, Sale of Assets: (A) PC Level. If PC shall be merged into or consolidated with another corporation and PC shall not be the surviving corporation or PC shall sell all or substantially all its assets to another person, so long as a majority of the Voting Stock of the surviving corporation is not Controlled by members of the Bleustein-Blanchet Family either directly or by Control of a majority of the Voting Stock of PSA so long as PSA shall Control a majority of the Voting Stock of the surviving corporation. (B) PSA Level. During any period in which PSA Controls at least 40% (e) An "FCB Event" shall be deemed to occur upon the existence of any of the following events: (iv) PC or PSA shall be in default in any material respect in the performance of any of its obligations -35- 36 hereunder or under the Master Alliance Agreement, the PC Shareholders Agreement, the Publicis Undertaking dated the date hereof, the PSA Shareholders Agreement, dated as of the date hereof, among PC, FCB International, Inc, and Publicis FCB B.V. or the Registration Rights Agreement, dated the date hereof, between PC and FCB (such agreements to be collectively referred to herein as the "Related Agreements") as determined by the arbitrator in proceedings pursuant to the Multi- Party Arbitration Agreement described in Section 7.3; (v) PC or PSA (so long as PSA shall Control PC) shall file a voluntary petition in bankruptcy or insolvency, or a petition for relief or reorganization under any bankruptcy or insolvency law or declare a moratorium with respect to the payment of its indebtedness; or an involuntary petition in bankruptcy or insolvency shall be filed against either of them and shall not have been vacated within sixty days; or a receiver, intervenor or custodian shall be appointed for all or a substantial portion of the property of either them; or (vi) Any of the stock or the advertising business of PC or PSA (so long as PSA shall Control PC) or any of the stock or the advertising business of Publicis Conseil shall have been expropriated or nationalized by any governmental Authority (other than the United States). -36- 37 (h) The term "Governmental Authority" means any nation or government, any state, province, department or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government have jurisdiction over a party. (i) The term "group" shall have the meaning comprehended by Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated thereunder. (j) The term "Market Price" means: (i) with respect to FCB Voting Stock, upon the issuance of any Notice hereunder in which the Market Price of FCB Voting Stock is applicable, (a) with respect to FCB Common Stock, the average of the closing prices of FCB Common Stock during the 20 trading days ending with the trading day next preceding the date the Notice is sent, as reported by the Wall Street Journal for the New York Stock Exchange, or as reported by the Wall Street Journal for the principal stock exchange on which such FCB Common Stock is listed (if other than the New York Stock Exchange) or as reported by the Wall Street Journal for the NASDAQ National Market System, if such Common Stock is principally traded thereon; and (b) with respect to any other Voting Stock of FCB that is not publicly listed or traded, the value of such Voting Stock on the date of such Notice, as jointly determined by nationally -37- 38 recognized investment banking firms selected by each party or, in the event such firms are unable to agree, a third nationally recognized investment banking firm to be selected by such two firms in accordance with the procedures set forth in clause (ii) hereof; (ii) with respect to FCB's PC Common Shares upon the issuance of any Notice hereunder in which the Market Price of PC Common Shares is applicable, (a) so long as such PC Common Shares are not publicly listed for trading on the French Stock Exchange. FCB and PSA shall each designate within 15 calendar days after delivery of such Notice an investment banker of recognized standing in France to evaluate FCB's PC Common Shares. PC shall give each investment banker full access to all information that it may reasonably request concerning PC and shall provide the same information to the other investment banker. Within 30 days of their selection, each investment banker must propose a market value for FCB's PC Common Shares as of the date of the Notice. If the market value proposed by FCB's investment banker is lower or not more than 10% more than the market value proposed by PSA's investment banker, then the Market Price shall be the average of such prices. If the price proposed by FCB's investment banker is more than 10% higher than the price proposed by PSA's investment banker, then the parties shall consult as to a fair price. If they are unable to agree within 10 days, they shall cause their investment bankers to select jointly a third investment -38- 39 banker who shall have access to all information it shall reasonably request concerning PC. The third investment banker shall within 30 days of its selection choose the market value which best reflects its professional opinion of the fair market value of FCB's PC Common Shares on the date the applicable Notice was first given which shall be the price proposed by FCB's investment banker or PSA's investment banker, and such choice shall be final. Each party shall each bear the costs of its own investment banker and the parties shall share equally the cost of the third investment banker; or (b) from the time PC Common Shares are listed on the French Stock Exchange, the price published in the "Cote Officielle" on the day of any notice hereunder, or, if no notice is provided, on the relevant day to be considered in the terms of this Agreement. The "French Stock Exchange" as used herein means either of the Cote Officielle, second Marche or Marche hors-cote. (k) A "PC Event" shall be deemed to occur upon the existence of any of the following events: (i) FCB or FCB International shall be in default in any material respect in the performance of any of its obligations hereunder or under any of the Related Agreements as determined by the arbitrators in proceedings pursuant to the Multi-Party Arbitration Agreement described in Section 7.3; -39- 40 (ii) FCB or FCB International shall file a voluntary petition in bankruptcy or insolvency, or a petition for relief or reorganization under any bankruptcy or insolvency law or declare a moratorium with respect to the payment of its indebtedness; or an involuntary petition in bankruptcy or insolvency shall be filed against FCB or FCB International and shall not have been vacated within sixty days; or a receiver, intervenor or custodian shall be appointed for all or a substantial portion of the property of FCB or FCB International; or (iii) Any of the stock or business of FCB shall have been expropriated or nationalized by any Governmental Authority (other than France); (l) The term "person" shall mean any person, individual, corporation, partnership, trust or other nongovernmental entity or any Governmental Authority. (m) The term "Publicis" or "PSA" means Publicis S.A., a societe anonyme, which at the date hereof controls PC. (n) The term "Significant Event" mean (i) any proposed amendment to the Certificate of Incorporation or By-laws of FCB, (ii) any disposition of FCB (by way of merger, disposition of assets or otherwise), (iii) any recapitalization, (iv) any liquidation, (v) any vote pursuant to any provision of law or FCB's Certificate of Incorporation or By-laws requiring or permitting stockholders to approve any -40- 41 business combination proposed by or with another person or its affiliates which have acquired a certain percentage of FCB's shares or to grant voting rights to such person or to waive or adopt provisions requiring such a vote, or (vi) any action which PC, in good faith, believes would be materially adverse to PC (other than actions which may be taken by FCB as contemplated by this Agreement). (o) The term "Total Voting Power" of a person which is a corporation means the total number of votes which may be cast in the election of directors of such person at any meeting of stockholders if all securities entitled to vote in the election of directors were present and voted at such meeting (other than votes that may be cast only upon the happening of a contingency). (p) The term "Voting Power" with respect to any person or group or with respect to the Voting Stock held by such person or group means the total number of votes to be cast in the election of directors of any corporation which such person or group, alone or in possession with any Affiliate, holds directly or indirectly, the power to vote. (q) The term "Voting Stock" means the common shares and any other securities issued by a corporation having the ordinary power to vote in the election of directors of such corporation (other than securities having such power only upon the happening of a contingency not then in effect). -41- 42 Section 7.2 Termination of Agreement. (a) FCB may terminate this Agreement, in its sole discretion, if PC at any time owns less than 10% of the FCB Voting Stock than outstanding, for a period in excess of 12 months; and PC may terminate this Agreement, in its sole discretion, if FCB at any time thereafter owns less than 10% of the PC Common Shares then outstanding, for a period in excess of 12 months. (b) Notwithstanding anything to the contrary in this Agreement, this Agreement shall terminate on December 31, 2008, except that Article I (other than Sections 1.6 and 1.7) and II shall expire on December 31, 1998. (c) From and after the termination of this Agreement, the covenants, obligations and agreements of the parties set forth herein shall be of no further force or effect and the parties shall be under no further obligation with respect thereto; provided that the representations, warranties and agreements of PC contained in Section 6.3 and the Registration Rights Agreement shall survive any termination of this Agreement. Section 7.3 Governing Laws, Dispute Resolution. (a) This Agreement shall be governed in all respects by the laws of the State of Delaware as applied to contracts entered into solely between residents of, and to be performed entirely within, such state, -42- 43 (b) All disputes arising under this Agreement and the Related Agreements shall be referred in the first instance by written notice in accordance with Section 7.6 to the Dispute Resolution Committee (described in Section 1.4 of the Master Alliance Agreement), and if not resolved by such Committee within thirty calendar days after the giving of notice may be referred by either party by written notice to the Chief Executive Officers or Chief Operating Officers of FCB and PC. (c) Disputes which are not revolved within thirty calendar days after the giving of notice to the Chief Executive or Chief Operating Officers referred to in clause (b) hereof shall be settled in accordance with the Multi-Party Arbitration Agreement attached as Appendix 7 to the Master Alliance Agreement, provided, nothing in this Section 7.3 shall prevent any party from seeking provisional or injunctive relief in any court having jurisdiction over the parties pending resolution of such dispute by the processes contemplated herein. Section 7.4 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties thereto and their respective successors and assigns. This Agreement may not be assigned by a party hereto, whether by operation of law or otherwise, without the prior written consent of the other party. -43- 44 Section 7.5 Entire Agreement; Amendment. This Agreement, the Master Alliance Agreement and the other documents delivered pursuant thereto constitute full and entire understanding and agreement between the parties with regard to the subject matter hereof and supersede all prior agreements and understandings among the parties relating to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. Section 7.6 Notices. Any notice, request or other demand to or upon the parties hereto shall be in writing (including telex and telecopy communication followed by registered mail with return receipt requested) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or when telexed (answer-back received) or telecopied (with receipt acknowledged) addressed to the party for which intended as provided below (or as hereafter specified by such party by notice hereunder): (a) if to PC or PSA, to it at: 133, avenue des Champs-Elysees Paris 76008 France Attn: President Directeur General (b) if to FCB, to it at: 101 E. Erie Street Chicago, Illinois 60666 USA -44- 45 Attn: Chief Executive Officer Section 7.7 Government Reviews, Enforceability. The parties and their respective subsidiaries will cooperate in the event of any governmental or EEC review of the transactions contemplated hereby, including furnishing information sought by the reviewing authority. This Agreement may be discussed with, shown to, and filed with any Governmental Authority or official as determined to be appropriate by a party. If, as a result of such representation or otherwise, any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable under the applicable laws or regulations of any jurisdiction, or is stricken or materially amended by the action of any competent authority or any change or modification of any such provision is required or recommended by any such Governmental Authority, the parties shall negotiate in good faith with respect to either an alternative or modified provision or the striking of such provision from this Agreement. After sixty days from the commencement of such negotiations, either party may submit the subject of such disagreement to arbitration in accordance with the Multi-Party Arbitration Agreement for reformation or termination of all or portions of this Agreement and the Related Agreements, all as deemed appropriate by the arbitrators. Section 7.8 Injunctive Relief. PC, on the one hand, and FCB on the other, acknowledge and agree that irreparable damage would occur in the event that any of the -45- 46 provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specific performance of the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they may be entitled at law or equity but subject to the provisions of Section 7.3 with regard to the Multi-Party Arbitration Agreement. Section 7.9 Non-Waiver. The failure by any party to enforce any provision of this Agreement shall not constitute a waiver or affect its right to require the performance thereof by the other party hereto or affect the validity of any other provision hereof. Section 7.10 Titles. Section titles used in the Agreement are used for convenience of reference only and shall in no event be used for interpretation purposes. Section 7.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterpart have been signed by each of the parties and delivered to the other party thereto. -46- 47 Section 7.12 PC Common Shares. When the term PC Common Shares is used herein, it shall mean PC Voting Stock. -47- 48 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on their behalf on January 23, 1989 to be effective as of the date first above written. PUBLICIS COMMUNICATION By: Name: Title: FOOTE, CONE & BELDING COMMUNICATIONS, INC. By: /s/ Norman W. Brown ----------------------- Name: Title: This agreement is executed in 2 full sets, one for each Party. -48- EX-99.C3 17 AGREEMENT, DATED AS OF MAY 19, 1997 1 EXHIBIT C(3) Execution Copy AGREEMENT, dated as of May 19, 1997 (the "Agreement") among PUBLICIS S.A., a societe anonyme organized and existing under the laws of France ("Publicis"), PUBLICIS COMMUNICATION, a societe anonyme organized and existing under the laws of France ("Communication"), and PUBLICIS-FCB EUROPE B.V., a company organized under the laws of the Netherlands ("PBV"), on the one hand, and TRUE NORTH COMMUNICATIONS INC., a Delaware corporation ("True North"), FCB INTERNATIONAL, INC., a Delaware corporation ("FCBI"), and TRUE NORTH HOLDINGS NETHERLANDS B.V., a company organized under the laws of the Netherlands ("TNBV"), on the other hand. INTRODUCTION Publicis, Communication and PBV, on the one hand, and True North, FCBI and TNBV, on the other hand, desire to create two separate worldwide agency networks, one owned and controlled by Communication and one owned and controlled by True North. Publicis and True North desire to set forth the parties' agreement concerning ownership of Communication and certain other agreements between them. In consideration of the foregoing and the representations, warranties, covenants and agreements set forth in this Agreement and other good and valuable consideration, the parties agree as follows: ARTICLE I EQUITY AND GOVERNANCE OF COMMUNICATION 1.1. Put and Call of Communication Stock. At the times and under the circumstances described below, True North shall have the right, in its sole discretion and on one occasion, to require Publicis to purchase from True North (the "Remainder Put"), and Publicis shall have the right, in its sole discretion and on one occasion, to require True North to sell to Publicis (the "Remainder Call") the number of shares of Communication Stock (as defined below) which is equal to the percentage of the issued and outstanding shares of Communication Stock owned by True North, less the Expiration Put Percentage (as defined below). The applicable percentage of issued and outstanding shares of Communication Stock subject to the Remainder Put and the Remainder Call is referred to herein as the "Remainder Percentage" and in no event shall exceed 6.5%. The shares subject to the Remainder Call or the Remainder Put shall be subject to appropriate adjustments for stock dividends, splits, combinations, exchanges, or similar events, occurring subsequent to such date of exercise and prior to the consummation of such Remainder Put or Call. True North may exercise the Remainder Put only if (i) Communication Stock has not been listed on a major European stock exchange on or prior to December 31, 1998 and (ii) True 2 North has previously exercised the Expiration Put (as defined below) and (iii) True North has given its notice of exercise on or prior to March 31, 2000. Publicis may exercise the Remainder Call only if (i) Communication Stock has not been listed on a major European stock exchange and (ii) either (A) True North has exercised its Expiration Put or (B) Publicis has given its notice of exercise on or after April 1, 2000 and on or prior to June 30, 2000. The purchase price shall be a price per share equal to the Put/Call Price, as determined pursuant to the terms of Section 1.1.1, and upon exercise of the Remainder Put, True North shall be bound to sell such shares to Publicis and convey ownership of such shares to Publicis and Publicis shall be bound to purchase such shares from True North and tender the purchase price therefor, in accordance with Section 1.1.2, and upon exercise of the Remainder Call, Publicis shall be bound to purchase such shares from True North and tender the purchase price therefor and True North shall be bound to sell such shares to Publicis and convey ownership of such shares to Publicis pursuant to Section 1.1.2. 1.1.1. The Put/Call Price per share of Communication Stock shall be equal to (X) the sum of (1) the average of (A) 60% of the average of the annual revenue of Communication and its subsidiaries, on a consolidated basis, for each of the two full calendar years ended immediately preceding the date of exercise of the Remainder Put or the Remainder Call, as the case may be, and (B) 11 times the average of the net income of Communication and its subsidiaries, on a consolidated basis (after taxes and before amortization of goodwill), for each of such two full calendar years (and if such average net income is negative, then such average net income shall be deemed to be zero) and (2) the amount of net tangible assets (net equity less intangible assets) of Communication as of the last day of the calendar year immediately preceding the date of exercise (less the amount of any dividends paid by Communication, and plus the amount of any capital contributions made to Communication, in each case after such last day of the calendar year immediately preceding the date of exercise and prior to the date of the consummation of such Remainder Put or Remainder Call), divided by (Y) the total number of shares of Communication Stock issued and outstanding on the date of exercise, subject to appropriate adjustments for stock dividends, splits, combinations, exchanges, or similar events, occurring subsequent to such date of exercise and prior to the consummation of such Remainder Put or Call. Subject to the last sentence of this Section 1.1.1, the calculations required to be made pursuant to this Section 1.1.1 shall be made by reference to the annual audited consolidated financial results of Communication determined in accordance with French generally accepted accounting principles, consistently applied. The annual audited consolidated financial results of Communication shall, for purposes of the calculations required to be made pursuant to this Section 1.1.1, be adjusted: (i) on a pro forma basis with respect to revenue and net income and any effect on net tangible assets or shares outstanding, to exclude from such calculations the revenue and net income generated and any effect on net tangible assets or shares outstanding during the second year of the two full calendar years ended immediately preceding the date of such exercise by any agencies acquired during such year by Communication from Publicis or a third party; provided that the inclusion of any pro forma revenue shall give effect to minority interests as set forth in clause (iii) of this Section 1.1.1 and provided further that the pro forma calculations required by this clause (i) shall give effect to Publicis' cost of financing any of the acquired agencies transferred to Communication and shall also give effect to any capital contributions made to finance such acquisition; 2 3 (ii) to exclude from net income any extraordinary and non-recurring losses incurred or extraordinary and non-recurring gains realized, in each case, only those losses or gains which are collectively in excess of US $5 million, during the relevant year; (iii) for any subsidiary or equity investment that is not directly or indirectly wholly-owned by Communication, to include in revenue that percentage of such subsidiary's or investee's revenue which reflects that percentage interest in such subsidiary or equity investment which is owned by Communication but only if such percentage interest is equal to or greater than 30%; and (iv) with respect to any items of revenue or net income attributable to True North and its subsidiaries which are included in the annual audited consolidated financial results of Communication to (x) exclude any such items of revenue and net income from the calculation of the Put/Call Price and (y) include in the calculation of the Put/Call Price (after the exclusion called for by clause (x) of this paragraph (iv)) an amount equal to 10 times the average net income of True North and its consolidated subsidiaries reflected in the annual audited consolidated financial results of Communication for each of the two full calendar years ended immediately preceding the date of exercise of the Remainder Put or the Remainder Call. 1.1.2. If either (i) True North wishes to exercise the Remainder Put or (ii) Publicis wishes to exercise the Remainder Call, in either case, such party shall give the other party written notice of such exercise, which notice shall contain the number of shares of Communication Stock which is the subject of such exercise together with the notifying party's estimated calculation of the Put/Call Price. The purchase and sale of such shares shall be consummated within 10 Business Days (as defined below) following the receipt of the notice of exercise or, in the event of exercise between January 1 and February 15 of any year, within 10 Business Days of February 15 of such year. In exchange for the payment by Publicis of the aggregate Put/Call Price determined pursuant to this Section, which shall be payable by wire transfer of immediately available funds in French Francs to a bank or other financial institution designated by True North, True North shall convey ownership of the Communication Stock subject to the Remainder Put or Remainder Call, as applicable, to Publicis, free of any mortgage, pledge, lien, encumbrance, assessment, charge or adverse claim affecting title to, or resulting in an encumbrance against, such Communication Stock, or a security interest of any kind (including any conditional sale or other title retention agreement), any option or other agreement to sell and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes of any U.S. or other jurisdiction) excluding, however, Encumbrances solely in favor of Publicis or Communication (collectively, "Encumbrances"). For purposes of this Agreement, "Business Day" shall mean any day that is not a Saturday, Sunday or a day on which banks in Chicago or Paris are permitted or required to be closed. After True North has given written notice to Publicis of its exercise of the Remainder Put, or Publicis has given written notice to True North of its exercise of the Remainder Call, as the case may be, such notice shall be irrevocable, and True North shall be bound to sell to Publicis and Publicis shall be bound to buy from True North that number of shares of Communication Stock specified in such notice at the Put/Call Price. Notwithstanding the immediately preceding sentence, in the event that the Remainder Put or Remainder Call shall have been exercised but the closing of such transaction shall not have occurred within 180 days of such 3 4 exercise, the exercising party, if not in breach of the provisions of such Remainder Put or Remainder Call, may cancel such exercise by written notice to the other party and upon such cancellation, neither party shall be required to fulfill its obligation with respect to such Remainder Put or Remainder Call (but otherwise without prejudicing the rights of any party with respect to a breach of such provisions by any other party). 1.2. Listing of Communication Stock. Publicis and Communication agree to use their respective best efforts to cause to be offered to the public and listed on a major European stock exchange prior to December 31, 1998, shares of the common stock, par value 100 French Francs, of Communication (including such other equity or debt securities as Communication may hereafter issue in respect of or in exchange for shares of such common stock in connection with any stock dividend or distribution, stock split-up, recapitalization, recombination, or exchange by Communication generally of shares of such common stock) (the "Communication Stock"). Publicis and Communication each agree to seek to cause such listing to occur in 1997. For the purposes of this Agreement, "major European stock exchange" shall be deemed to be the Paris Bourse or the London Stock Exchange. The intention of the parties is to provide True North with a means of selling its stake in Communication in a public market. A merger of Communication with an entity which is then publicly listed and which is the surviving corporation in such merger shall be deemed to be a public listing for all purposes under this Agreement. 1.3. Sale in Offering. Publicis and Communication shall give True North at least 30 days prior written notice of their intention to commence the offering and listing of Communication Stock. Upon True North's written request to Communication, given within 15 days of the receipt of such notice, to include in such offering shares of Communication Stock owned by True North, Publicis and Communication shall cause such shares to be included in such offering to the extent set forth below. True North's request shall include a schedule (the "Schedule") which shall set forth the amount of shares of Communication Stock which True North requests Communication to include in the offering assuming a range of hypothetical offering prices, which shall include the prices, based on a reasonable good faith estimate of market values, at which True North will request Communication to include 25%, 33 1/3% and 50% of its interests in the offering. As set forth in such Schedule, True North may request that any amount of its Communication Stock be included in such offering, provided, that it shall be entitled to have offered in such offering up to, but no more than, 50% of the Communication Stock owned by True North at the time True North requests that such shares be included in such offering (or, if higher, up to, but no more than, 50% of the Communication Stock owned by True North immediately prior to the consummation of such offering (to the extent so requested by True North)) in priority over any other shares so offered, until all of the shares which True North is entitled to have offered (pursuant to the provisions of this sentence) are sold. Subject to its rights to withdraw from such offering, as set forth below in this Section, True North shall use all commercially reasonable efforts to cooperate with Communication and its agents and advisors in effecting such offering. 1.3.1 If the offering is to be made on a major European stock exchange and the laws and regulations applicable to an offering thereon require that, prior to such offering, offering documents which include a minimum offering price must be lodged with a regulatory entity, not less than 5 days prior to the lodging of the offering with the Commission des Operations de Bourse (the "COB") or other regulatory entity, as the case may be, Communication shall furnish 4 5 True North with a written copy of the offering documents to be lodged with the COB or such regulatory entity, as the case may be, which shall include a minimum offering price per share. If the offering is to be made in a country which does not have such a regulatory requirement, then Communication agrees to give True North written notice not less than 5 days prior to the commencement of the offering, which notice shall contain a minimum offering price per share. Within 2 Business Days after its receipt of such documents or notice, as the case may be, True North may give written notification to Communication that it wishes to withdraw from the offering a portion or all of the shares it requested to be offered in accordance with the Schedule. If True North fails to give such notice within such time, it shall be deemed to have irrevocably committed to the offering all of its shares which it requested be offered in accordance with the Schedule; provided that the actual price at which shares are offered in such offering equals or exceeds the minimum offering price specified in the documents lodged with the COB or such regulatory entity or such notice, as the case may be. If True North so withdraws any or all of its shares and Publicis or Communication elects, each acting in its sole discretion, to offer and list any shares of Communication Stock in such offering, such offering and listing shall constitute the offering and listing of Communication Stock for all purposes under this Agreement. For the avoidance of doubt, the parties agree that if, following True North's election to withdraw some or all of its shares to be offered, the managing underwriter of such offering determines, in its sole discretion, that the number of shares remaining to be so offered shall be less than the number of shares required for a successful offering, such managing underwriter may terminate such offering and Publicis and Communication shall be deemed to have used their respective best efforts to effect such offering and listing of the Communication Stock for all purposes under this Agreement. 1.3.2. True North shall bear (i) its pro rata share of all underwriting discounts and commissions, listing or other regulatory fees of an offering to the extent incurred by Publicis and Communication and (ii) all costs and expenses incurred directly by True North in connection with such offering, including, without limitation, the fees and expenses of counsel, investment advisors or other professionals hired by True North. Except as specifically provided in clause (i) of the immediately preceding sentence, True North shall not be responsible for any expenses incurred by Publicis or Communication in connection with the offering and listing of the Communication Stock. True North's pro rata share of expenses incurred under clause (i) of the second preceding sentence shall be the percentage that the aggregate number of shares of Communication Stock to be sold by True North constitutes of the aggregate number of shares to be sold in such offering and listing. 1.3.3. In connection with any listing and offering of Communication Stock pursuant to the terms of this Agreement, each of Publicis and Communication agrees to indemnify and hold True North and its subsidiaries harmless, in accordance with customary practice, against any and all losses, claims, damages or liabilities to which they may become subject under any statute or common law or otherwise and to reimburse them for any reasonable legal or other expenses incurred by them in connection with defending any actions, insofar as any such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon any untrue statement or alleged untrue statement of a material fact contained in any offering documents or the omission or alleged omission to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing indemnification shall not apply to any losses, claims, damages, liabilities or actions which shall 5 6 arise from the sale of shares of Communication Stock to any person if such losses, claims, damages, liabilities or actions which shall arise out of or shall be based upon any such untrue statement or alleged untrue statement, or any omission or alleged omission, if such statement or omission shall have been made in reliance upon or in conformity with information furnished in writing by True North. In connection with any listing and offering of Communication Stock pursuant to the terms of this Agreement, True North agrees to indemnify and hold Publicis and Communication and each of their subsidiaries harmless, in accordance with customary practice, against any and all losses, claims, damages or liabilities to which they may become subject under any statute or common law or otherwise and to reimburse them for any reasonable legal or other expenses incurred by them in connection with defending any actions, insofar as any such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon any untrue statement or alleged untrue statement of a material fact contained in any offering documents or the omission or alleged omission to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading if such statement or omission shall have been made in reliance upon and in conformity with the information furnished in writing by True North to Communication in connection with the preparation of such registration or offering statement. 1.4. Put of Communication Stock if Not Listed. If Communication Stock has not been listed on a major European stock exchange on or prior to December 31, 1998, then on or prior to March 31, 2000, True North shall have the right, in its sole discretion and on one occasion, to require Publicis to purchase from True North (the "Expiration Put") up to, but not more than, the number of shares of Communication Stock which is equal to 20% (subject to adjustment) of the number of shares of Communication Stock issued and outstanding as of the date of exercise of such Expiration Put, subject to appropriate adjustments for stock dividends, splits, combinations, exchanges, or similar events, occurring subsequent to such date of exercise and prior to the consummation of such Expiration Put. The purchase price shall be a price equal to the fair market value, as of the date of the notice of exercise of the Expiration Put, of the block of Communication Stock sought to be sold by True North ("Fair Market Value"), as determined by a panel of three investment banks pursuant to the terms of Section 1.4.1, and upon exercise of the Expiration Put, True North shall be bound to sell and convey ownership of such shares, free of any Encumbrances, to Publicis and Publicis shall be bound to purchase such shares from True North and tender the purchase price therefor in accordance with Section 1.4.1. The 20% figure in the first sentence of this Section 1.4 shall be reduced if True North shall fail to exercise any Percentage Purchase Right or any True North Maintenance Right by multiplying 20 by a fraction, the numerator of which is the percentage of the issued and outstanding shares of Communication Stock owned by True North after such failure to exercise and the denominator of which is the percentage of such shares which would have been owned had there been an exercise. The applicable percentage of issued and outstanding shares of Communication Stock subject to the Expiration Put is referred to herein as the "Expiration Put Percentage." For the avoidance of doubt, the parties agree that the existence of the Expiration Put shall not relieve Publicis or Communication from their respective obligations pursuant to Section 1.2 to use their respective best efforts to offer and list the Communication Stock. 1.4.1. If True North wishes to exercise the Expiration Put, it shall give written notice to Publicis, subject to Section 1.4, at any time after December 31, 1998 and on or prior to 6 7 March 31, 2000, which notice shall include the number of shares of Communication Stock which it wishes Publicis to purchase and True North's selection of a globally recognized investment bank. Within 5 days of Publicis' receipt of such notice, Publicis shall give True North written notice of its selection of a globally recognized investment bank. If Publicis fails to select an investment bank within the allotted time, Publicis shall be deemed to have selected Lazard Freres. The two selected banks shall, within 10 days, agree upon a third globally recognized investment bank. If the two selected banks cannot agree on a third globally recognized investment bank, such third bank shall be selected by lot from among four candidates, two to be nominated by each of the selected banks. Each of True North and Publicis, respectively, shall bear the fees and expenses of the investment bank selected by it, and the fees and expenses of the third investment bank shall be shared equally by True North and Publicis. The three selected banks shall be directed by each party hereto to fully cooperate with one another and act in good faith to arrive jointly at the Fair Market Value within 45 days of the selection of the third bank. If the three selected banks cannot agree on a single determination of the Fair Market Value within 45 days, the determination of Fair Market Value shall be made by the Arbitral Tribunal (as defined below) in accordance with Section 3.4.1 through 3.4.10 hereof. The Arbitral Tribunal shall be given Terms of Reference (as defined below) which shall mandate a decision within 180 days from the date of the Notice of Arbitration. The purchase and sale of such shares shall be consummated within 5 Business Days following the determination of Fair Market Value. In exchange for the payment by Publicis of the Fair Market Value determined pursuant to this Section 1.4.1, which shall be payable by Publicis by wire transfer of immediately available funds in French Francs to a bank or other financial institution designated by True North, True North shall convey ownership of the Communication Stock subject to such Expiration Put to Publicis, free of any Encumbrances. After True North has given written notice to Publicis of its exercise of the Expiration Put, such notice shall be irrevocable, and True North shall be bound to sell to Publicis and Publicis shall be bound to buy from True North that number of shares of Communication Stock specified in such notice at the price determined pursuant to this Section 1.4.1. Notwithstanding the immediately preceding sentence, in the event that the Expiration Put shall have been exercised but the closing of such transaction shall not have occurred within 260 days of such exercise, the exercising party, if not in breach of the provisions of such Expiration Put, may cancel such exercise by written notice to the other party and upon such cancellation neither party shall be required to fulfill its obligation with respect to such Expiration Put (but otherwise without prejudicing the rights of any party hereto with respect to a breach of such provisions by any other party). 1.5. Maintenance of Percentage Ownership. If, at any time, or from time to time, (i) True North shall own securities having 20% or more of the total voting rights of all issued and outstanding equity of Communication (after giving pro forma effect to any Expiration Put, True North Maintenance Right, Remainder Put, Remainder Call or any prior exercise of the Percentage Purchase Right (as defined below) in each case if then exercised but not yet consummated), (ii) Communication issues or plans to issue a number of shares of Communication Stock or other equity securities (whether a new issuance of securities, securities issued upon the exercise of an option, warrant or conversion or an exchange right or other similar dilutive event (other than a repurchase by Communication or purchase by Publicis of Communication Stock from True North or its subsidiaries)) which would result, upon the consummation of the transaction giving rise to such issuance, in True North's owning securities having less than 20% of the total voting rights of each class of issued and outstanding equity securities of Communication (based on the number of 7 8 outstanding shares) all as determined in accordance with clause (i) above, and (iii) the Communication Stock is not listed on a major European stock exchange on the date of the consummation of such issuance (upon the occurrence of (i), (ii) and (iii), the date of the consummation of such issuance being a "Dilution Date"), True North shall have the right, in its sole discretion, to purchase from Publicis and/or Communication (who shall determine in their sole discretion which of whom shall sell such shares), and Publicis and/or Communication, as the case may be, shall be obligated to sell to True North, a number of shares of Communication Stock or other equity securities, as applicable, of Communication (the "Percentage Purchase Right") such that, following the consummation of such purchase and the consummation of the transaction giving rise to the occurrence of such Dilution Date, True North shall own securities representing 20% of the total voting rights of each class of issued and outstanding equity securities of Communication, all as determined in accordance with clause (i) above. If either Publicis or Communication is prohibited under applicable law to sell its shares to True North pursuant to the preceding sentence, then the party not so prohibited shall sell such shares to True North pursuant to the preceding sentence. The price per share of Communication Stock or other equity securities to be purchased by True North pursuant to the Percentage Purchase Right shall be the fair value of the per share consideration received by Communication in connection with the transaction giving rise to the occurrence of such Dilution Date (the "Transaction Valuation"). Notwithstanding the foregoing, to the extent that Communication issues options, warrants or purchase or subscription rights or any other non-voting security which converts into or can be exchanged for shares of Communication Stock or other voting security of Communication, the parties agree that a Dilution Date shall not have occurred with respect to such securities, until such time as the voting securities underlying such options, warrants, rights or other securities are issued. In respect of an event which both gives rise to a Dilution Date and constitutes a Publicis Acquisition, True North must elect between exercising a Percentage Purchase Right under Section 1.5 and exercising a True North Maintenance Right under Section 1.12. If either of such rights is exercised and consummated, True North's rights to (a) request the listing of Communication Stock pursuant to Section 1.6 and (b) exercise the Dilution Put pursuant to Section 1.6.1 shall be extinguished in respect of such event. 1.5.1. If Communication intends to issue additional shares of Communication Stock or other securities in an amount which would give rise to the occurrence of a Dilution Date, it shall give True North written notice not less than 10 Business Days in advance of the consummation of such event, which notice shall include the number of shares of Communication Stock or other securities which would be subject to the Percentage Purchase Right, the Transaction Valuation of such shares and sufficient information regarding such issuance transaction in order to reasonably substantiate the Transaction Valuation. So long as the Transaction Valuation has been approved by a majority of the three Outside Directors (as defined below) and by the Board of Directors of Communication, such Transaction Valuation shall be conclusive and binding upon the parties. Upon receipt of such notice, True North shall have 5 Business Days to give written notice to Communication that it wishes to exercise its Percentage Purchase Right with respect to such transaction. After True North has given written notice to Publicis of its exercise of the Percentage Purchase Right, such notice shall be irrevocable, and True North shall be bound to buy from Publicis and/or Communication and Publicis and/or Communication shall be bound to sell to True North that number of shares of Communication Stock specified in Communication's notice at the Transaction Valuation. The purchase and sale of shares pursuant to the Percentage Purchase 8 9 Right shall be consummated simultaneously with the issuance transaction giving rise to such right, payment to be made by True North by certified check payable to Publicis and/or Communication, as the case may be. 1.6. Listing of Communication Stock if Ownership Diluted. Upon (i) True North having received written notice of the anticipated occurrence of a Dilution Date in accordance with Section 1.5.1, (ii) the occurrence of any Dilution Date and (iii) True North's failure to elect to exercise its Percentage Purchase Right with respect to such Dilution Date within the time period specified in Section 1.5.1, and upon the written request of True North given to Communication within 5 Business Days following the Dilution Date, Publicis and Communication agree to use their respective best efforts to cause to be offered to the public and listed (within 120 days following the Dilution Date) on a major European stock exchange the Communication Stock. True North may request in such notice that any amount of its Communication Stock be included in such offering and listing, but shall be entitled only to have offered in the offering up to, but no more than, 50% of the Communication Stock owned by True North in the aggregate at the time True North requests for its shares or, if higher, up to, but not more than, 50% of the Communication Stock owned by True North immediately prior to the consummation of such offering (to the extent so requested by True North). True North's request shall include a schedule which shall set forth the amount of shares of Communication Stock which True North requests Communication to include in the offering assuming a range of hypothetical offering prices. Subject to its rights to withdraw from such offering, as set forth in this Section, True North shall use all commercially reasonable efforts to cooperate with Communication and its agents and advisors in effecting such offering. The obligations of the parties with respect to the offering and listing shall be treated as set forth in Section 1.3.1. The obligations of the parties with respect to indemnification and expenses of the offering and listing shall be treated as set forth in Sections 1.3.2 and 1.3.3., respectively. 1.6.1. Put of Communication Stock if Ownership Diluted and Communication Stock Not Listed. If True North makes a written request pursuant to Section 1.6 and the listing of the Communication Stock has not occurred within the 120 day period specified in Section 1.6, True North shall have the right, in its sole discretion and on one occasion per Dilution Date occurrence, which right shall be exercisable by written notice to Publicis for 30 days immediately following the expiration of such 120 day period, to require Publicis to purchase from True North (the "Dilution Put") all, but not less than all, of the shares of Communication Stock owned by True North on the date of such notice (the "Dilution Notice Date"), at the Dilution Price, calculated pursuant to the terms of Section 1.6.2, subject to appropriate adjustments for stock dividends, splits, combinations, exchanges, or similar events, occurring subsequent to such date but prior to the consummation of such Dilution Put, and upon exercise of the Dilution Put, Publicis shall be bound to purchase such shares from True North and tender the purchase price therefor, and True North shall be bound to tender such shares and convey ownership of such shares to Publicis, free of all Encumbrances, all in accordance with Section 1.6.3. For the avoidance of doubt, the parties agree that neither the existence of the Percentage Purchase Right nor the Dilution Put shall relieve Publicis or Communication from their respective obligations pursuant to Section 1.6 to use their respective best efforts to offer and list the Communication Stock. 9 10 1.6.2. The Dilution Price shall be equal to (X) the number of shares of Communication Stock owned by True North on the Dilution Notice Date multiplied by (Y) the sum of (1)(A) 75% of the fair market value as of the Dilution Notice Date of the block of Communication Stock owned by True North on the Dilution Notice Date, as determined pursuant to the procedures set forth in Section 1.4.1, divided by (B) the number of shares of Communication Stock owned by True North on the Dilution Notice Date, and (2) 25% of the Put/Call Price of Communication Stock, as determined pursuant to Section 1.1.1 as appropriately modified to replace all references to the Remainder Put with the Dilution Put. 1.6.3. Subject to the conditions set forth in Section 1.6.1, if True North wishes to exercise the Dilution Put, it shall give Publicis written notice of such exercise within 30 days of the expiration of the 120 day period referred to in Section 1.6, together with True North's estimated calculation of Put/Call Price (if then available) and True North's selection of a globally-recognized investment bank. The purchase and sale of such shares shall be consummated within 20 Business Days following the determination of the Dilution Price. In exchange for the payment by Publicis of the aggregate Dilution Price determined pursuant to Section 1.6.2, which shall be payable by Publicis by wire transfer of immediately available funds in French Francs to a bank or other financial institution designated by True North, True North shall convey ownership of all of the Communication Stock owned by True North on the Dilution Notice Date to Publicis, free of all Encumbrances. After True North has given written notice to Publicis of its exercise of the Dilution Put, such notice shall be irrevocable, and True North shall be bound to sell to Publicis and Publicis shall be bound to buy from True North that number of shares of Communication Stock owned by True North on the Dilution Notice Date. 1.6.4. Subsequent Dilutive Events. True North's rights under Sections 1.5 through 1.6.1 of this Agreement shall apply with respect to each successive subsequent Dilution Date. 1.7. Transactions on Arm's Length Basis. So long as True North owns at least 10% of the issued and outstanding shares of Communication Stock, any significant transactions effected by Communication shall be effected on an arm's length basis; provided, that this Section shall not apply to the merger or other combination of PBV and Communication or acquisition of PBV by Communication. 1.8. Communication Directors. As soon as practicable, but no later than 60 days after the consummation of the transactions contemplated by this Agreement and in all events prior to the consummation or corporate approval of any transaction to transfer to Communication agencies owned by Publicis, and so long thereafter as True North owns at least 10% of the issued and outstanding shares of Communication Stock, Communication shall elect to its Board of Directors three members who have no prior significant relationship with Publicis, True North or the directors or senior officers of either (the "Outside Directors"). Publicis and Communication shall consult with True North prior to the appointment of the three Outside Directors. A majority of the three Outside Directors and the Board of Directors of Communication must approve any transaction (other than those specifically contemplated by this Agreement or the Memorandum of Agreement) of Communication, including transactions with Publicis or any affiliates of Publicis, that a majority of the three Outside Directors deem to be significant. 10 11 1.9 True North Director. (a) If at any time or from time to time True North owns at least 18% of the issued and outstanding shares of Communication Stock, True North shall have the right to nominate and have elected one member of the Board of Directors of Communication. (b) If, as a result of the occurrence of a Dilution Date or Publicis Acquisition, True North shall own less than 18% of the issued and outstanding shares of Communication Stock and True North shall have given (and not withdrawn) notice to Communication of its exercise of the Percentage Purchase Right or the True North Maintenance Right, as the case may be, True North shall retain its right to its directorship through the time of closing of such Percentage Purchase Right or the True North Maintenance Right, as the case may be. (c) Following the offering and listing of Communication Stock, Publicis's and Communication's obligation pursuant to subsection (a) of this Section 1.9 shall be fulfilled by Publicis and Communication by (i) the inclusion of the nominee proposed by True North in the slate of nominees recommended by the Communication Board of Directors to stockholders for election as directors at the next annual meeting of stockholders of Communication if True North owns at least 18% of the issued and outstanding shares of Communication Stock at the time of slating of such nominees, (ii) Communication using reasonable efforts to cause the shares for which Communication's management or Board of Directors holds proxies or is otherwise entitled to vote to be voted in favor of such nominee and (iii) Publicis voting, or causing the vote of, shares of Communication Stock owned by it or any of its affiliates in favor of such nominee. Following the offering and listing of Communication Stock, if, as a result of the issuance of shares of Communication Stock or similar dilutive event affecting the Communication Stock, True North shall own less the 18% of the issued and outstanding shares of Communication Stock at the time of slating of the nominees recommended by the Communication Board of Directors to its stockholders for election of directors at any annual meeting of stockholders of Communication, Communication shall give True North written notice of the slating of directors and that True North owns less than 18% of the issued and outstanding shares of Communication and if, within 5 Business Days of receipt of such notice, True North gives Communication written notice stating that True North intends to purchase additional shares of Communication Stock such that True North will own at least 18% of the issued and outstanding shares of Communication Stock within six months of the date of such notice from True North to Communication, Communication shall continue to fulfill its obligations under clauses (i), (ii) and (iii) of the preceding sentence for such six month period; provided, however, that if True North does not effect such purchases within such six month period, True North, upon Communication's request, shall cause its designee on the Communication Board of Directors to immediately resign. Following such resignation, all of Communication's obligations with respect to this Section 1.9 shall terminate. If at any time True North shall own less than 18% of the issued and outstanding shares of Communication Stock for any reason other than the issuance of shares of Communication Stock or similar dilutive event affecting the Communication Stock, True North, at the request of Communication, shall cause its designee on the Communication Board of Directors to immediately resign. Following such resignation, all of Communication's obligations with respect to this Section 1.9 shall terminate. True North acknowledges that the Communication Board of Directors may form a committee, which does not include the True North designee, to consider issues involving a direct conflict 11 12 between True North and Communication, provided that the formation of any such committee shall be approved by a majority of the non-management directors of Communication (excluding the True North designee). It is further understood and agreed that True North's designee shall not be an officer or director or employee of True North or any of its affiliates. 1.10. Financial Reports and Appraisals. (a) So long as True North owns at least 10% of the issued and outstanding shares of Communication Stock, Communication shall (i) provide all financial and other information reasonably requested by True North for purposes of True North's compliance with U.S. income tax laws and other U.S. regulatory requirements, (ii) cause its independent auditors to complete their annual audit and provide the results to True North before February 15 of each year, and shall provide True North with unaudited quarterly consolidated financial results before April 30, July 30, and October 30 of each year. (b) The parties acknowledge that in connection with the transactions contemplated in this Agreement, True North desires to obtain such independent appraisals as are necessary to support the necessary or desirable accounting for financial tax reporting purposes. Each of Publicis, Communication and PBV agrees to use all commercially reasonable efforts to provide the assistance necessary to enable True North to obtain such appraisals. 1.11. Transfer of Publicis Agency Network; True North Consent. Prior to the earlier of (i) the offering and listing of Communication Stock on a major European stock exchange or (ii) December 31, 1998, Publicis, Communication and PBV agree to combine or merge Communication and PBV and to transfer for consideration the Publicis global agency network owned by Publicis so that such global network is owned by Communication. True North authorizes and consents to any and all transactions designed to combine or merge Communication with PBV and any and all transactions designed to transfer the Publicis global agency network owned by Publicis so that such global network is owned by Communication. Following such transactions, Communication and its subsidiaries will be the holding company of the worldwide agency network for Publicis. It is understood and agreed that all such material transactions between Communication and Publicis will be effected on an arm's length basis. 1.12. True North Maintenance Right. In the event that, prior to the completion of an initial public offering of the Communication Stock, Communication acquires any entity or interest from Publicis in a transaction involving the issuance of Communication Stock or other equity of Communication (a "Publicis Acquisition"), True North shall have the right, in its sole discretion, to purchase from Publicis and/or Communication (who shall determine in their sole discretion which of whom shall sell such shares), and Publicis and/or Communication, as the case may be, shall be obligated to sell to True North, a number of shares of Communication Stock or other securities (the "True North Maintenance Right") such that, following the consummation of such purchase and the consummation of such acquisition by Communication, True North shall own the same percentage of shares of Communication Stock owned by True North immediately prior to the Publicis Acquisition and to the extent of issuance of any other class of equity securities, True North shall own the same percentage of such other class as it owned of Communication Stock immediately prior to the Publicis Acquisition (after giving effect to the consummation of any 12 13 Liquidity Right (as defined below) if such right was exercised and not withdrawn, but not yet consummated). For purposes of this Agreement the term "Liquidity Right" shall mean the Percentage Purchase Right, the listing of Communication Stock pursuant to Section 1.4 or 1.6, the Dilution Put, the Remainder Put, the Remainder Call and the Expiration Put. If either Publicis or Communication is prohibited under applicable law to sell its shares to True North pursuant to the preceding sentence, then the party not so prohibited shall sell such shares of Communication Stock or other securities to True North pursuant to the preceding sentence. The price per share of Communication Stock to be purchased by True North pursuant to the True North Maintenance Right shall be the per share value of the consideration received by Communication in connection with such Publicis Acquisition. In respect of an event which both gives rise to a Dilution Date and constitutes a Publicis Acquisition, True North must elect between exercising a Percentage Purchase Right under Section 1.5 and exercising a True North Maintenance Right under Section 1.12. If either of such rights is exercised and consummated, True North's rights to (a) request the listing of Communication Stock pursuant to Section 1.6 and (b) exercise the Dilution Put pursuant to Section 1.6.1 shall be extinguished in respect of such event. 1.12.1. If Communication intends to consummate a Publicis Acquisition, it shall give True North written notice not less than 10 Business Days in advance of the consummation of such event, which notice shall include the number of shares of Communication Stock or other securities subject to the True North Maintenance Right, the price per share and sufficient information regarding such issuance transaction in order to reasonably substantiate the price per share. So long as the price per share has been approved by a majority the three Outside Directors and by the Board of Directors of Communication, such price per share shall be conclusive and binding on the parties. Upon receipt of such notice, True North shall have 5 Business Days to give written notice to Communication that it wishes to exercise its True North Maintenance Right with respect to such transaction. After True North has given written notice to Publicis of its exercise of the True North Maintenance Right, such notice shall be irrevocable, and True North shall be bound to buy from Publicis and/or Communication and Publicis and/or Communication shall be bound to sell to True North that number of shares of Communication Stock specified in Communication's notice at such aggregate price. The purchase and sale of shares pursuant to the True North Maintenance Right shall be consummated simultaneously with the issuance transaction giving rise to such right, payment to be made by True North by certified check payable to Publicis and/or Communication, as the case may be. 1.13. Communication May Act for Publicis; Guarantee. The parties agree that Publicis shall have the right, acting in its sole discretion, to assign to Communication Publicis's rights and/or obligations to purchase shares of Communication Stock from True North, pay the purchase price therefor and fulfill any or all of the obligations of Publicis in connection therewith in the event of the exercise of any Remainder Put, Remainder Call, Expiration Put, Dilution Put or rights pursuant to Section 1.16; provided, that in the event of any such assignment, Publicis shall remain liable for the performance of any and all obligations owing to True North in any such event. Publicis hereby guarantees the performance of all obligations of Communication under this Agreement. 1.14. True North Equity Rights. For purposes of Article I, references to shares of Communication Stock owned by True North shall be deemed to refer to shares of Communication 13 14 Stock owned by True North and its subsidiaries, in the aggregate. In the event that True North shall acquire, upon exercise of a Percentage Purchase Right or a True North Maintenance Right, any shares of a class of equity securities other than Communication Stock, such shares shall be includible in any other Liquidity Right (other than the obligation of Communication to list equity securities pursuant to sections 1.4 or 1.6). 1.15. Currency. All references to French Francs shall be deemed to refer to French Francs or any successor currency. 1.16. Publicis Maintenance of Majority Control of Communication. (a) In the event that, following an acquisition by Communication of a privately held advertising company, an exercise by True North of its Percentage Purchase Right or its True North Maintenance Right, together with the issuance of Communication Stock or other securities giving rise thereto, would result in Publicis owning securities having less than 51% of the total voting rights of each class of issued and outstanding equity securities of Communication (based on the number of outstanding shares), Communication shall issue non-voting securities to True North in lieu of voting securities to the extent required to maintain such 51% control by Publicis. Such non-voting securities shall be identical in all respects (other than voting rights) to the Communication Stock or other securities otherwise issuable pursuant to the Percentage Purchase Right or True North Maintenance Right, as applicable, and shall be issued upon the same price and other terms. For purposes of the percentage threshold requirements of Sections 1.9 and 1.10, such non-voting securities shall be treated as if they had the same voting rights as the voting securities otherwise issuable. (b) If (i) notwithstanding True North's exercise of its commercially reasonable efforts to maintain equity accounting treatment for its investment in Communication, it is unable to do so under United States generally accepted accounting principles due solely to its receipt of non-voting securities in lieu of voting securities pursuant to Section 1.16(a), and (ii) the Communication Stock has not been listed on a major European stock exchange, then True North shall promptly notify Publicis in writing of its inability to maintain equity accounting treatment, and Publicis shall purchase from True North, and True North shall sell to Publicis, all such non-voting securities at the same price originally paid for them by True North. The purchase and sale of such shares shall be consummated within 20 Business Days following the date of True North's notice. In exchange for the payment by Publicis of the aggregate price for such non-voting securities, which shall be payable by Publicis by wire transfer of immediately available funds in French Francs to a bank or other financial institution designated by True North, True North shall convey ownership of all of such non-voting securities to Publicis, free of all Encumbrances. (c) True North may elect in addition, in its notice given pursuant to Section 1.16(b), to require Publicis to purchase from True North (the "Accounting Put") all, but not less than all, of the shares of Communication Stock owned by True North on the date of such notice (the "Accounting Notice Date"), at the Accounting Price, as defined below, subject to appropriate adjustments for stock dividends, splits, combinations, exchanges, or similar events, occurring subsequent to such date but prior to the consummation of such Accounting Put, and upon exercise of the Accounting Put, Publicis shall be bound to purchase such shares from True North and 14 15 tender the purchase price therefor, and True North shall be bound to tender such shares and convey ownership of such shares to Publicis, free of all Encumbrances, all in accordance with this paragraph (c). True North shall specify in such notice its selection of a globally-recognized investment bank. The Accounting Price will be determined as follows: The percentage of voting shares of Communication owned by True North at the time of the Accounting Notice Date multiplied by the fair market value of the combined enterprise of Communication and the acquired or merged entity. The fair market value of the combined enterprise will be established pursuant to the procedures set forth in Section 1.4.1. The purchase and sale of such shares shall be consummated within 20 Business Days following the determination of the Accounting Price. In exchange for the payment by Publicis of the aggregate Accounting Price, which shall be payable by Publicis by wire transfer of immediately available funds in French Francs to a bank or other financial institution designated by True North, True North shall convey ownership of all of the Communication Stock owned by True North on the Accounting Notice Date to Publicis, free of all Encumbrances. ARTICLE II OTHER AGREEMENTS 2.1. Covenants and Consents of True North with Respect to South Africa, Thailand, Argentina and India. 2.1.1. True North, on its own behalf and to the extent of its ownership interest in any direct or indirect subsidiaries and investees, hereby (i) waives any and all pre-emptive or similar rights it has or may have with respect to the shares of the Partnership agency in South Africa and (ii) consents to the sale by Lindsay Smithers/FCB or any of its affiliates to Publicis or any of its affiliates of 100% of the Partnership agency in South Africa, as agreed by the parties. 2.1.2. At the Closing, True North agrees that it shall pay Publicis, by certified check payable to Publicis, US $310,000. Such payment represents True North's allocated portion of the purchase price to be paid by Publicis for the Prakit-Publicis agency in Thailand. If Publicis has not acquired the Prakit-Publicis agency as contemplated by the Thailand Agreement (as defined below) prior to June 30, 1998, then Publicis shall pay True North, by certified check payable to True North, US$310,000 within 30 days following such date; provided, however, that Publicis shall not be required to pay such US $310,000 if the failure to acquire the Prakit-Publicis agency results directly or indirectly from the breach by True North or any of its affiliates of the obligations set forth in the Agreement (Thailand) among the parties hereto dated as of the date hereof (the "Thailand Agreement"). 2.1.3. True North agrees to service the Nestle, L'Oreal and other Publicis client accounts in Argentina through Pragma/FCB pursuant to the terms of Section 2.6 of this Agreement until such time as Publicis shall have established stand-alone operations in Argentina. At such time as Publicis notifies True North that it has established stand-alone operations in Argentina, True North shall, pursuant to Section 2.7 of this Agreement, transfer the Nestle, L'Oreal and other Publicis client accounts, if any, to Publicis' stand-alone agency. 15 16 2.1.4. True North agrees that until the consummation of the transactions contemplated by the Thailand Agreement and the Agreement (India) among the parties hereto dated as of the date hereof (the "India Agreement"), True North will service the Nestle, L'Oreal and other Publicis client accounts, if any, in Thailand and India through Prakit/FCB and FCB/Ulka, respectively, pursuant to the terms of Section 2.6 of this Agreement. If, for any reason, the transactions contemplated by either the Thailand Agreement and the India Agreement are not consummated, True North agrees to continue to service the Nestle, L'Oreal and other Publicis client accounts, if any, in Thailand and India pursuant to Section 2.6. Pursuant to Section 2.7 of this Agreement, True North agrees to transfer the Nestle, L'Oreal and other Publicis client accounts to Publicis stand-alone agency. 2.2. Publicis Director. (a) If at any time or from time to time Communication owns at least 18% of the issued and outstanding shares of the Common Stock, par value $.33 1/3 per share (the "True North Stock"), Communication shall have the right to nominate and have elected one member of the Board of Directors of True North. (b) True North's obligation pursuant to the preceding sentence has been fulfilled by True North by the nomination of Communication's designee for election to the True North Board of Directors at the 1997 Annual Meeting (unless such designee is then serving on such Board of Directors) and its commitment to use its reasonable best efforts to cause the shares for which True North's management or Board of Directors holds proxies or is otherwise entitled to vote to be voted in favor of such nominee and thereafter by (i) the inclusion of the nominee proposed by Communication in the slate of nominees recommended by the True North Board of Directors to stockholders for election as directors at the next annual meeting of stockholders of True North if Communication owns at least 18% of the issued and outstanding shares of True North stock at the time of slating of such nominees, and (ii) True North's using reasonable best efforts to cause the shares for which True North's management or Board of Directors holds proxies or is otherwise entitled to vote to be voted in favor of such nominee. If, as a result of the issuance of shares of True North Stock or similar dilutive event affecting the True North Stock, Communication shall own less than 18% of the issued and outstanding shares of True North Stock at the time of slating of the nominees recommended by the True North Board of Directors to its stockholders for election of directors at any annual meeting of stockholders of True North, True North shall give Communication written notice of the slating of directors and that Communication owns less than 18% of the issued and outstanding shares of True North and if, within 5 business days of receipt of such notice, Communication gives written notice to True North stating that Communication intends to purchase additional shares of True North Stock such that Communication will own at least 18% of the issued and outstanding shares of True North Stock within six months of the date of such notice from Communication to True North, True North shall continue to fulfill its obligations under clauses (i) and (ii) of the preceding sentence for such six month period; provided, however, that if Communication does not effect such purchases within such six month period, Communication, at the request of True North, shall cause its designee on the True North Board of Directors to immediately resign. Following such resignation, all of True North's obligations with respect to this Section 2.2 shall terminate. If at any time Communication shall own less than 18% of the issued and outstanding shares of True North Stock for any reason other 16 17 than the issuance of shares of True North Stock or similar dilutive event affecting the True North Stock, Communication shall cause its designee on the True North Board of Directors to immediately resign. Following such resignation, all of True North's obligations with respect to this Section 2.2 shall terminate. Communication acknowledges that the True North Board of Directors may form a committee, which does not include the Communication designee, to consider issues involving a direct conflict between Communication and True North, provided that the formation of any such committee shall be approved by a majority of the non-management directors of True North (excluding the Communication designee). It is further understood and agreed that Communication's designee shall not be an officer or director or employee of either Publicis or Communication or any of their affiliates. 2.3. Financial Reports. So long as Publicis and/or Communication owns at least 10% of the issued and outstanding shares of True North Stock, True North shall provide all financial and other information reasonably requested by Publicis and/or Communication for purposes of their compliance with French and European income tax laws and other French and European regulatory requirements, shall cause its independent auditors to complete their annual audit and provide the results to Publicis and Communication before February 15 of each year, and shall provide Publicis and Communication with unaudited quarterly consolidated financial results before April 30, July 30, and October 30 of each year. 2.4. Use of Names. 2.4.1. As between True North, FCBI and TNBV, on the one hand, and Publicis, Communication and PBV on the other hand, True North and FCBI shall own all right, title and interest in and to any trademark, service mark or trade name (collectively "Trademarks") which comprises or incorporates any of the following: Foote, Cone & Belding, FCB, True North, TN, Impact, Mind & Mood or Ulka (collectively, the "True North Trademarks"). 2.4.2. As between True North, FCBI and TNBV, on the one hand, and Publicis, Communication and PBV on the other hand, Publicis, Communication and PBV shall own all right, title and interest in and to any Trademark which comprises or incorporates any of the following: Publicis, FCA/BMZ or Optimedia (collectively, the "Publicis Trademarks"). 2.4.3. Except as provided for herein, each of True North, FCBI and TNBV agrees that it will not, and will not permit its subsidiaries to, use, adopt, apply to register or register any Trademark which comprises or contains a Publicis Trademark. Except as provided for herein, each of Publicis, Communication and PBV agrees that it will not, and will not permit its subsidiaries to, use, adopt, apply to register or register any Trademark which comprises or contains a True North Trademark. The parties hereby agree that neither will, nor permit any of their respective subsidiaries to, challenge the use of the other party's Trademarks anywhere in the world. 2.4.4. As soon as reasonably practicable, but in no event later than 30 days after the consummation of the transactions contemplated by this Agreement, each party, and each of its respective subsidiaries, shall cease to use any Trademark owned by the other. 17 18 2.4.5. If True North, FCBI or TNBV, or any of their respective subsidiaries, has obtained a Trademark registration in any country for any Publicis Trademark or has applied to register a Publicis Trademark in any country, each of True North, FCBI and TNBV agrees to assign, or cause its subsidiaries to assign, such Trademark registrations or applications and all its rights herein to Communication, except for Trademarks comprised of both a Publicis Trademark and a non-Publicis Trademark, which (rather than being assigned to Communication) shall be affirmatively abandoned or amended so as to effectively eliminate all use or reference to the Publicis Trademark. If Publicis, Communication or PBV or any of their respective subsidiaries has obtained a Trademark registration in any country for any True North Trademark or has applied to register a True North Trademark in any country, each of Publicis, Communication and PBV agrees to assign, or cause its subsidiaries to assign, such Trademark registrations or applications and all its rights therein to True North, except for Trademarks comprised of both a True North Trademark and a non-True North Trademark, which (rather than being assigned to True North) shall be affirmatively abandoned or amended so as to effectively eliminate all use or reference to the True North Trademark. 2.4.6. None of True North, FCBI or TNBV, nor any of their respective subsidiaries, has granted nor is obligated to grant a license, assignment or other right in respect of any Publicis Trademark nor has it sold or otherwise encumbered any Publicis Trademark. None of Publicis, Communication nor PBV, nor any of their respective subsidiaries, has granted nor is obligated to grant a license, assignment or other right in respect of any True North Trademark nor has it sold or otherwise encumbered any True North Trademark. 2.4.7. Each party agrees to work diligently to identify all Trademarks or registrations or applications therefor worldwide which are subject to this Agreement and to take those steps that may be necessary to effectuate the purposes of this Agreement when and as any such Trademark or registration or application therefor becomes known to it. Each party shall advise the other when and as it learns of any information concerning any such Trademarks or registrations or applications therefor. The parties further agree that they will cooperate with each other in all reasonable respects regarding this Agreement and each will promptly execute any document reasonably necessary to facilitate the protection by the other party of its Trademarks anywhere in the world. The parties further agree that they will cause any entity owned or controlled by either of them to cooperate in effectuating the terms of this Agreement and to execute any document necessary to facilitate the terms of this Agreement. 2.5. Coordination Fees. Each of True North, FCBI and TNBV, on the one hand, and Publicis, Communication and PBV, on the other hand, shall pay to the other coordination fees of 1% of capitalized billings for "qualified international accounts" (as hereinafter defined), computed as being 6.67% of revenue from such qualified international accounts. Such fees shall be payable hereunder retroactively from January 1, 1996. Each of True North, FCBI and TNBV, on the one hand, and Publicis, Communication and PBV, on the other hand, agree to pay all such fees due in respect of billings during calendar year 1996 on or prior to June 30, 1997, such payment to be made by certified check. All fees due in respect of each succeeding calendar year, including 1997, shall be due and payable on June 30 of the year immediately following such year, such payment to be made by appropriate means. Each of True North, FCBI and TNBV, on the one hand, and Publicis, Communication and PBV, on the other hand, agree to provide the other party with such 18 19 information requested by such party as is reasonably required in order to substantiate such fee requests. "Qualified international accounts" are clients which are (i) aligned on a worldwide basis with either Publicis or True North, (ii) served by a worldwide coordination team working with an agency consisting of agency employees located in proximity to the client's headquarters and delivering services through local agencies and (iii) coordinated on and administered by such team through a global network of local agencies. Specific clients which will be "qualified international accounts" for 1996 and subsequent years, if any, will be jointly agreed upon by the CEO of Communication and the CEO of FCB 2.6. Collaboration in Certain Countries. For a period of one year from the date of this Agreement, each of Publicis, Communication and PBV, on the one hand, and True North, FCBI and TNBV, on the other hand, shall, upon request, service clients of the other in countries where the other has not established operations. This covenant shall be renewable for additional one year terms by either party upon the delivery of written notice to the other prior to the 60th day prior to the expiration of such period. Each of the foregoing arrangements shall be terminable on a country-by-country basis by either party upon 6 weeks prior written notice. 2.7. Transfer of Certain Clients, Employees. Subject to the parties understanding that the concurrence of a client to a transfer of its account from one agency to another is the way the advertising business works (and it is the parties' assumption that neither party will attempt to obstruct such concurrence), each client of Publicis, Communication and PBV, on the one hand, and True North, FCBI and TNBV, on the other hand, whose account was managed by the other party because such client was located within the other party's "sphere of influence" (within the meaning of such term under the Master Alliance Agreement referred to below), shall be transferred to the party having the worldwide agreement with such client. Such transfer shall be effected as soon as possible after the party having such worldwide agreement has available to it, in its sole judgment, agencies capable of serving such transferred client. Employees of the transferring party responsible primarily for the servicing of such transferred client shall be given the opportunity to leave the employ of the transferring party and become employed by the agency to whom the client is to be transferred. 2.8. Termination of Adversarial Proceedings; Releases. Each of Publicis, Communication and PBV, and their respective subsidiaries, on the one hand and True North, FCBI and TNBV, and their respective subsidiaries, on the other hand, shall immediately and irrevocably terminate with prejudice any and all adversarial proceedings now pending between them, of every nature and in every forum, including all litigation or arbitration which arises out of events occurring prior to the date of this Agreement. 2.8.1. Non-Assignment of Claims. Each of True North, FCBI and TNBV represents and warrants, on behalf of themselves and their respective subsidiaries, to Publicis, Communication and PBV that it has not assigned and will not assign any claim it may have against the Publicis Released Parties, as defined in paragraph 2.8.2 herein, to any other person or entity. Each of Publicis, Communication and PBV, on behalf of themselves and their respective subsidiaries, represent and warrant to True North, FCBI and TNBV that they have not assigned and will not assign any claim they may have against the True North Released Parties, as defined in paragraph 2.8.3 herein, to any other person or entity. 19 20 2.8.2. True North Release of Publicis. Each of True North, FCBI and TNBV, on behalf of themselves, their respective subsidiaries, and each of their respective officers, directors, employees and affiliates, hereby releases, remises and forever discharges Publicis, Communication, PBV, their respective subsidiaries and each of their respective present and former officers, directors, employees, shareholders, principals, affiliates, subsidiaries, consultants and agents (collectively, the "Publicis Released Parties") from all actions, causes of action, suits, debts, dues, sums of money, claims for unpaid remuneration, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, obligations, claims and demands whatsoever ("True North Claims"), in contract or tort, in law or equity, whether known or unknown, including without limitation, all True North Claims arising under or related in any way to the Master Alliance Agreement and the other agreements and undertakings contemplated thereby, which True North or True North's successors and assigns ever had, now have or hereafter can, shall or may have against the Publicis Released Parties for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date hereof, but excluding any True North Claims relating to or arising under this Agreement and the other Operative Agreements (as hereinafter defined). 2.8.3. Publicis Release of True North. Each of Publicis, Communication and PBV, on behalf of themselves, their respective subsidiaries, and each of their respective officers, directors, employees and affiliates, hereby releases, remises and forever discharges True North, FCBI, TNBV, their respective subsidiaries and each of their respective present and former officers, directors, employees, shareholders, principals, affiliates, subsidiaries, consultants and agents (collectively, the "True North Released Parties") from all actions, causes of action, suits, debts, dues, sums of money, claims for unpaid remuneration, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, obligations, claims and demands whatsoever ("Publicis Claims"), in contract or tort, in law or equity, whether known or unknown, including without limitation, all Publicis Claims arising under or related in any way to the Master Alliance Agreement and the other agreements and undertakings contemplated thereby, which Publicis or Publicis's successors and assigns ever had, now have or hereafter can, shall or may have against the True North Released Parties for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date hereof, but excluding any Publicis Claims relating to or arising under this Agreement and the other Operative Agreements. 2.9. Publicis Consent to Certain Transactions. Subject to the provisions of Section 2.4, each of Publicis, Communication and PBV authorizes and consents to any and all transactions by True North and its subsidiaries in Europe designed to establish an independent True North network in Europe; provided that such authorization and consent shall not extend to the solicitation by any of True North, FCBI, TNBV or any of their respective subsidiaries of employees or clients of any of Publicis, Communication or PBV or their respective subsidiaries. 2.10. Status of Alliance Agreements. The parties hereto hereby confirm the status of the following agreements previously entered into between and among the parties hereto: 20 21 a. The Master Alliance Agreement dated as of January 1, 1989 between Communication and True North (then known as Foote, Cone & Belding Communications, Inc.) has been terminated in its entirety and has no current or further force or effect. b. The Publicis Communication Shareholders Agreement dated as January 1, 1989 among Communication, Publicis and True North (then known as Foote, Cone & Belding Communications, Inc.) has been terminated in its entirety and has no current or further force or effect. c. The FCB Stockholders Agreement dated as of January 1, 1989 between Communication and True North (then known as Foote, Cone & Belding Communications, Inc.) has been terminated in its entirety and has no current or further force or effect. d. The PBV Stockholders Agreement dated as of January 1, 1989 among Communication, FCBI and PBV has been terminated in its entirety and has no current or further force or effect. e. The Publicis Undertaking made and entered into as of January 1, 1989 by Publicis has been terminated in its entirety and has no current or further force or effect. f. The Multiparty Arbitration Agreement dated as of January 1, 1989 among Communication, Publicis, FCBI, True North and PBV has been terminated in its entirety and has no current or further force or effect. g. The Registration Rights Agreement dated as of January 1, 1989 (the "Registration Rights Agreement") between Communication and True North (then known as Foote, Cone & Belding Communications, Inc.) is, as of the date hereof, in full force and effect and is hereby agreed by the parties to be in all respects reaffirmed, remade and ratified; provided, that the arbitration provisions contained in Sections 8(b) and (c) thereof are agreed by the parties to be replaced with the arbitration provisions contained in Sections 3.4.2 through 3.4.10 hereof. In respect of each of the agreements referred to in this Section, each of the parties hereto agrees to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to confirm the terminations provided for under clauses a through f, and the reaffirmation provided for under clause g, of this Section. 2.11. Right of Communication to Buy True North Stock. True North agrees that it shall not on or before March 31, 2000 (i) amend the Rights Agreement, dated as November 16, 1988, between True North (then known as Foote, Cone & Belding Communications, Inc.) and Harris Trust and Savings Bank, to establish an ownership threshold below 22% as it relates to Communication, (ii) adopt a new rights agreement (or other device similar to a rights agreement) with an ownership threshold below 22% as it relates to Communication; or (iii) amend its bylaws, certificate of incorporation or fail to take an action under Section 203 of the Delaware General 21 22 Corporation law (or the analogous statute in another jurisdiction applicable to True North) which would limit Communication's ability to beneficially own up to 22% of the outstanding shares of True North Stock. 2.12. Payment of Fees. Upon the consummation of the transactions contemplated by this Agreement and as a condition to the transfers contemplated by the Share Repurchase and Share Exchange Agreement (as hereinafter defined), True North agrees that it shall pay Publicis, by certified check payable to Publicis, US$2,300,000 in respect of coordination and development fees due for the years 1992, 1993, 1994 and 1995. 2.13. Payment of Dividends. At the Closing, True North agrees that it shall pay Publicis, by certified check payable to Publicis, FFr 8,500,000 (less an agreed amount to provide for True North's anticipated tax burden, if any) in respect of dividends of Gnomi FCB Athens for the years 1992, 1993, 1994 and 1995. 2.14. Closing of All Transactions. The Closing (as defined below) shall take place on Tuesday, June 10, 1997 (the "Closing Date") at 10:00 a.m. U.S. Eastern Daylight Time at the offices of Howard, Darby & Levin, 1330 Avenue of the Americas, New York, NY USA. All of the actions to be taken and documents to be executed and delivered at the closing shall be deemed to be taken, executed and delivered simultaneously, and no such action, execution or delivery shall be effective until all actions to be taken and execution and deliveries to be effected at the closing are complete. At the Closing: (1) the transactions contemplated by the Share Purchase and Share Exchange Agreement shall be consummated; (2) the transactions contemplated by the Germany Agreement shall be consummated; (3) the parties shall execute and deliver the definitive agreement contemplated by the Australian Agreement; and (4) True North shall pay to Publicis: (i) U.S.$310,000 pursuant to Section 2.1.2. (ii) U.S.$2,300,000 pursuant to Section 2.12. (iii) FFr 8,500,000 (less an agreed amount to provide for True North's anticipated tax burden, if any) pursuant to Section 2.13. 2.15. Effective Date of Transactions. The parties agree that the effective date of the transactions contemplated by the Share Repurchase and Share Exchange Agreement shall be January 1, 1997. Notwithstanding the foregoing, the parties acknowledge that True North reserves the right to treat the closing date of such transactions as the effective date for US 22 23 financial and tax reporting purposes. ARTICLE III MISCELLANEOUS 3.1. Entire Agreement. This Agreement, the Memorandum of Agreement dated February 19, 1997 (the "Memorandum of Agreement") among Publicis, Communication, PBV, True North, Foote, Cone & Belding Communications Inc., FCBI, the Registration Rights Agreement, the Share Repurchase and Share Exchange Agreement, dated as of the date hereof (the "Share Repurchase and Share Exchange Agreement"), the India Agreement, the Thailand Agreement, the Germany Agreement, the Pooling Agreement and the Australian Agreement (collectively, the "Operative Agreements") constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and supersede all prior agreements and understandings among the parties relating to the subject matter hereof. With the exception of the Memorandum of Agreement and the Registration Rights Agreement, no Operative Agreement will be of any force or effect until all Operative Agreements have been executed and delivered by each party thereto. To the extent that there is any conflict between the provisions of the Memorandum of Agreement and the provisions of this Agreement or the other Operative Agreement, dated as of the date hereof, the provisions of this Agreement or the other Operative Agreement, dated as of the date hereof shall govern. 3.2. Notices. Any notice, request or other demand to or upon the parties hereto shall be in writing (including telex and telecopy communication followed by registered mail with return receipt requested) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or when telexed (answer-back received) or telecopied (with receipt acknowledged) addressed to the party for which intended as provided below (or as hereafter specified by such party by notice hereunder): If to Communication, Publicis or PBV, to it at: 133 avenue des Champs-Elysees 75380 Paris Cedex 08 France Attention: President-Directeur General Telecopy: 33-1-44-43-75-50 with a copy to: Howard, Darby & Levin 1330 Avenue of the Americas New York, New York 10019 United States of America Attention: Thomas J. Kuhn, Esq. Telecopy: 212-841-1010 23 24 If to True North, FCBI or TNBV, to it at: 101 East Erie Street Chicago, Illinois 60611 United States of America Attention: Chief Executive Officer Telecopy: 1-312-425-5010 with a copy to: General Counsel True North Communications Inc. 101 East Erie Street Chicago, Illinois 60611 United States of America Telecopy: 1-312-425-6354 with a copy to: Sidley & Austin One First National Plaza Chicago, Illinois 60603 Unites States of America Attention: Thomas A. Cole Telecopy: 1-312-853-7036 3.3. Survival. All representations and warranties, agreements and covenants contained herein or in any document delivered pursuant hereto or in connection herewith (unless otherwise expressly provided herein or therein) shall survive the date of this Agreement and shall remain in full force and effect. 3.4.1. Governing Laws; Arbitration. Sections 2.2, 2.3 and 2.11 of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America. All other terms and conditions of this Agreement and the Operative Agreements (except as specifically otherwise provided in these Agreements), including, without limitation, the validity, interpretation, performance or termination of such agreements, shall be governed by and construed in accordance with the laws of France applicable to agreements executed and delivered and to be performed in France, without regard to conflicts of laws principles. 3.4.2. All disputes, differences, controversies or claims arising out of, related to or in connection with this Agreement or the Operative Agreements (other than the Pooling Agreement) or the transactions contemplated hereby and thereby shall be submitted to and resolved by arbitration in London, England conducted in accordance with UNCITRAL Arbitration Rules as then in force (the "Rules"). The London Court of International Arbitration shall be the administrative and appointing authority (the "Appointing Authority"). Each of the parties hereto hereby submits to such jurisdiction, forum and rules and irrevocably waives any and all objections 24 25 to such jurisdiction, forum and rules. 3.4.3. Any such arbitration shall be initiated upon notice (the "Notice of Arbitration") by any party (the "Initiating Party") to any other party. Unless the Arbitral Tribunal (as defined in Section 3.4.5) directs otherwise, all communications between the parties and the Arbitral Tribunal (except at hearings and meetings) shall be made through the Appointing Authority. When passed on by the Appointing Authority to any party, such notices or communications shall be sent to the address of that party specified in Section 3.2. 3.4.4. The Notice of Arbitration shall be signed by the chief executive officer of the Initiating Party. A copy of the Notice of Arbitration shall simultaneously be communicated by the Initiating Party to each and every other party regardless of whether or not they are sought as respondents in the said Notice of Arbitration. 3.4.5. An arbitral tribunal (the "Arbitral Tribunal") shall be created which shall consist of three arbitrators all to be appointed by the Appointing Authority pursuant to the procedure contemplated in Article 6(3) of the Rules, except that the list procedure shall only be applied in respect of the presiding arbitrator and that Article 7 of the Rules shall not apply. All such arbitrators shall be capable of participating in the proceedings in both French and English. The presiding arbitrator of the Arbitral Tribunal shall be a lawyer and shall not be a citizen or resident of France or the United States of America. Contrary to the first phrase of Article 14 of the Rules, if any arbitrator is replaced, including the presiding arbitrator, any hearings held previously shall only be repeated if and to the extent deemed necessary by the Arbitral Tribunal. 3.4.6. Subject to the Rules and the provisions hereof, the Arbitral Tribunal shall conduct the arbitration in such manner as it considers appropriate. The shall be no discovery or interrogatory proceedings unless and to the extent deemed by the Arbitral Tribunal to be necessary for fairly disposing of the matter or matters before it. All oral hearings shall be taped recorded and copies made available to all parties. Each party can speak in English or French and file any document in its own language with a translation into the other language. 3.4.7. Any party hereto shall have the right within thirty days from the Notice of Arbitration (or from joinder of a new party to the arbitration) to be joined as a party in any arbitration initiated hereunder between other parties hereto, regardless of whether or not they are parties to the same Operating Agreement. Any party named as a Respondent in the Notice of Arbitration shall have the right within thirty days from such Notice of Arbitration to join as a party in the arbitration one or more other parties hereto. Any party jointed in arbitration, pursuant to this Section, shall have the right within thirty days from such joinder to join in its turn any other party hereto not yet a party to the arbitration. All joinders pursuant to this Section shall be effected by notice communicated to all parties hereto and to the Appointing Authority. 3.4.8. After submission of the statements of defense, or at any later stage, if the Arbitral Tribunal so decides, the Arbitral Tribunal shall draw up in the presence of the parties to the arbitration and in the light of their submissions a document (the "Terms of Reference") which shall include the following particulars: 25 26 - the names and addresses of the arbitrators; - the full names and description of the parties to the arbitration; - the addresses of the parties to the arbitration to which notifications or communications arising in the course of the arbitration may validly be made; - a summary of the respective claims of the parties to the arbitration and the issues on which the Arbitral Tribunal must decide; and - any particular rules of the conduct of arbitration on which the parties to the arbitration may agree or on which the Arbitral Tribunal may decide without prejudice to the power of the Arbitral Tribunal to make further procedural rulings as circumstances may require. The Terms of Reference shall be signed by a duly authorized representative of each party to the arbitration who shall include the attorneys for any such party and by the arbitrators. Should any party to the arbitration refuse to take part in the drawing up of the Terms of Reference or refuse to sign the same, the Terms of Reference shall be communicated to the Appointing Authority, who shall send a copy thereof to each party to the arbitration. The Arbitral Tribunal, if it is satisfied prima facie that the Arbitration Agreement is binding on the defaulting party and that this party has been informed of the arbitral proceedings initiated shall set a fixed limit for the signature of the Terms of Reference by the defaulting party and on expiring of that time limit the arbitration shall proceed and the award to be rendered shall be binding on the defaulting party. The Terms of Reference, when signed, shall be sent by the Arbitral Tribunal to all the Parties hereto who are not yet party to the arbitration and any such party wishing to be joined in the arbitration may do so on notice given within thirty days of such party's receipt of those Terms of Reference to all other parties to the arbitration and the Arbitral Tribunal; the decision of the Arbitral Tribunal on any matters therein included shall be binding on all the Parties who received copies thereof whether or not they have joined the arbitration proceedings. 3.4.9. In the event a matter is submitted to arbitration involving a provision of an Operative Agreement which is invalid, illegal or unenforceable and for which the parties to such agreement have failed to reach a negotiated solution, the Arbitral Tribunal shall have the power to replace or remove such provision as it deems necessary to most closely achieve the original intent expressed by the replaced or removed provision. 3.4.10. Nothing herein shall limit the right of a party to seek provisional or injunctive relief pending resolution of a dispute pursuant to this Agreement. The arbitrators shall be entitled to consider the adequacy of performance by the Parties under all the Agreements in considering any relief requested hereunder and to award such relief including release of a party from its obligations under any or all of the Agreements or requiring a party to perform such obligations under any or all of the Agreements as they determine. 3.5. Enforceability. It is the desire and intent of the parties hereto that the provisions of this Agreement and the Operative Agreements shall be enforced to the fullest permissible extent under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement or the Operative Agreements shall be adjudicated to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only 26 27 with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 3.6. Expenses. Except as the parties may otherwise agree, all fees, commissions and expenses incurred by True North, Publicis, or Communication in connection with the negotiation of this Agreement shall be borne by the party incurring such expenses. All fees, expenses, and costs incurred by True North, Publicis or Communication in connection with the adversarial proceedings referred to in Section 2.8 above shall be borne by the party incurring such fees, expenses or costs. 3.7. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties thereto and their respective successors and assigns. This Agreement may not be assigned by a party hereto, whether by operation of law or otherwise, without the prior written consent of the other party. Any purported assignment in violation of this provision shall be void and of no force or effect. 3.8. Descriptive Headings. Section headings used in the Agreement are used for convenience of reference only and shall in no event be used for interpretation purposes. 3.9. Amendment; Waivers. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 3.10. Severability. It is the desire and intent of the parties that this Agreement and the Operative Agreements shall be enforced to the fullest extent permissible under the governing laws. Accordingly, if any provision of this Agreement or the Operative Agreements shall be adjudicated to be invalid or unenforceable, under French or Delaware law, as applicable, then such provision shall be interpreted under Dutch law, and insofar as it is invalid or unenforceable under Dutch law, such provision shall be interpreted under the laws of France (in the case of Sections 2.2, 2.3 and 2.11) and as under the laws of Delaware in the case of all other provisions. 3.11. Counterparts. This Agreement may be executed in one or more counter-parts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterpart have been signed by each of the parties and delivered to each of the other parties thereto. 3.12. Organization and Authority of Publicis, Communication and PBV. Each of Publicis, Communication and PBV represents and warrants to True North and FCBI as follows: Each of Publicis and Communication is a limited liability entity similar to a corporation duly organized, validly existing and in good standing under the laws of France. PBV is a Besloten Vennootschap duly organized, validly existing and in good standing under the laws of the Netherlands. Each of Publicis, Communication and PBV has full power and authority to execute and deliver this Agreement and each other Operative Agreement to which it is a party and to perform its obligations hereunder and thereunder. All corporate action on the part of each of Publicis, Communication and PBV and its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of all of the obligations of each of Publicis, 27 28 Communication and PBV under this Agreement and each other Operative Agreement to which it is party has been taken prior to closing except for certain corporate actions which will be taken prior to the Closing, which actions are not required for this Agreement to be enforceable. Each of this Agreement and each other Operative Agreement, when executed and delivered, shall constitute the valid and legally binding obligation of each of Publicis, Communication and PBV (assuming that they are parties thereto) enforceable in accordance with its terms. 3.13. Organization and Authority of True North and FCBI. Each of True North and FCBI represents and warrants to Publicis, Communication and PBV as follows: Each of True North and FCBI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to execute and deliver this Agreement and each other Operative Agreement and to perform its obligations hereunder and thereunder. All corporate action on the part of each of True North and FCBI and its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of all of the obligations of each of True North and FCBI under this Agreement has been taken prior to closing except for certain corporate actions which will be taken prior to the Closing, which actions are not required for this Agreement to be enforceable. Each of this Agreement and each other Operative Agreement, when executed and delivered, shall constitute the valid and legally binding obligation of each of True North and FCBI (assuming that they are parties thereto) enforceable in accordance with its terms. 3.14. Minor Disputes. Any dispute arising under this Agreement and the Operative Agreements which involves a claim for the payment of money is an amount not in excess of US $500,000 shall be referred in the first instance by written notice to a committee consisting of an equal number of members to be appointed by the Chief Executive Officer of each of True North and Communication. If such dispute is not resolved by such committee within thirty days, the dispute may be referred by either party to the Chief Executive Officers or Chief Operating Officers of True North and Communication. Disputes which are not resolved within thirty days after giving notice to the Chief Executive or Chief Operating Officers shall be settled in accordance with Section 3.4.1 through 3.4.10 hereof. 28 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers, effective as of the date first written above. PUBLICIS S.A. TRUE NORTH COMMUNICATIONS INC. By: /s/ Maurice Levy By: /s/ Stephen T. Vehslage ------------------ ------------------------- Name: Maurice Levy Name: Stephen T. Vehslage Title: President of Directoire Title: Director, Chairman of Special Committee PUBLICIS COMMUNICATION FCB INTERNATIONAL, INC. By: /s/ Maurice Levy By: /s/ Theodore J. Theophilos ------------------ ---------------------------- Name: Maurice Levy Name: Theodore J. Theophilos Title: Director General Title: Executive Vice President PUBLICIS-FCB EUROPE B.V. TRUE NORTH HOLDINGS NETHERLANDS B.V. By: /s/ Maurice Levy By: /s/ Theodore J. Theophilos ------------------ ---------------------------- Name: Maurice Levy Name: Theodore J. Theophilos Title: President Director Title: Executive Vice President 29 EX-99.C4 18 POOLING AGREEMENT 1 EXHIBIT C(4) Execution Copy 19 May 1997 POOLING AGREEMENT Agreement dated as of May 19, 1997 (this "Agreement") by and among Publicis S.A., a societe anonyme organized and existing under the laws of France ("Publicis"), Publicis Communication, a societe anonyme organized and existing under the laws of France ("Communication") and True North Communications Inc., a Delaware corporation ("True North"). In consideration of the representations, warranties, covenants and agreements set forth in this Agreement and other good and valuable consideration, and independently and unconditionally with respect to any and all other agreements between the parties, the parties agree as follows: ARTICLE I AGREEMENTS 1.1. Obligation of Publicis and Communication to Deliver Pooling Letter. So long as Communication or any of its affiliates owns at least 10% of the issued and outstanding shares of True North Stock (as hereinafter defined), within 30 days after receiving a written request from True North delivered before the third anniversary of this Agreement, Publicis and Communication shall (a) furnish True North, and shall cause any designee of Communication serving on the Board of Directors of True North to furnish True North, with a "pooling letter", in substantially the form attached hereto as Exhibit A, or upon the request of True North, in such other form as is conventional for a transaction accounted for as a pooling of interests under generally accepted accounting principles applied in the United States, and, (b) if reasonably requested, take such other action in support of the transaction (other than a commitment to vote for such transaction) as would be customary with respect to an acquisition or other similar business transaction in which True North may participate; provided that Publicis and Communication may withdraw such pooling letter if any of the following conditions is not met within 90 days after Publicis and Communication shall have furnished such pooling letter. (i) True North has obtained a fairness opinion from a nationally recognized investment bank with regard to the contemplated transaction; (ii) A majority of the non-management directors of True North has voted to approve the terms and conditions of the contemplated transaction; and 2 (iii) True North has obtained pooling letters (or similar action) by all other non-de minimis affiliates of True North. 1.1.1. Not later than 90 days after Publicis and Communication shall have furnished the pooling letter, True North shall call a meeting of the shareholders of True North, to be held within a further 60 days, to vote on the contemplated transaction. If a majority vote of the outstanding shares of True North in favor of the contemplated transaction is not obtained at such meeting (or at an adjournment thereof within such 60 day period), Publicis and Communication may withdraw their pooling letter. 1.1.2. The obligation of Publicis and Communication to furnish a pooling letter pursuant to this Section 1.1 shall expire at the end of the earlier of (a) True North's successful completion of a significant transaction involving the pooling method of accounting or (b) three years after the date of this Agreement. 1.2. Obligations of True North to Deliver Pooling Letter. So long as True North and its subsidiaries own in the aggregate at least 10% of the issued and outstanding shares of Communication Stock, within 30 days after receiving a written request from Communication delivered before the third anniversary of this Agreement, True North shall (a) furnish Communication, and shall cause any designee of True North serving on the Board of Directors of Communication to furnish Communication, with a pooling letter, in a form as is conventional for a transaction accounted for as a pooling of interests under generally accepted accounting principles applied in France, and, (b) if reasonably requested, take such other action in support of the transaction (other than a commitment to vote for such transaction) as would be customary with respect to an acquisition or other similar business transaction in which Communication may participate; provided that True North may withdraw such pooling letter if any of the following conditions is not met within 90 days after True North shall have furnished such pooling letter. (i) Communication has obtained a fairness opinion from a nationally recognized investment bank with regard to the contemplated transaction; (ii) A majority of the outside Directors of Communication has voted to approve the terms and conditions of the contemplated transaction; and (iii) Communication has obtained pooling letters (or similar action) by all other non-de minimis affiliates of Communication. 1.2.1. Not later than 90 days after True North shall have furnished the pooling letter, Communication shall call a meeting of the shareholders of Communication, to be held within a further 60 days, to vote on the contemplated transaction. If a majority vote of the outstanding shares of Communication in favor of the contemplated transaction is not obtained at such meeting, True North may withdraw its pooling letter. 2 3 1.2.2. The obligation of True North to furnish a pooling letter pursuant to this Section 1.2 shall expire at the end of the earlier of (a) Communication's successful completion of a significant transaction involving the pooling method of accounting or (b) three years after the date of this Agreement. ARTICLE II MISCELLANEOUS 2.1. Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof and supersedes all prior agreements and understandings among the parties relating to the subject matter hereof. This Agreement shall be of no force or effect until the Agreement dated as of the date hereof by and among the parties hereto, Publicis-FCB Europe B.V. ("PBV"), FCB International Inc. ("FCBI") and True North Holdings Netherlands B.V. ("TNBV") (the "Main Agreement") has been executed and delivered by each party thereto. 2.2. Notices. Any notice, request or other demand to or upon the parties hereto shall be in writing (including telex and telecopy communication followed by registered mail with return receipt requested) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or when telexed (answer-back received) or telecopied (with receipt acknowledged) addressed to the party for which intended as provided below (or as hereinafter specified by such party by notice hereunder): 3 4 If to Communication or Publicis, to it at: 133 avenue des Champs-Elysees 75380 Paris Cedex 08 France Attention: President-Directeur General Telecopy: 33-1-44-43-75-50 with a copy to: Thomas Kuhn, Esq. Howard, Darby & Levin 1330 Avenue of the Americas New York, New York 10019 United States of America Telecopy: 1-212-841-1010 If to True North, to it at: 101 East Erie Street Chicago, Illinois 60611 United States of America Attention: Chief Executive Officer Telecopy: 1-312-425-5010 with a copy to: General Counsel True North Communications Inc. 101 East Erie Street Chicago, Illinois 60611 United States of America Telecopy: 1-312-425-6354 4 5 2.3. Survival. Sections 2.4.1, 2.4.2, 2.4.3, and 2.5 and agreements and covenants contained in any document delivered pursuant hereto or in connection herewith (unless otherwise expressly provided herein or therein) shall survive the termination of this Agreement and shall remain in full force and effect. 2.4.1. Governing Laws. The provisions of this Agreement, including, without limitation, the validity, interpretation, performance or termination of them, shall be governed by and construed in accordance with (a) to the extent relating to a request under Section 1.1, the laws of the State of Delaware, United States of America, excluding its choice of law rules and (b) to the extent relating to a request under Section 1.2, the laws of France applicable to agreements executed and delivered and to be performed in France, without regard to conflicts of laws principles. 2.4.2. Any claim arising out of a request under Section 1.1 of this Agreement shall be brought only in a court of the State of Delaware or in a United States District Court located within the State of Delaware. This provision shall be enforceable by any party even if another party has related disputes with persons who are not parties to this Agreement. Each of the parties hereto irrevocably consents and submits to the jurisdiction of such courts in any action within the scope of this provision. Each of the parties to this Agreement agrees to the sufficiency of service of process if made by hand delivery pursuant to Section 2.2 of this Agreement. Each of the parties to this Agreement hereby irrevocably waives any objections to jurisdiction or venue in such courts, including but not limited to objections based on the common law doctrine or forum non coveniens or its statutory counterparts. Without limiting the rights of True North to pursue any other legal and equitable remedies available to it for any breach by Publicis and Communication of this Agreement arising out of a request under Section 1.1, Publicis and Communication acknowledge that such a breach would cause a loss to True North which could not be reasonably or adequately compensated in damages in an action at law, that remedies other than injunctive relief could not fully compensate True North for a breach of said covenants and that, accordingly, True North shall be entitled to injunctive relief to prevent any breach or continuing breaches of this Agreement arising out of a request under Section 1.1. It is the intention of the parties hereto that if any term, restriction, covenant or promise is found to be unenforceable and for that reason is unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court. 2.4.3. Any claim arising out of a request under Section 1.2 shall be brought only in a court of France located in Paris, France. This provision shall be enforceable by any party even if another party has related disputes with persons who are not parties to this Agreement. Each of the parties hereto irrevocably consents and submits to the jurisdiction of such courts in any action within the scope of this provision. Each of the parties to this Agreement agrees to the sufficiency of service of process if made by hand delivery pursuant to Section 2.2 of this Agreement. Each of the parties to this Agreement hereby irrevocably waives any objections to jurisdiction or venue in such courts, including but not limited to objections based on the common law doctrine of forum 5 6 non conveniens or its statutory counterparts. Without limited the rights of Communication to pursue any other legal and equitable remedies available to it for any breach by True North of this Agreement arising out of a request under Section 1.2, True North acknowledges that such a breach would cause a loss to Communication which could not be reasonably or adequately compensated in damages in an action at law, that remedies other than injunctive relief could not fully compensate Communication for a breach of said covenants and that, accordingly, Communication shall be entitled to injunctive relief to prevent any breach or continuing breaches of this Agreement arising out of a request under Section 1.2. It is the intention of the parties hereto that if any term, restriction, covenant or promise is found to be unenforceable and for that reason is unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court. 2.5. Enforceability; Severability. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the governing laws. Accordingly, if any provision of this Agreement is or becomes invalid or unenforceable, is held by any competent court or arbitral tribunal to be invalid or unenforceable, or is challenged by either party hereto as being invalid or unenforceable under French or Delaware law, respectively, then such provision shall be interpreted under laws of the State of Delaware or France, respectively, and insofar as it is invalid or unenforceable under Delaware or French law, respectively, be given no effect and shall be deemed not be included in this Agreement, but without invalidating any of the remaining provisions of this Agreement, which other provisions shall remain in full force and effect. The parties shall then negotiate in good faith and shall be bound to replace without delay the invalid or unenforceable provision by a valid provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. 2.6. Expenses. Except as the parties may otherwise agree, all fees, commissions and expenses incurred by True North, Publicis, or Communication in connection with the negotiation, execution, delivery or performance of this Agreement shall be borne by the party incurring such expenses. 2.7. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties thereto and their respective successors and assigns. This Agreement may not be assigned by a party hereto, whether by operation of law or otherwise, without the prior written consent of the other party. Any purported assignment in violation of this provision shall be void and of no force or effect. 2.8. Descriptive Headings. Section headings used in the Agreement are used for convenience of reference only and shall in no event be used for interpretation purposes. 2.9. Amendment; Waivers. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument 6 7 signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 2.10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterpart shall have been signed by each of the parties and delivered to each of the other parties thereto. 7 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers, effective as of the date first written above. PUBLICIS S.A. TRUE NORTH COMMUNICATIONS, INC. By: /s/ Maurice Levy By: /s/ Stephen T. Vehslage -------------------------------- --------------------------------- Name: Maurice Levy Name: Stephen T. Vehslage Title: President of Directoire Title: Director, Chairman of Special Committee PUBLICIS COMMUNICATION By: /s/ Maurice Levy -------------------------------- Name: Maurice Levy Title: Director General 8 EX-99.G1 19 AUDITED CONSOLIDATED FINANCIAL STATEMENTS & NOTES 1 Exhibit g(1) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the inclusion of our report dated March 13, 1997 on the consolidated financial statements of Publicis SA included as an Exhibit to the Schedule 14D-1 and Amendment N(o) 10 to Schedule 13D, dated December 16, 1997 of Publicis SA and Publicis Communication. MAZARS & GUERARD MAZARS & GUERARD LLP Paris New York
December 16, 1997 2 PUBLICIS S.A. INDEPENDENT AUDITORS' REPORT The Boards of Directors and Shareholders Publicis We have audited the accompanying consolidated balance sheet of Publicis as of December 31, 1996 and 1995, and the related consolidated statements of income, shareholder's equity and cash flows, for each of the three years in the period ended December 31, 1996, which have been prepared on the basis of accounting principles generally accepted in France. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in France and in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Publicis at 31 December, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with accounting principles generally accepted in France. Application of accounting principles generally accepted in the United States would have affected shareholder's equity as of December 31, 1996, 1995 and 1994 and net income for each of the three years in the three-year period ended December 31, 1996 to the extent summarised in note 9 to the consolidated financial statements. MAZARS & GUERARD MAZARS & GUERARD LLP Paris New York
Paris, March 13, 1997 2 3 PUBLICIS S.A. CONSOLIDATED BALANCE SHEETS (IN FRF THOUSAND)
ASSETS 12/31/94 12/31/95 12/31/96 --------- --------- --------- FIXED ASSETS................................................ 1,558,405 1,634,341 1,785,704 Gross intangible assets..................................... 733,826 891,874 938,534 Depreciation on intangible assets........................... (72,418) (87,621) (171,861) Gross tangible assets....................................... 1,300,567 1,335,128 1,393,685 Accumulated depreciation on gross tangible assets........... (803,642) (854,929) (935,450) INTANGIBLE AND TANGIBLE FIXED ASSETS, NET................... 1,158,333 1,284,452 1,224,908 Non consolidated investments................................ 35,150 34,885 184,507 Subsidiaries and affiliates accounted for by the equity method.................................................... 302,296 278,736 329,899 Loans and advances to subsidiaries and affiliates........... 35,643 10,482 17,712 Other long-term investments (gross)......................... 50,152 49,420 47,380 Loss provisions relating to long-term investments........... (23,169) (23,634) (18,702) LONG-TERM INVESTMENTS, NET.................................. 400,072 349,889 560,796 CURRENT ASSETS.............................................. 5,420,349 5,607,947 5,753,259 Inventories and work in progress............................ 232,900 257,396 251,971 Advances to suppliers....................................... 65,573 56,226 65,486 Trade accounts receivable................................... 2,815,142 2,751,508 3,034,935 Other debtors............................................... 1,272,479 1,374,929 1,068,481 Cash and cash equivalents................................... 1,034,255 1,167,888 1,332,386 PREPAID EXPENSES............................................ 91,618 78,766 72,485 TOTAL ASSETS................................................ 7,070,372 7,321,054 7,611,448 LIABILITIES CONSOLIDATED SHAREHOLDERS' EQUITY........................... 1,939,958 2,180,288 2,397,066 Retained earnings........................................... 1,212,137 1,269,245 1,373,405 Group net income............................................ 120,456 152,726 185,331 SHAREHOLDERS' EQUITY........................................ 1,332,593 1,421,971 1,558,736 Minority interest in retained earnings...................... 506,235 602,654 685,073 Minority interest in consolidated income.................... 101,130 155,663 153,257 MINORITY INTERESTS.......................................... 607,365 758,317 838,330 LOSS AND CONTINGENCY PROVISIONS............................. 374,423 395,108 363,334 CURRENT LIABILITIES......................................... 4,661,647 4,654,365 4,753,894 Financial debts (other than bank borrowings)................ 215,919 130,471 68,699 Bank borrowings and overdrafts.............................. 543,790 592,617 625,789 Advances on orders.......................................... 160,512 176,419 198,620 Trade accounts payable...................................... 2,163,139 2,083,696 2,243,818 Other creditors............................................. 1,578,287 1,671,162 1,616,968 PREPAID INCOME.............................................. 94,344 91,293 97,154 TOTAL LIABILITIES........................................... 7,070,372 7,321,054 7,611,448
3 4 PUBLICIS S.A. CONSOLIDATED INCOME STATEMENTS (IN FRF THOUSAND)
YEAR ENDED DECEMBER 31, ------------------------------------------- 1994 1995 1996 % 96/95 ----------- ----------- ----------- ------- Sales..................................... 20,002,154 20,542,689 21,964,216 7% Cost of sales............................. (16,563,440) (16,893,334) (18,218,142) REVENUES.................................. 3,438,714 3,649,355 3,746,074 3% Payroll expenses.......................... (1,850,426) (1,992,398) (2,033,681) Administrative expenses................... (1,006,654) (1,073,203) (1,096,932) Total expenses............................ (2,857,080) (3,065,601) (3,130,613) 2% Other operating income.................... 76,389 77,003 62,492 Earnings before depreciation, interest and taxes (loss)............................ 658,023 660,757 677,953 Depreciation and amortization............. (192,629) (192,440) (188,273) Provisions for bad debts.................. (32,281) (22,888) (31,007) Other reserves............................ (27,490) (30,868) (33,711) Financial result, net..................... 21,918 39,315 36,091 CURRENT INCOME............................ 427,541 453,876 461,053 2% Exceptional income (loss)................. (17,484) (5,912) (604) Employee profit-sharing................... (8,026) (11,108) (13,288) Corporate and income tax.................. (157,259) (174,682) (175,018) Income from companies accounted for by the equity method........................... 56,814 46,215 58,144 Exceptional provision..................... (80,000) -- -- TOTAL NET INCOME FROM ORDINARY OPERATIONS.............................. 221,586 308,389 330,287 7% GROUP NET INCOME FOR ORDINARY OPERATIONS (EXCLUDING MINORITY INTERESTS).......... 120,456 152,726 177,565 16% NET EXTRAORDINARY PROFIT.................. 8,301 TOTAL NET INCOME.......................... 221,586 308,389 338,588 10% GROUP NET INCOME (EXCLUDING MINORITY INTERESTS).............................. 120,456 152,726 185,331 21%
4 5 PUBLICIS S.A. CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (IN FRF THOUSAND)
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 ------- ------- ------- USES OF FUNDS Dividends distributed......................................... 81,162 93,415 96,370 Investments in consolidated subsidiaries and affiliates....... 195,560 126,608 49,924 Investments in affiliates accounted for by the equity method...................................................... 24,858 0 13,203 Non-consolidated investments (Publicis Monde network)......... 0 0 151,603 Other long-term investments................................... 149,194 153,297 124,978 Loans and advances to subsidiaries and affiliates............. 0 5,500 5,000 Working capital............................................... 61,917 88,115 (66,357) TOTAL USES OF FUNDS (1)....................................... 512,691 466,935 374,721 SOURCES OF FUNDS Net income.................................................... 221,586 308,389 338,588 Depreciation and amortization................................. 192,629 192,440 188,273 Non-recurring provision....................................... 80,000 0 0 SOURCES OF FUNDS FROM OPERATIONS.............................. 494,215 500,829 526,861 Profit (loss) of companies accounted for by the equity method...................................................... (56,813) (46,215) (58,144) Dividends received from companies accounted for by the equity method...................................................... 14,984 57,787 23,468 Capital increases............................................. 1,436 35,891 16,779 Repayment of loans to subsidiaries and affiliates............. 22,908 0 0 Translation adjustments and other gains (losses).............. (14,159) 3,448 (2,917) TOTAL SOURCES OF FUNDS (2).................................... 462,571 551,740 506,047 NET SOURCES OF FUNDS (2) -- (1)............................... (50,120) 84,805 131,326
5 6 PUBLICIS S.A. CHANGE IN CONSOLIDATED WORKING CAPITAL REQUIREMENT AND CASH FLOW (IN FRF THOUSAND)
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 ------- ------- ------- CHANGE IN WORKING CAPITAL USES OF FUNDS (3) Decrease in loss and contingency provisions................... 0 0 29,755 Increase in inventories and work in progress.................. 65,830 24,496 0 Decrease in loans and other long-term debts................... 0 85,448 61,772 Increase in accounts receivable and other current assets*..... 390,266 18,013 0 456,096 127,957 91,527 SOURCES OF FUNDS (4) Increase in loss and contingency provisions................... 28,613 20,114 0 Decrease in inventories and work in progress.................. 0 0 5,425 Increase in loans and other long-term debts................... 61,278 0 0 Decrease in accounts receivable and other current assets*..... 0 0 49,930 Increase in accounts payable and other debts*................. 304,288 19,728 102,529 394,179 39,842 157,884 CHANGE IN NET WORKING CAPITAL REQUIREMENT (3) - (4)........... 61,917 88,115 (66,357) CHANGE IN CASH POSITION Cash and cash equivalents..................................... (85,430) 133,633 164,498 Less: Banks (liabilities)........................................... (35,310) 48,828 33,172 NET CHANGE IN CASH POSITION................................... (50,120) 84,805 131,326
- --------------- * The sharp rise in accounts receivable and other current assets, and in accounts payable and other debts in 1994 stemmed primarily from the first-time consolidation of the FCA group. 6 7 PUBLICIS S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT EVENTS 1.1. GLOBALIZATION OF THE GROUP The outstanding event of 1996 was the implementation by Publicis S.A. of its strategy to build a worldwide network. This began in Latin America with the acquisition of a 51% interest in Publicis Romero (Mexico) and a 60% interest in Publicis Norton in Brazil. The Group then strengthened its presence in North America with the acquisition of a 70% interest in the BCP Group, Canada's no. 7 advertising agency. This strategy to build a worldwide network spread to Asia with the acquisition, at the end of the year, of 60% of Publicis Eureka in Singapore and of a 30% shareholding in Basic Advertising and Asia Link in the Philippines. These companies have not been consolidated by Publicis at December 31, 1996. For the record, their 1996 billings totaled FRF 1.7 billion, representing 8% of Publicis Group consolidated billings. 1.2. MAIN ACQUISITIONS AND INCREASES IN EQUITY INVESTMENTS MAIN ACQUISITIONS Main acquisitions in 1996 were: in Sweden, 76% of GRO&S, which changed its name to Publicis GRO&S; in the Netherlands, 52% of BMB by Overad; and various small acquisitions and start-ups in Eastern Europe. DISPOSAL Publicis FCB Communication Germany sold its 50% interest in the MC&D Messeagentur agency (which specializes in trade fairs and exhibitions) to the Siemens Group. The disposal of this agency, which had billings of FRF 313 million in 1995, had no material impact on the Group's consolidated financial statements. 1.3. MAJOR NEW ACCOUNTS WON -- Worldwide: Bally, Inmarsat, Tambrands; -- European: Guinness, Hewlett Packard, Stafford Miller. 2. METHODS AND PRINCIPLES OF CONSOLIDATION 2.1. RULES The consolidated financial statements of the Publicis Group were established as at December 31, 1996 in accordance with current laws and regulations in France (the January 3, 1985 Act and the enabling decree of February 17, 1986), with the rules laid down by the Conseil National de la Comptabilite (French accounting standards board), and with generally accepted international accounting policies. 2.2. CONSOLIDATION CRITERIA All companies controlled by Publicis are fully-consolidated. The concept of control is defined, in the first place, in terms of ownership percentage and attendant voting rights. It applies to all companies in which Publicis owns more than 50%. 7 8 Media space sales companies in which it owns a 49% interest are fully-consolidated when Publicis exercises a contractual controlling and commercial management role. Companies over which Publicis exercises a permanent and significant influence, as evidenced by a percentage holding of at least 20%, are accounted for by the equity method. Equity investments and subsidiaries that are not significant in relation to the consolidated financial statements are not consolidated. 2.3. FOREIGN COMPANIES The financial statements of foreign companies are translated at the year-end closing rate. The Group's interest in translation gains or losses on the share capital and reserves of foreign subsidiaries is recorded under "Group interest in consolidated reserves", non-Group interests being recorded in "Minority interests". The choice of this method is justified by the fact that the majority of Publicis units are located in low-inflation countries in Europe, and by its relatively small fixed assets. The main exchange rates used are as follows:
12/31/94 12/31/95 12/31/96 % CHANGE 95/96 -------- -------- -------- -------------- Deutschmark (DEM)...................... 3.45 3.42 3.37 -1.5% Belgian Franc (BEF).................... 0.168 0.166 0.164 -1.2% Peseta (ESP)........................... 0.0406 0.0404 0.0400 -1.0% US Dollar (USD)........................ 5.35 4.90 5.24 6.9% Sterling (GBP)......................... 8.35 7.60 8.90 17.1% Lira (ITL) (000)....................... 3.29 3.09 3.43 11.0% Dutch Florin (NLG)..................... 3.08 3.05 3.00 -1.6% Escudo (PTE)........................... 0.0336 0.0328 0.0335 2.1% Swiss Franc (CHF)...................... 4.08 4.26 3.88 -8.9%
2.4. CLOSING DATE The consolidated financial statements, parent company financial statements and those of nearly all consolidated companies are closed at December 31. The fiscal year of Regie 1 ends on September 30 and the company is fully-consolidated on the basis of its statutory financial statements. Giraudy, which closes its financial statements at the same date, is accounted for under the equity method and the share of profit or loss included in the consolidated financial statements is based on the figures at September 30. 2.5. INTRA-GROUP ELIMINATIONS Reciprocal assets and liabilities and intra-group transactions between fully-consolidated companies are eliminated. Significant intra-group profits and losses, provisions and dividends are eliminated where necessary. 3. ACCOUNTING POLICIES, RULES AND METHODS 3.1. METHODS OF VALUATION AND PRESENTATION Methods of valuation and presentation of the consolidated financial statements and those of consolidated companies in 1996 are unchanged from those applied in the previous year, with the exception of retirement allowances, the annual change in which is recorded in the income statement (see 3.11 Retirement allowances and similar payments). 8 9 3.2. RESEARCH COSTS The advertising industry is now highly technical. Each campaign is subject to studies and research, and pre- and post-testing. Research programs also investigate consumer behavior in various areas. Media buying is another area in which extensive research and modeling is conducted in order to optimize the use and choice of media, and the selection of target publics. Publicis and Optimedia draw on high-performance computerized mathematical models such as Optimix for these purposes. Publicis operates a media research center called the Credome, and the Institute of Context Analysis, an advertising research center. Both centers market highly-sophisticated products. A new research product called Tweens was launched in 1996, and results look highly promising. A large number of employees, generally with a scientific background, are contributing to progress in these fields, foreshadowing trends in consumer behavior and our advertisers' future needs. Many of the expenses incurred in the design and development of these models and studies concern long-lived products and could therefore justifiably be amortized over a period of time. However, Publicis has adopted a conservative accounting policy, and these costs are therefore expensed as incurred. Consequently, these sizable programs are not recorded under assets in the balance sheet. 3.3. INTANGIBLE ASSETS These comprise goodwill arising on acquisition, local goodwill, leasehold rights, and software. ACQUISITION GOODWILL Goodwill arising on first time consolidation consists of the difference between the acquisition cost of shares in consolidated companies and the Group's share in their net assets restated in accordance with Publicis' policies and accounting principles at the time of entry into the Group. These differences are allocated between goodwill arising on valuation or on acquisition, according to whether they are, respectively, identifiable or non-identifiable intangible assets. Goodwill arising on valuation is determined on the basis of verifiable, objective criteria, e.g. market share, trade-marks, trade names, client lists, brands, revenues and earnings, and are therefore identifiable. These assets are not amortized systematically but are subjected to annual review of their market value on the basis of the parameters used at the time of their acquisition. A loss provision or depreciation is recorded if their market value is found to be persistently (more than three years) less than their acquisition cost. All acquisition goodwill at the date of this report has been assigned to identifiable intangible assets. As a result, the consolidated financial statements of Publicis do not record any differences arising on acquisition. Any future acquisition goodwill, i.e. unidentifiable intangible assets, would systematically be amortized over a maximum of 40 years. Relatively small acquisition goodwill arising on first time consolidation (generally less than FRF 1 million) is amortized in full in the year of recognition. LEASEHOLD RIGHTS AND LOCAL GOODWILL These are carried in the balance sheet at their historical acquisition cost, which consists of their cost at the time of their entry into the Group's assets. These items are not amortized, but they are written down when their useful value is lower than their acquisition cost. 9 10 SOFTWARE This comprises: -- software for internal use, which is valued at purchase cost; -- software for commercial use, which is mainly utilized by our computer services subsidiary and is valued at production cost. These are amortized over a period not exceeding three years. 3.4. TANGIBLE ASSETS Tangible assets are valued at cost. This is made up of either their original cost (purchase price plus incidental expenses, e.g. transportation, installation and assembly costs, etc.), or their contributed value (generally their net book value). A limited number of assets have been revalued in accordance with French legislation, but the amounts concerned are insignificant. They are amortized according to the method best-suited to record their economic depreciation, the most commonly-used amortization periods being (straight line method): Buildings................................................ 20 years Fixtures and fittings, and general installations......... 10 years Billboards............................................... 4-7 years Office furniture, and equipment.......................... 5-10 years Vehicles................................................. 4 years Computer hardware........................................ 2-4 years
3.5. FIXED ASSETS PRODUCED BY THE COMPANY The Group creates products for its clients which can be used over several years. To be prudent, however, these items are not recorded as fixed assets. For similar reasons, no value is placed in the consolidated balance sheet on brands, business goodwill and other intangible assets produced by the Group. 3.6. CAPITAL LEASES Assets acquired under finance leases or long-term rental are not capitalized. Corresponding rent is recorded under operating expenses in the year in which it is paid. Rentals remaining to be paid and other liabilities relating to these contracts are shown as contingent liabilities. Capitalization of these assets would not have significant impact on the consolidated balance sheet. 3.7. NON-CONSOLIDATED INVESTMENTS These refer to companies not included in the scope of consolidation (see 2.2 Consolidation criteria). Where appropriate, a loss provision is recorded if their useful value is less than their book value. Useful value is determined on the basis of criteria such as revalued net assets, capitalized earnings, stock market price, the outlook for the sector and the likely impact on the performance of the company, and the strategic value of the shareholding to the Group. Any provisions thus made are recorded under "Provisions for long-term investments". 3.8. LOANS AND ADVANCES TO SUBSIDIARIES AND AFFILIATES This item comprises financial claims held by the Group on companies accounted for by the equity method and nonconsolidated companies. 10 11 A loss provision is booked where the financial position of the subsidiaries concerned gives rise to a risk of non-collection. This provision is included under "Provisions for long-term investments". 3.9. INVENTORIES AND WORK IN PROGRESS This item includes: -- advertising-related work in progress. This consists of technical creative and production work (graphic design, TV and radio production, publishing, etc.) which is billable, but not yet billed, to the client. A write-down charge is taken on these items where their value on completion will be less than their cost of production. Unbillable work and costs incurred in acquiring new clients are not recorded in the balance sheet. -- inventories of merchandise relating to the Group's retailing business (Drugstores) are valued at weighted average costs and are written down when their sale value is less than their cost to the Group. 3.10. DERIVATIVE PRODUCTS The Group makes no use of financial derivative instruments, having little exposure to foreign exchange and interest rate risk. Cash surpluses are invested in liquid, immediately realizable, non-speculative instruments. 3.11. RETIREMENT ALLOWANCES AND SIMILAR PAYMENTS FRENCH COMPANIES The advertising industry collective bargaining agreement to which Publicis is affiliated provides for payment of a retirement allowance to all employees equivalent to 1/4 of one month's remuneration at the last salary level for each year of services within the Group. For executive-grade staff, this entitlement is increased to 1/3 of the monthly salary beyond the tenth year of employment. After 20 years' seniority, employees further qualify for a "loyalty bonus" of between 5 and 20%. In view of labor market trends in general, and in the advertising industry in particular, it has been considered necessary to bring Publicis' criteria for calculating retirement allowances and related entitlements up to date. It has therefore been decided to bring the age from which retirement allowances and related entitlements start to be calculated forward, from 55 to 50 years of age. The methods of calculation remain unchanged: retirement allowances, including social security contributions, are recognized in loss and contingency provisions. Their annual change is recorded in the income statement. For the first year of application of this new rule, a decision was taken, exceptionally, to draw on available reserves the sum representing the impact of this change of method on the previously-established provision. The annual allocation is recognized in the income statement under payroll expenses. Consequently, no further contingent liability exists in this regard. FOREIGN COMPANIES Provision for retirement allowances is made in accordance with local regulations and legislation. The main countries concerned are Germany and Italy, where the following accounting policies are applied: -- vested rights of all employees are revalued on the basis of mortality tables, pursuant to German law and agreements with the labor unions; -- in Italy, an equalization fund is set up consisting of capitalized and revalued vested rights. 11 12 3.12. SALES COMMUNICATIONS SECTOR Billings in this sector mainly consist of sales of advertising produced and of advertising space. MEDIA BUYING IN FRANCE The Sapin Law, which came into force on March 31, 1993, modified the ground rules of our business, obliging media buyers to act under an agency contract. Consequently, media space buying operations conducted by agents (whether advertising agencies or centralized buying units) on behalf of clients are no longer recorded in the sales and purchases ledger accounts. Debts and receivables in respect of these operations are recorded under "Other debtors" and "Other creditors" in the balance sheet. In order to compare our billings with the figures for previous years, and with those of our international competitors in our business, the media billings handled by French centralized media buying units acting under an agency contract are recorded under consolidated billings. French media buying accounts for less than 10% of our consolidated billings. MEDIAS AND MEDIA SPACE SALES Billings here consist of sales of advertising space in media for which we act as space vendors or which are owned by us (newspapers and magazines, radio, cinemas, billboards). DIVERSIFIED BUSINESSES These billings are generated by our retailing, EDP, real estate and administrative services businesses. 3.13. REVENUES These represent the difference between billings and the cost of external production and media purchases. It is the concept commonly used in the advertising sector to measure real activity levels. It is the only truly significant measure of an advertising firm's volume of activity, expressing the true value added by the agencies. 3.14. EXPOSURE TO FOREIGN EXCHANGE RISK The Group has little exposure to foreign exchange risks, since it generates 40% of its billings in France and 53% in the rest of Europe, where the European Monetary System regulates currency fluctuations. However, the Group is exposed to fluctuations in the pound sterling, which has still not joined the EMS. Changes in the dollar exchange rate have no significant impact on the Group's financial statements, only 7% of consolidated billings being generated in dollars. With respect to the results of companies accounted for under the equity method, and because of the consolidation of True North, a 10% variation in the dollar exchange rate would have an approximately FRF 3.7 million impact on total consolidated earnings. The impact of exchange rate variations on the consolidated financial statements (use of year-end closing rates) is discussed where appropriate. Most commercial transactions are conducted in local currency. Worldwide accounts are not managed centrally from either a financial or an administrative standpoint. These accounts are managed in accordance with outline agreements which are transposed to all countries in which our clients operate. Moreover, intra-group cross-border transactions are too small to incur any significant currency risk and are therefore not hedged. 12 13 3.15. EXPOSURE TO INTEREST RATE RISK The group has little exposure to interest rate risk thanks to its strong cash position. Consequently, the Group does not utilize financial instruments to hedge its interest rate risk. 3.16. CORPORATE AND INCOME TAX All income is taxed in accordance with local tax legislation. All tax immediately due or due at some future date is booked on an accrual basis. Tax loss carryforwards and deferred depreciation are not recorded under assets in the consolidated balance sheet, and they are not restated in the income statement. This conservative position has been adopted by the Publicis Group and applies equally to the recognition and to the utilization of the said tax losses. In certain countries in Europe (the United Kingdom, the Netherlands, Germany, etc.), we have elected to create consolidated tax groups combining all of our companies in those countries, allowing profits to be offset against losses in the different units concerned. Average income tax rates in the main countries in which we operate were as follows in 1996: France..................... 36.66% Italy(2)................... 53% Germany(1)................. 44% and 50% Netherlands................ 35% Belgium.................... 41% Portugal................... 41% Spain(2)................... 35% Switzerland................ 30% United Kingdom............. 33% United States.............. 34%
- --------------- (1) 44% on distributed income, and 50% on undistributed income. (2) The Group does not pay income tax in Spain and Italy. 4. NOTES AND COMMENTS RELATING TO THE CONSOLIDATED BALANCE SHEET 4.1. SCOPE OF CONSOLIDATION The list of consolidated companies at December 31, 1996, with details of methods of consolidation and ownership percentages, is attached. As stated in 1.1 Globalization of the Group, acquisitions made by Publicis in 1996 in Latin America (Romero, Norton), Canada (BCP) and Asia (Eureka and Basic-Asia Link) are not consolidated at December 31, 1996. The other consolidation changes that took place in 1996 did not have a material impact on the financial statements of the Publicis Group at December 31, 1996. 4.2. INTANGIBLE ASSETS Changes in the year were as follows:
GROSS AMOUNT CHANGES IN GROSS AMOUNT AT 1996 CURRENCY AT IN THOUSANDS OF FRF 12/31/1995 ACQUISITIONS DISPOSALS AND OTHER 12/31/1996 ------------------------ ------------ ------------ ---------- --------- ------------ Differences arising on valuation............. 742,146 56,162 (20,081) 2,558 780,785 Local goodwill.......... 91,594 5,756 (1,848) (64) 95,438 Software, leasehold rights, and other..... 58,134 4,177 -- -- 62,311 TOTAL................... 891,874 66,095 (21,929) 2,494 938,534
13 14 DIFFERENCES ARISING ON VALUATION The main goodwill items arising on valuation in 1996 were: -- FRF 23,715,000 following the acquisition of additional investments by Publicis-FCB Europe in Northern Europe (Norway, Sweden and Finland); -- FRF 19,984,000 following the acquisition of additional investments by Publicis Communication in FCA Amsterdam and FCA/BMZ CID Madrid. At December 31, 1996, gross valuation differences recognized in the consolidated balance sheet were as follows: -- advertising agencies in Europe: FRF 686,622,000; -- media buying in France, Publicis Centre Media: FRF 52,565,000; -- Publicis in the United States: FRF 15,090,000; -- Media & Advertising Space Sales sector: FRF 26,508,000 LOCAL GOODWILL Le Monde Publicite, in which we hold a 49% interest, owns the commercial advertising and classified advertising space sales division of the French newspaper Le Monde. A value of FRF 30 million was placed on this local goodwill at the time of the share transfer operations in 1985; this amount is not amortized. Its current value is assessed as exceeding its book value. The technical support contracts and financial operating terms of this advertising space sales unit were renewed for a period of ten years in 1995. The acquisition cost of the local goodwill corresponding to the advertising space sales contract with the weekly magazine l'Evenement du Jeudi is also included under this heading for a gross amount of FRF 26 million, with a FRF 8 million amortization charge. The other advertising space sales contracts held by the Group, including the one for the newspaper Liberation(also renewed in 1995), and for Pariscope, are not recognized in the consolidated balance sheet. The other business franchises included in this item were acquired from advertising agencies, mainly in France, the recorded amount being FRF 39,022,000. Business franchises created by the company itself are not recognized in the balance sheet. Net amounts for intangible assets are as follows:
GROSS VALUE ACCUMULATED NET VALUE IN THOUSANDS OF FRF AT 12/31/1996 AMORTIZATION AT 12/31/1996 ------------------------------------- ------------- ----------- ------------- Differences arising on valuation..... 780,785 (121,616) 659,169 Local goodwill....................... 95,438 (10,393) 85,045 Software, leasehold rights and other.............................. 62,311 (39,852) 22,459 TOTAL................................ 938,534 (171,861) 766,673
A portion (FRF 40,000,000) of the extraordinary provision made on Italy in 1994 and recorded in loss and contingency provisions, was assigned in 1996 to amortization of the goodwill recognized on Italy. It is included in the FRF 121,616,000 referred to above. Further, no capital gain on the disposal of MC&D Messeagentur is recognized in the consolidated financial statements. This disposal resulted in an increase of approximately FRF 12 million in amortization of intangible assets relating to our German operations. Net intangible assets excluding software and leasehold rights, totaling FRF 744,214,000 are split between the Publicis Group's share (FRF 426,925,000) and minority interests (FRF 317,289,000). 14 15 The net amounts shown above do not reflect the economic value of the Group's intangible assets, since this is substantially greater on the basis of their fair market value. 4.3. TANGIBLE ASSETS The following changes occurred in the Group's tangible assets in 1996:
CHANGES IN 1996 GROSS VALUE --------------------------- GROSS VALUE AT CONSOLIDATION CURRENCY AT IN THOUSANDS OF FRF 12/31/1995 ACQUISITIONS DISPOSALS CHANGES AND OTHER 12/31/1996 - ----------------------- ----------- ------------ --------- ------------- --------- ----------- Land and buildings..... 163,095 1,723 -- -- 819 165,637 Other.................. 1,172,033 151,357 (93,403) (14,019) 12,080 1,228,048 TOTAL.................. 1,335,128 153,080 (93,403) (14,019) 12,899 1,393,685
Net value of tangible assets:
GROSS VALUE AT ACCUMULATED NET VALUE IN THOUSANDS OF FRF 12/31/1996 DEPRECIATION AT 12/31/1996 --------------------------------------- ----------- ----------- ------------- Land and buildings..................... 165,637 (46,732) 118,905 Other.................................. 1,228,048 (888,718) 339,330 TOTAL.................................. 1,393,685 (935,450) 458,235
LAND AND BUILDINGS The gross value of the Publicis Group's real estate holdings is recorded at FRF 166 million in the balance sheet, with a net amount of FRF 119 million. The main asset is the headquarters building at 133, avenue des Champs-Elysees, a prime Paris location. This 7-floor building contains about 12,000 square meters of office space, occupied by the Drugstore Champs-Elysees and two movie theaters open to the public. The Group is also joint-owner of the building that houses the Drugstore Matignon (floorspace approximately 2,400 square meters) and a movie theater, at the "Rond-Point des Champs-Elysees". Our subsidiary Metrobus owns three stories of the building at 15 rue du Dome, Boulogne, where its headquarters are located. Outside France, our advertising agencies own premises in downtown districts in Brussels, Amsterdam and Lisbon with a total floorspace of approximately 6,000 square meters. OTHER TANGIBLE ASSETS "Other tangible assets" include substantial computer facilities dedicated to the creation and production of advertising material, management of media buying, and administrative operations. Most of the advertising agencies are now equipped with large installed bases of networked microcomputers. SGIP, the Group's information technology and electronic communications subsidiary, is equipped with a client/server system based on a 31 MIPS ES 9000 main-frame, located at its teleport in the Bastille district of Paris. This system hosts the Group's Internet, videotext and network facilities with a capacity of 3,000 connections. Gross tangible assets also comprise FRF 345 million of billboards and street furniture belonging to the Group's billboard operating companies, chiefly Publex in the Netherlands and Metrobus, a public transit and airports advertising space sales unit operating in France, Spain and Portugal. This equipment is written down over a maximum of seven years. 15 16 4.4. NON-CONSOLIDATED INVESTMENTS FRF 151,603,000 of this amount consists of shares in companies acquired by Publicis at the end of 1996 (see 1.1 Globalization of the Group), which will be consolidated as from January 1, 1997. The balance, i.e., FRF 32,904,000, comprises shares of companies over which Publicis exercises no significant influence or whose unit value is too small to meet the consolidation criteria. Provision for the latter is made under the heading "provisions for long-term investments" for an amount of FRF 13,915,000, or a net amount of FRF 18,989,000, versus a net amount of FRF 15,257,000 at December 31, 1995. 4.5. SUBSIDIARIES AND AFFILIATES ACCOUNTED FOR BY THE EQUITY METHOD
BALANCE SHEET AMOUNT ------------------------------- IN THOUSANDS OF FRF 1994 1995 1996 - -------------------------------------------------------------- ------- ------- ------- True North Communications (20%)............................... 124,822 92,895 122,057 Giraudy (29.23%).............................................. 126,399 130,033 149,778 Mediavision (33.30%).......................................... 15,476 16,287 17,294 Other......................................................... 35,599 39,521 40,770 TOTAL......................................................... 302,296 278,736 329,899
TRUE NORTH, in which Publicis Communications holds a 20% interest, is listed on the New York Stock Exchange. Our worldwide partner is the n(o) 10 advertising group, with billings of USD 3.3 billion. It has operations in the United States, Southern and Central America, and in the Asia-Pacific zone. Its main clients are ATT, SC Johnson, Levi Strauss, Citibank, Mazda, Kraft General Food and Mattel. True North's group net income (excluding minority interests) totaled USD 26,630,000 versus USD 19,653,000 in 1995, in which year a one-time charge of USD 13 million was recorded. The contribution of Publicis Communication and Publicis FCB Europe to the earnings of True North for 1996 totaled USD 15.7 million. Consolidated total assets of True North stand at USD 930,000,000, with net assets of USD 241,000,000. True North's financial statements are drawn up in accordance with US accounting standards (GAAP) which are akin to the ones applied by the Publicis Group. They are audited by Arthur Andersen, which has certified the 1996 financial statements. The 4,658,000 shares in True North held by Publicis Communication (which is the main shareholder) are valued at FRF 122,057,000 in the consolidated balance sheet of the Publicis Group. This figure represents our interest in the restated net assets of True North. Since the beginning of the relationship, owing to the very particular nature of the alliance between Publicis and True North, which is treated as a "pooling of interests", goodwill recognized in True North's balance sheet has been eliminated for the purpose of computing our interest in the net assets of True North. True North had a market capitalization of approximately USD 500 million at February 28, 1997, on the basis of shares outstanding at December 31, 1996 and Publicis Communication's interest in True North contains an unrealized gain of approximately FRF 430 million. As a consequence of deep strategic divergences between Publicis Communication and True North, the alliance was terminated since January 1995, with effect from February 29, 1996. On February 19, 1997, the two groups announced an agreement to resolve their differences. Details of this agreement are provided in Section 6.2 Subsequent events. GIRAUDY is France's number 1 4x3 meters billboard operator and is 29.23% held by Publicis S.A. The shares are traded on the Paris USM ("marche Hors Cote"). Consolidated billings total FRF 1.2 billion and consolidated net income FRF 34,019,000. 16 17 Consolidated total assets stand at FRF 1.1 billion, with consolidated net assets of FRF 510,408,000. Giraudy's shares are valued at FRF 150 million in the consolidated balance, which is less than their fair market value. Although it operates mainly in France, Giraudy has in recent years expanded its operations in Europe (mainly in Spain). MEDIAVISION, a movie theater advertising space sales unit, is one-third held by Publicis S.A. The company generated a net income of FRF 9,460,000 on billings of FRF 165 million in 1996. Mediavision holds interests in Belgium, the USA, the UK, and Spain. CHANGE IN SUBSIDIARIES AND AFFILIATES ACCOUNTED FOR BY THE EQUITY METHOD Between December 31, 1995 and December 31, 1996, this item increased by FRF 58 million, less FRF 26 million in dividends paid, representing 1996 earnings of subsidiaries and affiliates accounted for by the equity method. This item also increased to FRF 13 million as a result of the acquisition of an additional stake in Giraudy. It was further increased by FRF 5 million as a result of the favorable impact of currency changes on True North shares. 4.6. OTHER LONG-TERM INVESTMENTS This item amounts to FRF 47,380,000 in the 1996 balance sheet, versus FRF 49,420,000 at December 31, 1995. It mainly concerns amounts paid to outside parties as guarantees and deposits (for the most part real estate rental guarantees) and loans made by Group companies (construction loans, etc.). 4.7. INVENTORIES AND WORK IN PROGRESS
BALANCE SHEET AMOUNT -------------------------------- IN THOUSANDS OF FRF 1994 1995 1996 ---------------------------------------------------- -------- -------- -------- Inventories of merchandise relating to retailing and catering (Drugstores)............................. 18,654 17,395 14,994 Billboard operating companies' spare parts and equipment......................................... 16,587 23,439 18,570 Advertising and other work in progress.............. 197,659 216,562 218,407 TOTAL............................................... 232,900 257,396 251,971
4.8. ADVANCES TO SUPPLIERS This item increased from FRF 56,226,000 at December 31, 1995 to FRF 65,486,000 at December 31, 1996. It shows down payments and advances paid to suppliers by the Group: -- prior to the start of work on orders (advances), -- upon proof of partial execution of orders (down payments). 4.9. TRADE ACCOUNTS RECEIVABLE These are recorded in the consolidated balance sheet at FRF 3,034,935,000 at December 31, 1996, versus FRF 2,751,508,000 one year earlier. This item comprises all receivables pertaining to the operating cycle together with bills receivable and invoices pending relating to operations for the year. These receivables are all considered to be current assets. Accounts receivable relating to media buying in France are recording under "Other debtors" given the specific nature of this sector. The average client credit period at December 31, 1996, was 46 days, unchanged from December 31, 1995. 17 18 4.10. OTHER DEBTORS This item amounted to FRF 1,068,481,000 at December 31, 1996, as against FRF 1,374,929,000 one year earlier. It comprises amounts owed by advertisers to French media buying units and advertising agencies in respect of advertising space bought under agency contracts rendered mandatory by the "Sapin Law", together with tax, social security and other receivables. 4.11. CASH AND CASH EQUIVALENTS Cash and cash equivalents chiefly comprises bank accounts in credit and marketable securities. Short-term cash surpluses are invested in liquid instruments such as mutual funds and investment funds, or similar, and are realizable at short notice. The Group does not make use of derivative financial instruments. Our Group is made up of legally distinct entities subject to a variety of local legislation and with different shareholders. It is therefore not possible to practice any netting of debit balances (cash and cash equivalents under assets) and credit balances (bank overdrafts) either within a single country or between legally separate units. In certain cases, needless to say, cash balances are managed on a centralized basis, using surpluses from one subsidiary to finance the needs of others, charging a market rate of return on such transfers. The net free cash balance of the Publicis Group at December 31, 1996 (in FRF) was: Cash and cash equivalents............................. 1,332,386,000 Bank overdrafts....................................... (625,789,000) NET CASH BALANCE...................................... 706,597,000
This cash balance may be considered to be representative of the Group's average free cash position, given the relatively small seasonal variations. The net cash balance shows an increase of FRF 131,326,000 over the December 31, 1995 figure of FRF 575,271,000. The improvement stems from the non-reinvested balance of funds provided from operations for the year (see Statement of sources and uses of funds). 4.12. PREPAID EXPENSES This item fell from FRF 78,766,000 in 1995 to FRF 72,485,000 at December 31, 1996 and mainly comprises deferred expenses and prepaid expenses. It also includes translation adjustments on subsidiaries, corresponding to potential losses on currency translation recognized at year-end on foreign-currency denominated debts and receivables. Provisions are made for potential losses and reported under loss and contingency provisions. 18 19 4.13. SHAREHOLDER'S EQUITY A) CHANGE The change in Group net assets and non-Group interests between December 31, 1995 and December 31, 1996, before 1996 income, is analyzed as follows:
GROUP NON- IN THOUSANDS OF FRF TOTAL SHARE GROUP -------------------------------------------------------- --------- --------- ------- Net assets at December 31, 1995......................... 1,871,899 1,269,245 602,654 1995 income............................................. 308,389 152,726 155,663 THEORETICAL NET ASSETS AT DECEMBER 31, 1996............. 2,180,288 1,421,971 758,317 1996 operations with an impact on net assets: -- Publicis S.A. capital increase (and additional paid-in capital).................................... 8,979 8,979 0 -- Distribution of parent company dividends........... (32,244) (32,244) 0 -- Dividends paid by subsidiaries to minority shareholders........................................ (59,915) 0 (59,915) -- Adjustment to provision for retirement allowances.......................................... (37,396) (25,443) (11,953) -- Translation adjustments............................ 5,807 2,207 3,600 -- Consolidation changes and other.................... (7,041) (2,065) (4,976) NET ASSETS BEFORE 1996 INCOME, AT DECEMBER 31, 1996..... 2,058,478 1,373,405 685,073
DIVIDENDS PAID -- by parent company: FRF 4 per share with a par value of FRF 25, paid in respect of 1995 by Publicis S.A. on the 8,061,125 shares making up the share capital. -- by subsidiaries to minority shareholders: this mainly concerns dividends paid by the subsidiaries of Publicis. FCB Europe to non-Group shareholders (FRF 20 million) and minority shareholders' interests in the dividends paid by subsidiaries. ADJUSTMENTS TO PROVISION FOR RETIREMENT ALLOWANCES As mentioned in 3.11 Accounting policies, rules and methods, the Group modified the accounting rules relating to the provision for retirement allowances. The resulting additional provision in respect of prior years was drawn from reserves. The amount concerned was FRF 37 million, of which FRF 25 million was drawn from the Group's interest in consolidated reserves. TRANSLATION ADJUSTMENTS As mentioned in 2.3 Foreign companies, translation adjustments recognized from one year to the next on the occasion of the translation of the financial statements of foreign subsidiaries are recorded under net assets, and are split between "Group interest" and "Minority interests" on the basis of ownership percentages. The main translation adjustments recorded in 1996 flow from the rise in the dollar exchange rate, which increased 7% from FRF 4.90 at December 31, 1995 to FRF 5.24 at December 31, 1996, and in that of sterling, which increased 17% from FRF 7.60 at December 31, 1995 to FRF 8.90 at December 31, 1996. These rises against the franc were partially offset by depreciation of the Dutch florin, which fell from FRF 3.05 at December 31, 1995 to FRF 3 at December 31, 1996. CHANGES IN THE SCOPE OF CONSOLIDATION AND OTHER FACTORS This item chiefly concerns: -- a fall of FRF 12,087,000 in minority interests (non-Group share) at Publicis--FCB Europe, as a result of the acquisition of additional shareholdings, mainly in Norway, and the withdrawal of minority shareholders from Publicis MC&D Messeagentur following the sale of that company to Siemens; 19 20 -- FRF 7,800,000 representing the fraction subscribed by minority shareholders in the increase in the capital of Le Monde Publicite. B) ANALYSIS Group net assets are analyzed as follows (in thousands of FRF): Authorized capital...................................... 202,454 Parent company reserves................................. 934,548 Consolidated reserves................................... 236,403 GROUP NET ASSETS AT DECEMBER 31, 1996................... 1,373,405
4.14. LOSS AND CONTINGENCY PROVISIONS These totaled FRF 363,334,000 at December 31, 1996, versus FRF 395,108,000 for the previous year, representing a decrease of FRF 31,774,000. This change stems primarily from the allocation of a portion -- FRF 40 million -- of the one-time provision on Italy to amortization of Italian goodwill (see 4.2 Intangible assets). These provisions are by definition intended to cover the contingencies and charges that arise in the conduct of our businesses. By nature, these provisions are hard to quantify with precision. The Publicis Group follows an extremely conservative policy in setting up these provisions and exercises great caution in appraising risks. Generally speaking, annual allocations to provisions for contingencies and charges are tax-deductible in the countries in which they are set up. However, some of them inherently do not qualify for tax deductions, and Publicis prefers not to deduct others from taxable income to be prudent and in order to avoid disputes with the local tax authorities. At December 31, 1996, nearly half of all loss and contingency provisions were not treated as tax deductible and are therefore unencumbered by any potential tax liability. These provisions may therefore be considered to be permanent resources. PROVISIONS FOR RETIREMENT ALLOWANCES This item is the main component of loss and contingency provisions, totaling FRF 143,146,000 at December 31, 1996 compared with FRF 99,441,000 one year earlier (adjusted for consolidated changes, ie excluding MC&D Messeagentur), representing a net new allocation of FRF 43,705,000. The policies governing the setting up and utilization of these provisions are described in section III -- Provisions for retirement allowances or equivalent. This balance includes FRF 74,626,000 in provisions set up outside France, concerning Germany and Italy. EXTRAORDINARY PROVISION FOR ITALY Part of this provision (total FRF 59,225,000 at December 31, 1995) was allocated to amortization of intangible assets (FRF 40,000,000), and part was reclassified in the provision for general risks (FRF 19,225,000). PROVISIONS FOR LAWSUITS, GENERAL RISKS AND CUSTOMERS These totaled FRF 92,780,000, in provisions for general risks, versus FRF 92,441,000 at December 31, 1995. 20 21 OTHER PROVISIONS These totaled FRF 127,407,000 in 1996, versus FRF 116,330,000 in 1995, and they comprise provisions relating to major repairs, computer and removal expenses, for personnel costs, taxation, financial risks, and miscellaneous risks. 4.15. FINANCIAL DEBTS (OTHER THAN BANK BORROWINGS) These totaled FRF 68,699,000 at December 31, 1996, versus FRF 130,471,000 one year earlier. This item mainly concerns debts payable to former shareholders of consolidated subsidiaries and balances payable, as well as security deposits received. 4.16. ADVANCES RECEIVED ON ORDERS These totaled FRF 198,620,000 in 1996 versus FRF 176,419,000 the previous year. The item records amounts received from clients, following conclusion of the sale, in the form of down payments on the stipulated contract price. A distinction is made between: -- advances, which are paid prior to the start of work on a contract, -- down payments, which are paid upon proof of partial execution. 4.17. TRADE ACCOUNTS PAYABLE This item totaled FRF 2,243,818,000 at December 31, 1996, compared with FRF 2,083,696,000 in 1995. It comprises all operating debts (including bills payable and invoices awaited) relating to the acquisition of goods and services, with the exception of those pertaining to media space buying in France, which is conducted within the framework of the "Sapin Law" (recorded under "Other creditors"). Average supplier credit in 1996 was 40 days (unchanged from 1995). 4.18. OTHER CREDITORS These amounted to FRF 1,616,968,000 at December 31, 1996, versus FRF 1,671,162,000 in 1995. Amounts payable to advertising media in France by media buying units under agency contracts rendered mandatory under the "Sapin Law" are recorded under "Other creditors" (see 3.2 Sales). This item also includes liabilities vis-a-vis personnel, social security agencies, the State and other outside creditors. 4.19. PREPAID INCOME These amounts include prepayments and goodwill under liabilities. This item totaled FRF 97,154,000 at December 31, 1996, against FRF 91,293,000 in 1995. 21 22 4.20. FINANCIAL RATIOS
1994 1995 1996 ------------- ------------- ------------- Surplus of equity over fixed assets(FRF)....... 381,552,000 545,948,000 611,363,000 Equity/Fixed assets ratio...................... 1.24 1.33 1.34 Fixed assets/Total assets...................... 22% 22% 23% Equity/Total assets............................ 27% 30% 31% Group net assets (FRF): -- before goodwill write-offs................ 1,332,593,000 1,421,971,000 1,558,736,000 -- after goodwill write-offs................. 1,070,856,000 1,037,128,000 1,185,627,000 Financial debt/Equity ratio.................... nil(1) nil(1) nil(1)
- --------------- (1) The Group has a positive net cash balance. 5. NOTES TO THE CONSOLIDATED INCOME STATEMENT 5.1. BREAKDOWN OF BILLINGS AND INCOME
GROUP INCOME FROM ORDINARY GROUP NET OPERATIONS 1996 INCOME IN FRF MILLION (EXCL. --------------------------- MINORITY EXCL. INCL. SHAREHOLDERS) INCOME FROM INCOME FROM 1996 IN FRF COMPANIES COMPANIES MILLION ACCOUNTED ACCOUNTED ----------- 1996 FOR FOR AFTER NET BILLINGS BY THE BY THE ONE-TIME BY BUSINESS IN FRF EQUITY EQUITY CAPITAL SEGMENT BILLION METHOD METHOD GAIN - ------------------------------------------------ ------------ ----------- ----------- ----------- Communications.................................. 19.5 88% 114 87% 146 82% 146 79% Media and media sales division.................. 2.4 11% 30 23% 45 25% 38 21% Other activities................................ 0.2 1% (13) -10% (13) -7% 1 1% Intra-Group..................................... (0.2) n.s. -- -- -- -- -- -- TOTAL........................................... 22.0 100% 132 100% 178 100% 185 100%
GROUP INCOME FROM ORDINARY GROUP NET OPERATIONS 1996 INCOME IN FRF MILLION (EXCL. --------------------------- MINORITY EXCL. INCL. SHAREHOLDERS) INCOME FROM INCOME FROM 1996 IN FRF COMPANIES COMPANIES MILLION ACCOUNTED ACCOUNTED ----------- 1996 FOR FOR AFTER NET BILLINGS BY THE BY THE ONE-TIME BY GEOGRAPHIC IN FRF EQUITY EQUITY CAPITAL REGION BILLION METHOD METHOD GAIN - ------------------------------------------------ ------------ ----------- ----------- ----------- France.......................................... 8.9 40% 70 53% 83 47% 91 49% Rest of Europe.................................. 11.6 53% 58 44% 60 34% 60 33% United States................................... 1.6 7% 4 3% 34 19% 34 18% Intra-Group..................................... (0.2) n.s -- -- -- -- -- TOTAL........................................... 22.0 100% 132 100% 178 100% 185 100%
22 23 5.2. BREAKDOWN OF BILLINGS OUTSIDE FRANCE
BILLING IN FRF % OF TOTAL BILLION BILLINGS ------ ---------- Germany.................................................................... 3.9 18% United Kingdom............................................................. 2.1 10% United States.............................................................. 1.6 7% Netherlands................................................................ 1.5 7% Italy...................................................................... 0.8 4% Spain...................................................................... 0.6 3% Portugal................................................................... 0.6 3% Switzerland................................................................ 0.5 2% Belgium.................................................................... 0.4 2% Other...................................................................... 1.1 5% TOTAL OUTSIDE FRANCE....................................................... 13.2 60%
5.3. WORK FORCE
1994 1995 1996 ------ ------ ------ BY GEOGRAPHIC REGION France............................................................ 2,825 2,982 2,975 Rest of Europe.................................................... 2,432 2,694 2,785 United States..................................................... 283 290 278 BY BUSINESS SEGMENT Communications.................................................... 4,155 4,593 4,731 Media and advertising space sales................................. 718 728 766 Diversified business.............................................. 667 645 541 TOTAL............................................................. 5,540 5,966 6,038
BY FUNCTION Sales................................................................................ 45% Creative............................................................................. 20% Administrative/Management............................................................ 20% Production........................................................................... 10% Media/Research....................................................................... 5% TOTAL................................................................................ 100%
5.4. PAYROLL EXPENSES These totaled FRF 2,033,681,000 in 1996, versus FRF 1,992,398,000 in 1995 and comprise all staff-related expenses, namely: -- personnel remuneration (salaries, wages, commissions, bonuses, incentive plan and paid vacation leave); -- social security contributions and staff health and related benefits. Fiscal charges based on salaries are recorded in "Administrative expenses". 23 24 5.5. ADMINISTRATIVE EXPENSES These totaled FRF 1,096,932,000 in 1996, compared with FRF 1,073,203,000 the previous year and comprise, among others: -- rents, and rental and condominium charges; -- office supplies, consumables and material consumed in the year; -- computer costs (external subcontracting and processing); -- fees, commissions and brokers' fees; -- research (see 3.2 Research costs); -- insurance premiums; -- advertising and public relations expenses to promote companies (advertising campaigns, catalogs and other printed material, conferences, seminars, publicity material and bonuses, gifts to clients); -- transport, travel and entertainment expenses; -- postal expenses and bank charges; -- other sundry administration expenses (royalties, directors' fees, losses on bad debts, gifts and fringe benefits, etc.); -- taxation (other than corporate income taxes) and equivalent payments, mainly comprising payroll taxes and other tax contributions; -- other routine operating expenses. 5.6. DEPRECIATION AND AMORTIZATION This item totaled FRF 188,273,000 in 1996, versus FRF 192,440,000 the previous year. It comprises allocations to operating depreciation and amortization. Extraordinary charges corresponding to definitive write-downs and exceptional depreciation are recorded under exceptional profits or losses, as appropriate. Amortization charges are determined on the basis of amortization schedules adopted for the different categories of amortizable assets discussed in 3.3 Intangible assets and 3.4 Tangible assets. The allocation for the year flows from: -- fixed assets depreciation: FRF 150 million; -- amortization and write-downs of intangible assets and deferred expenses: FRF 12 million; -- amortization of small valuation differences or for occasional impairment of value relative to fair market value of intangibles (see section III -- Intangible assets): FRF 26 million. 5.7. OPERATING RESERVES These totaled FRF 33,711,000, versus FRF 30,869,000 in 1995. This item comprises allocations to provisions for asset write-downs (excluding customer accounts, which are recorded under "Provisions for doubtful debts") and allocations to provisions for operating risks and charges. 5.8. FINANCIAL RESULT, NET This item corresponds to the net balance of financial expense and revenues, after eliminating dividends paid by consolidated subsidiaries to their parent company (FRF 36,091,000 for 1996, versus FRF 39,315,000 in 1995). 24 25 5.9. EXCEPTIONAL INCOME (LOSS) The Group registered a net exceptional loss of FRF 604,000 in 1996 versus a loss of FRF 5,912,000 in 1995. All amounts recorded under this item correspond to one-time charges or gains determined in accordance with the French chart of accounts. The main components of this item are: -- exceptional charges and gains on business operations (penalties, fines, gifts, irrecoverable debts, grants and subsidies, etc.), -- one-time charges and gains on capital operations (asset disposals); however, the net capital gain realized on the sale of the Drugstore Saint-Germain leasehold has been presented under a separate heading, owing to its nature and amount (see paragraph 5.10 below), -- allocations to and releases of exceptional amortization charges and provisions (on fixed-assets, tax-regulated provisions and exceptional write-downs, exceptional items, etc.). However, this item only records amounts that are exceptional by their amount or their nature, but it does not include exceptional overhead charges. Consequently, all exceptional personnel expenses and overheads generated on the occasion of mergers or geographical transfers of agencies continue to be booked under overheads. 5.10. NET EXTRAORDINARY PROFIT As announced last year, we agreed to sell the leasehold of the Drugstore Saint-Germain to Giorgio Armani. Since all of the suspensive conditions were lifted in March 1996, the sale became effective at this date. This operation generated an extraordinary capital gain of approximately FRF 15 million. Moreover, Medias et Regies Presse was obliged to pay an exceptional FRF 7 million indemnity to a newspaper. The total net effect of these operations was an aggregate one-time profit of FRF 8,301,000, in which the Group's interest amounted to FRF 7,766,000. 5.11. EMPLOYEE PROFIT-SHARING This totaled FRF 13,288,000 in 1996, versus FRF 11,108,000 the previous year. This item is peculiar to France and does not include amounts recorded under the statutory employee profit-sharing plan provided under the French government ordinance of October 21, 1986 and the enabling decree of July 17, 1987. All other variable components of remuneration are recorded under "Payroll expenses". 5.12. CORPORATE AND INCOME TAX These taxes are booked in accordance with the methods described in 3.16 Corporate and income tax. They totaled FRF 175,018,000 in 1996, compared with FRF 174,682,000 in 1995. Our subsidiary Publicis Conseil benefited from tax saving of approximately FRF 16 million in 1996 resulting from the utilization of FRF 44 million tax loss carry forwards from FCAB. Ordinary tax loss carry forwards and deferred depreciation at Publicis Conseil, and still available at December 31, 1996, totaled FRF 7,510,000 (which may be carried forward indefinitely). At current tax rates, this represents a potential tax saving of FRF 2,750,000. Long-term capital losses eligible for carry forward (until 2003 and 2004) amount to FRF 83,855,092. At December 31, 1996, Publicis S.A. and Publicis Communication held tax loss carry forwards (until 1999 and beyond) and deferred depreciation of FRF 25,119,000 and FRF 9,690,000 respectively. 25 26 No tax loss eligible for carryforward is recorded upon consolidation, in keeping with the prudent policies applied by the Group, even though there is a high probability of subsequent recovery. The average corporate tax rate (applied to current income) was 38%. Tax paid in France totaled FRF 61,370,000 (of which FRF 5.6 million corresponded to the additional 10% tax levy), and those paid abroad amounted to FRF 113,648,000. 5.13. INCOME FROM COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
GROUP INTEREST IN INCOME (LOSS) ----------------------------- IN THOUSANDS OF FRF 1994 1995 1996 ----------------------------------------------------- ------- ------- ------- True North Communications (20%)...................... 39,980 26,741 37,246 Giraudy (29.23%)..................................... 3,618 4,934 9,944 Mediavision (33.30%)................................. 1,901 3,274 2,976 Other................................................ 11,315 11,266 7,978 TOTAL................................................ 56,814 46,215 58,144
The increase in the income of companies accounted for by the equity method is the direct outcome of increased income at True North, which took a net one-time charge of USD 13 million in 1995 (Publicis Communication's 20% interest representing FRF 13 million). 5.14. TOTAL INCOME, GROUP NET INCOME (EXCLUDING MINORITY SHAREHOLDERS) Total Publicis Group net income came to FRF 330,287,000 in 1996, the Group's interest in this amount being FRF 177,565,000, versus FRF 308,389,000 and FRF 152,726,000 respectively at December 31, 1995. After recognition of a net one-time capital gain of FRF 8,301,000 (Group share FRF 7,766,000) total net income amounts to FRF 338,588,000, Group net income (excluding minority shareholders) amounting to FRF 185,331,000. The high proportion of minority interests stems from: -- the Publicis Communication Group (FRF 113 million) in which True North holds a 20.83% interest, and primarily Publicis FCB Europe, in which True North holds a 49% interest; -- the remainder stems from the Media and Media Sales division, in which the Group co-partners the media on whose behalf the advertising space sales units act. The minority interests stem mainly from Regie 1, Metrobus and Publex, which are 50%-held, representing FRF 39 million for these three companies. 5.15. BREAKDOWN OF TOTAL INCOME AND GROUP NET INCOME BEFORE EXTRAORDINARY ITEMS
1996 (BEFORE NET ONE-TIME CAPITAL 1994 (BEFORE EXTRAORDINARY ITEMS) 1995 GAIN) ---------------------------------- ---------------------------------- ---------------------------------- PUBLICIS PUBLICIS PUBLICIS GROUP GROUP NET GROUP GROUP NET GROUP GROUP NET INTEREST IN INCOME INTEREST IN INCOME INTEREST IN INCOME TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL. IN MILLIONS OF FRF INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES) - ------------------- ------ ----------- ----------- ------ ----------- ----------- ------ ----------- ----------- Communications..... 198 106 79 241 155 123 259 184 146 Media and Media sales division... 75 40 40 94 51 51 87 45 45 Diversified activities....... (1) (2) (2) (14) (15) (15) (3) (3) (3) Holding company.... 34 34 34 (3) (3) (3) (10) (10) (10) Restatements....... (4) 0 0 (9) (4) (3) (3) 0 0 TOTAL.............. 302 178 151 308 184 153 330 216 178
26 27 AFTER EXTRAORDINARY ITEMS
1996 (AFTER NET ONE-TIME CAPITAL 1994 (AFTER EXTRAORDINARY ITEMS) 1995 GAIN) ---------------------------------- ---------------------------------- ---------------------------------- PUBLICIS PUBLICIS PUBLICIS GROUP GROUP NET GROUP GROUP NET GROUP GROUP NET INTEREST IN INCOME INTEREST IN INCOME INTEREST IN INCOME TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL. TOTAL SUB-GROUP'S (EXCL. IN MILLIONS OF FRF INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES) INCOME RESULTS MINORITIES) - ------------------- ------ ----------- ----------- ------ ----------- ----------- ------ ----------- ----------- Communications..... 118 66 49 241 155 123 259 184 146 Media and Media sales division... 75 40 40 94 51 51 81 38 38 Diversified activities....... (1) (2) (2) (14) (15) (15) 12 11 11 Holding company.... 34 34 34 (3) (3) (3) (10) (10) (10) Restatements....... (4) 0 0 (9) (4) (3) (3) 0 0 TOTAL.............. 222 137 121 308 184 153 339 223 185
5.16. FINANCIAL RATIOS
1994 1995 1996 ----------- ----------- ----------- Payroll expenses/Revenues........................... 53.8% 54.6% 54.3% Administrative expenses/Revenues.................... 29.3% 29.4% 29.3% Consolidated net income (excluding extraordinary items)............................................ 301,586,000 308,389,000 338,588,000 Allocations to amortization and depreciation........ 192,629,000 192,440,000 188,273,000 CASH FLOW........................................... 494,215,000 500,829,000 526,861,000 Cash flow/Revenues.................................. 14.4% 13.7% 14.1% EARNINGS BEFORE INTEREST, DEPRECIATION AND INCOME TAX: income before amortization, provisions, financial result, taxation and extraordinary items (EBDIT)........................................... 658,023,000 660,757,000 677,953,000 CURRENT INCOME: income before taxation and extraordinary items (EBIT)........................ 427,541,000 453,876,000 461,052,000 EBDIT/Revenues...................................... 19.1% 18.1% 18.1% Income before exceptional items and tax/Revenues.... 12.4% 12.4% 12.3%
6. OTHER INFORMATION 6.1. SURETIES AND COMMITMENTS
COMMITMENTS GIVEN COMMITMENTS RECEIVED ------------------------- -------------------- IN THOUSANDS OF FRF 1994 1995 1996 1994 1995 1996 - -------------------------------------------------- ------- ------ ------ ----- ---- ----- Discounted notes not yet matured.................. 4,867 3,300 3,322 -- -- -- Endorsements and sureties......................... 6,239 6,653 3,914 7,123 325 1,986 Finance lease commitments(1)...................... 89,232 81,538 75,249 -- -- -- Other............................................. 11,497 5,256 2,523 -- -- -- TOTAL............................................. 111,835 96,747 85,008 7,123 325 1,986
- --------------- (1) Of which real estate finance leases amounting to FRF 69,496,000 in 1996 (FRF 75,740,000 in 1995). The main real estate leasing contract, signed by Metrobus, a 50%-owned subsidiary of Publicis, relates to the acquisition over 15 years of two floors of office premises, with a floorspace of 1,500 square meters, in the building in which its headquarters are located, at 15, rue du Dome, Boulogne. 6.2. SUBSEQUENT EVENTS On February 19, 1997, Publicis and True North agreed to resolve the strategic divergences existing between them. Upon completion of execution of this agreement, each of the two parties will have its own network, and cross-shareholdings will be confined to the holding companies, Publicis Communication and True North. 27 28 The main points of the agreement are: Publicis will transfer to True North four former FCB agencies in Paris, London, Lisbon and Athens. In exchange, True North will sell its 49% shareholdings in Publicis FCB Europe (which will become Publicis Europe) to Publicis Communication and will increase its shareholding in Publicis Communication to 26.5%, compared with 20.83% as at present. Publicis Communication, meanwhile, will maintain its 20% shareholding in True North. True North will assist Publicis in building up its worldwide network by selling to it units or majority shareholdings (in South Africa, Australia, New Zealand, Argentina, Thailand, and India). 6.3. SHARE SUBSCRIPTION OPTION PLAN (STOCK OPTIONS) The Extraordinary General Meetings of Shareholders of November 27, 1987 and June 21, 1991 authorized the issue of 616,800 shares in the form of share subscription options, all of which were allocated in earlier years. Beneficiaries may exercise their options within a period of 10 years. During the course of the year, 37,016 options were exercised, increasing the share capital by FRF 925,400, with additional paid-in capital of FRF 8,053,710. Options outstanding at December 31, 1996, were as follows:
NUMBER OF OPTIONS SHARES OF FRF 25 PAR VALUE DATE GRANTED OUTSTANDING OPTION PRICE EXPIRATION DATE - ------------------------------------- ------------ ----------------- ------------ --------------- First tranche........................ 11/27/87 7,458 115 1997 Second tranche....................... 12/16/88 21,116 194 1998 Third tranche........................ 12/04/89 28,480 322 1999 Fourth tranche....................... 12/17/90 78,960 204 2000 Fifth tranche........................ 01/06/92 334,560 187 2002 Sixth tranche........................ 11/30/92 51,840 174 2002 TOTAL................................ 522,414
6.4. FIVE-YEAR CONSOLIDATED SUMMARY
IN MILLIONS OF FRF 1992 1993 1994 1995 1996 - ---------------------------------------------- ------ ------ ------ ------ ------ Billings...................................... 20,002 18,236 20,002 20,543 21,964 Revenues...................................... 3,517 3,140 3,439 3,649 3,746 Total income.................................. 295 260 222 308 339 Group net income (excl. minority interests)... 149 127 120 153 185 Cash flow..................................... 470 435 494 501 527
6.5. FIVE-YEAR PER SHARE DATA
IN FRF 1992 1993 1994 1995 1996 - -------------------------------------------------------- ---- ---- ---- ---- ---- Total consolidated net earnings per share(1)............ 19.2 15.7 14.9 18.9 22.9 Adjusted dividend per share(1).......................... 3.33 3.33 3.33 4.00 4.80 Group net equity, including income(1)................... 180 164 165 176 192 Share price at December 31(1)........................... 216 477 367 289 452
- --------------- (1) Adjusted for January 1994 two-for-one stock split and one-for-five bonus share issue in July 1995. However, no account is taken of potential dilution resulting from stock options. 28 29 7. CONSOLIDATED COMPANIES 7.1. ADVERTISING AGENCIES
COMPANY NAME - ----------------------------- PUBLICIS COMMUNICATION....... 79.17 FINANCE FRANCE PARIS PUBLICIS CONSEIL............. 99.61 ADVERTISING FRANCE PARIS FCA/BMZ...................... 100.00 Advertising France Paris Exclamation.................. 89.97 Advertising France Paris Loeb et Associes............. 55.00 Advertising France Paris Mundocom..................... 100.00 Advertising France Paris Interplans Edition........... 100.00 Advertising France Paris Procis....................... 89.40 Advertising France Paris Publicis Direct.............. 77.04 Advertising France Paris Directis..................... 77.05 Advertising France Paris ID3d......................... 69.88 Advertising France Paris Extension.................... 100.00 Advertising France Paris Publicis Design.............. 100.00 Advertising France Paris Motivom...................... 74.50 Advertising France Paris Media System................. 99.67 Advertising France Paris Guillaume Tell............... 80.00 Advertising France Paris Verbe........................ 70.00 Advertising France Paris Publicis Hourra.............. 80.71 Advertising France Lille Epure........................ 99.67 Advertising France Lille Publicis Cachemire........... 66.93 Advertising France Lyon, Clermont-Ferrand Phreas....................... 99.00 Advertising France Lyon 2(e) Communication........... 51.00 Advertising France Lyon Publicis Mediterranee........ 100.00 Advertising France Marseille Publicis Soleil.............. 50.25 Advertising France Toulouse, Montpellier Publicis Grand Angle......... 74.11 Advertising France Brest, Nantes, Rennes Positif...................... 99.80 Advertising France Brest Publicis Grand Est/Koufra.... 63.32 Advertising France Nancy, Dijon, Strasbourg Publicis Qualigraphie........ 93.57 Advertising France Rouen, Caen Reseau Graphic............... 66.79 Advertising France Rouen Publicis Atlantique.......... 100.00 Advertising France Bordeaux Expression................... 51.00 Advertising France Bordeaux Racines Grand Centre......... 66.00 Advertising France Tours SKT.......................... 68.78 Advertising France Paris Exaudi....................... 99.80 Advertising France Paris Jacques Schu et Associes..... 100.00 Advertising France Paris Hautefeuille Regions......... 100.00 Advertising France Lyon Hautefeuille Mediterranee.... 99.85 Advertising France Nice Hautefeuille Grenoble........ 100.00 Advertising France Grenoble Hautefeuille Besancon........ 90.00 Advertising France Besancon O' de Formes................. 76.00 Advertising France Lyon O' REP FLB................... 65.00 Advertising France Lyon Publicis Alpes............... 99.85 Advertising France Annecy PUBLICIS-FCB EUROPE.......... 51.00 FINANCE NETHERLANDS AMSTERDAM, PARIS Publicis-FCB................. 100.00 Advertising Austria Vienna
29 30
Publicis-FCB................. 100.00 Advertising Belgium Brussels Cre-Action -- Full Option.... 53.95 Advertising Belgium Brussels Publicis-FCB Direct.......... 100.00 Advertising Belgium Brussels FCA! BMZ..................... 100.00 Advertising Belgium Brussels Publicis Trzisno Komuniciranje................ 100.00 Advertising Croatia Zagreb Czech Publicis-FCB................. 60.00 Advertising Republic Prague Publicis-FCB................. 100.00 Advertising Denmark Copenhagen Publicis Torma............... 60.03 Advertising Finland Helsinki FCB.......................... 100.00 Advertising France Paris Groupe Kenya................. 53.00 Advertising France Paris Kenya Institutionnel......... 65.00 Advertising France Paris Empir........................ 100.00 Advertising France Paris Empir Media.................. 100.00 Media buying France Paris Publicis-FCB Communication... 100.00 Finance Germany Dusseldorf B.M.Z.FCA.................... 64.50 Advertising Germany Dusseldorf Prorepro..................... 100.00 Advertising Germany Dusseldorf More Sales................... 100.00 Advertising Germany Dusseldorf More Media................... 90.00 Media buying Germany Dusseldorf Publicis..................... 100.00 Advertising Germany Frankfurt Mundocom..................... 100.00 Advertising Germany Frankfurt Mundo Sales.................. 100.00 Advertising Germany Frankfurt FCB Hamburg.................. 98.00 Advertising Germany Hamburg Optimedia.................... 100.00 Media buying Germany Dusseldorf FCB Direct Marketing......... 90.00 Advertising Germany Hamburg Publicis Vital............... 90.00 Advertising Germany Frankfurt B.R.P........................ 98.00 Advertising Germany Dusseldorf Publicis MCD................. 74.90 Advertising Germany Erlangen, Munich Contur....................... 100.00 Advertising Germany Friedrichsdorf Contur Identity Design....... 100.00 Advertising Germany Friedrichsdorf Contec....................... 100.00 Advertising Germany Friedrichsdorf Sisyphos..................... 51.00 Advertising Germany Berlin Publicis Hellas Advertising.................. 100.00 Advertising Greece Athens Publicis-FCB Magyarorszag.... 100.00 Advertising Hungary Budapest Publicis-FCB................. 100.00 Advertising Italy Milan, Rome FCA! BMZ..................... 100.00 Advertising Italy Milan Optimedia Italia............. 100.00 Advertising Italy Milan Overad....................... 100.00 Finance Netherlands Amsterdam Publicis-FCB................. 100.00 Advertising Netherlands Amsterdam Publicis-FCB Eindhoven....... 100.00 Advertising Netherlands Eindhoven HVR Advertising.............. 100.00 Advertising Netherlands The Hague Mundocom A.A.C............... 100.00 Advertising Netherlands Amsterdam, Eindhoven Kern Habbema & Yap........... 53.00 Advertising Netherlands Amsterdam Bruggenwirth, Mass & Boswinkel.................... 52.00 Advertising Netherlands Amsterdam Overad Property.............. 100.00 Finance Netherlands Amsterdam Publicis-FCB................. 100.00 Advertising Norway Oslo Publicis-FCB Direct.......... 91.00 Advertising Norway Oslo Strategic Marketing.......... 100.00 Advertising Norway Oslo
30 31
Basic........................ 100.00 Advertising Norway Oslo Publicis-FCB Reklamebyra..... 95.00 Advertising Norway Oslo Park Reklamebyra............. 100.00 Advertising Norway Oslo Sponsor Marketing............ 65.00 Advertising Norway Oslo Publicis-FCB Polska.......... 70.00 Advertising Poland Warsaw FCB Publicidade.............. 83.00 Advertising Portugal Lisbon Publicis Publicidade......... 90.00 Advertising Portugal Lisbon BMZ/Park Publicidade......... 56.44 Advertising Portugal Lisbon Comunicar Publicidade e Promocao..................... 90.00 Advertising Portugal Lisbon Optimedia Publicidade........ 93.00 Media buying Portugal Lisbon Publicis-FCB................. 100.00 Advertising Russia Moscow Publicis Virgo Komunikacije................. 60.00 Advertising Slovenia Ljubljana Publicis-FCB Arge............ 100.00 Advertising Spain Madrid, Barcelona Optimedia.................... 98.00 Media buying Spain Madrid Publicis Etoile.............. 100.00 Advertising Sweden Stockholm Publicis GRO & S............. 76.00 Advertising Sweden Stockholm Farner Publicis-FCB.......... 90.00 Advertising Switzerland Zurich Bureau d'Etudes Publicitaires BEP.......................... 100.00 Advertising Switzerland Lausanne United Multi Market Services........ 100.00 Finance Kingdom London United Publicis..................... 100.00 Advertising Kingdom London United FCB Advertising.............. 100.00 Advertising Kingdom London United FCB Impact................... 100.00 Advertising Kingdom London United Mundocom..................... 100.00 Advertising Kingdom London United Optimedia International...... 100.00 Advertising Kingdom London FCA EUROPE FCA/BMZ International........ 100.00 Advertising France Paris FCA Amsterdam................ 97.00 Advertising Netherlands Amsterdam FCA Walker................... 77.10 Advertising Netherlands Amsterdam FCA Werner & Messelink....... 60.00 Advertising Netherlands Amsterdam United FCA London................... 100.00 Advertising Kingdom London FCA/BMZ CID.................. 100.00 Advertising Spain Madrid, Barcelona, Seville WAM.......................... 79.76 ADVERTISING FRANCE PARIS PUBLICIS BLOOM............... 96.15 ADVERTISING USA NEW YORK, DALLAS PUBLICIS CENTRE MEDIA........ 100.00 MEDIA BUYING FRANCE PARIS PUBLICIS CONSULTANTS......... 100.00 ADVERTISING FRANCE PARIS Media-Finance................ 100.00 Advertising France Paris Idees Dialogue Conseil....... 100.00 Advertising France Paris Publicis Consultants Nederland.................... 93.00 Advertising Netherlands Amsterdam
31 32 7.2. MEDIA BUYING UNITS
COMPANY NAME - ------------------------------------- MEDIA & REGIES EUROPE................ 100.00 FINANCE FRANCE PARIS Medias et Regies Presse.............. 100.00 Media buying/ France Paris Services Le Monde Publicite................... 49.00 Media buying France Paris Regiscope............................ 49.00 Media buying France Paris Espaces Liberation................... 49.00 Media buying France Paris Profil 18/30......................... 50.00 Media buying France Paris TV Mission........................... 77.80 Advertising France Paris Regie T.............................. 49.00 Electronic media France Paris Regie T Mexico....................... 51.00 Electronic media Mexico Mexico City Publex............................... 50.00 Billboards Netherlands Amsterdam V.K.M................................ 50.00 Billboard unit Netherlands Amsterdam Spectacolor.......................... 80.00 Billboards France Paris SB System............................ 100.00 Billboards France Paris REGIE 1.............................. 50.00 RADIO AIRTIME FRANCE PARIS BUYING METROBUS............................. 50.00 BILLBOARD UNIT FRANCE PARIS Sodex................................ 99.54 Billboard unit France Paris AP Systemes.......................... 99.24 Billboards France Paris Transcom Publicite................... 99.97 Billboard unit France Paris France Index......................... 99.97 Billboard unit France Paris Publisistemas........................ 100.00 Billboards Spain Madrid Aerosistemas......................... 99.24 Billboards Spain Madrid AP Portugal.......................... 89.60 Billboards Portugal Lisbon
7.3. OTHER SECTORS
COMPANY NAME - ------------------------------------- Les Drugstores Publicis.............. 100.00 Finance France Paris Drugstore Champs-Elysees............. 100.00 Retailing France Paris Drugstore Matignon................... 100.00 Retailing France Paris SCI de L'Etoile...................... 100.00 Real estate France Paris S.G.I.P.............................. 66.00 Data processing France Paris Groupe Publicis Services............. 100.00 Services France Paris Communication et Publicite........... 50.00 Finance France Paris Farner Holding....................... 100.00 Finance Switzerland Zurich
32 33 8. COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD
COMPANY NAME - ------------------------------------- True North Communications............ 20.00 Advertising USA Chicago Gnomi FCB............................ 40.00 Advertising Greece Athens Giraudy.............................. 29.23 Billboards France Paris Somupi............................... 34.00 Billboards France Paris Sopact............................... 49.00 Billboards France Paris TCS Portugal......................... 35.00 Billboards Portugal Lisbon Metromatic........................... 50.00 Promotional Spain Madrid Mediavision.......................... 33.30 Movie theater France Paris Promometro........................... 33.92 Promotional France Paris Elysee Marbeuf (Pub Renault)......... 25.00 Retailing France Paris
9. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING POLICIES GENERALLY ACCEPTED IN THE UNITED STATES AND FRANCE The consolidated financial statements of Publicis S.A. have been prepared in accordance with French accounting principles which differ in certain respects from generally accepted accounting principles in the United States. The principal differences between French GAAP and U.S. GAAP as they relate to Publicis S.A. are discussed in further detail below. 9.1. GOODWILL Publicis S.A. does not systematically amortize goodwill, but subjects the asset to annual review of its market value, with a provision for loss being recorded if the market value is less than the acquisition cost for more than three years. Further, the utilization of tax loss carryforwards of acquired companies is accounted for as a reduction of tax expense. Under U.S. GAAP, the amount of goodwill would be reduced by the amount of acquired deferred tax assets and would be amortized on a straight-line basis over the estimated useful life of the asset, which the Company has determined to be within a range of 10 to 40 years, depending on the type of entity acquired. 9.2. POST-RETIREMENT BENEFITS As described in further detail in 3.11 Retirement allowances and similar payments, the Company's French employees are entitled to certain lump-sum payments upon retirement. Under French GAAP, through December 31, 1995, Publicis S.A. reported expense based on contributions due, and disclosed the estimated full obligation in the footnotes to the financial statements. Beginning December 31, 1996, the liability was recorded on the balance sheet, with the accumulated effect as of January 1, 1996 being recorded as a direct adjustment to shareholders' equity. Under U.S. GAAP, the full actuarially defined obligation would be recorded on the balance sheet for all periods presented and the increases to the reserve would be recorded as a charge in the income statement. Further, the Company calculates its post-retirement benefit obligation for French personnel only for employees over 50 years old. U.S. GAAP requires that the estimation take into consideration all employees, with the estimated turnover and interest rate being used. 9.3. RESTRUCTURING PROVISION In 1994, the Company recorded for French accounting purposes a FRF 40 000 000 provision for the restructuring of its Italian operations. This provision did not meet the requirements as set forth in EITF 94-3 and so would not have been recorded until 1995 under U.S. GAAP. 33 34 9.4. NET EXTRAORDINARY PROFIT In 1996, Publicis S.A. recognized a capital gain on the sale of retail leasehold and an expense related to a settlement paid to a newspaper. The net gain arising from these two transactions has been characterized as "extraordinary" under French accounting principles. As neither transaction meets the U.S. GAAP criteria of being "unusual and infrequent", both would be classified elements of "net income from ordinary operations". The approximate effects of these differences on net income and shareholders' equity are as follows:
YEAR ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 (IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF FRF ------------------------------------------ --------- --------- --------- NET INCOME AS REPORTED IN THE CONSOLIDATED STATEMENT OF INCOME..................... 185,331 152,726 120,456 Adjustments to conform to U.S. GAAP Amortization of goodwill................ (239) (6,136) (4,147) Provision for post-retirement benefit obligation........................... 1,402 (2,238) (5,228) Restructuring provision................. 0 (8,080) 16,160 Deferred taxes acquired in business combinations......................... (14,611) (108) 4,651 Tax on the above adjustments............ (514) 3,784 (3,644) --------- --------- --------- NET INCOME AS ADJUSTED FOR U.S. GAAP...... 171,369 139,948 128,248 --------- --------- --------- EARNINGS PER SHARE AS ADJUSTED FOR U.S. GAAP.................................... 20.52 16.90 15.38 ======== ======== ========
AT DECEMBER 31, ------------------------------------- 1996 1995 1994 (IN THOUSANDS) FRF FRF FRF ------------------------------------------ --------- --------- --------- SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEET.............. 1,558,736 1,421,971 1,332,593 Adjustments to conform to U.S. GAAP Amortization of goodwill................ (36,480) (36,241) (30,105) Provision for post-retirement benefit obligation........................... 13,845 (16,859) (14,621) Restructuring provision................. 8,080 8,080 16,160 Deferred taxes ......................... 17,605 29,774 29,268 Tax on the above adjustments.............. (8,040) 3,219 (513) --------- --------- --------- SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S. GAAP.................................... 1,553,746 1,409,944 1,332,782 ======== ======== ========
9.5. CONSOLIDATION OF SUBSIDIARIES THAT ARE LESS THAN MAJORITY-OWNED The principles covering the scope of consolidation under French GAAP are set forth in 2.2 Methods and principles of consolidation criteria. Under this policy, certain companies in which Publicis S.A. owns 49% or 50% and exercises control over significant financial operating policies are consolidated. For U.S. GAAP purposes, only majority-owned companies, based on voting rights directly or indirectly held, are fully consolidated, and less than majority-owned companies over which Publicis S.A. exercises significant influence (generally 20% or more owned), would be included in the consolidated financial statements using the equity method. This difference in accounting policy has no effect on either net income or shareholder's equity. The approximate effects on the consolidated balance sheet at December 31, 1996, 1995 and 1994 would be to decrease minority interest by FRF 141 124 000, FRF 123 216 000 and FRF 116 708 000, respectively and to 34 35 record on one line the investment in companies accounted for using the equity method of FRF 145 540 000, FRF 133 744 000 and FRF 116 708 000, respectively. The impact on working capital on all periods is not material. The principal income statement line items, if such investments were accounted for using the equity method rather than being consolidated, would be decreased by the following amounts:
AT DECEMBER 31, ---------------------------------------- 1996 1995 1994 (IN THOUSANDS) FRF FRF FRF --------------------------------------- ---------- ---------- ---------- Sales.................................. 1,933,403 1,937,557 1,985,027 Cost of sales.......................... (1,422,718) (1,446,466) (1,490,894) Revenues............................... 510,685 491,091 494,133 Current income......................... 115,354 125,242 134,839 ========= ========= =========
9.6. SUPPLEMENTARY CASH FLOW INFORMATION Following is summarized cash flow information prepared in accordance with U.S. GAAP:
YEAR ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 (IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF FRF - ---------------------------------------------------------- --------- --------- --------- Cash flows from operating activities: Net income as adjusted for U.S. GAAP.................... 171,369 139,948 128,248 Depreciation and amortization........................... 184,601 224,522 244,256 Minority interest....................................... 157,538 139,961 123,940 Equity income (loss), net of dividends received......... (58,144) (46,215) (56,813) Changes in working capital accounts..................... 141,482 (6,269) (125,424) --------- --------- --------- 596,846 451,947 314,207 Cash flows from investing activities: Acquisition of subsidiaries............................. (214,730) (126,608) (220,418) Dividend received....................................... 23,468 57,787 14,984 Purchase of fixed assets................................ (124,978) (153,297) (149,194) --------- --------- --------- (316,240) (222,118) (354,628) Cash flows from financing activities: Proceeds from loans..................................... (66,772) (90,948) (35,310) Repayment of loans...................................... 33,172 48,827 84,186 Issuance of common stock................................ 16,779 35,891 1,436 Payment of dividends.................................... (96,370) (93,415) (81,162) --------- --------- --------- (113,191) (99,645) (30,850) Effect of exchange rate changes on cash................... (2,917) 3,448 (14,159) --------- --------- --------- Increase (decrease) in cash............................... 164,498 133,633 (85,430) Cash at beginning of year................................. 1,167,888 1,034,255 1,119,685 --------- --------- --------- Cash at end of year....................................... 1,332,386 1,167,888 1,034,255 ========= ========= =========
35 36 PUBLICIS S.A. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
6/30/96 6/30/97 --------- --------- FIXED ASSETS.................................................................... 1,656,351 2,006,185 -- Intangible assets.......................................................... 917,824 1,308,097 -- Depreciation and amortization on intangible assets......................... (101,763) (196,995) -- Tangible assets (gross).................................................... 1,394,899 1,445,011 -- Depreciation and amortization on tangible assets........................... (916,163) (987,656) NET TANGIBLE AND INTANGIBLE ASSETS.............................................. 1,294,797 1,568,457 -- Investments (non-consolidated companies)................................... 35,436 42,665 -- Investments (equity subsidiaries).......................................... 283,705 18,969 -- Intercos loans............................................................. 20,662 28,864 -- Other financial assets..................................................... 47,282 60,134 -- Provisions on financial assets............................................. (25,531) (12,904) NET FINANCIAL ASSETS............................................................ 361,554 437,728 CURRENT ASSETS.................................................................. 5,948,602 6,140,041 -- Work in progress........................................................... 390,254 407,486 -- Advance payments made...................................................... 96,425 93,711 -- Accounts receivable (net).................................................. 2,875,603 3,183,320 -- Other debtors.............................................................. 1,543,288 1,326,445 -- Cash....................................................................... 1,043,032 1,129,079 OTHER CURRENT ASSETS............................................................ 123,715 79,829 TOTAL ASSETS.................................................................... 7,728,668 8,226,055 TOTAL EQUITY.................................................................... 2,245,574 2,319,805 -- Equity (before net income), Group share.................................... 1,389,346 1,671,604 -- Net income, Group share.................................................... 78,611 92,935 TOTAL EQUITY GROUP SHARE........................................................ 1,467,957 1,764,539 -- Equity (before net income), non-Group share................................ 702,250 499,511 -- Net income, non-Group share................................................ 75,367 55,755 TOTAL EQUITY NON-GROUP SHARE.................................................... 777,617 555,266 PROVISIONS FOR CONTINGENCIES.................................................... 372,676 395,029 SHORT TERM LIABILITIES.......................................................... 4,889,504 5,320,938 -- Borrowings................................................................. 82,759 74,449 -- Banks...................................................................... 819,553 571,154 -- Advance payments from clients.............................................. 164,674 255,052 -- Account payable............................................................ 2,049,209 2,466,166 Other creditors............................................................... 1,773,309 1,954,117 OTHER ACCRUALS.................................................................. 220,914 190,283 TOTAL LIABILITIES............................................................... 7,728,668 8,226,055
36 37 PUBLICIS S.A CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
SIX MONTHS ENDED -------------------------- CONSOLIDATED INCOME STATEMENT 6/30/96 6/30/97 - ------------------------------------------------------------------- ---------- ----------- Billings........................................................... 10,681,967 12,380,259 Purchases.......................................................... (8,853,523) (10,350,067) REVENUES........................................................... 1,828,444 2,030,192 Salaries and Benefits.............................................. (995,586) (1,157,791) Office and general expenses........................................ (528,429) (597,416) TOTAL EXPENSES..................................................... (1,524,015) (1,755,207) OTHER INCOME....................................................... 32,521 29,755 OPERATING PROFIT................................................... 336,950 304,740 Depreciation and amortization...................................... (87,514) (86,669) Provision doubtful debts........................................... (10,393) (6,312) Other provisions................................................... (13,867) (8,186) Financial result, net.............................................. 10,615 25,635 PROFIT BEFORE TAX.................................................. 235,791 229,208 Exceptional income (loss).......................................... (4,570) 1,949 Profit sharing -- statutory........................................ (5,739) (4,398) Income Tax......................................................... (91,967) (101,991) Profit (equity subsidiaries)....................................... 15,462 16,699 Exceptional item................................................... 0 7,223 CURRENT NET INCOME................................................. 148,977 148,690 CURRENT GROUP SHARE................................................ 73,611 92,935 Exceptional net capital gain....................................... 5,000 0 NET INCOME......................................................... 153,977 148,690 GROUP SHARE........................................................ 78,611 92,935
37 38 PUBLICIS S.A. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The condensed consolidated balance sheet of Publicis S.A. as of June 30, 1997 and the related condensed consolidated statements of income for the six-month periods ended June 30, 1997 and 1996 have been prepared in accordance with accounting principles generally accepted in France on a basis consistent with Publicis S.A.'s audited consolidated financial statements for the year ended December 31, 1996. For the purposes of these condensed consolidated interim financial statements certain information and disclosures normally included in financial statements prepared in accordance with French generally accepted accounting principles have been condensed or omitted. In the opinion of management, all adjustments considered necessary, consisting only of normal recurring accruals, to present fairly the consolidated financial position and results of operations for such interim periods have been made. 2. ACQUISITIONS During the first six months of 1997, the Group acquired advertising agencies for a total amount of approximately FF 287,000,000:
DATE OF COUNTRY FORMER NAME NEW NAME ACQUISITION % OF CONTROL --------------- --------------------------- -------------------- ----------- ------------ WORLDWIDE Mexico......... Romero y Associados Publicis Romeo January 97 51% Brazil......... Norton Publicis Norton January 97 60% Canada......... BCP Publicis BCP January 97 70% Singapore...... Eureka advertising Publicis Eureka January 97 60% Philippines.... Basic Advertising Publicis Basic January 97 60% Australia...... MOJO Partners Publicis MOJO June 97 100% South Africa... Partnership in advertising Publicis June 97 60% Johannesburg EUROPE UK............. SMI Publicis Technology June 97 100% UK............. KWS merged with FCA/BMZ June 97 100% FRANCE Additional ownership interest in CP 50% Metrobus 50% Mediavision 33% SGIP 34%
3. EVENTS SUBSEQUENT TO JUNE 30, 1997 Subsequent to June 30, 1997 the Group continued its policy of international development by acquiring advertising agencies for a total amount of approximately FF 60,000,000:
DATE OF COUNTRY FORMER NAME NEW NAME ACQUISITION % OF CONTROL ---------------------------- ----------- ------------------- --------------- ------------ Israel...................... Ariely Publicis Ariely July 1997 51% Indonesia................... Inovasi Publicis Inovasi September 1997 51% Argentina................... Capurro Publicis Capurro October 1997 60% South Africa................ Blue Print Publicis Cape Town November 1997 60%
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 38 39 4. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING POLICIES GENERALLY ACCEPTED IN THE UNITED STATES AND FRANCE The unaudited consolidated interim financial statements of Publicis S.A. have been prepared in accordance with French accounting principles which differ in certain respects from generally accepted accounting principles in the United States. The principal differences between French GAAP and U.S. GAAP as they relate to Publicis S.A. are discussed in further detail in the final Note to the audited consolidated financial statements for the year ended December 31, 1996. The approximate effects of these differences on net income and shareholders' equity are as follows:
SIX MONTHS ENDED JUNE 30, ----------------- 1997 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF - ------------------------------------------------------------------------- ------ ------ NET INCOME AS REPORTED IN THE CONSOLIDATED STATEMENT OF INCOME........... 92,935 78,611 Adjustments to conform to U.S. GAAP Amortization of goodwill............................................... (7,791) (3,084) Provision for post-retirement benefit obligation....................... (2,228) 701 Deferred taxes acquired in business combinations....................... 2,158 (6,085) Tax on the above adjustments........................................... 817 (257) ------ ------ NET INCOME AS ADJUSTED FOR U.S. GAAP..................................... 85,891 69,886 ====== ====== EARNINGS PER SHARE AS ADJUSTED FOR U.S. GAAP............................. 10.18 8.39 ====== ======
AT JUNE 30, 1997 (IN THOUSANDS) FRF - ---------------------------------------------------------------------------- --------- SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEET.......... 1,764,539 Adjustments to conform to U.S. GAAP Amortization of goodwill.................................................. (44,271) Provision for post-retirement benefit obligation.......................... 11,617 Restructuring provision................................................... 8,080 Deferred taxes acquired in business combinations.......................... 20,060 Tax on the above adjustments.............................................. (7,223) --------- SHAREHOLDERS' EQUITY AS ADJUSTED FOR U.S. GAAP.............................. 1,752,802 =========
The principal income statement line items, if less than majority-held investments were accounted for using the equity method rather than being consolidated, would be decreased by the following amounts:
AT JUNE 30, ---------------------- 1997 1996 (IN THOUSANDS) FRF FRF ---------------------------------------------------- --------- -------- Sales............................................... 876,716 1,017,289 Cost of sales....................................... (655,811) (762,279) Revenues............................................ 220,905 254,410 Current income...................................... 50,261 66,002 ======== ========
39 40 Following is summarized cash flow information prepared in accordance with U.S. GAAP:
SIX MONTHS ENDED JUNE 30, ----------------------- 1997 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA) FRF FRF ---------------------------------------------------- --------- --------- Cash flows from operating activities: Net income as adjusted for U.S. GAAP.............. 85,891 69,887 Depreciation and amortization..................... 99,179 91,818 Minority interest................................. 49,905 73,110 Equity income, net of dividends received.......... (16,669) (15,463) Changes in working capital accounts............... 105,614 (340,978) -------- -------- 323,890 (121,626) Cash flows from investing activities: Acquisition of subsidiaries....................... (287,316) (30,981) Dividend received................................. 24,258 22,981 Purchase of fixed assets.......................... (98,985) (88,716) -------- -------- (362,043) (96,716) Cash flows from financing activities: Proceeds from loans............................... (98,975) (47,712) Repayment of loans................................ 44,055 226,936 Issuance of common stock.......................... 5,096 8,878 Payment of dividends.............................. (113,118) (85,999) -------- -------- (162,942) 102,103 Effect of exchange rate changes on cash............. (2,212) (8,617) -------- -------- Increase (decrease) in cash......................... (203,307) (124,856) Cash at beginning of year........................... 1,332,386 1,167,888 -------- -------- Cash at end of year................................. 1,129,079 1,043,032 ======== ========
40 EX-99.H1 20 COMPLAINT OF PUBLICIS COMMUNICATION 1 EXHIBIT h(1) IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION PUBLICIS COMMUNICATION, ) ) Plaintiff,) ) v. ) Civil No. 97 C 8263 ) TRUE NORTH COMMUNICATIONS INC., ) BRUCE MASON, STEPHEN T. VEHSLAGE, ) GREGORY W. BLAINE, LAUREL CUTLER, ) J. BRENDAN RYAN, RICHARD S. ) BRADDOCK, MICHAEL P. MURPHY, and ) RICHARD P. MAYER, ) ) Defendants.) COMPLAINT Publicis Communication ("Publicis"), through its undersigned counsel, for its complaint against defendant True North Communications Inc. ("True North" and the "Company") and defendants Bruce Mason, Gregory W. Blaine, Richard S. Braddock, Laurel Cutler, Richard P. Mayer, Michael P. Murphy, J. Brendan Ryan, and Stephen T. Vehslage (together, the "Director Defendants"), alleges as follows: Nature of the Action 1. Publicis brings this action to redress a wrongful course of conduct by True North and its Board of Directors. Publicis is True North's largest shareholder, holding 18.4% of its common stock. Publicis has a long history of disagreements with 2 current True North management. True North now seeks substantially to dilute the holdings of Publicis and all public shareholders and to vest effective control of the Company in its management. 2. True North seeks to implement this change of control by means of a merger with another advertising firm, Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"). Under the merger agreement, True North will issue 20 million new shares of True North common stock, an amount that will dilute the holdings of True North's current public shareholders - and Publicis - by approximately 50%. After the merger, management of the surviving True North will own and/or have the power to direct the votes for a controlling block of the Company's stock, while Publicis' stake will be reduced to less than 10%. 3. In breach of its fiduciary obligations, the True North Board has refused to meet with Publicis to consider a superior proposal made by Publicis that will deliver more value to the Company's shareholders. Instead, True North management has embarked upon a campaign to lock up its future, improperly restricting the Board's ability to consider superior offers, and manipulating the corporate machinery to fix the upcoming special shareholder vote on the Bozell merger. Defendants have violated the New York Stock Exchange Rules as well as the federal proxy rules in order to disenfranchise those stockholders who are likely to vote against the Bozell merger. 4. Upon information and belief, if the Bozell merger is consummated, the pay-off to members of post-merger True North management and one of True North's outside directors - who will potentially receive tens of millions of dollars over the next -2- 3 several years - is fantastic. Unfortunately, the shareholders will not reap the same windfall. 5. Publicis brings this action for preliminary and permanent injunctive relief, for declaratory relief, and for damages. Jurisdiction and Venue 6. This Court has jurisdiction over this action pursuant to 28 U.S.C. Section 1332. The amount in dispute exceeds $75,000. 7. Venue is proper under 28 U.S.C. Section 1391. The Parties 8. Publicis is a wholly owned subsidiary of Publicis, S.A. Both Publicis and Publicis S.A. are French corporations with their principal place of business in Paris, France. Publicis is one of Europe's largest advertising networks, with offices in 35 countries and 71 cities. Publicis S.A.'s stock is publicly traded on the Paris stock exchange. 9. Defendant True North is a Delaware company with its principal place of business in Chicago, Illinois. True North is a communications company and the parent of Foote, Cone & Belding, a national advertising agency network. Its stock is traded on the New York Stock Exchange. 10. Defendant Bruce Mason is the Chairman of the Board of Directors and Chief Executive Officer of True North. Defendants Stephen T. Vehslage, Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer are directors of True North. Defendants Gregory W. Blaine, Laurel Cutler, and J. Brendan Ryan are officers and -3- 4 directors of True North. Upon information and belief, the Director Defendants are citizens of Illinois, New York, and Connecticut. Background 11. In 1989, Publicis and True North formed a separate joint venture in which the two companies combined certain of their European operations. As part of the formation of the joint venture, the parties also became significant shareholders of one another. 12. In the years since the formation of the Publicis/True North joint venture, the parties have had disagreements concerning the nature and scope of their joint efforts. Notwithstanding these disagreements, Publicis has never posed any type of threat to True North's corporate policies or effectiveness, although, upon information and belief, True North incorrectly and unreasonably perceived Publicis as a threat. In May 1997, the parties signed a series of agreements that unwound their European joint venture. After consummation of the transactions contemplated by the May 1997 agreements, Publicis remained an 18.5% owner of True North, and True North became a 26.5% owner of Publicis. The Bozell Merger 13. On July 31, 1997, True North announced its agreement to merge with Bozell, an advertising firm with headquarters in New York City (the "Bozell Merger"). True North did not consult its largest stockholder, Publicis, with respect to the Bozell Merger. Since the July announcement, the stockholders of True North have not been provided with detailed information regarding the Bozell Merger. -4- 5 14. The merger agreement with Bozell (the "Merger Agreement") requires True North to issue 20 million new shares of common stock, nearly doubling the 25 million currently outstanding. The Merger Agreement also requires an amendment of True North's charter to increase the total number of authorized shares of common stock from 50 million to 90 million. Each share of Bozell common stock will be converted into 0.51 shares of True North common stock upon completion of the Bozell Merger. 15. Upon information and belief, post-merger management of True North will effectively control the Company. Through the exercise of options and distribution of newly issued shares, the post-merger management of True North will gain voting control of a dominant block of the Company's shares, many times larger than the block owned by Publicis. Publicis and True North's public shareholders, on the other hand, will suffer an approximate 50% dilution in their holdings. In addition, post-merger management will control the newly constituted and expanded Board of Directors. Publicis may lose its single seat on the Board. 16. In connection with the Merger Agreement, upon information and belief, employment agreements were entered into with certain members of senior management of both companies that provide that, upon consummation of the Merger, certain of the Defendants will receive exorbitant compensation, potentially in excess of tens of millions of dollars over the next several years. 17. The Merger Agreement prohibits True North and its officers, directors, and employees from engaging in discussions or negotiations with other potential bidders for True North except under very limited circumstances. The Merger Agreement only permits the True North Board to consider a "Superior Parent Takeover Proposal", -5- 6 which is narrowly defined as a third-party offer for a business combination with True North in which the sole consideration to be received by True North shareholders is the stock of a widely-held public company. The Publicis Proposal 18. On November 10, 1997, Publicis chairman Maurice Levy sent a letter to the True North Board of Directors stating Publicis' belief that "True North's transaction with Bozell is contrary to the best interests of True North's stockholders, of which Publicis is by far the largest with 18.5% of True North's common stock." As Mr. Levy explained: The acquisition does not solve True North's fundamental strategic weakness, which has been its failure to establish a global presence. Bozell is primarily a U.S.-based business with a weak international presence, and Publicis believes that its acquisition by True North will compound, rather than solve, True North's strategic weaknesses. As global marketers have increasingly demanded worldwide coverage, True North has continued to focus on its U.S. business and as a result, we believe that True North now finds itself at a significant competitive disadvantage. In short, True North's proposed acquisition of Bozell does nothing to solve these problems, and we believe (based on the limited information that has been made available to date) that the price to be paid for Bozell significantly exceeds the value of Bozell's business." 19. As an alternative to the Bozell transaction, Mr. Levy stated that Publicis is "prepared to propose a business combination between Publicis Communication and True North in which each outstanding share of True North would be valued at US$28": -6- 7 Publicis has for some time believed that a combination of Publicis Communication's businesses with those of True North would create a powerful global presence with tremendous opportunities for growth. . . . We at Publicis continue to believe that a merger between Publicis Communication and True North is in the best interests of both True North's and Publicis' stockholders and their respective clients and employees. . . . 20. Mr. Levy concluded with an invitation "to discuss with True North and its representatives the details of our proposal, including the cash and stock components of our US$28 valuation": We would be willing to meet with you and your advisors at your earliest convenience to discuss our proposal and to answer any questions you may have. Our preferred course would be to negotiate a transaction that can be presented to our respective stockholders and clients as the amicable and joint effort of Publicis, True North and each of the companies' Boards of Directors and senior management. I hope that each of you will give our proposal serious consideration, and I look forward to your reply. We stand ready to meet with the Board to present our plans. True North's Attempts to Steal the Special Shareholder Vote 21. True North did not disclose Publicis' letter to the public. Nor did it respond in any way to Publicis. Instead, True North - recognizing that Publicis' opposition and counter-offer would seriously threaten its proposed merger with Bozell - immediately undertook to rig the vote at a special shareholders' meeting (set for December 22, 1997) at which the Bozell transaction would be voted upon by True North shareholders. -7- 8 22. True North attempted to manipulate the vote by setting a premature record date, the date used to determine who is entitled to vote at the special shareholders' meeting. Without revealing to the New York Stock Exchange (the "Exchange") or to the public the highly material information that it had received from Publicis, True North set a record date of Tuesday, November 18. True North sat silently upon this information as well, deliberately choosing not to announce that it had set a record date for the special shareholders' meeting. 23. After a week had passed with no response, on November 17, Publicis decided to disclose publicly the text of the letter. The stock market's reaction was immediate and dramatic. On the day of the announcement, the price of a share of True North common stock rose more than 12%, from 23 3/8 to 26 1/4. Approximately one million shares were traded on November 17 and 18, more than twelve times the average daily volume of the stock. The market's reaction to the news of Publicis' opposition to the Bozell merger and its counter-proposal demonstrates the significance of the news to True North shareholders. 24. True North's decision to set an early record date while it sat silently upon this explosive news, if not remedied, will deprive the holders of over a million True North shares of the opportunity to participate in a contested special shareholders' meeting. Because trades of securities take three business days to settle, every single shareholder who purchased True North securities after Thursday, November 13 - including persons who purchased at higher prices that prevailed after the public announcement of Publicis' opposition and counter-proposal - has been disenfranchised. -8- 9 25. True North's decisions to set a premature record date, to remain silent about Publicis' opposition and counter-proposal, and not to announce its record date have disenfranchised holders of millions of True North shares who purchased because of their interest in, or at prices that reflected, Publicis' counter-proposal. And True North shareholders who sold their shares before the news about Publicis was released will be permitted to vote, notwithstanding their lack of interest in the meeting. In short, because True North remained silent about Publicis' opposition and counter-proposal and furtively set an early record date, no True North shareholder who purchased knowing of Publicis' opposition and counter-proposal will be allowed to participate in the special shareholders' meeting. 26. True North's eight-day notice to the Exchange violated Section 401.02 of the rules set forth in the New York Stock Exchange Listed Company Manual, which applies to True North. Section 401.02 provides that "[a] minimum of ten days' notice is required prior to the record date established (or closing of the transfer books) for determination of shareholders entitled to vote at the meeting." True North also violated Securities and Exchange Commission ("SEC") Rule 14a-13 regarding the solicitation of proxies, which requires the mailing of broker inquiries twenty days in advance of the record date. 17 C.F.R. Section 240.14a-13. In violation of Rule 14a-13, True North did not mail broker inquiries until the day before and, in some cases, the day after the record date to maintain the secrecy of its record-date maneuver. True North's Delayed Response to Publicis 27. After the close of trading on November 17 - and after Publicis had publicly disclosed the contents of its November 10 letter - True North (through its -9- 10 chairman, Bruce Mason) finally responded to Publicis' November 10 merger proposal. Mason claimed that the Board of Directors discussed the proposal "at length" but rejected the offer, even though it refused to meet with or discuss the proposal with Publicis. 28. Also on November 17, 1997, True North filed a complaint in the Delaware Court of Chancery against Publicis and its parent company, Publicis S.A., seeking a preliminary and permanent injunction to provide certain financial information and documentation to the SEC in connection with True North's preliminary proxy and registration statements. No hearing or other proceeding was held in the action and, on November 21, 1997, counsel for True North informed the Delaware court that Publicis had fully complied with its requests. Count I Breach of Fiduciary Duty (Interference with Stockholder Franchise) 29. Plaintiff repeats and realleges paragraphs 1 through 28 as if fully set forth herein. 30. Defendants' actions in setting a premature record date, in sitting silently while that record date passed without disclosing Publicis' opposition to the Bozell Merger and its counter-proposal, and in deliberately choosing not to announce its record date were taken for the primary purpose of impeding and/or interfering with the effective exercise of the stockholder franchise in connection with the vote at the special shareholders' meeting. Defendants sat silently upon the highly material news of Publicis' offer after surreptitiously setting a record date in violation of the New York Stock Exchange Rules. Defendants also violated Rule 14a-13 of the federal proxy rules by failing to send out broker inquiries until approximately the record date. -10- 11 31. Defendants took these actions to disenfranchise shareholders who purchased or would be purchasing True North stock after the disclosure of Publicis' opposition to the Bozell Merger and $28 per share counter-proposal. As True North knew, those shareholders who purchased upon the news of Publicis' opposition and counter-proposal would be likely to vote against the Bozell Merger. 32. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. Count II Breach of Fiduciary Duty (Failure to Maximize Stockholder Value) 33. Plaintiff repeats and realleges paragraphs 1 through 32 as if fully set forth herein. 34. The Bozell Merger will result in a change of the effective control of True North. In this context, the Board's fiduciary duty is to seek to obtain the best available terms for True North's shareholders and not to favor one potential acquirer over another or one type of financial alternative over another. In pursuing this objective, True North's Board of Directors have a duty to inform themselves, prior to making business decisions, of all information reasonably available to them. 35. The True North Directors have not sought to obtain the best available terms for the True North shareholders and have not properly informed themselves. They have breached, and are continuing to breach, their fiduciary duties. 36. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. -11- 12 Count III Breach of Fiduciary Duty (Breach of Duty of Loyalty) 37. Plaintiff repeats and realleges paragraphs 1 through 36 as if fully set forth herein. 38. Upon information and belief, some or all of the Director Defendants will receive exorbitant compensation - potentially tens of millions of dollars - in the period following the consummation of the Bozell Merger. By placing their own personal interests and the interests of new True North management ahead of the shareholders' interests, these defendants have acted in bad faith and have breached their duty of loyalty. 39. Publicis is being, or will be, irreparably injured by Director Defendants' misconduct and has no adequate remedy at law. Count IV Breach of Fiduciary Duty (Unreasonable Preemptive Defensive Measures) 40. Plaintiff repeats and realleges paragraphs 1 through 39 as if fully set forth herein. 41. Upon information and belief, the Defendants sought and agreed to the Bozell Merger as a defensive measure to dilute the holdings of its largest shareholder, Publicis, with whom it has had a hostile relationship for years. By the Bozell Merger, the Defendants sought to entrench senior True North management. The Bozell Merger is not in the best interests of True North shareholders and is an unreasonable and disproportionate response to the perceived threat posed by Publicis. 42. Similarly, Defendants' restriction upon the offers that may be considered under the Merger Agreement, their manipulation of the record date in violation -12- 13 of the rules of the New York Stock Exchange, and their violation of the federal proxy rules in failing to send out timely broker inquiries constitute unreasonable and disproportionate responses by the True North Board of Directors to Publicis and Publicis' proposal. The impact of these responses upon True North shareholders is disproportionately large in relation to any "threat" allegedly posed by Publicis' proposal. The Defendants thereby have breached, and are threatening to continue to breach, their fiduciary duties. 43. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. WHEREFORE, Publicis seeks judgment: (a) enjoining the special shareholders' meeting until the True North Board of Directors has engaged in serious, good faith discussions with Publicis concerning the Publicis proposal; (b) enjoining the special shareholders' meeting unless and until a proper record date, including through compliance with all applicable laws, rules, and regulations; (c) rescinding the restrictions in the Merger Agreement purporting to prohibit True North from engaging in discussions and/or negotiating a transaction with Publicis; (d) declaring that the Merger Agreement between True North and Bozell is void; (e) awarding Publicis damages in an amount to be determined at trial, as well as the costs and fees incurred by Publicis in prosecuting this lawsuit; and -13- 14 (f) granting such other and further relief as the Court deems just and proper. Dated: November 26, 1997 /s/ C. William Phillips ---------------------------------- One of the Attorneys for Plaintiff C. William Phillips HOWARD, DARBY & LEVIN 1330 Avenue of the Americas New York, New York 10019 (212) 841-1000 Local Counsel: /s/ Stephen J. Bisgeier ---------------------------------- One of the Attorneys for Plaintiff Stephen J. Bisgeier (00213756) MILLER, SHAKMAN, HAMILTON, KURTZON & SCHLIFKE 208 South LaSalle Street Chicago, Illinois 60604 (312) 263-3700 -14- EX-99.H2 21 NOTICE OF ARBITRATION 1 Exhibit (h)(2) [TRUE NORTH LOGO] 101 EAST ERIE STREET, CHICAGO, ILLINOIS 60611-2897, USA PHONE 312 425 6501 FAX 312 425 6352 December 3, 1997 VIA TELECOPY AND REGISTERED MAIL Publicis S.A. Publicis Communication 133 avenue des Champs-Elysees 75380 Paris Cedex 08 France Attention: President-Directeur General The London Court of International Arbitration 12 Carthusian Street London EC1M 6EB Attention: The Registrar NOTICE OF ARBITRATION Gentlemen: Pursuant to Section 3.4.3 of the Agreement dated May 19, 1997 among Publicis S.A., Publicis Communication and Publicis-FCB Europe B.V. on the one hand, and True North Communications Inc. ("True North"), FCB International, Inc. and True North Holdings Netherlands B.V. on the other hand (hereinafter, the "Agreement"), True North hereby serves notice of its initiation of an arbitration to resolve the claims described below against Publicis S.A. and Publicis Communication (collectively, "Publicis") for their willful and deliberate breach of the Agreement. This letter serves as a demand for and notice of arbitration. True North reserves the right, if it deems it necessary, to submit an additional statement of claims pursuant to Article 18 of the UNCITRAL Arbitration Rules. 2 THE PARTIES TO THIS ARBITRATION The parties to this arbitration, which is to be conducted in accordance with Section 3.4 of the Agreement (attached hereto as Exhibit A), are True North (the Claimant) against Publicis S.A. and Publicis Communication (the Respondents). True North is a communications company incorporated in Delaware with its principal place of business at 101 East Erie Street, Chicago, Illinois, 60611. True North is engaged in all aspects of the advertising and marketing business in the United States and abroad. Among its other assets, True North is the holding company of Foote, Cone & Belding, one of the largest advertising agencies in the world. Publicis S.A. and Publicis Communication are both French corporations with their principal place of business at the above address. Publicis S.A. is a publicly traded company listed on the French stock exchange. Publicis Communication owns and operates numerous advertising agencies in various countries. In 1989, True North and Publicis created a global joint venture called Publics-FCB. The joint venture owned and operated numerous advertising agencies located in Europe. In addition, the companies each acquired a significant portion of the other's stock. True North currently owns 26.5% of Publicis Communication's common stock, and Publicis Communication owns 18.4% of True North's common stock. Almost from the beginning, the parties had great difficulty with the joint venture. The alliance between True North and Publicis did not work to either company's satisfaction and relations between them soured over time. Accordingly, the parties mutually agreed to unwind the joint venture. In May 1997, the parties executed a series of contracts, including the Agreement dated May 19, 2 3 1997, to undo the joint venture and divide ownership of the advertising agencies operated by the joint venture. THE PARTIES' AGREEMENT Given True North's substantial stake in Publicis Communication, the Agreement contains numerous terms dealing with the ownership and operation of Publicis Communication. These terms were needed to protect True North's 26.5% minority ownership of Publicis Communication in light of the potential that Publicis S.A. would abuse its dominant 73.5% ownership portion. Accordingly, the Agreement provides in Section 1.7 that "any significant transactions" effected by Publicis Communication, including those involving Publicis S.A., be conducted at arm's length. Section 1.7 of the Agreement provides, in pertinent part, as follows: Transactions on Arm's Length Basis. So long as True North owns at least 10% of the issued and outstanding shares of Communication Stock, any significant transactions effected by Communication shall be effected on an arm's length basis;... Similarly, to protect True North, the parties agreed in Section 1.8 of the Agreement that Publicis Communication would elect to its Board of Directors three independent, outside directors before approving any major transactions. The parties further agreed that a majority of these three "Outside Directors" must approve any transaction they deem to be significant. Section 1.8 of the Agreement provides as follows: Communication Directors. As soon as practicable, but no later than 60 days after the consummation of the transactions contemplated by this Agreement and in all events prior to the consummation or corporate 3 4 approval of any transaction to transfer to Communication agencies owned by Publicis, and so long thereafter as True North owns at least 10% of the issued and outstanding shares of Communication Stock, Communication shall elect to its Board of Directors three members who have no prior significant relationship with Publicis, True North or the directors or senior officers of either (the "Outside Directors"). Publicis and Communication shall consult with True North prior to the appointment of the three Outside Directors. A majority of the three Outside Directors and the Board of Directors of Communication must approve any transaction (other than those specifically contemplated by this Agreement or the Memorandum of Agreement) of Communication, including transactions with Publicis or any affiliates of Publicis, that a majority of the three Outside Directors deem to be significant. Despite this clear mandate, Publicis Communication has not elected any Outside Directors to its Board. And, as described below, Publicis S.A. and Publicis Communication have breached or now threaten to breach Section 1.7 and Section 1.8 of the Agreement by purporting to propose a "business combination" with True North in an effort to thwart True North's acquisition of another advertising company, Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"). THE BREACHES OF SECTIONS 1.7 AND 1.8 OF THE AGREEMENT On or about July 31, 1997, True North announced that it had entered into an Agreement and Plan of Merger to acquire Bozell (the "Merger Agreement") in a merger worth an estimated $1.2 billion. On or about August 6, 1997, True North filed a Form 8-K with the United States Securities and Exchange Commission that included a copy of the Merger Agreement. The expiration date for the merger is December 31, 1997. In accordance with the Merger Agreement, a wholly-owned True North subsidiary will merge with and into Bozell, with Bozell surviving as a wholly-owned subsidiary of True North. Each share of Bozell common stock will be converted into 0.51 of a share of 4 5 True North common stock. As a consequence, the acquisition of Bozell essentially will nearly double the size and market capital of True North. Publicis recently launched a campaign to derail True North's acquisition of Bozell by inter alia, withholding crucial information in violation of their contractual obligations, commencing meritless litigation, and purporting to propose an "offer" to acquire True North in a transaction prohibited by Sections 1.7 and 1.8 of the Agreement. Despite having been aware of the proposed True North-Bozell merger since the end of July 1997, Publicis waited until November 10, 1997 and then sent a letter to True North expressing their objection to the Bozell acquisition, and purporting to set forth an "offer" regarding a "combination" between Publicis Communication and True North. (A copy of Publicis's November 10, 1997 letter is attached hereto as Exhibit B.) Publicis's supposed proposal to acquire True North is nothing more than a ruse designed to interfere with the proposed Bozell acquisition and to mislead True North shareholders. Moreover, Publicis's purported "offer" violates, and is therefore barred by, the specific contractual provisions in the Agreement drafted by the parties for the protection of True North: First, the terms of the November 10, 1997 letter sent on behalf of Publicis Communication contemplate a "significant transaction" within the meaning of Section 1.7, yet Publicis S.A. has not conducted its affairs with Publics Communication on an arm's length basis with respect to the transaction proposed in the letter. The purported transaction reflected in the November 10, 1997 letter necessarily involves arrangements between Publicis Communication and Publicis S.A., yet Publicis S.A. has not treated Publicis Communication and its shareholders -- including True North -- fairly. 5 6 Second, notwithstanding the express provisions of Section 1.8 of the Agreement, Publicis Communication has not elected, and Publicis has failed to cause the election, of any of the three required Outside Directors to the Board of Publicis Communication. Until such Outside Directors are elected, Publicis Communication is prohibited under Section 1.8 from undertaking any significant transactions, including the one purportedly contemplated by Publicis's November 10, 1997 letter. The failure by Publicis S.A. and Publicis Communication to elect the Outside Directors breaches Section 1.8 of the Agreement. In addition, unless Publicis S.A. and Publicis Communication refrain, or are ordered to refrain, from proceeding with the purported "offer" in the November 10, 1997 letter, they will further violate Sections 1.7 and 1.8 of the Agreement and cause True North substantial damages. OTHER BREACHES OF THE AGREEMENT: SECTION 1.10 Publicis S.A. and Publicis Communication also agreed in the agreement to provide True North with "all financial and other information" True North needs to comply with the United States income tax laws, including the information needed to satisfy the requirements of the U.S. Internal Revenue Service ("I.R.S."). This was necessary because, as a significant shareholder in Publicis Communication, the earnings of Publicis Communication and its related companies have a significant effect on True North's income. Accordingly, Paragraph 1.10 of the Agreement provides: (a) So long as True North owns at least 10% of the issued and outstanding shares of Communications Stock, Communication shall (i) provide all financial and other information reasonably requested by True North for purposes of True North's compliance with U.S. income tax laws 6 7 and other U.S. regulatory requirements, (ii) cause its independent auditors to complete their annual audit and provide the results to True North before February 15 of each year, and shall provide True North with unaudited quarterly consolidated financial results before April 30, July 30, and October 30 of each year. (b) The parties acknowledge that in connection with the transactions contemplated in this Agreement, True North desires to obtain such independent appraisals as are necessary to support the necessary or desirable accounting for financial tax reporting purposes. Each of Publicis, Communication and PBV agrees to use all commercially reasonably efforts to provide the assistance necessary to enable True North to obtain such appraisals. In accordance with Paragraph 1.10 of the Agreement, True North has made a series of reasonable requests upon Publicis S.A. and Publicis Communication for tax information relating to the 1994, 1995 and 1996 tax years. The tax information is essential for True North to fulfill its U.S. tax filing obligations and to avoid severe penalties and damages. Publicis, however, has not complied with True North's requests. Specifically, True North has requested repeatedly that Publicis provide financial and tax information about the individual advertising and holding companies that were operated by the parties' joint venture during 1994, 1995 and 1996, as well as advertising entities owned by Publicis Communication outside of the joint venture. True North requires this information to properly report and support (1) its foreign earnings and (2) its foreign tax credits with respect to its foreign earnings. Among other information reasonably requested, Publicis must provide True North with the financial statements, tax returns, tax payment receipts, dividend payment information, withholding tax receipts and corporate structure change information for Publicis Communication, each of the joint venture companies and their related entities, as 7 8 well as advertising entities owned by Publicis Communications outside the joint venture during the 1994 through 1996 period. True North will request the same information for the 1997 tax year. True North has requested the above information and, to date, Publicis has failed to provide the necessary or complete information. The I.R.S. currently is auditing True North's tax returns for the years 1994 through 1996. The I.R.S. has notified True North that if it does not provide the information and documents in the materials requested from Publicis, True North will be sanctioned. If Publicis does not fully comply with True North's requests, True North faces tax penalties, lost foreign tax credits and interest of approximately $10 million. These damages can be averted if Publicis promptly complies, or is ordered to comply, with True North's outstanding requests made pursuant to Section 1.10 of the Agreement. THE ARBITRATION PROVISION The Agreement provides for this arbitration in Section 3.4.2. All disputes, differences, controversies or claims arising out of, related to or in connection with this Agreement or the Operative Agreements (other than the Pooling Agreement) or the transactions contemplated hereby and thereby shall be submitted to and resolved by arbitration in London, England conducted in accordance with UNCITRAL Arbitration Rules as then in force (the "Rules"). The London Court of International Arbitration shall be the administrative and appointing authority (the "Appointing Authority"). Each of the parties hereto hereby submits to such jurisdiction, forum and rules and irrevocably waives any and all objections. Claims To Be Arbitrated and Relief Sought Based on the foregoing, True North will arbitrate the following claims and seeks the following relief from Publicis S.A. and Publicis Communication: 8 9 1. For their breach of Section 1.7 of the Agreement, an award enjoining Publicis S.A. and Publicis Communication from proceeding with the purported "offer" set forth in the November 10, 1997 letter, or any similar transaction, and an award of monetary damages in an amount to be determined at the arbitration. 2. For their breach of Section 1.8 of the Agreement, an award enjoining Publicis S.A. and Publicis Communication from proceeding with the purported "offer" set forth in the November 10, 1997 letter, or any similar transaction, an award ordering Publicis Communication to elect three independent outside directors in accordance with Section 1.8 of the Agreement, and an award of monetary damages in an amount to be determined at the arbitration. 3. For its breach of Section 1.10 of the Agreement, an award ordering Publicis Communication to provide True North with all the financial and other information requested by True North pursuant to Section 1.10 of the Agreement and an award of monetary damages in an amount to be determined at the arbitration. 9 10 In addition to the above relief, True North will seek an award of its costs and disbursements relating to this arbitration, including attorneys' fees, and any other relief that is just and proper. Very truly yours, Bruce Mason Chairman and Chief Executive Officer True North Communications Inc. cc: Howard, Darby & Levin 1330 Avenue of the Americas New York, New York 10019 Attention: Thomas J. Kuhn, Esq. 10 EX-99.H3 22 ANSWER AND COUNTERCLAIMS OF TRUE NORTH 1 Exhibit (h)(3) IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION PUBLICIS COMMUNICATION, ) ) Plaintiff, ) ) v. ) Civil No. 97 C 8263 ) TRUE NORTH COMMUNICATIONS INC., ) Judge Joan B. Gottschall BRUCE MASON, STEPHEN T. VEHSLAGE, ) GREGORY W. BLAINE, LAUREL CUTLER, ) J. BRENDAN RYAN, RICHARD S. ) BRADDOCK, MICHAEL P. MURPHY, and ) RICHARD P. MAYER, ) ) Defendants. ) ) ) JURY TRIAL DEMANDED ) TRUE NORTH COMMUNICATIONS INC., a ) Delaware corporation ) ) Counterclaim-Plaintiff, ) ) v. ) ) PUBLICIS COMMUNICATION, a ) French corporation, PUBLICIS S.A., a ) French corporation, and MAURICE LEVY ) a French citizen, ) ) Counterclaim-Defendants.) ANSWER OF DEFENDANTS TRUE NORTH COMMUNICATIONS INC., BRUCE MASON, STEPHEN T. VEHSLAGE, GREGORY W. BLAINE, LAUREL CUTLER, J. BRENDAN RYAN, RICHARD S. BRADDOCK, MICHAEL P. MURPHY, AND RICHARD P. MAYER AND VERIFIED COUNTERCLAIM OF TRUE NORTH COMMUNICATIONS INC. 2 Defendants True North Communications Inc. ("True North"), Bruce Mason, Stephen T. Vehslage, Gregory W. Blaine, Laurel Cutler, J. Brendan Ryan, Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer (collectively, the "Defendants"), by their undersigned counsel, hereby answer the complaint of Publicis Communication as follows: NATURE OF THE ACTION 1. Publicis brings this action to redress a wrongful course of conduct by True North and its Board of Directors. Publicis is True North's largest shareholder, holding 18.4% of its common stock. Publicis has a long history of disagreements with current True North management. True North now seeks substantially to dilute the holdings of Publicis and all public shareholders and to vest effective control of the Company and its management. ANSWER: Defendants admit that Publicis Communication is True North's largest shareholder of record and that there has been a long history of disagreements between True North and Publicis Communication and its parent, Publicis S.A. Defendants deny that they have engaged in any wrongdoing and further deny each and every other allegation of paragraph 1. 2. True North seeks to implement this change of control by means of a merger with another advertising firm, Bozell Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"). Under the merger agreement, True North will issue 20 million new shares of True North common stock, an amount that will dilute the holdings of True North's current public shareholders -- and Publicis -- by approximately 50%. After the merger, management of the surviving True North will own and/or have the power to direct the votes for a controlling block of the Company's stock, while Publicis' stake will be reduced to less than 10%. ANSWER: Defendants admit that True North has entered into a Merger Agreement with the advertising firm of Bozell, Jacobs, Kenyon & Eckhardt. Inc. ("Bozell"), that pursuant to the -2- 3 Merger Agreement, True North will issue new shares of True North common stock in exchange for the stock of Bozell, and that following such issuance, Publicis Communication is expected to hold less than 10% of the outstanding shares of True North. Publicis Communication has, however, the right to purchase additional shares of True North. Defendants deny that the Merger Agreement with Bozell constitutes a change of control and deny that management will have the power to direct a controlling block of stock, and further deny each and every other allegation of paragraph 2. 3. In breach of its fiduciary obligations, the True North Board has refused to meet with Publicis to consider a superior proposal made by Publicis that will deliver more value to the Company's shareholders. Instead, True North management has embarked upon a campaign to lock up its future, improperly restricting the Board's ability to consider superior offers, and manipulating the corporate machinery to fix the upcoming special shareholder vote on the Bozell merger. Defendants have violated the New York Stock Exchange Rules as well as the federal proxy rules in order to disenfranchise those stockholders who are likely to vote against the Bozell merger. ANSWER: Defendants admit that the True North Board has not met with Publicis in connection with a letter received by True North on November 10, 1997, but further state that there has been no breach of fiduciary obligations and deny each and every other allegation of paragraph 3. 4. Upon information and belief, if the Bozell merger is consummated, the pay-off to members of post-merger True North management and one of True North's outside directors - who will potentially receive tens of millions of dollars over the next several years - is fantastic. Unfortunately, the shareholders will not reap the same windfall. -3- 4 ANSWER: Defendants deny each and every allegation of paragraph 4. 5. Publicis brings this action for preliminary and permanent injunctive relief, for declaratory relief, and for damages. ANSWER: Defendants deny that Publicis has properly brought this action and further deny that Publicis is entitled to any relief. JURISDICTION AND VENUE 6. This Court has jurisdiction over this action pursuant to 28 U.S.C. Section 1332. The amount in dispute exceeds $75,000. ANSWER: Defendants admit that this court has jurisdiction and that the amount in dispute exceeds $75,000. 7. Venue is proper under 28 U.S.C. Section 1391. ANSWER: Defendants admit the allegations in paragraph 7. THE PARTIES 8. Publicis is a wholly-owned subsidiary of Publicis, S.A. Both Publicis and Publicis S.A. are French corporations with their principal place of business in Paris, France. Publicis is one of Europe's largest advertising networks, with offices in 35 countries and 71 cities. Publicis S.A.'s stock is publicly traded on the Paris stock exchange. -4- 5 ANSWER: Defendants deny that Publicis Communication is a wholly-owned subsidiary of Publicis S.A.; in fact, True North owns 26.5% of the shares of Publicis Communication. Upon information and belief, defendants admit the remaining allegations in paragraph 8. 9. Defendant True North is a Delaware company with its principal place of business in Chicago. True North is a communications company and the parent of Foote, Cone & Belding, a national advertising agency network. Its stock is traded on the New York Stock Exchange. ANSWER: Defendants admit the allegations in paragraph 9. 10. Defendant Bruce Mason is the Chairman of the Board of Directors and Chief Executive Officer of True North. Defendants Stephen T. Vehslage, Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer are directors of True North. Defendants Gregory W. Blaine, Laurel Cutler, and J. Brendan Ryan are officers and directors of True North. Upon information and belief, the Director Defendants are citizens of Illinois, New York, and Connecticut. ANSWER: Defendants deny that Laurel Cutler is an officer of True North and state that the Director Defendants are citizens of Illinois, New York or Connecticut. Defendants otherwise admit the allegations in paragraph 10. 11. In 1989, Publicis and True North formed a separate joint venture in which the two companies combined certain of their European operations. As part of the formation of the joint venture, the parties also became significant shareholders of one another. -5- 6 ANSWER: Defendants admit the allegations of paragraph 11. 12. In the years since the formation of the Publicis/True North joint venture, the parties have had disagreements concerning the nature and scope of their joint efforts. Notwithstanding these disagreements, Publicis has never posed any type of threat to True North's corporate policies or effectiveness, although, upon information and belief, True North incorrectly and unreasonably perceived Publicis as a threat. In May 1997, the parties signed a series of agreements that unwound their European joint venture. After consummation of the transactions contemplated by the May 1997 agreements, Publicis remained an 18.5% owner of True North, and True North became a 26.5% owner of Publicis. ANSWER: Defendants admit that, as a result of Publicis Communication's and Publicis S.A.'s wrongful conduct, the parties had disagreements concerning the joint venture from its inception until early 1997, and defendants further admit that in May 1997, the parties signed a series of agreements to end their joint venture and that, as a result of those agreements, Publicis Communication remained a stockholder of True North and True North remained a stockholder of Publicis Communication. Defendants deny each and every other allegation of paragraph 12. THE BOZELL MERGER 13. On July 31, 1997, True North announced its agreement to merge with Bozell, an advertising firm with headquarters in New York City (the "Bozell Merger"). True North did not consult its largest stockholder, Publicis, with respect to the Bozell merger. Since the July announcement, the stockholders of True North have not been provided with detailed information regarding the Bozell Merger. -6- 7 ANSWER: Defendants admit that True North announced the Merger Agreement with Bozell on July 31, 1997. Defendants deny each and every other allegation of paragraph 13. 14. The merger agreement with Bozell (the "Merger Agreement") requires True North to issue 20 million new shares of common stock, nearly doubling the 25 million currently outstanding. The Merger Agreement also requires an amendment of True North's charter to increase the total number of authorized shares of common stock from 50 million to 90 million. Each share of Bozell common stock will be converted into 0.51 shares of True North common stock upon completion of the Bozell Merger. ANSWER: Defendants admit that the Merger Agreement requires an increase in the total number of True North authorized shares of common stock and that each share of Bozell common stock will be converted into 0.51 shares of True North common stock upon completion of the Merger. Defendants deny each and every other allegation of paragraph 14. 15. Upon information and belief, post-merger management of True North will effectively control the Company. Through the exercise of options and distribution of newly issued shares, the post-merger management of True North will gain voting control of a dominant block of the Company's shares, many times larger than the block owned by Publicis. Publicis and True North's public shareholders, on the other hand, will suffer an approximate 50% dilution in their holdings. In addition, post-merger management will control the newly constituted and expanded Board of Directors. Publicis may lose its single seat on the Board. ANSWER: Defendants admit that, as a result of the Bozell Merger, Publicis Communication's percentage ownership of True North will decrease, but further state that Publicis Communication has the right to buy additional shares of True North common stock so as to -7- 8 maintain its current ownership percentage. Defendants deny each and every other allegation of paragraph 15. 16. In connection with the Merger Agreement, upon information and belief, employment agreements were entered into with certain members of senior management of both companies that provide that, upon consummation of the Merger, certain of the Defendants will receive exorbitant compensation, potentially in excess of tens of millions of dollars over the next several years. ANSWER: Defendants deny the allegations of paragraph 16. 17. The Merger Agreement prohibits True North and its officers, directors, and employees from engaging in discussions or negotiations with other potential bidders for True North except under very limited circumstances. The Merger Agreement only permits the True North Board to consider a "Superior Parent Takeover Proposal", which is narrowly defined as a third-party offer for a business combination with True North in which the sole consideration to be received by True North shareholders is the stock of a widely-held public company. ANSWER: Defendants admit that the Merger Agreement, among its numerous terms and conditions, places certain specified limitations upon True North in engaging in discussions or negotiations with potential bidders for True North. The Merger Agreement places similar limitations upon Bozell. Defendants deny each and every other allegations of paragraph 17. THE PUBLICIS PROPOSAL 18. On November 10, 1997, Publicis chairman Maurice Levy sent a letter to the True North Board of Directors stating Publicis' belief that "True North's transaction with Bozell is contrary to the best interests of True North's stockholders, of which Publicis is by far the largest with 18.5% of True North's common stock." As Mr. Levy explained: -8- 9 The acquisition does not solve True North's fundamental strategic weakness, which has been its failure to establish a global presence. Bozell is primarily a U.S.-based business with a weak international presence, and Publicis believes that its acquisition by True North will compound, rather than solve, True North's strategic weaknesses. As global marketers have increasingly demanded worldwide coverage, True North has continued to focus on its U.S. business and as a result, we believe that True North now finds itself at a significant competitive disadvantage. In short, True North's proposed acquisition of Bozell does nothing to solve these problems, and we believe (based on the limited information that has been made available to date) that the price to be paid for Bozell significantly exceeds the value of Bozell's business." ANSWER: Defendants admit that on November 10, 1997, True North received a letter from Maurice Levy and admit that the letter contains the quoted language. Defendants refer to the entirety of Mr. Levy's letter for its full contents, and deny each and every other allegation of paragraph 18. 19. As an alternative to the Bozell transaction, Mr. Levy stated that Publicis is "prepared to propose a business combination between Publicis Communication and True North in which each outstanding share of True North would be valued at US$28": Publicis has for some time believed that a combination of Publicis Communication's businesses with those of True North would create a powerful global presence with tremendous opportunities for growth.... We at Publicis continue to believe that a merger between Publicis Communication and True North is in the best interests of both True North's and Publicis' stockholders and their respective clients and employees .... ANSWER: Defendants admit that on November 10, 1997, True North received a letter from Maurice Levy and admit that the letter contains the quoted language. Defendants refer to the -9- 10 entirety of Mr. Levy's letter for its full contents, and deny each and every other allegation of paragraph 19. 20. Mr. Levy concluded with an invitation "to discuss with True North and its representatives the details of our proposal, including the cash and stock components of our US$28 valuation": We would be willing to meet with you and your advisors at your earliest convenience to discuss our proposal and to answer any questions you may have. Our preferred course would be to negotiate a transaction that can be presented to our respective stockholders and clients as the amicable and joint effort of Publicis, True North and each of the companies' Boards of Directors and senior management. I hope that each of you will give our proposal serious consideration, and I look forward to your reply. We stand ready to meet with the Board to present our plans. ANSWER: Defendants admit that on November 10, 1997, True North received a letter from Maurice Levy and admit that the letter contains the quoted language. Defendants refer to the entirety of Mr. Levy's letter for its full contents, and deny each and every other allegation of paragraph 20. TRUE NORTH'S ATTEMPTS TO STEAL THE SPECIAL SHAREHOLDER VOTE 21. True North did not disclose Publicis' letter to the public. Nor did it respond in any way to Publicis. Instead, True North -- recognizing that Publicis' opposition and counter-offer would seriously threaten its proposed merger with Bozell -- immediately undertook to rig the vote at a special shareholders' meeting (set for December 22, 1997) at which the Bozell transaction would be voted upon by True North shareholders. -10- 11 ANSWER: Defendants admit that True North did not disclose the letter to the public until after Mr. Levy and Publicis voluntarily chose to disclose the letter publicly on November 17, 1997. Defendants further state that Mr. Levy's letter to the True North Board stated that it was "STRICTLY CONFIDENTIAL". Defendants deny each and every other allegation of paragraph 21. 22. True North attempted to manipulate the vote by setting a premature record date, the date used to determine who is entitled to vote at the special shareholders' meeting. Without revealing to the New York Stock Exchange (the "Exchange") or to the public the highly material information that it had received from Publicis, True North set a record date of Tuesday, November 18. True North sat silently upon this information as well, deliberately choosing not to announce that it had set a record date for the special shareholders' meeting. ANSWER: Defendants state that on November 7, 1997, three days prior to Publicis' "offer," True North initially attempted to set a record date with the New York Stock Exchange. Defendants further state that its counsel first contacted the New York Stock Exchange on the morning of November 10, 1997 prior to becoming aware of the existence of Publicis' November 10, 1997 letter. True North's counsel was advised that the earliest potential record date for the Special Shareholders meeting was November 18, 1997. Accordingly, on the morning of November 10, 1997 and without consideration of the letter received from Mr. Levy, True North, in consultation with and with the approval of the New York Stock Exchange, arranged for a record date of Tuesday, November 18, 1997. Defendants deny each and every other allegation of paragraph 22. -11- 12 23. After a week had passed with no response, on November 17, Publicis decided to disclose publicly the text of the letter. The stock market's reaction was immediate and dramatic. On the day of the announcement, the price of a share of True North common stock rose more than 12%, from 23 3/8 to 26 1/4. Approximately one million shares were traded on November 17 and 18, more than twelve times the average daily volume of the stock. The market's reaction to the news of Publicis' opposition to the Bozell merger and its counter-proposal demonstrates the significance of the news to True North shareholders. ANSWER: Defendants admit that Mr. Levy and Publicis chose to disclose the November 10, 1997 letter on November 17, 1997 and further admit that the stock market reacted to the announcement. Defendants deny each and every other allegation of paragraph 23. 24. True North's decision to set an early record date while it sat silently upon this explosive news, if not remedied, will deprive the holders of over a million True North shares of the opportunity to participate in a contested special shareholders' meeting. Because trades of securities take three business days to settle, every single shareholder who purchased True North securities after Thursday, November 13 -- including persons who purchased at higher prices that prevailed after the public announcement of Publicis' opposition and counter-proposal -- has been disenfranchised. ANSWER: Defendants deny the allegations of paragraph 24. 25. True North's decisions to set a premature record date, to remain silent about Publicis' opposition and counter-proposal, and not to announce its record date have disenfranchised holders of millions of True North shares who purchased because of their interest in, or at prices that reflected, Publicis' counter-proposal. And True North shareholders who sold their shares before the news about Publicis was released will be permitted to vote, notwithstanding their lack of interest in the meeting. In short, because True North remained silent about Publicis' opposition and counterproposal and furtively set an early record date, no True North shareholder who purchased knowing of Publicis' opposition and counter-proposal will be allowed to participate in the special shareholders' meeting. -12- 13 ANSWER: Defendants deny the allegations in paragraph 25. 26. True North's eight-day notice to the Exchange violated Section 401.02 of the rules set forth in the New York Stock Exchange Listed Company Manual, which applies to True North. Section 401.02 provides that "[a] minimum of ten days' notice is required prior to the record date established (or closing of the transfer books) for determination of shareholders entitled to vote at the meeting." True North also violated Securities and Exchange Commission ("SEC") Rule 14a-13 regarding the solicitation of proxies, which requires the mailing of broker inquiries twenty days in advance of the record date. 17 C.F.R 240.14a-13. In violation of Rule 14a-13, True North did not mail broker inquiries until the day before and, in some cases, the day after the record date to maintain the secrecy of its record-date maneuver. ANSWER: Defendants deny the allegations of paragraph 26 and further state that plaintiff has intentionally and misleadingly quoted both the rules of the New York Stock Exchange and the rules of the Securities and Exchange Commission. Section 401.02 of the New York Stock Exchange rules specifically provides, in pertinent part: If it appears impossible to fix a record date which will permit ten days advance notice to be given, that fact should be communicated to the company's Exchange representative as soon as the difficulty becomes apparent. When this is done early enough, it will generally be possible to work out an alternative arrangement. Securities and Exchange Commission Rule 14a-13 specifically provides that there is no absolute rule for mailing broker inquiry cards twenty days prior to the record date. Rather, the rule states in pertinent part: if such inquiry is impracticable 20 business days prior to the record date of a special meeting, as many days before the record date of such meeting as is practicable. -13- 14 TRUE NORTH'S DELAYED RESPONSE TO PUBLICIS 27. After the close of trading on November 17 - and after Publicis had publicly disclosed the contents of its November 10 letter - True North (through its chairman, Bruce Mason) finally responded to Publicis' November 10 merger proposal. Mason claimed that the Board of Directors discussed the proposal "at length" but rejected the offer, even though it refused to meet with or discuss the proposal with Publicis. ANSWER: Defendants admit that True North publicly disclosed its written response to Mr. Levy's November 10, 1997 letter on November 17, 1997, and incorporates herein the full text of that letter. Defendants deny each and every other allegation of paragraph 27. 28. Also on November 17, 1997, True North filed a complaint in the Delaware Court of Chancery against Publicis and its parent company, Publicis S.A., seeking a preliminary and permanent injunction to provide certain financial information and documentation to the SEC in connection with True North's preliminary proxy and registration statements. No hearing or other proceeding was held in the action and, on November 21, 1997, counsel for True North informed the Delaware court that Publicis had fully complied with its requests. ANSWER: Defendants admit that on November 17, 1997, True North was forced to file a complaint in the Delaware Court of Chancery to compel Publicis Communication and Publicis S.A. to abide by their contractual commitments to True North. Only after the Delaware Court of Chancery had scheduled a conference at True North's request did Publicis belatedly provide the requested information. Defendants deny each and every other allegation of paragraph 28. -14- 15 COUNT I BREACH OF FIDUCIARY DUTY (INTERFERENCE WITH STOCKHOLDER FRANCHISE) 29. Plaintiff repeats and realleges paragraphs 1 through 28 as if fully set forth herein. ANSWER: Defendants repeat and reallege their answers to paragraphs 1 through 28 as if fully set forth herein. 30. Defendants' actions in setting a premature record date, in sitting silently while that record date passed without disclosing Publicis' opposition to the Bozell Merger and its counter-proposal, and in deliberately choosing not to announce its record date were taken for the primary purpose of impeding and/or interfering with the effective exercise of the stockholder franchise in connection with the vote at the special shareholders' meeting. Defendants sat silently upon the highly material news of Publicis' offer after surreptitiously setting a record date in violation of the New York Stock Exchange Rules. Defendants also violated Rule 14a-13 of the federal proxy rules by failing to send out broker inquiries until approximately the record date. ANSWER: Defendants deny the allegations of paragraph 30. 31. Defendants took these actions to disenfranchise shareholders who purchased or would be purchasing True North stock after the disclosure of Publicis' opposition to the Bozell Merger and $28 per share counter-proposal. As True North knew, those shareholders who purchased upon the news of Publicis' opposition and counter-proposal would be likely to vote against the Bozell Merger. ANSWER: Defendants deny the allegations of paragraph 31. -15- 16 32. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. ANSWER: Defendants deny the allegations of paragraph 32. COUNT II BREACH OF FIDUCIARY DUTY (FAILURE TO MAXIMIZE STOCKHOLDER VALUE) 33. Plaintiff repeats and realleges paragraphs 1 through 32 as if fully set forth herein. ANSWER: Defendants repeat and reallege their answers to paragraphs 1 through 32 as if fully set forth herein. 34. The Bozell Merger will result in a change of the effective control of True North. In this context, the Board's fiduciary duty is to seek to obtain the best available terms for True North's shareholders and not to favor one potential acquirer over another or one type of financial alternative over another. In pursuing this objective, True North's Board of Directors have a duty to inform themselves, prior to making business decisions, of all information reasonably available to them. ANSWER: Defendants deny that the Merger Agreement with Bozell will result in a change of control of True North and further deny each and every other allegation of paragraph 34. 35. The True North Directors have not sought to obtain the best available terms for the True North shareholders and have not properly informed themselves. They have breached, and are continuing to breach their fiduciary duties. -16- 17 ANSWER: Defendants deny the allegations of paragraph 35. 36. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. ANSWER: Defendants deny the allegations of paragraph 36. COUNT III BREACH OF FIDUCIARY DUTY (BREACH OF DUTY OF LOYALTY) 37. Plaintiff repeats and realleges paragraphs 1 through 36 as if fully set forth herein. ANSWER: Defendants repeat and reallege their answers to paragraphs 1 through 36 as if fully set forth herein. 38. Upon information and belief, some or all of the Director Defendants will receive exorbitant compensation - potentially tens of millions of dollars - in the period following the consummation of the Bozell Merger. By placing their own personal interests and the interests of new True North management ahead of the shareholders' interests, these defendants have acted in bad faith and have breached their duty of loyalty. ANSWER: Defendants deny the allegations of paragraph 38. 39. Publicis is being, or will be, irreparably injured by Director Defendants' misconduct and has no adequate remedy at law. -17- 18 ANSWER: Defendants deny the allegations of paragraph 39. COUNT IV BREACH OF FIDUCIARY DUTY (UNREASONABLE PREEMPTIVE DEFENSIVE MEASURES) 40. Plaintiff repeats and realleges paragraphs 1 through 39 as if fully set forth herein. ANSWER: Defendants repeat and reallege their answers to paragraphs 1 through 39 as if fully set forth herein. 41. Upon information and belief, the Defendants sought and agreed to the Bozell Merger as a defensive measure to dilute the holdings of its largest shareholder, Publicis, with whom it has had a hostile relationship for years. By the Bozell Merger, the Defendants sought to entrench senior True North management. The Bozell Merger is not in the best interests of True North shareholders and is an unreasonable and disproportionate response to the perceived threat posed by Publicis. ANSWER: Defendants admit that, as a result of Publicis Communication's and Publicis S.A.'s misconduct and lack of cooperation, there has long been an extremely difficult relationship between True North and Publicis. It was as a result of these difficulties that True North sought to and succeeded in terminating the joint venture in May 1997. Defendants deny each and every other allegation of paragraph 41. 42. Similarly, Defendants' restriction upon the offers that may be considered under the Merger Agreement, their manipulation of the record date in violation of the rules of the New York Stock Exchange, and their violation of the federal proxy rules in failing to send out -18- 19 timely broker inquiries constitute unreasonable and disproportionate responses by the True North Board of Directors to Publicis and Publicis' proposal. The impact of these responses upon True North shareholders is disproportionately large in relation to any "threat" allegedly posed by Publicis' proposal. The Defendants thereby have breached, and are threatening to continue to breach, their fiduciary duties. ANSWER: Defendants deny the allegations of paragraph 42. 43. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. ANSWER: Defendants deny the allegations of paragraph 43. WHEREFORE, Publicis seeks judgment: (a) enjoining the special shareholders' meeting until the True North Board of Directors has engaged in serious, good faith discussions with Publicis concerning the Publicis proposal; (b) enjoining the special shareholders' meeting unless and until a proper record date, including through compliance with all applicable laws, rules, and regulations; (c) rescinding the restrictions in the Merger Agreement purporting to prohibit True North from engaging in discussions and/or negotiating a transaction with Publicis; (d) declaring that the Merger Agreement between True North and Bozell is void; (e) awarding Publicis damages in an amount to be determined at trial, as well as the costs and fees incurred by Publicis in prosecuting this lawsuit; and (f) granting such other and further relief as the Court deems just and proper. -19- 20 ANSWER: Defendants deny that plaintiff is entitled to any relief, and defendants seek an order dismissing the complaint with prejudice, as well as awarding costs and fees to the defendants and granting such other and further relief as the court deems just and proper. AFFIRMATIVE DEFENSES Defendants state the following affirmative defenses without assuming the burden of proof on such issues that would otherwise rest on Plaintiff. FIRST DEFENSE The alleged causes of action set forth in the Complaint fail to state a claim upon which relief may be granted. SECOND DEFENSE The alleged causes of action set forth in the Complaint seeking equitable relief are barred by Plaintiff's unclean hands. THIRD DEFENSE The alleged causes of action set forth in the Complaint seeking equitable relief are barred by Plaintiff's laches. FOURTH DEFENSE Plaintiff has no standing to bring the causes of action alleged in the Complaint in its individual capacity. The alleged causes of action are derivative, not direct. -20- 21 VERIFIED COUNTERCLAIM OF TRUE NORTH COMMUNICATIONS INC. Counterclaim-Plaintiff True North Communications Inc. ("True North"), by its undersigned counsel for its Verified Counterclaim alleges as follows: NATURE OF ACTION 1. This is an action for injunctive and other relief arising from the concerted attempt by Counterclaim-Defendants Publicis S.A., Publicis Communication and Maurice Levy to disrupt and prevent True North's acquisition of Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"), one of the world's leading advertising companies. 2. True North, a Delaware corporation, is a worldwide advertising and marketing company. Counterclaim-Defendants Publicis S.A. and Publicis Communication are French corporations, also involved in the communications and advertising business. Counterclaim-Defendant Maurice Levy is a French citizen, and is the President Directoire of Publicis S.A. and is the Director General of Publicis Communication. 3. On July 31, 1991, True North announced that it had entered into a merger agreement with Bozell, by which True North would acquire Bozell. True North's opportunity to acquire Bozell is exceptional and uniquely valuable. Completing the merger will significantly increase the size and market capitalization of True North, and create one of the largest advertising companies in the world. 4. Defendants have engaged and are engaging in a series of wrongful and unlawful acts in an effort to disrupt True North's acquisition of Bozell. These acts include: (1) the issuance of false and misleading statements in violation of the United States securities laws, -21- 22 and specifically Section 14(a) of the Securities Exchange Act, 15 U.S.C. Section 18n(a), and Rule 14a-9, 17 C.F.R. Section 240.14a-9; (2) the inducement and attempted inducement of breaches of fiduciary duty owed by True North's directors to True North; (3) the repeated breach of contractual obligations owed by Publicis S.A. and Publicis Communication in connection with the Agreement dated as of May 19, 1997 among, inter alia, Publicis S.A., Publicis Communication and True North; and (4) the repeated breaches of contractual obligations owed by Publicis S.A. and Publicis Communication in connection with the Pooling Agreement dated as of May 19, 1997 among Publicis S.A., Publicis Communication and True North. 5. Though Publicis has publicly stated that it is opposing the True North - Bozell transaction in the interests of shareholder value, its actions have not been consistent with the best interests of an open shareholder vote. Its real intention is to block the True North-Bozell transaction by any means, to damage True North and its stock price for the benefit of Publicis -- as Publicis would hope to acquire or merge with True North at a greatly reduced price in order to address Publicis' significant strategic void. 6. Unless the Counterclaim-Defendants are enjoined from their course of wrongful conduct, True North is at risk of losing its unique opportunity to acquire a major global advertising company and the shareholders of True North will continue to be misled. THE PARTIES 7. Counterclaim-Plaintiff True North is a communications company incorporated in Delaware with its principal place of business in Chicago, Illinois. True North is engaged in all aspects of the advertising and marketing business in the United States and -22- 23 abroad. Among its other assets, True North owns Foote, Cone & Belding, one of the largest advertising agencies in the world. 8. Counterclaim-Defendants Publicis S.A. and Publicis Communication are both French corporations. Publicis S.A. is a publicly traded company listed on the French stock exchange. Publicis Communication owns and operates numerous advertising agencies in various countries. 9. Counterclaim-Defendant Maurice Levy is a French citizen, and is a principal executive officer of each of the two corporate Counterclaim-Defendants. He is the President Directoire of Publicis S.A. and is the Director General and Chief Executive Officer of Publicis Communication. JURISDICTION AND VENUE 10. This Court has jurisdiction over Count I of this counterclaim pursuant to Section 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. Section 78aa and 28 U.S.C. Section 1331. 11. Venue is proper in this District over Count I pursuant to Section 27 of Exchange Act, 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391. 12. This Court has jurisdiction over Counts II, III, IV and V of this counterclaim pursuant to 28 U.S.C. Section 1332 and Section 1367. 13. Venue is proper in this District over Counts II, III, IV and V of this counterclaim pursuant to 28 U.S.C. Section 1391. -23- 24 14. This Court has personal jurisdiction over the Counterclaim-Defendants as a result of, inter alia, their violations of the federal securities laws and their commission of tortious acts within the State of Illinois. BACKGROUND ALLEGATIONS COMMON TO ALL COUNTS 15. In 1989, True North and Publicis formed a global alliance. As a part of that alliance, True North and Publicis created a joint venture company called Publicis-FCB. The joint venture owned and operated numerous advertising agencies located in Europe. 16. Almost from the beginning, the parties had great difficulty with the global alliance and the joint venture. As a result of Publicis' failure to cooperate and failure to function properly within the alliance and the joint venture, the alliance between True North and Publicis did not work and relations between the parties soured over time. 17. Accordingly, earlier this year, the parties mutually agreed to unwind the alliance and joint venture. Therefore, on or about May 19, 1997, the parties executed a series of agreements to dissolve the joint venture and divide ownership of the advertising agencies operated by the joint venture. A centerpiece of the May 19, 1997 unwind was the agreement that each party would support the other party's pursuit of strategic acquisitions. 18. Subsequent to the agreement to unwind the joint venture, True North negotiated extensively to acquire Bozell. The acquisition of Bozell presented True North with a unique opportunity to expand and strengthen its business by, inter alia, adding a second major brand to True North's already-existing Foote, Cone & Belding subsidiary. Bozell is an -24- 25 international communications company with advertising and public relations agencies in 53 countries around the world. 19. After extensive negotiations and the receipt of a fairness opinion from its investment banker, the True North Board of Directors on July 30, 1997 approved the acquisition of Bozell. 20. On or about July 31, 1997, True North announced that it had entered into an Agreement and Plan of Merger to acquire Bozell (the "Merger Agreement") in a merger worth in excess of $1 billion. On or about August 6, 1997, True North filed a Form 8-K with the United States Securities And Exchange Commission that included a copy of the Merger Agreement. 21. In accordance with the Merger Agreement, a wholly-owned True North subsidiary (Cherokee Acquisition Corporation) will merge with and into Bozell, with Bozell surviving as a wholly-owned subsidiary of True North. Each share of Bozell common stock will be converted into 0.51 of a share of True North common stock. As a consequence, the acquisition of Bozell essentially will substantially increase the size and market capitalization of True North. 22. Under the Merger Agreement, the expiration date for the merger is December 31, 1997. The Merger Agreement specifically provides that either True North or Bozell may terminate the agreement if the merger is not closed by December 31, 1997. -25- 26 COUNT I (VIOLATION OF FEDERAL SECURITIES LAWS) 23. True North repeats and realleges its allegations in paragraphs 1-22 as if set forth fully herein. THE COUNTERCLAIM-DEFENDANTS SOLICIT TRUE NORTH SHAREHOLDERS BY MEANS OF FALSE AND MISLEADING COMMUNICATIONS. 24. On November 17, 1997, Publicis Communication and Publicis S.A., upon information and belief at the instruction of Mr. Levy , released a vague and highly misleading November 10, 1997 letter to the press in an effort to solicit True North's shareholders to vote against the Bozell acquisition by falsely communicating to such shareholders that Publicis Communication and Publicis S.A. were interested in acquiring True North at $28 per share. As Mr. Levy and Publicis intended, the press coverage concerning the November 10, 1997 letter uniformly described Publicis' proposed "combination" as an acquisition by Publicis of True North at $28.00 per share. For instance, on November 18, 1997, The New York Times reported that "Publicis, the Paris-based ad agency company, said it would seek to acquire True North Communications, a former partner, for $577.4 million if True North abandons its pending acquisition of [Bozell]. " That same day, the Chicago Sun Times reported that True North had rejected Publicis' "takeover effort," stating that Publicis had "offered to purchase the remainder of the shares [that Publicis did not already own] for $28 each in cash and stock." Similarly, on December 1, 1997, Reuters Financial reported, "Publicis last month offered $28 for every outstanding True North share ...." 25. Publicis' supposed proposal to acquire True North is nothing more than a ruse designed to interfere with the proposed Bozell acquisition and to mislead True North -26- 27 shareholders. Publicis has indicated to True North that the "combination" Publicis had referred to in the November 10, 1997 letter was in actuality an acquisition of Publicis by True North. In other words, Publicis' supposed "combination" is in reality a proposal whereby True North would buy out Publicis - -- not, as the Counterclaim-Defendants had told True North's shareholders, that Publicis was seeking to acquire True North at $28 per share. There has been no "offer to acquire" True North stock, but merely an unfounded speculation promoted by Publicis and Mr. Levy as to what they think True North stock might eventually be worth if Publicis Communication were merged into True North with Publicis management taking control. THE COUNTERCLAIM-DEFENDANTS ORCHESTRATE A CAMPAIGN TO MISLEAD TRUE NORTH SHAREHOLDERS 26. Despite having been aware of the proposed True North-Bozell merger since the end of July 1997, Mr. Levy , Publicis S.A. and Publicis Communication waited until November 10, 1997 to send a letter to True North expressing their objection to the proposed Bozell acquisition, and purporting to set forth an "offer" regarding a "combination" between Publicis and True North. A copy of their November 10, 1997 letter is attached as Exhibit A to Plaintiff's Motion for Expedited Discovery and a Preliminary Injunction. 27. Mr. Levy's November 10, 1997 letter on behalf of Publicis S.A. and Publicis Communication contained numerous knowingly false and misleading statements. For instance, Mr. Levy falsely suggested that Publicis would propose an alternative to the Bozell acquisition whereby Publicis would acquire True North at a price of $28 per share of True North. Mr. Levy stated that Publicis was "prepared to propose a business combination -27- 28 between Publicis Communication and True North in which the each [sic] outstanding share of True North would be valued at US$28." Publicis also falsely characterized its proposed acquisition as "a unique opportunity for the stockholders of True North to maximize the value of their shares." (Emphasis added.) 28. On November 12, 1997 the True North Board of Directors, after considering Publicis' November 10, 1997 letter and consulting with its financial and legal advisors, determined that it would decline Publicis' request for a meeting. The Board's decision was the product of careful deliberation and a detailed understanding of Publicis and Mr. Levy . The Board considered, inter alia, True North's intention to proceed with the Bozell acquisition, the fact that the financial terms of the November 10, 1997 letter were extremely vague and, when construed in the best possible light to Publicis, did not appear to be materially different from other strategic alternatives that had been explicitly considered and rejected by the Board, the lengthy history of difficulties between True North and Publicis, and True North's contractual obligations to Bozell. PUBLICIS HAS VIOLATED SECTION 14(a) AND RULE 14A-9 UNDER THE EXCHANGE ACT 29. Rule 14a-9 prohibits any solicitation of shareholders by means of any . . . communication, written or oral, containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading. -28- 29 30. In releasing the November 10, 1997 letter to the press, the Counterclaim-Defendants intended to and did seek to solicit True North's shareholders to vote against the Bozell acquisition by means of communications containing false and misleading statements. In particular, each of these communications to True North's shareholders concerning the purported "combination" between True North and Publicis contained knowingly misleading and false statements of material fact, or omitted material facts necessary to render the statements not misleading, in that, as they have now acknowledged, Publicis and Mr. Levy never had any intention of offering to pay $28 in stock and cash for each share of True North. Moreover, the Counterclaim Defendants have stood mute while these inaccuracies have been communicated to True North's shareholders and have never attempted to clarify the true nature of the proposed "combination" with True North, despite their clear legal obligation promptly to correct any false and misleading statements to True North's shareholders. 31. Each of these false, deceptive, misleading and manipulative statements and the information and facts omitted as set forth above was made with knowledge of and/or reckless disregard for their falsity. 32. Each of these false, deceptive, misleading and manipulative statements and the information and facts omitted as set forth above are material to each and every True North shareholder in determining whether to vote in favor of the Bozell acquisition. 33. Each of these false, deceptive, misleading and manipulative statements and the information and facts omitted as set forth above was made, directly or indirectly, by means of instrumentalities of interstate commerce and/or of the mails. -29- 30 34. By reason of the foregoing, Mr. Levy , Publicis Communication and Publicis S.A have violated Section 14(a) of the Exchange Act, 15 U.S.C. Section 78n(a), and Rule 14a-9, 17 C.F.R. Section 240.14a-9, promulgated thereunder. In addition, Mr. Levy is a controlling person within the meaning of Section 20(a) of the Exchange Act, 15 U.S.C. Section 78p(a), and is liable for Publicis Communication's and Publicis S.A.'s violations thereof. 35. Unless the injunctive relief sought under this claim is granted, True North and its stockholders will be irreparably harmed in that the false, deceptive, misleading and manipulative statements and the information and facts omitted as set forth above will remain uncorrected and the Counterclaim-Defendants will continue to seek to mislead and falsely solicit proxies from the True North stockholders. 36. True North has no adequate remedy at law. COUNT II (TORTIOUS INTERFERENCE WITH FIDUCIARY DUTIES) 37. True North repeats and realleges its allegations in paragraphs 1-36 as if set forth fully herein. 38. Pursuant to the agreements entered into in May 1997 by which True North and Publicis Communication and Publicis S.A. agreed to terminate their joint venture, Publicis Communication was afforded the contractual right to nominate one person to the True North Board of Directors. 39. Pursuant to its contractual right, on or about May 23, 1997, Publicis Communication nominated Mr. Ali Wambold to the True North Board. Mr. Wambold is a -30- 31 partner at Lazard Freres in Paris. Publicis Communication and Publicis S.A. have retained Lazard Freres as their investment banker and financial advisor in connection with their hostile actions to disrupt the Bozell merger. 40. As a director of True North, Mr. Wambold owes strict fiduciary duties to True North and its shareholders. 41. On November 10, 1997, at the direction of Counterclaim-Defendants Publicis S.A. and Publicis Communication and at the specific instruction of Maurice Levy, Mr. Wambold privately telephoned three members of the Board of Directors of True North. 42. During his conversations with these members of the True North Board, Mr. Wambold urged these Board members to support the initiatives of Publicis set forth in Mr. Levy's letter of November 10, 1997. Mr. Wambold stated that Mr. Levy held these individuals in high esteem and, in certain instances, Mr. Wambold stated that Mr. Levy believed that certain of these individuals would play an important role in a combined Publicis - True North entity. 43. Mr. Wambold's statements to these members of the True North Board were calculated to induce them to breach their fiduciary duties to True North and were in gross violation of Mr. Wambold's fiduciary duties as a director of True North. 44. Upon information and belief, Mr. Wambold's breach of his fiduciary duties as set forth in paragraphs 42 and 43 was made at the direction and insistence of Mr. Levy , Publicis Communication and Publicis S.A. -31- 32 45. Upon information and belief, Mr. Levy, Publicis Communication and Publicis S.A. have caused Mr. Wambold to breach his fiduciary duties in additional ways, including, inter alia, causing Mr. Wambold to disclose to them confidential information of True North made known to Mr. Wambold by True North solely in his capacity as a director of True North. 46. The actions of Mr. Levy, Publicis Communication and Publicis S.A. in causing Mr. Wambold to breach his fiduciary duties have injured True North and its shareholders. 47. Unless the injunctive relief sought under this claim is granted, True North and its stockholders will be irreparably harmed by further efforts by the Counterclaim-Defendants to induce breaches of fiduciary duties by the True North directors. 48. True North has no adequate remedy at law. COUNT III (BREACH OF CONTRACT BY PUBLICIS S.A. AND PUBLICIS COMMUNICATION) 49. True North repeats and realleges its allegations in paragraphs 1-48 as if fully set forth herein. 50. As part of the termination of the parties' joint venture in May 1997, Publicis S.A. and Publicis Communication entered into a detailed agreement with True North separating their respective worldwide agency networks (the "May 19 Agreement"). A copy of that agreement is attached as Exhibit 1. -32- 33 51. The May 19 Agreement contains a substantial number of terms dealing with the ownership and operation of Publicis Communication. These terms were needed because of True North's 26.5% minority ownership of Publicis Communication and the potential that Publicis S.A. would abuse its dominant 73.5% ownership position. 52. Accordingly, to protect the interest of True North, Section 1.8 of the May 19 Agreement provides, as follows: Communication Directors. As soon as practicable, but no later than 60 days after the consummation of the transactions contemplated by this Agreement and in all events prior to the consummation or corporate approval of any transaction to transfer to Communication agencies owned by Publicis, and so long thereafter as True North owns at least 10% of the issued and outstanding shares of Communication Stock, Communication shall elect to its Board of Directors three members who have no prior significant relationship with Publicis, True North or the directors or senior officers of either (the "Outside Directors"). Publicis and Communication shall consult with True North prior to the appointment of the three Outside Directors. A majority of the three Outside Directors and the Board of Directors of Communication must approve any transaction (other than those specifically contemplated by this Agreement or the Memorandum of Agreement) of Communication, including transactions with Publicis or any affiliates of Publicis, that a majority of the three Outside Directors deem to be significant. 53. Notwithstanding the express provisions of Section 1.8, Publicis S.A. has failed to cause the election of three independent directors to the Board of Publicis Communication. Until such independent directors are appointed, Publicis Communication is prohibited under Section 1.8 from undertaking any "significant transaction." -33- 34 54. Even though Section 1.8 sets conditions that have not been met on any "significant transaction" of the type purportedly contemplated by Mr. Levy's November 10, 1997 letter, Publicis S.A and Publicis Communication have acted and are threatening to continue to act in violation of the May 19 Agreement. 55. Similarly, Section 1.7 of the May 19 Agreement provides, in pertinent part, as follows: Transactions on Arm's Length Basis. So long as True North owns at least 10% of the issued and outstanding shares of Communication Stock, any significant transactions effected by Communication shall be effected on an arm's length basis; .... 56. Notwithstanding this specific contractual provision drafted for the protection of True North, Publicis S.A. and Publicis Communication have breached Section 1.7. The terms of the November 10, 1997 letter written by Mr. Levy on behalf of Publicis Communication clearly contemplate a "significant transaction" within the meaning of Section 1.7, yet Publicis S.A. has not treated Publicis Communication on an arm's length basis with respect to the initiative set forth in Mr. Levy's November 10, 1997 letter. 57. Section 3.4 of the May 19 Agreement provides generally that disputes between the parties with respect to the May 19 Agreement are subject to arbitration. However, Section 3.4.10 further specifies, in pertinent part, that: Governing Laws; Arbitration .... Nothing herein shall limit the right of a party to seek provisional or injunctive relief pending resolution of a dispute pursuant to this Agreement. -34- 35 58. True North has taken steps to commence an arbitration to vindicate its rights under the May 19 Agreement. 59. Pending resolution of the arbitration, True North is entitled to an injunction prohibiting Publicis S.A. and Publicis Communication from breaching their obligations under the May 19 Agreement and prohibiting Publicis Communication from considering any significant transaction unless and until the requirements of Sections 1.7 and 1.8 are complied with. 60. True North has no adequate remedy at law. COUNT IV (BREACH OF CONTRACT) 61. True North repeats and realleges its allegations in paragraphs 1-60 as if set forth fully herein. 62. In addition to the May 19 Agreement, in connection with the parties' termination of their alliance and joint venture, Publicis Communication, Publicis S.A. and True North entered into an additional contract entitled the "Pooling Agreement." A copy of this contract is attached as Exhibit 2. 63. The Pooling Agreement was specifically entered into to prevent Publicis S.A. or Publicis Communication from misusing Publicis Communication's ownership in True North to undermine True North's subsequent acquisition efforts. -35- 36 64. Accordingly, under the Pooling Agreement, Publicis S.A. and Publicis Communication agreed that they would take any action reasonably requested in support of a True North acquisition, other than committing to vote for such a transaction. 65. Specifically, pursuant to section 1.1 of the Pooling Agreement, Publicis S.A. and Publicis Communication agreed to take any action reasonably requested by True North in support of a business transaction. Thus, Publicis agreed to (a) provide True North with a "pooling letter" if necessary to effect a pooling of interests transaction; and (b) if reasonably requested, take such other action in support of the transaction (other than a commitment to vote for such transaction) as would be customary with respect to an acquisition or other similar business transaction in which True North may participate. (Emphasis added.) In sum, short of committing to vote its shares in favor of a True North acquisition, Publicis agreed to support a True North acquisition when and if True North requests such support. Under section 1.2 of the Pooling Agreement, True North undertook a reciprocal obligation to Publicis. 66. The Pooling Agreement further provides that any breach by Publicis arising from a request by True North under section 1.1 entitles True North to injunctive relief. In section 2.4.2 of the Pooling Agreement, Publicis acknowledged that such "a breach would cause a loss to True North which could not be reasonably or adequately compensated in damages" and "True North shall be entitled to injunctive relief to prevent any breach or continuing breaches of this Agreement arising out of a request under Section 1.1." -36- 37 67. Pursuant to the Pooling Agreement, True North has reasonably requested that Publicis S.A and Publicis Communication refrain from taking actions against the proposed Bozell transaction and take actions in furtherance of that merger. 68. Publicis S.A and Publicis Communication have at every opportunity taken action contrary to True North's reasonable request, and willfully, deliberately and intentionally breached their obligations under the Pooling Agreement. These actions include, inter alia, filing a meritless complaint against True North and its directors seeking to deprive the True North shareholders of an opportunity to vote on the Bozell transaction, and engaging in the other various wrongful conduct which is set forth in this counterclaim. 69. Publicis S.A.'s and Publicis Communication's breach of the Pooling Agreement threatens to sabotage the Bozell merger. 70. If Publicis and Publicis Communication succeed in stopping the Bozell merger by violating their contractual obligations to True North, the financial harm to True North and its shareholders will be substantial and irreparable. 71. As a direct and proximate cause of their intentional breaches of the Pooling Agreement, True North has been or will be injured in an amount that cannot be fully measured in terms of money damages. Insofar as some portion of the harm to True North is quantifiable, however, True North has been or will be injured in an amount to be determined at trial of not less than $300 million, not including punitive damages. -37- 38 COUNT V (TORTIOUS INTERFERENCE WITH BUSINESS RELATIONS) 72. True North repeats and realleges the allegations contained in paragraphs 1-71 of this complaint as if fully set forth herein. 73. By taking the foregoing wrongful actions, Publicis S.A., Publicis Communication and Mr. Levy threaten to and intend to interfere with and defeat the pending merger of True North and Bozell. Their actions were undertaken intentionally, maliciously and in bad faith with the deliberate purpose of interfering with the merger of True North and Bozell. 74. By virtue of the foregoing, Publicis S.A., Publicis Communication, and Mr. Levy have sought to intentionally interfere with the pending merger of True North and Bozell for the purpose of terminating the current and expected relationship between True North and Bozell. 75. As a direct and proximate cause of their tortious interference with the merger of True North and Bozell, True North has been or will be injured in an amount that cannot be fully measured in terms of money damages. Insofar as some portion of the harm to True North is quantifiable, however, True North has been or will be injured in an amount to be determined at trial of not less than $300 million, not including punitive damages. -38- 39 WHEREFORE, True North demands judgment against Publicis S.A., Publicis Communication and Mr. Levy , and respectfully prays that this Court enter orders as follows: (a) Declaring that the Counterclaim-Defendants have violated Section 14(a) of the Exchange Act, 15 U.S.C. Section 78n(a) and Rule 14a-9, 17 C.F.R. Section 240.14a-9 and ordering that corrective disclosures be made at the expense of the Counterclaim-Defendants; (b) Enjoining the Counterclaim-Defendants from making false and misleading statements in connection with the solicitation of proxies; (c) Enjoining the Counterclaim-Defendants from any further interference with Mr. Wambold and/or directly or indirectly through any agents or other persons acting in concert with them from any further interference with True North directors; (d) Enjoining Publicis S.A. and Publicis Communication from proceeding with any significant transaction until three (3) independent directors are seated and fully functioning on the Publicis Communication Board of Directors; (e) Enjoining Publicis S.A. to adhere to the terms of the Pooling Agreement; (f) Enjoining the Counterclaim-Defendants from any further interference with the Bozell transaction; -39- 40 (g) Awarding True North compensatory and punitive damages in amounts to be determined; (h) Awarding True North the costs and disbursements related to this action, including reasonable attorneys' fees; and (i) Awarding such further and other relief as may be just and proper. /s/ One of the Attorneys for Defendants and for Counterclaim Plaintiff Robert D. McLean Walter C. Carlson Richard B. Kapnick Bruce M. Zessar James W. Ducayet SIDLEY & AUSTIN One First National Plaza Chicago, Illinois 60603 (312) 853-7000 Of Counsel: Kenneth J. Nachbar MORRIS, NICHOLS, ARSHT & TUNNELL 1201 North Market Street P.O. Box 1347 Wilmington, Delaware 19899 (302) 658-9200 Martin London Robert A. Atkins PAUL, WEISS, RIFKIND, WHARTON & GARRISON 1285 Avenue of the Americas New York, NY 10019-6064 (212) 373-3000 -40- 41 JURY TRIAL DEMANDED Defendants and the Counterclaim Plaintiff hereby demand trial by jury for all issues so triable under the Plaintiff's complaint and the Counterclaim-Plaintiffs Counterclaim. /s/ One of the Attorneys for Defendants and for Counterclaim Plaintiff Robert D. McLean Walter C. Carlson Richard B. Kapnick Bruce M. Zessar James W. Ducayet SIDLEY & AUSTIN One First National Plaza Chicago, Illinois 60603 (312) 853-7000 Of Counsel: Kenneth J. Nachbar MORRIS, NICHOLS, ARSHT & TUNNELL 1201 North Market Street P.O. Box 1347 Wilmington, Delaware 19899 (302) 658-9200 Martin London Robert A. Atkins PAUL, WEISS, RIFKIND, WHARTON & GARRISON 1285 Avenue of the Americas New York, NY 10019-6064 (212) 373-3000 -41- 42 VERIFICATION BRUCE MASON, being duly sworn, states that he is the Chairman of the Board of Directors and Chief Executive Officer of Counterclaim Defendant True North Communications Inc. and that the allegations of the foregoing Verified Counterclaim are true and correct as to the best of his knowledge, except as to matters alleged on information and belief, and that as to those matters he believes to the best of his knowledge that such allegations are true. /s/ BRUCE MASON Sworn to before me this [2nd] day of December 1997 /s/ Notary Public [SEAL] -42- EX-99.H4 23 TRUE NORTH'S MOTION/EMERGENCY RESTRAINING ORDER 1 Exhibit (h)(4) IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION PUBLICIS COMMUNICATION, ) ) Plaintiff, ) ) v. ) Civil No. 97 C 8263 ) Judge Joan B. Gottschall TRUE NORTH COMMUNICATIONS INC., ) BRUCE MASON, STEPHEN T. VEHSLAGE, ) GREGORY W. BLAINE, LAUREL CUTLER, ) J. BRENDAN RYAN, RICHARD S. ) BRADDOCK, MICHAEL P. MURPHY, ) RICHARD P. MAYER, and BOZELL, ) JACOBS, KENYON & ECKHARDT, INC. ) ) Defendants. ) - --------------------------------------------) TRUE NORTH COMMUNICATIONS INC., a ) Delaware corporation, ) ) Counterclaim-Plaintiff, ) ) v. ) ) PUBLICIS COMMUNICATION, a ) French corporation, PUBLICIS S.A., a ) French corporation, and MAURICE LEVY, ) a French citizen, ) ) Counterclaim-Defendants ) COUNTERCLAIM PLAINTIFF'S EMERGENCY MOTION FOR A TEMPORARY RESTRAINING ORDER Counterclaim-Plaintiff True North Communications Inc. ("True North"), by its attorneys, hereby moves this Court, pursuant to Fed R. Civ. P. 65(b), for a temporary restraining order against Counterclaim-Defendants Publicis Communication, Publicis S.A. and Maurice Levy (collectively, the "Publicis Parties"). 2 1. Enjoining the Publicis Parties from engaging in any conduct that is not in support of the Bozell merger (other than committing to vote for such transaction), including engaging in any unsolicited tender offer that is conditioned upon the termination of the Bozell Agreement. 2. Enjoining the Publicis Parties from soliciting any True North shareholders to vote against the Bozell merger. In support of this motion, True North respectfully refers the Court to its Verified Counterclaim, the Affidavit of Theodore J. Theophilos submitted herewith and the accompanying Memorandum of Law. Dated: December 5, 1997 /s/ Walter C. Carlson ------------------------------------- One of the Attorneys for Counterclaim- Plaintiff, True North Communications, Inc. Robert D. McLean Walter C. Carlson Richard B. Kapnick Bruce M. Zessar James W. Ducayet SIDLEY & AUSTIN One First National Plaza Chicago, Illinois 60603 (312) 853-7000 Of Counsel: Kenneth J. Nachbar MORRIS, NICHOLS, ARSHT & TUNNELL 1201 North Market Street P.O. Box 1347 Wilmington, Delaware 19899 (302) 658-9200 -2- EX-99.H5 24 PRELIMINARY INJUNCTION ORDER 1 EXHIBIT (h)(5) IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION PUBLICIS COMMUNICATION, ) ) Plaintiff, ) ) v. ) No. 97 C 826 ) TRUE NORTH COMMUNICATION INC., ) Judge Joan B Gottschall BRUCE MASON, STEPHEN T. VEHSLAGE, ) GREGORY W. BLAINE, LAUREL CUTLER, ) J. BRENDAN RYAN, RICHARD S. ) BRADDOCK, MICHAEL P. MURPHY, and ) RICHARD P. MAYER, ) ) Defendants ) - -------------------------------- ) TRUE NORTH COMMUNICATIONS INC., a ) Delaware corporation, ) ) Counterclaim-Plaintiff, ) ) ) v. ) ) PUBLICIS COMMUNICATION, a ) French corporation, PUBLICIS S A., a ) French corporation, and MAURICE LEVY, ) a French citizen, ) ) Counterclaim-Defendants ) ) 2 PRELIMINARY INJUNCTION ORDER Based upon the findings of fact, conclusions of law and additional reasons stated in open court this day, the Court, pursuant to Federal Rule of Civil Procedure 65(a), hereby enters its preliminary injunction order against Publicis Communication, Publicis S.A., and Maurice Levy (collectively, the "Publicis Parties"), enjoining the Publicis Parties and their respective officers, agents, servants, employees and attorneys from engaging in any of the following conduct with respect to or in connection with the Agreement and Plan of Merger dated as of July 30, 1997 (the "Merger Agreement") among True North Communications Inc. ("True North") and Bozell, Jacobs, Kenyon & Eckhardt, Inc ("Bozell") and the merger contemplated thereby (the "Bozell Merger"): 1. announcing, commencing or further proceeding with any tender offer for any shares of capital stock of True North; 2. soliciting, contacting or otherwise communicating in any way with any record or beneficial holder of capital stock of True North, by means of soliciting proxies or otherwise, to urge such stockholders to vote against the Bozell Merger or the other proposals to be voted on at the True North Special Meeting of Stockholders set for December 30, 1997, or to urge such stockholders not to vote on such Merger or the other proposals to be voted on at said Special Meeting; 3. inducing, assisting or encouraging third parties to take actions in opposition to True North's proposed combination with Bozell. The Court finds that a bond in an amount of twelve million dollars $12,000,000. be posted by True North. The Clerk is hereby directed to enter this Order. Dated December 10, 1997 /s/ JOAN B. GOTTSCHALL ---------------------- Joan B. Gottschall United States District Judge EX-99.H6 25 PUBLICIS' AMENDED & SUPPLEMENTAL COMPLAINT 1 EXHIBIT (h)(6) IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION PUBLICIS COMMUNICATION, ) ) Plaintiff, ) ) v. ) ) TRUE NORTH COMMUNICATIONS INC., ) BRUCE MASON, STEPHEN T. VEHSLAGE, ) 97 C 8263 GREGORY W. BLAINE, LAUREL CUTLER, ) Judge Joan B. Gottschall J. BRENDAN RYAN, RICHARD S. ) BRADDOCK, MICHAEL P. MURPHY, ) RICHARD P. MAYER, and BOZELL, ) JACOBS, KENYON & ECKHARDT, INC. ) ) Defendants. ) AMENDED AND SUPPLEMENTAL COMPLAINT Publicis Communication ("Publicis"), through its undersigned counsel, for its Amended and Supplemental Complaint against True North Communications Inc. ("True North" and the "Company"), Bruce Mason, Gregory W. Blaine, Richard S. Braddock, Laurel Cutler, Richard P. Mayer, Michael P. Murphy, J. Brendan Ryan, and Stephen T. Vehslage (together, the "Director Defendants"), and Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("Bozell"), alleges as follows: Nature of the Action 1. Publicis brings this action for, among other remedies, injunctive and/or declaratory relief: 2 (a) to prevent the application of defendant True North's anti-takeover devices and any other defensive measures to Publicis' tender offer, proposed merger and solicitation of revocations and conditional proxies, in violation of fiduciary duties owed to True North's stockholders; (b) to prevent True North from otherwise impeding Publicis' tender offer, proposed merger and solicitation of revocations and conditional proxies, which comply with all applicable laws and other obligations; (c) to enjoin True North from continuing its course of proxy fraud, in violation of the federal securities laws; (d) to enjoin the special meeting of True North stockholders called for December 30, 1997 (the "Special Meeting") to approve a merger between True North and another advertising firm, Bozell (the "Bozell Merger"), until a proper record date is set, until True North has engaged in serious, good faith discussions with Publicis concerning Publicis' tender offer, proposed merger and solicitation of revocations and conditional proxies and until the marketplace has absorbed all corrective disclosures by True North; and (e) to void the Merger Agreement between True North and Bozell dated July 30, 1997 (the "Merger Agreement") and enjoin the consummation of the Merger or, alternatively, to void the Merger Agreement's so-called "fiduciary out" provision. 2. Publicis is True North's largest shareholder, holding 18.4% of its common stock. On December 4, 1997, Publicis announced its intention to commence an all-cash tender offer for approximately 9.6 million shares of True North common stock at 2 3 a price of $28 per share (the "Offer"). These shares, when added to the shares already owned by Publicis, will constitute a majority of the total number of outstanding shares of True North. The Offer is conditioned on a number of matters, including the termination of the Merger Agreement in accordance with its terms and the removal or inapplicability of certain of True North's anti-takeover devices. At the same time as it announced the Offer, Publicis announced its intention to solicit revocations and conditional proxies to defeat stockholder approval of the Bozell Merger at the Special Meeting (the "Publicis Solicitation"). 3. Upon consummation of the Offer, Publicis intends to combine True North and Publicis to create a unified company run by one successful management team (the "Proposed Publicis Merger"). The Offer is non-coercive and fair to True North's stockholders. The Offer represents a substantial premium over the market price for True North shares prior to the disclosure on November 17, 1997 of Publicis' proposed merger. The Offer, Proposed Publicis Merger and Publicis Solicitation provide True North stockholders with a superior alternative to the Bozell Merger - evidenced by the market's enthusiastic response upon the disclosure of the Proposed Publicis Merger - and pose no threat to the interests of True North's stockholders or to True North's corporate policy and effectiveness. 4. The Offer arises in the context of years of hostility by True North senior management against Publicis. The parties formed a joint venture over a decade ago, but have endured years of disagreements. For years, True North management has viewed Publicis as a threat to its continued control over True North and as a potential hostile acquirer. Indeed, True North management has gone to great lengths to defend 3 4 against the perceived threat of a hostile takeover from Publicis, including upon information and belief investigations of Publicis' chairman, Maurice Levy: - In August 1995, a True North employee was instructed to enter the hotel room of Mr. Levy, without his consent, and search his wastebasket for his Board of Directors' book. The employee recovered a torn copy of Mr. Levy's personal agenda from the wastebasket, pieced it together and delivered the personal agenda to True North chairman Bruce Mason. Mr. Levy was not told of the incident for a year. - Between September 1995 and February 1996, True North used a private investigator to investigate Mr. Levy. True North decided to pursue the investigation in connection with its anti-takeover defenses. 5. The Bozell Merger is True North's latest attempt to fend off Publicis while enriching top management. If the Bozell Merger is consummated, Publicis - as well as all other public stockholders of True North - - will suffer a dilution in their stockholdings of approximately 50%. The price to be paid for Bozell is far in excess of its real value to True North - a fact that exposes the motives of True North management. Certain senior members of True North management stand to gain employment contracts that will pay them tens of millions of dollars over the years to come. Moreover, upon information and belief the combined stock holdings of True North and Bozell management will gain effective control over the surviving company and its Board of Directors, thus ensuring its continued entrenchment. Such entrenchment would be to the substantial detriment of True North stockholders, who have seen the value of their investment in True North stagnate in a period of strong growth for advertising companies. 4 5 6. True North's Board of Directors has rejected Publicis' merger proposal and has sought to preclude True North stockholders from having a fair and full opportunity to decide the future of their Company and to realize the full value of their stock. Instead, to gain stockholder approval of the Bozell Merger and to defeat the Publicis proposal, Defendants have embarked upon a campaign marked by breaches of their fiduciary duties to True North stockholders and by proxy fraud. In breach of its fiduciary obligations, the True North Board has refused to meet with Publicis to consider Publicis' superior proposal; improperly restricted the Board's ability to consider superior offers; and manipulated the corporate machinery in an attempt to fix the upcoming special shareholder vote on the Bozell merger. Defendants have violated the New York Stock Exchange Rules as well as the federal proxy rules in order to disenfranchise those stockholders who are likely to vote against the Bozell merger. 7. Publicis is not now and never has been a threat to True North. True North's Board of Directors should not be allowed to deprive the stockholders of the opportunity to decide upon the merits of the Offer for themselves. True North has no reasonable grounds to view Publicis or its proposal to merge as a threat, and True North's responses - proxy fraud, interfering with the stockholder franchise, restricting the Board's ability to consider a superior offer, and refusing even to discuss the Publicis' proposal - - are unreasonable and disproportionate responses, designed to entrench and enrich current management in violation of the Board of Directors' fiduciary duties owed to True North's stockholders. These violations will cause Publicis and True North's stockholders irreparable injury. 5 6 8. Unless enjoined, the True North Board will use other anti-takeover devices in its arsenal, such as its "poison pill", which limits the ability of True North's stockholders' to consider, accept or approve any tender offer unless True North's Board of Directors removes the poison pill. It is for True North's stockholders to decide the fate of their company, whether to merge with Bozell, merge with Publicis, or hold out for an alternative offer. Publicis asks the Court to provide the stockholders with the unfettered right to decide. Jurisdiction and Venue 9. This Court has jurisdiction over this action pursuant to 28 U.S.C. Sections 1331, 1332 and 1367. The amount in dispute exceeds $75,000. 10. Venue is proper under 28 U.S.C. Section 1391. The Parties 11. Publicis is a 73.5% owned subsidiary of Publicis, S.A. The remaining 26.5% of Publicis is owned by True North. Both Publicis and Publicis S.A. are French corporations with their principal place of business in Paris, France. Publicis is one of Europe's largest advertising networks, with offices in 50 countries and 97 cities. Publicis S.A.'s stock is publicly traded on the Paris stock exchange. 12. Defendant True North is a Delaware company with its principal place of business in Chicago, Illinois. True North is a communications company and the parent of Foote, Cone & Belding, a national advertising agency network. Its stock is traded on the New York Stock Exchange. 6 7 13. Defendant Bruce Mason is the Chairman of the Board of Directors and Chief Executive Officer of True North. Defendants Stephen T. Vehslage, Richard S. Braddock, Michael P. Murphy, and Richard P. Mayer are directors of True North. Defendants Gregory W. Blaine, Laurel Cutler, and J. Brendan Ryan are officers and directors of True North. Upon information and belief, the Director Defendants are citizens of Illinois, New York, and Connecticut. 14. Defendant Bozell is an advertising network, incorporated in Delaware, with its principal place of business in New York, New York. Bozell is named as a defendant because of the relief being sought by Publicis in this action. Publicis does not assert any claims specifically against Bozell. Background 15. In 1989, Publicis and True North formed a joint venture in which the two companies combined certain of their European operations. As part of the formation of the joint venture, the parties also became significant shareholders of one another. 16. In the years since the formation of the Publicis/True North joint venture, the parties have had disagreements concerning the nature and scope of their joint efforts. Notwithstanding these disagreements, Publicis has never posed any type of threat to True North's corporate policies or effectiveness, although True North incorrectly perceived Publicis as a threat with no reasonable grounds for its perception. Publicis' 1995 Proposal to Merge with True North 17. At various times during 1995, Publicis officers discussed with True North senior management and directors the possibility of a merger of True North and 7 8 Publicis. The reaction of True North's senior management was hostile. Upon information and belief, True North senior management perceived Mr. Levy's merger proposal as a threat to their continued control of True North and began to explore and to implement various anti-takeover defenses to Publicis. Upon information and belief, True North hired private investigators to conduct an investigation of Mr. Levy in connection with anti-takeover devices against Publicis. 18. Upon information and belief, after an August 16, 1995 True North Board of Directors' meeting - which Mr. Levy attended as a True North director - True North directed an employee to enter Mr. Levy's hotel room and search through his wastebasket to find, and to remove, his Board book. The employee found a torn copy of Mr. Levy's personal agenda, which was pieced together and delivered to Bruce Mason. The reconstructed agenda revealed, among other matters, a planned meeting between Mr. Levy and Charles D. Peebler, Jr., chairman of Bozell. (The meeting with Mr. Peebler was canceled and never rescheduled.) 19. On November 15, 1995, Publicis chairman Maurice Levy made a detailed presentation to the True North Board of Directors demonstrating the rationale for a proposed merger of True North and Publicis. The merger would create a global advertising network, offering a complete range of services across North America and Europe. The merger also would create significant incremental income as well as savings from the efficiencies realized through the combined operations of the firms. Mr. Levy concluded that the only logical and sensible solution to the obstacles faced by both firms was a merger. 8 9 20. True North rejected Publicis' merger proposal and continued to press for a complete termination of their relationship. In May 1997, the parties signed a series of agreements that unwound their European joint venture. After consummation of the transactions contemplated by the May 1997 agreements, Publicis remained an 18.5% owner of True North, and True North became a 26.5% owner of Publicis. The Bozell Merger 21. In February 1995, True North and Bozell entered into significant discussions concerning a possible acquisition of Bozell by True North. Upon information and belief, these discussions were prompted by True North's concern over a possible Publicis proposal to merge. However, True North had no reasonable grounds to believe that Publicis or its 1995 merger proposal were a threat to True North or its corporate policies. 22. The discussions with Bozell continued throughout 1995 and, at an August 16, 1995, True North Board meeting, members of the True North Board discussed the proposed transaction and determined that negotiations should continue. Mr. Levy expressed his concerns about the proposal with Bozell, including concerns (among others) that Bozell's recent profitability might represent an anomaly and that conflicts between automotive clients of the two firms could not be resolved, therefore risking the loss of a significant account if the firms merged. (Attached as Exhibit A to the Complaint is a copy of Mr. Levy's August 21, 1995 letter to Bruce Mason.). The negotiations nonetheless continued, but ended late in the year. 23. In late 1995 and through the summer of 1996, True North approached and was approached by a number of parties concerning possible acquisitions 9 10 or combinations. Some of these discussions became serious enough to warrant the execution of confidentiality agreements to enable the parties to exchange confidential and/or proprietary information. 24. Negotiations between True North and Bozell resumed in early 1997. During the negotiations over the next several months, Bruce Mason met with a senior executive of a large global advertising agency to see if the agency had any interest in a merger with True North. True North also received a substantial proposal for a merger from the chief executive offer of a publicly held marketing services company. Simultaneously with its Bozell negotiations, True North executives held several meetings with executives of the marketing services company to explore its proposal, and entered into a confidentiality agreement pursuant to which True North supplied confidential information to the company. The negotiations between True North and the marketing services firm involved a specific range for a purchase price of True North. True North has never disclosed those specifics. 25. On July 31, 1997, True North announced its agreement to merge with Bozell, an advertising firm with headquarters in New York City. True North did not consult its largest stockholder, Publicis, with respect to the Bozell Merger. On December 1, 1997, True North mailed final proxy materials describing the transaction (the "True North Proxy Statement") and, for the first time, publicly disclosing the Bozell Merger Agreement. 26. The Merger Agreement requires True North to issue approximately 20 million new shares of common stock, nearly doubling the 25 million currently outstanding. Each share of Bozell common stock will be converted into 0.51 shares of 10 11 True North common stock upon completion of the Bozell Merger. Under the terms of the transaction, True North will pay more than twice the price for Bozell that was proposed in 1995, notwithstanding the fact that the 1995 proposal was based upon projections of net income that were twice those actually realized. 27. The Bozell Merger significantly overvalues Bozell and undervalues True North. Information in the True North Proxy Statement indicates that True North is paying too high a price for a deal that does nothing to address True North's basic strategic weakness: the lack of an international presence. True North's proposed Bozell Merger fails to address this basic flaw, and instead devotes additional resources to expanding the domestic market in which True North already has a significant presence. Further, by undervaluing True North and overvaluing Bozell, True North proposes to pay dearly for this unnecessary acquisition. In addition to overpaying for Bozell, the True North Proxy Statement also states that True North expects to take a charge against earnings for the Bozell Merger of between $80 and $120 million on an after-tax basis, causing the Company effectively to pay even more for Bozell. And, as Mr. Levy predicted in 1995, the surviving firm will not be able to keep both of its automotive clients: one has announced that it has pulled its account with True North. 28. Upon information and belief, post-merger management of True North will effectively control the Company. Through the exercise of options and distribution of newly issued shares, the post-merger management of True North will gain voting control of a dominant block of the Company's shares - - a block that will be significantly larger than the block owned by Publicis. Publicis, as well as True North's public shareholders, will suffer an approximate 50% dilution in their holdings. In addition, post-merger 11 12 management will control the newly constituted and expanded Board of Directors. Publicis may lose its single seat on the Board. 29. In connection with the Merger Agreement, upon information and belief, employment agreements were entered into with certain members of senior management of both companies that provide that, upon consummation of the Merger, certain of the Defendants will receive exorbitant compensation, potentially in excess of tens of millions of dollars over the next several years. 30. The Merger Agreement prohibits True North and its officers, directors, and employees from engaging in discussions or negotiations with other potential bidders for True North except under very limited circumstances (the "fiduciary out" provision). The Merger Agreement only permits the True North Board to consider a "Superior Parent Takeover Proposal", which is narrowly defined as a third-party offer for a business combination with True North in which the sole consideration to be received by True North shareholders is the stock of a widely-held public company. The Proposed Publicis Merger 31. On November 10, 1997, Publicis chairman Maurice Levy sent a letter to the True North Board of Directors stating Publicis' belief that "True North's transaction with Bozell is contrary to the best interests of True North's stockholders, of which Publicis is by far the largest with 18.5% of True North's common stock." As Mr. Levy explained: The acquisition does not solve True North's fundamental strategic weakness, which has been its failure to establish a global presence. Bozell is primarily a U.S.-based business with a weak international presence, and Publicis believes 12 13 that its acquisition by True North will compound, rather than solve, True North's strategic weaknesses. As global marketers have increasingly demanded worldwide coverage, True North has continued to focus on its U.S. business and as a result, we believe that True North now finds itself at a significant competitive disadvantage. In short, True North's proposed acquisition of Bozell does nothing to solve these problems, and we believe (based on the limited information that has been made available to date) that the price to be paid for Bozell significantly exceeds the value of Bozell's business. 32. As an alternative to the Bozell transaction, Mr. Levy stated that Publicis is "prepared to propose a business combination between Publicis Communication and True North in which each outstanding share of True North would be valued at US$28": Publicis has for some time believed that a combination of Publicis Communication's businesses with those of True North would create a powerful global presence with tremendous opportunities for growth. . . . We at Publicis continue to believe that a merger between Publicis Communication and True North is in the best interests of both True North's and Publicis' stockholders and their respective clients and employees. 33. Mr. Levy concluded with an invitation "to discuss with True North and its representatives the details of our proposal, including the cash and stock components of our US$28 valuation": We would be willing to meet with you and your advisors at your earliest convenience to discuss our proposal and to answer any questions you may have. Our preferred course would be to negotiate a transaction that can be presented to our respective stockholders and clients as the amicable and 13 14 joint effort of Publicis, True North and each of the companies' Boards of Directors and senior management. I hope that each of you will give our proposal serious consideration, and I look forward to your reply. We stand ready to meet with the Board to present our plans. True North's Attempts to Steal the Special Shareholder Vote 34. True North did not disclose Publicis' letter to the public. Nor did it respond in any way to Publicis. Instead, True North - recognizing that Publicis' opposition and merger proposal would seriously threaten the Bozell Merger - immediately undertook to manipulate the vote at the Special Meeting (then set for December 22, 1997) at which the Bozell transaction would be voted upon by True North shareholders. 35. True North attempted to manipulate the vote by setting a premature record date, the date used to determine who is entitled to vote at the Special Meeting. Without revealing to the New York Stock Exchange (the "Exchange") or to the public the highly material information that it had received from Publicis, True North set a record date of Tuesday, November 18. True North sat silently upon this information as well, deliberately choosing not to announce that it had set a record date for the Special Meeting. 36. After a week had passed with no response, on November 17, Publicis decided to disclose publicly the text of the letter. The stock market's reaction was immediate and dramatic. On the day of the announcement, the price of a share of True North common stock rose more than 11%, from 23 3/8 to 26. Approximately one million shares were traded on November 17 and 18, more than twelve times the average daily volume of the stock. The market's reaction to the news of Publicis' merger proposal and 14 15 opposition to the Bozell Merger demonstrates the significance of the news to True North shareholders. 37. True North's decision to set an early record date while it sat silently upon this explosive news, if not remedied, will deprive the holders of over a million True North shares of the opportunity to participate in a contested special shareholders' meeting. Because trades of securities take three business days to settle, every single shareholder who purchased True North securities after Thursday, November 13 - including persons who purchased at higher prices that prevailed after the public announcement of Publicis' merger proposal and opposition to the Bozell Merger - has been disenfranchised. 38. True North's decisions to set a premature record date, to remain silent about Publicis' merger proposal and opposition to the Bozell Merger, and not to announce its record date have disenfranchised holders of millions of True North shares who purchased because of their interest in, or at prices that reflected, Proposed Publicis Merger. And True North shareholders who sold their shares before the news about Publicis was released will be permitted to vote, notwithstanding their potential lack of interest in the meeting. In short, because True North remained silent about Publicis' merger proposal and opposition to the Bozell Merger and set an early record date, no True North shareholder who purchased knowing of Publicis' merger proposal and opposition to the Bozell Merger will be allowed to participate in the Special Meeting. 39. True North's eight-day notice to the Exchange violated Section 401.02 of the rules set forth in the New York Stock Exchange Listed Company Manual, which applies to True North. Section 401.02 provides that "[a] minimum of ten days' notice is required prior to the record date established (or closing of the transfer books) for 15 16 determination of shareholders entitled to vote at the meeting." True North also violated Securities and Exchange Commission ("SEC") Rule 14a-13 regarding the solicitation of proxies, which requires the mailing of broker inquiries twenty days in advance of the record date. 17 C.F.R. Section 240.14a-13. In violation of Rule 14a-13, True North did not mail broker inquiries until the day before and, in some cases, the day after the record date to maintain the secrecy of its record-date maneuver. True North's Delayed Response to Publicis 40. After the close of trading on November 17 - and after Publicis had publicly disclosed the contents of its November 10 letter - True North (through its chairman) finally responded to Publicis' November 10 letter. Bruce Mason claimed that the Board of Directors discussed the proposal "at length" but rejected the offer, even though it refused to meet with or discuss the proposal with Publicis. 41. Also on November 17, 1997, True North filed a complaint in the Delaware Court of Chancery against Publicis and its parent company, Publicis S.A., seeking a preliminary and permanent injunction to provide certain statements from Publicis' accountants for submission to the SEC and to True North's auditors in connection with True North's preliminary proxy and registration statements. No hearing or other proceeding was held in the action and, on November 21, 1997, counsel for True North informed the Delaware court that Publicis had fully complied with its requests. 16 17 True North's Misleading and Coercive Statements about the Bozell Merger 42. On December 1, 1997, True North mailed its definitive Proxy Statement/Prospectus to its stockholders. The True North Proxy Statement paints a false and misleading picture of the potential for alternatives to the proposed Bozell Merger. 43. The True North Proxy Statement states that from the spring of 1995 through the summer of 1996, True North approached or was approached by Publicis and other parties to discuss significant acquisitions or combinations. All details of any offers it received from other parties - including key elements such as price - are omitted. Thus, the True North Proxy Statement does not provide any information about any offers received or combinations discussed that would allow True North shareholders to compare the Publicis merger proposal and the Bozell Merger with prior offers or proposed combinations. 44. Of critical importance, the True North Proxy Statement states that True North held particularly serious and detailed takeover discussions with one unnamed "Interested Party" from May 1997 through July 1997, the same time frame as the Bozell Merger negotiations. The True North Proxy Statement suggests that the Interested Party's proposed transaction was of less value to True North shareholders than the Bozell Merger by stating that the closing price of True North stock on November 25, 1997, the last day before the filing of the True North Proxy Statement (but long after the announcement of the Bozell Merger Agreement), was above the Interested Party's "final tentative offering price." 17 18 45. But the Proxy Statement fails to disclose to True North shareholders that the price on November 25, 1997 reflected the $2.63 jump in True North's share value on November 17, 1997, when Publicis disclosed its proposed offer. This omission is materially misleading because it suggests that the Interested Party transaction is of less value than the proposed Bozell Merger, when no such inference can fairly be drawn from the price of True North's shares on November 25, 1997. True North's Misleading and Coercive Statements About Publicis 46. True North's determination to tilt the playing field against Publicis is further demonstrated by its false and misleading public statements about Publicis in connection with the True North proxy solicitation. Those false and misleading statements are calculated to cast Publicis and its proposed offer in an unfairly negative light, causing irreparable injury to Publicis. 47. On December 2, 1997, True North filed definitive additional proxy materials with the SEC, consisting of a letter directed to True North shareholders who are also True North employees. The letter erroneously states that "Publicis withh[eld] some obligatory financial documentation [from True North]," and blames Publicis for causing an alleged delay in obtaining SEC approval of True North's proxy solicitation materials. Both statements are not only false but materially misleading, since they incorrectly suggest that Publicis withheld information from True North and that it did so to hinder the Bozell Merger. 48. First, it is false to say that Publicis withheld any "financial documentation" from True North. True North did not ask Publicis for "financial documentation," such as financial statements, but for a statement from its accountants as 18 19 to which accounting standards had been applied to Publicis' previously disclosed 1994-96 financial statements. Further, Publicis did not withhold anything., but requested its accountants to comply. 49. True North then sued Publicis in Delaware state court on November 17, 1997 demanding that Publicis provide it with signed accountants' statements. Two days later, on November 19, 1997, Publicis provided True North with these signed statements. True North's suggestion that Publicis somehow hindered the production of these documents is false and materially misleading. 50. Second, it is false to state that the SEC's process for approving True North's Proxy Statement was "delayed due to Publicis withholding" any documentation. On November 20, 1997, True North informed Publicis that the accountants' statements - prepared precisely in accordance with the form provided by True North - were insufficient due to True North's own mistake. True North then asked Publicis again to provide it with new signed statements; Publicis did so the next day, November 21, 1997. True North did not file its definitive Proxy Statement or Amendment No. 2 to its Form 10-K (in which True North's version of Publicis' consolidated financial statements appears) until November 26, 1997, five days later. This delay could not possibly have been caused by Publicis' provision of the accountants' statements requested by True North. True North's suggestion that Publicis hindered the SEC approval process is thus false and materially misleading. 19 20 True North's Misleading and Coercive Statements About the Proxy Solicitation 51. True North has also tried to mislead its shareholders into believing that the results of the proxy solicitations, and the Bozell Merger, are a forgone conclusion. Such statements plainly violate SEC Rule 14a-9, which prohibits True North from making any claim about the results of its solicitation before the Special Meeting is held. 52. On November 21, 1997, Bruce Mason gave a live interview on the CNBC network's "Power Lunch" program. Upon information and belief, during this interview, Mason publicly predicted that True North shareholders would vote to approve the Bozell Merger. Mason stated during the interview that True North expected the Merger to be completed by December 31, 1997. This would be possible only if the shareholders were to approve the Merger at the Special Meeting. 53. On November 25, 1997, Mason gave an interview to the Paris daily newspaper Le Figaro, in which he once again predicted that the Merger was a virtual certainty, stating that True North and Bozell "are going to constitute" a very powerful combination. The interview was published in the November 26, 1997 issue of Le Figaro. An English-language summary of the interview was transmitted across news wires into the United States in the early morning of November 26, 1997. Publicis' Offer 54. On December 4, 1997, Publicis announced its intention to commence an all-cash offer to purchase 9,619,904 shares of True North common stock or such greater number of shares that, when added to Publicis' existing holdings, constitute a majority of outstanding shares of True North common stock. The price offered by 20 21 Publicis is $28 per share in cash. The Offer is a first step in consummating a proposed business combination to create a unified company run by one successful management team. 55. Publicis' Offer addresses True North's strategic weaknesses. True North's failure to establish a global network is a fundamental shortcoming. As global marketers have increasingly demanded worldwide coverage, True North has continued to focus on the U.S. and, as a result, True North has placed itself at a significant competitive disadvantage to its global competitors. Publicis' Offer and the Proposed Publicis Merger directly address these weaknesses by providing access to the type of integrated global network that today's international advertisers demand and offering a management team with a proven track record of achievement. 56. The combination of Publicis with True North will create a creative, powerful presence in most of the world's significant markets. Publicis believes that the resulting international network would be a market leader in both the United States and Europe with tremendous opportunities for growth around the world and that the strategic benefits of the Proposed Publicis Merger are undeniable and far superior to the Bozell Merger, which ignores the imperatives of True North's businesses and dissipates stockholder value in an unnecessary transaction. 57. The Proposed Publicis Merger contemplates the consolidation of True North and Publicis under one management. In this way, the combined entity will have the tremendous advantage of a strong U.S. and international network, as today's market requires. This structure avoids, however, the difficulties inherent in the joint venture, formed by True North and Publicis in 1989, in which the two companies 21 22 combined certain of their European operations, which did not achieve its potential because it lacked a clear chain of command and a fully integrated structure. 58. Publicis' Offer is in the best interests of True North's stockholders. It is an all-cash offer, available to all True North stockholders, for approximately 9.6 million shares. It is not coercive in nature. Moreover, it provides True North's stockholders with the opportunity to realize a substantial premium over the market price of their shares prior to announcement of the Offer. On November 14, 1997, the last New York Stock Exchange trading day before Publicis' public disclosure of its merger proposal, the closing price of True North shares was $23.38 per share. The Offer price represents a premium of $4.63 per share (or nearly 20%) over the market price of the shares immediately prior to the disclosure of Publicis' proposal. 59. Publicis' Offer, proposed merger and Publicis Solicitation do not pose any threat to the interests of True North's stockholders or to True North's corporate policy and effectiveness. The Offer, Proposed Publicis Merger and Solicitation comply or will comply with all applicable laws and other obligations, including, without limitation, the securities laws, the antitrust laws, and all other legal obligations to which plaintiffs are subject. The offering documents fairly disclose all information material to the decision of True North's stockholders whether to accept or reject the Offer, in compliance with plaintiffs' obligations under the securities laws. True North's "Poison Pill" 60. Publicis' Offer and proposed merger cannot be completed successfully unless the True North Board of Directors agrees to remove or make inapplicable True North's anti-takeover devices. The application of such anti-takeover 22 23 devices to the Offer and proposed merger in these circumstances would be an unreasonable and disproportionate response, in breach of the True North Board of Directors' fiduciary duties. 61. On November 16, 1988, the Board declared a dividend of one Series A Junior Participating Preferred Stock purchase right (the "Right") for each outstanding Share of the Company (the "Poison Pill"). The Poison Pill effectively allows the Board of Directors to block any acquisition offers, even those providing substantial benefit to True North's stockholders. 62. Each Right entitles the registered holder thereof to purchase from True North, following the Distribution Date (as defined in the Poison Pill), one two-thousandth of a share of True North's Series A Junior Participating Preferred Stock at an exercise price of $42.50, subject to adjustment. Furthermore, following the occurrence of certain other events, including the acquisition of 20% or more of True North's common stock (or 25% in the case of Publicis), each holder of a Right will be able to exercise that Right and purchase common stock of True North (or the surviving company in the event of merger) at half-price. 63. Because any current acquirer of 20% or more of True North's common stock would not be entitled to exercise Rights, the dilutive effect of the Poison Pill, if implemented, on the value of such acquirer's common stock is overwhelming. Because of this prohibitive economic consequence, the Poison Pill effectively precludes the Proposed Publicis Merger without the consent of the True North Board. 64. True North's Board of Directors can redeem the Rights at a redemption price of $.005 per Right, or alternatively, can amend the Poison Pill to make 23 24 the Rights inapplicable to the Offer and the Proposed Merger. Given the nature and value of the Offer, a proper exercise of the True North Board of Directors' fiduciary duties would require it to redeem the Rights, or amend the Poison Pill to make the Rights inapplicable to the Offer and Proposed Publicis Merger, to enable stockholders to decide upon the merits of the Offer for themselves. Count I False and Misleading Statements in Violation of Federal Securities Law (Section 14(a) of the Securities Exchange Act and Rule 14a-9) 65. Plaintiff repeats and realleges paragraphs 1 through 64 as if fully set forth herein. 66. True North's Proxy Statement and Bruce Mason's letter of December 2, 1997 were solicitations of proxies with respect to the Special Meeting. Bruce Mason's interviews of November 21 and 25, 1997 were claims by True North regarding the results of a solicitation. 67. These solicitations contained false or misleading statements, or omitted facts that were necessary in order to make the statements not false or misleading. 68. These statements are false or misleading as to facts (whether omitted or affirmatively stated) that are material, because there is a substantial likelihood that a reasonable True North shareholder would consider these facts important in deciding how to vote on the merger and the other proposals at the Special Meeting. 69. Because these solicitation statements are an essential link in achieving a shareholder vote at the Special Meeting in favor of the Merger, these statements have caused and are continuing to cause injury to Publicis. 24 25 70. By reason of the foregoing, True North has violated Section 14a of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. Section 78n(a), and Rule 14a-9, 17 C.F.R. Section 240.14a-9, promulgated thereunder. Publicis is being, or will be, irreparably injured by True North's misconduct and has no adequate remedy at law. Count II Breach of Fiduciary Duty (Interference with Stockholder Franchise) 71. Plaintiff repeats and realleges paragraphs 1 through 70 as if fully set forth herein. 72. Defendants' actions in setting a premature record date, in sitting silently while that record date passed without disclosing Publicis' merger proposal and its opposition to the Bozell Merger, and in deliberately choosing not to announce its record date were taken for the primary purpose of impeding and/or interfering with the effective exercise of the stockholder franchise in connection with the vote at the Special Meeting. Defendants sat silently upon the highly material news of Publicis' offer after surreptitiously setting a record date in violation of the New York Stock Exchange Rules. Defendants also violated Rule 14a-13 of the federal proxy rules by failing to send out broker inquiries until approximately the record date. 73. Defendants took these actions to disenfranchise shareholders who purchased or would be purchasing True North stock after the disclosure of Publicis' opposition to the Bozell Merger and $28 per share merger proposal. As True North knew, those shareholders who purchased upon the news of Publicis' merger proposal and opposition would be likely to vote against the Bozell Merger. 25 26 74. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. Count III Breach of Fiduciary Duty (Failure to Maximize Stockholder Value) 75. Plaintiff repeats and realleges paragraphs 1 through 74 as if fully set forth herein. 76. The Bozell Merger will result in a change in the effective control of True North. In this context, the Board's fiduciary duty is to seek to obtain the best available terms for True North's shareholders and not to favor one potential acquirer over another or one type of financial alternative over another. In pursuing this objective, True North's Board of Directors have a duty to inform themselves, prior to making business decisions, of all information reasonably available to them. 77. The True North Directors have not sought to obtain the best available terms for the True North shareholders and have not properly informed themselves. They have breached, and are continuing to breach, their fiduciary duties. 78. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. Count IV Breach of Fiduciary Duty (Breach of Duty of Loyalty) 79. Plaintiff repeats and realleges paragraphs 1 through 78 as if fully set forth herein. 26 27 80. Upon information and belief, some or all of the Director Defendants will receive exorbitant compensation - potentially tens of millions of dollars - in the period following the consummation of the Bozell Merger. By placing their own personal interests and the interests of new True North management ahead of the shareholders' interests, these defendants have acted in bad faith and have breached their duty of loyalty. 81. Publicis is being, or will be, irreparably injured by Director Defendants' misconduct and has no adequate remedy at law. Count V Breach of Fiduciary Duty (Unreasonable Preemptive Defensive Measures) 82. Plaintiff repeats and realleges paragraphs 1 through 81 as if fully set forth herein. 83. Defendants have no reasonable grounds to perceive Publicis or its merger proposals in 1995 or now as a threat to the Company or to its policies. The Defendants sought and agreed to the Bozell Merger as a defensive measure to dilute the holdings of its largest shareholder, Publicis, with whom it has had a hostile relationship for years. By the Bozell Merger, the Defendants sought to entrench senior True North management. The Bozell Merger and the Merger Agreement are not in the best interests of True North shareholders and are an unreasonable and disproportionate response to the perceived threat posed by Publicis. 84. Similarly, Defendants' restriction upon the offers that may be considered under the Merger Agreement, their manipulation of the record date in violation of the rules of the New York Stock Exchange, and their violation of the federal proxy rules in failing to send out timely broker inquiries constitute unreasonable and 27 28 disproportionate responses by the True North Board of Directors to Publicis and Publicis' merger proposal. The impact of these responses upon True North shareholders is disproportionately large in relation to any "threat" allegedly posed by Publicis' merger proposal. The Defendants thereby have breached, and are threatening to continue to breach, their fiduciary duties. 85. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. Count VI Breach of Fiduciary Duty (Unreasonable Preemptive Defensive Measures) 86. Plaintiff repeats and realleges paragraphs 1 through 85 as if fully set forth herein. 87. Publicis' Offer is non-coercive and non-discriminatory; it is fair to True North's stockholders; and it represents a substantial premium over the market price of True North's shares prior to the disclosure of Publicis' proposal to True North. Publicis' Offer, Proposed Merger and Publicis Solicitation comply with all applicable laws and other obligations and pose no threat to the interests of True North's stockholders or to True North's corporate policy or effectiveness. Use of True North's anti-takeover devices or any other defensive measures to prevent True North stockholders from deciding for themselves whether or not to accept the Publicis Offer or Publicis Solicitation is not proportionate, nor within the range of reasonable responses to the Publicis Offer, Proposed Merger or Publicis Solicitation, and is a breach of the Board of Directors' fiduciary duties to True North's stockholders. 28 29 88. Publicis is being, or will be, irreparably injured by Defendants' misconduct and has no adequate remedy at law. WHEREFORE, Publicis seeks judgment: (a) enjoining Defendants from making false and misleading statements in connection with the solicitation of proxies; (b) ordering corrective disclosures at the expense of Defendants; (c) enjoining the Special Meeting until the market has absorbed Defendants' corrective disclosures; (d) enjoining the Special Meeting until the True North Board of Directors has engaged in serious, good faith discussions with Publicis concerning the Publicis merger proposal; (e) enjoining the Special Meeting unless and until a proper record date is set, including through compliance with all applicable laws, rules, and regulations; (f) declaring void the restrictions in the Merger Agreement purporting to prohibit True North from engaging in discussions and/or negotiating a transaction with Publicis; (g) declaring that the Merger Agreement between True North and Bozell is void and enjoining the consummation of the Bozell Merger; (h) awarding Publicis damages in an amount to be determined at trial, as well as the costs and fees incurred by Publicis in prosecuting this lawsuit; and (i) granting such other and further relief as the Court deems just and proper. 29 30 Dated: December 4, 1997 -------------------------------------- One of the Attorneys for Plaintiff C. William Phillips HOWARD, DARBY & LEVIN 1330 Avenue of the Americas New York, New York 10019 (212) 841-1000 Local Counsel: Stephen J. Bisgeier (00213756) MILLER, SHAKMAN, HAMILTON, KURTZON & SCHLIFKE 208 South LaSalle Street Chicago, Illinois 60604 (312) 263-3700 30 EX-99.H7 26 DECISION OF THE SEVENTH CIRCUIT COURT OF APPEALS 1 EXHIBIT H7 IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT ----------------------------------- No. 97-4096 PUBLICIS COMMUNICATION, Plaintiff-Appellant v. TRUE NORTH COMMUNICATIONS INC., et al, Defendants-Appellees. ----------------------------------- Appeal from the United States District Court for the Northern District of Illinois, Eastern Division No. 97 C 8263 - Joan B. Gottschall, Judge ----------------------------------- SUBMITTED DECEMBER 12, 1997 - DECIDED DECEMBER 15, 1997* ----------------------------------- Before BAUER, FLAUM, and EASTERBROOK, Circuit Judges. EASTERBROOK. Circuit Judge. Last February Publicis Communications and True North Communications (parent of the Foote, Cone & Belding agency) dissolved their joint venture in the advertising industry. One of eight agreements ancillary to this dissolution requires Publicis to participate in pooling of financial statements should True North acquire a third corporation and deem a pooled statement of accounts advantageous. Section 1.1 of this - ------------------------- * This opinion is being released in typescript, a printed copy will follow 2 No. 97-4096 Page 2 contract, applicable as long as Publicis owns at least 10% of True North's stock, requires Publicis to (a) furnish True North . . . with a "pooling letter" [in a prescribed form] under generally accepted accounting principles applied in the United States and, (b) if reasonably requested, take such other action in support of the transaction (other than a commitment to vote for such transaction) as would be customary with respect to an acquisition or other similar business transaction in which True North may participate). In August 1997 True North announced that it had agreed to merge with Bozell, Jacobs, Kenyon & Eckhardt, Inc. and asked Publicis to provide a pooling letter. Publicis, which owns some 19% of True North stock, is obliged to comply. But it thinks the acquisition a mistake and announced its intention to vote its shares against the transaction at the stockholders' meeting (now scheduled for December 30), as the parenthetical expression in the contract allows. Publicis also has solicited proxies from other investors in an effort to defeat the transactions and, backing up words with deeds, has commenced a tender offer for True North's stock, offering $28 per share. The market price of True North's stock rose from $23 to $26 when the bid was announced. True North opposes the offer, and litigation predictably ensued. True North sued Publicis in the Chancery Court of Delaware, contending that Publicis has failed to provide information needed to facilitate registration of the stock that will be issued as part of the merger. Delaware is the parties' chosen forum for disputes about the pooling agreement. One clause of this contract reads: "Any claim arising out of a request under Section 1.1 of this Agreement shall be brought only in a court of the State of Delaware or in a United States District Court located within the State of Delaware." Publicis, by contrast, does not make any claim based on True North's request under the pooling agreement and therefore has more choice of forum. Publicis filed suit in the federal district court in Chicago under 28 U.S.C. Section 1332(a)(2) (it is a French corporation), arguing that by proposing a merger with Bozell and opposing the tender offer, True North's board violated its duties to investors. 3 No. 97-4096 Page 3 True North quickly filed counterclaims, arguing among other things that the proxy solicitation and tender offer should be enjoined because they violate Publicis' duty under Section 1.1(b) of the pooling agreement to take "action in support of the transaction" on True North's request. The district court on December 10 issued an injunction requiring Publicis to desist from its tender offer and proxy solicitation. Publicis complied (depressing the market price of True North shares) but has asked us for a stay pending appeal. This case has been as fully briefed on the stay motion as most cases ever are, and it is clear that the district judge should not have entertained the counterclaim. True North promised to litigate such matters in Delaware, and to Delaware it must go if it desires relief based on the pooling agreement. We summarily vacate the injunction, mooting the motion for a stay. The claim on which the district court issued the injunction arises out of a request under Section 1.1 of the pooling agreement and therefore "shall be brought only in a court of the State of Delaware or in a United States District Court located within the State of Delaware." The district judge put this requirement to one side, however, after concluding that True North's arguments form a compulsory counterclaim within the scope of Fed. R. Civ. P. 13(a). We shall assume that True North's claim fits Rule 13(a) because it "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim" and that the suit already on file in Delaware presents a different "claim" under the pooling agreement and therefore is not subject to the second sentence of Rule 13(a): "the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action". Neither of these assumptions supports the district court's conclusion that the forum-selection clause may be ignored. Despite the impression one might get from the name of the doctrine, no one is "compelled" to present a compulsory counterclaim. Only a litigation that wants to avoid a later defense of preclusion need do so. The definition of a compulsory counterclaim -- a claim that "arises out of the trans- 4 No. 97-4096 Page 4 action or occurrence that is the subject matter of the opposing party's claim"-- mirrors the condition that triggers a defense of claim preclusion (res judicata) if a claim was left out of a prior suit. The aspect of preclusion known as "merger and bar", see Migra v. Warren City School District Board of Education, 465 U.S. 75 (1984); Cromwell v. County of Sac, 94 U.S. 351 (1877), prevents the plaintiff in the first suit from later making any claim that arose out of the same transaction but was omitted from the initial suit. See Herrmann v. Cencom Cable Associates, Inc., 999 F.2d 223 (7th Cir. 1993); Supporters to Oppose Pollution, Inc. a Heritage Group, 973 F.2d 1320 (7th Cir. 1992). Rule 13(a) establishes that a defendant's omission has the same consequences as a plaintiff's. Southern Construction Co. v. Pickard, 371 U.S. 57. 60 (1962). Whether this is strictly an application of claim preclusion may be debated, see Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, 6 Federal Practice and Procedures Section 1417 (2d ed. 1990), but both the scope of the doctrine and its rationale are the same as those of claim preclusion, and most of the time the label is inconsequential. Preclusion is an affirmative defense, and like other legal affairs is subject to contractual adjustment by the parties. Just as one litigant may promise not to plead the statute of limitations, so it may promise not to plead the defense of claim preclusion. If A promises B not to assert preclusion against some claim if adjudication is postponed, then B safely may omit that claim from pending litigation, even if it meets the standards of Rule 13(a). Publicis did not in so many words promise not to invoke the defense of preclusion in Delaware, but any forum selection clause has this effect. If the parties promise to litigate a dispute only in a particular forum, a party to the contract cannot seek to bar the litigation in that forum because the claim was not presented in some other forum. So much would be clear if Publicis and True North had agreed to arbitrate any dispute arising out of the pooling agreement. Electrical Workers Local No. 11 v. G.P. Thompson Electric, Inc., 363 F.2d 181 (9th Cir. 1966), holds that a dispute covered by a contract's 5 No. 97-4096 Page 5 arbitration clause need not--indeed, may not--be asserted as a compulsory counterclaim in litigation. Accord, Bristol Farmers Market & Auction Co. v. Arlen Realty & Development Corp., 589 F.2d 1214, 1220-21 (3d Cir. 1978). See Federal Practice and Procedure Section 1412 at 96-97. An arbitration clause is just a particular kind of forum-selection clause. See Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989), Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974); The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972); Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600 (7th Cir. 1994); Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993); What holds for arbitration therefore must hold for other forum- selection clauses. One court of appeals has expressed in dictum the view that a party to a forum-selection clause may not raise in a different forum, even as a compulsory counterclaim, a dispute within the scope of that clause, Karl Koch Erecting Co. v. New York Convention Center Development Corp., 838 F.2d 656, 659 (2nd Cir. 1988). That conclusion must be right. By agreeing to litigate in Delaware all claims arising out of requests under Section 1.1 of the pooling agreement. True North promised not to assert such claims in other forums whether or not they would be "compulsory" counterclaims, and Publicis promised not to contend (in Delaware) that True North should have raised the claim somewhere else. By presenting the claim in Chicago, True North broke its promise. The district court should have enforced the pooling agreement by dismissing the counterclaim. Perhaps one could argue that to prevent duplication the district court should dismiss the principal claim as well -- for if True North's claim under the pooling agreement is a compulsory counterclaim to Publicis' suit, then Publicis' claims are equally compulsory counterclaims to True North's invocation of the pooling agreement, which now will occur in Delaware. Only in Delaware may all claims arising out of the merger be handled together. But True North has not asked for this relief, and at all events 6 No. 97-4096 Page 6 Delaware's counterpart to Rule 13(a)(l) (see Del. Ch. R 13(a)) may save Publicis' claims from being consolidated there with True North's. These subjects, not now before us, are open to consideration by the district court or the state court should they be raised there. Publicis has asked us to postpone the shareholders' vote on the merger agreement in order to avoid prejudice from the erroneously-issued injunction. True North replies that the vote is scheduled the day before the drop-dead date in the merger agreement, and that the remedy Publicis seeks therefore would be equivalent to an outright award of victory. We doubt this: True North and Bozell can renegotiate the closing date if they really want to carry through with the merger. But it is difficult from our perspective to tell whether the brief interruption caused by the injunction is likely to affect the shareholders' vote or the outcome of the tender offer. Perhaps True North would prefer to postpone its election as an alternative to damages for procuring an improper injunction -- the district court made the injunction contingent on the posting of $12 million bond. This remedial issue is something the parties and the district judge should address on remand, and the timing of the shareholders' vote is a subject on which the Chancery Court of Delaware is entitled to express an independent view. Nothing we say here is designed to affect proceedings pending (or soon to be commenced) in that court. The injunction is vacated, and the case is remanded for further proceedings consistent with this opinion. -----END PRIVACY-ENHANCED MESSAGE-----