As Filed with the Securities and Exchange Commission on April 19, 2001.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(Exact name of registrant as specified in its Charter)
DELAWARE 7311 13-1024020
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
-------------------------------------
1271 Avenue of the Americas
New York, New York 10020
(212) 399-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
------------------
NICHOLAS J. CAMERA, SENIOR VICE PRESIDENT,
GENERAL COUNSEL & SECRETARY
THE INTERPUBLIC GROUP OF COMPANIES, INC.
1271 Avenue of the Americas
New York, New York 10020
212-399-8000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
-------------------
Copies to:
Barry M. Fox, Esq. Thomas A. Cole, Esq.
William A. Groll, Esq. Imad I. Qasim, Esq.
Cleary, Gottlieb, Steen & Hamilton Sidley & Austin
One Liberty Plaza Bank One Plaza, 10 S. Dearborn Street
New York, New York 10006 Chicago, Illinois 60603
(212) 225-2000 (312) 853-7000
------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
------------------
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [ ].
------------------
CALCULATION OF REGISTRATION FEE
======================================= ================== ====================== ====================== ========================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of Registration
to be Registered Registered (1) Share Price (2) Fee
--------------------------------------- ------------------ ---------------------- ---------------------- ------------------------
Shares of Common Stock 67,644,272 N/A 2,342,449,946.64 $585,612.49
======================================= ================== ====================== ====================== ========================
(1) The number of shares of The Interpublic Group of Companies, Inc. common
stock, par value $0.10, to be registered is determined by multiplying 1.14
(the exchange ratio contemplated by the merger agreement) by 59,337,081,
which represents the approximate maximum number of shares of True North
Communications Inc. common stock, par value $0.33 , (i) currently
outstanding, (ii) reserved for issuance pursuant to outstanding options and
options to be granted prior to the merger to which this Registration
Statement relates and (iii) otherwise expected to be issued on or before
the merger to which this Registration Statement relates.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, the registration fee is based on $39.477, the average of the high
and low sale prices of True North Communications Inc. common stock, as
reported by the New York Stock Exchange, Inc., on April 12, 2001.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
SUBJECT TO COMPLETION AND CHANGE, DATED APRIL 19, 2001. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE.
[True North Logo] [Interpublic logo]
PROXY STATEMENT/PROSPECTUS
Merger Proposal - Your Vote Is Very Important
Fellow Stockholders:
You are cordially invited to attend a special meeting of stockholders
of True North Communications Inc. on __, 2001, at 10:00 a.m., Chicago time, at
__, Chicago, Illinois.
At the special meeting you will have the chance to vote on the proposed
merger between True North and a subsidiary of The Interpublic Group of
Companies, Inc. If the merger is completed, True North will become a wholly
owned subsidiary of Interpublic, and each of your shares of True North common
stock will be converted into the right to receive 1.14 shares of Interpublic
common stock. The Interpublic common stock is quoted on the New York Stock
Exchange under the symbol "IPG." True North common stock is quoted on the New
York Stock Exchange under the symbol "TNO." On __, 2001, the closing price of
Interpublic common stock was $ __ per share and the closing price of True North
Common Stock was $ __ per share.
Your board of directors has determined that the merger is advisable and
in the best interests of True North and its stockholders and recommends that all
stockholders vote "FOR" the adoption of the merger agreement at the special
meeting. The financial advisor to True North, Morgan Stanley & Co. Incorporated,
has delivered its written opinion to the effect that, as of the date of the
merger agreement, the exchange ratio was fair from a financial point of view to
the holders of shares of True North common stock.
The accompanying notice of meeting and proxy statement/prospectus
explain the proposed merger and provide specific information concerning the
special meeting. Please read these materials carefully. You should also
carefully consider the discussion of risk factors beginning on page 11.
Your vote is very important. To be certain that your shares are voted
at the special meeting, please sign, date and return the enclosed proxy card as
soon as possible, whether or not you plan to attend in person. You may also vote
your shares by telephone or internet by following the instructions on the
accompanying proxy card.
Very truly yours,
David A. Bell
Chairman and Chief Executive Officer
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Interpublic common stock described in
this document or determined if this document is truthful or complete. Any
representation to the contrary is a criminal offense. This document does not
constitute an offer to sell or a solicitation of an offer to buy any securities
in any jurisdiction where an offer or solicitation would be illegal.
--------------------------------------------------------------------------------
The proxy statement/prospectus is dated __, 2001 and was first mailed to True
North stockholders on __, 2001.
[True North Logo]
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On __, 2001
To the Stockholders of
True North Communications Inc.
Notice is hereby given that a special meeting of stockholders of True
North Communications Inc. will be held on __, 2001, at 10:00 a.m., Chicago time,
at __, Chicago, Illinois.
You are cordially invited to attend the special meeting. The purposes
of the special meeting are:
o To consider and vote on a proposal to adopt the Agreement and
Plan of Merger, dated as of March 18, 2001, among The
Interpublic Group of Companies, Inc., Veritas Acquisition
Corp., a wholly owned subsidiary of Interpublic, and True
North Communications Inc., pursuant to which True North will
be merged with and become a wholly owned subsidiary of
Interpublic, and each share of True North common stock
outstanding immediately prior to the merger will be converted
into 1.14 shares of Interpublic common stock.
o To transact any other business as may properly come before the
special meeting or any adjournment or postponement of the
special meeting.
The special meeting and the proposed merger are more fully described in
the document attached to this notice.
Only stockholders of record at the close of business on __, 2001 are
entitled to notice of and to vote at the special meeting and any adjournments of
the special meeting. You may vote in person or by proxy. Mailing your completed
proxy, or submitting a proxy by telephone or internet, in advance of the meeting
will not prevent you from voting in person at the special meeting.
It is important to you and to True North that your shares be voted on
the proposed merger.
By order of the Board of Directors,
Dale F. Perona
Senior Vice President and Secretary
Date: __, 2001
Important Notice
Whether or not you plan to attend the special meeting in person, you
are urged to read the attached proxy statement/prospectus carefully and then
sign, date and return the accompanying proxy card in the enclosed postage-paid
envelope or submit a proxy by telephone or internet by following the
instructions on the accompanying proxy card. If you later desire to revoke your
proxy for any reason, you may do so in the manner set forth in the attached
proxy statement/prospectus.
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE MERGER..............................................................................1
WHO CAN HELP ANSWER YOUR QUESTIONS..................................................................................2
SUMMARY.............................................................................................................3
The Companies..............................................................................................3
The Merger.................................................................................................3
Recommendation to Stockholders.............................................................................3
Opinion of Financial Advisor to True North.................................................................3
Material Federal Income Tax Consequences...................................................................3
Anticipated Accounting Treatment...........................................................................4
Treatment of True North Stock Options......................................................................4
The Special Meeting........................................................................................4
Markets and Market Prices..................................................................................4
Interests of True North's Directors and Management in the Merger...........................................4
Conditions to the Merger...................................................................................4
Regulatory Approvals.......................................................................................5
Termination of the Merger Agreement........................................................................5
Termination Fee............................................................................................6
SELECTED FINANCIAL DATA.............................................................................................7
Selected Historical Financial Data of Interpublic..........................................................7
Selected Historical Financial Data of True North...........................................................8
Selected Unaudited Pro Forma Combined Condensed Financial Data.............................................9
UNAUDITED COMPARATIVE PER SHARE DATA...............................................................................10
RISK FACTORS.......................................................................................................11
You will receive a fixed number of shares of Interpublic common
stock for each of your shares of True North common stock despite
changes in the market value of True North common stock and
Interpublic common stock...........................................................................11
Provisions in the merger agreement may discourage other companies from
trying to acquire True North even though those companies might
be willing to offer greater value to True North stockholders
than Interpublic has offered in the merger
agreement..........................................................................................11
Shares of Interpublic common stock are subject to different market risks than shares of True North
common stock.......................................................................................12
The market price of Interpublic common stock may decline as a result of the merger........................12
Interpublic and True North may not realize expected synergies or cost savings.............................12
The performance of the combined company will be affected by its ability to retain key personnel...........12
We may lose existing clients, retain clients on less favorable terms and impede our ability to attract
new clients as a result of the merger..............................................................13
-i-
TABLE OF CONTENTS
(continued)
Page
The receipt of required regulatory approvals may jeopardize or delay completion of the merger or may
reduce the anticipated benefits of the merger......................................................13
Directors and executive officers of True North have conflicts of interest that may have influenced
their decision to approve the merger...............................................................13
Forward-looking statements may prove inaccurate...........................................................14
THE SPECIAL MEETING................................................................................................17
Special meeting for True North Stockholders...............................................................17
Vote Required.............................................................................................17
Record Date; Voting Rights................................................................................17
Quorum....................................................................................................17
Proxies...................................................................................................17
THE MERGER.........................................................................................................19
Background of the Merger..................................................................................19
Recommendation of the True North Board; Considerations of the True North Board............................25
Opinion of True North's Financial Advisor.................................................................28
Interests of True North's Directors and Management in the Merger..........................................35
Anticipated Accounting Treatment..........................................................................37
Regulatory Approvals......................................................................................37
Resale of Shares of Interpublic Common Stock..............................................................38
No Appraisal Rights.......................................................................................39
Material U.S. Federal Income Tax Consequences of the Merger...............................................39
New York Stock Exchange Listing of Interpublic Common Stock; De-listing and De-registration of True
North Common Stock.................................................................................40
THE MERGER AGREEMENT...............................................................................................41
Effective Time of the Merger..............................................................................41
What True North Stockholders Will Receive in the Merger...................................................41
True North Stock Options and Deferred Stock Compensation..................................................41
Exchange of True North Common Stock.......................................................................41
Representations and Warranties............................................................................42
Covenants and Other Agreements............................................................................44
Conditions to the Merger..................................................................................47
Termination...............................................................................................48
Termination Fee...........................................................................................49
Amendments................................................................................................50
-ii-
TABLE OF CONTENTS
(continued)
Page
MARKET PRICES AND DIVIDENDS........................................................................................51
Interpublic...............................................................................................51
True North................................................................................................52
BUSINESS OF INTERPUBLIC............................................................................................53
BUSINESS OF TRUE NORTH.............................................................................................55
OWNERSHIP OF TRUE NORTH COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................57
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION.......................................................59
DESCRIPTION OF INTERPUBLIC SHARE CAPITAL...........................................................................65
General...................................................................................................65
Common Stock..............................................................................................65
Preferred Stock...........................................................................................66
COMPARATIVE RIGHTS OF HOLDERS OF TRUE NORTH COMMON STOCK AND INTERPUBLIC COMMON STOCK..............................66
Annual Meetings of Stockholders...........................................................................66
Special Meetings of Stockholders..........................................................................66
Action by Consent in Writing of Stockholders..............................................................66
Advance Notification of Stockholder Proposals.............................................................67
Number and Nomination of Directors........................................................................67
Removal of Directors......................................................................................68
Rights Plan...............................................................................................68
LEGAL OPINION......................................................................................................68
EXPERTS............................................................................................................68
WHERE YOU CAN FIND MORE INFORMATION................................................................................70
Annex A- Agreement And Plan Of Merger.............................................................................A-1
Annex B- Opinion Of Morgan Stanley & Co. Incorporated.............................................................B-1
-iii-
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. What is the proposed merger?
A: True North and Interpublic have agreed to a merger in which True North will
merge with, and become, a wholly owned subsidiary of Interpublic.
Q. What will I receive in the merger for my True North common stock?
A: You will receive 1.14 shares of Interpublic common stock for each share of
your True North common stock. This is the exchange ratio.
Q: Are shares of Interpublic common stock traded on any stock exchange?
A: Yes. Shares of Interpublic common stock are traded under the symbol "IPG"
on the New York Stock Exchange.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
document, just vote your shares following the instructions contained in
this document and the proxy card included with it, so that your shares may
be represented at the special meeting. If you do not vote your shares in
connection with the merger proposal, it will have the same effect as voting
against the merger proposal.
Q: Should I send in my stock certificates now?
A: No. You will receive instructions for exchanging your stock certificates
after the merger is completed.
Q: If my shares are held in street name by my broker, will my broker vote my
shares for me?
A: No. Your broker can vote your shares only if you provide instructions on
how to vote.
You should instruct your broker to vote your shares, following the
directions provided by your broker. Your failure to instruct your broker on
how to vote your shares will be the equivalent of voting against the
merger.
Q: How do I vote my 401(k) plan shares?
A: If you have a balance in the True North Stock Fund within the True North
Retirement Plan, you should instruct the trustee for the plan, Fidelity
Management Trust Company, to vote your shares in accordance with the
instruction card that will be provided to you by Fidelity.
Q: Can I change my vote after I have mailed my proxy card or provided
instructions to my broker?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. This document contains instructions on how to change your
vote. If you have instructed your broker to vote your shares, you must
follow directions received from your broker to change those instructions.
Q: Do I need to attend the True North special meeting in person?
A: No. It is not necessary for you to attend the special meeting to vote your
shares, although you are welcome to attend.
Q: When and where is the special meeting?
A: The special meeting will take place on __, 2001, at 10:00 a.m. local time
at __, Chicago, Illinois.
Q: When will the merger be completed?
A: Interpublic and True North are working toward completing the merger as soon
as possible, and expect to complete it shortly after the special meeting if
the stockholders approve the merger proposal. However, it is possible that
delays in obtaining regulatory approvals could delay completion of the
merger.
Q: Do I have dissenters' or appraisal rights?
A: No. Holders of True North common stock do not have dissenters' or appraisal
rights under Delaware law as a result of the merger.
1
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger after reading this
document, you should contact:
True North Communications Inc. or D. F. King & Company, Inc.
101 East Erie Street 77 Water Street
Chicago, Illinois 60611 New York, NY 10005
Attn: Investor Relations Banks and Brokers call collect:
Telephone: (312) 425-6570 Telephone: (212) 269-5500
All others call toll free:
Telephone: (800) 769-5414
2
SUMMARY
This summary highlights key aspects of the merger which are described
in greater detail elsewhere in this document. It does not contain all of the
information that may be important to you. To better understand the merger, and
for a more complete description of the legal terms of the merger, you should
read this entire document carefully, including the Annexes, and the additional
documents to which we refer you. You can find information with respect to these
additional documents in "Where You Can Find More Information" on page 70.
The Companies (see pages 53 and 55)
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, NY 10020
Telephone: (212) 399-8000
Interpublic is one of the world's largest organizations of advertising
agencies and communications-services companies. Interpublic has more than 48,000
employees and offices in 127 countries. Interpublic had revenue of approximately
$5.6 billion in 2000.
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
Telephone: (312) 425-6500
True North is a global advertising and marketing communications holding
company. True North has more than 13,000 employees and offices in more than 98
countries and territories. True North had revenue of approximately $1.6 billion
in 2000.
The Merger (see page 41)
In the merger, True North will merge with, and become, a wholly owned
subsidiary of Interpublic. For each share of your True North common stock you
will receive 1.14 shares of Interpublic common stock.
Interpublic will not issue fractional shares in the merger. As a
result, the total number of shares of Interpublic common stock that you receive
in the merger will be rounded down to the nearest whole number. You will receive
a cash payment equal to the value, based on the closing price on the day of the
merger, of the remaining fraction of a share of Interpublic common stock that
you would otherwise receive.
The merger agreement, which is the primary legal document that governs
the merger, is attached as Annex A. You are encouraged to read the merger
agreement carefully.
Recommendation to Stockholders (see page 25)
The True North Board has approved the merger agreement and recommends
that you vote "FOR" the merger proposal.
Opinion of Financial Advisor to True North (see page 28)
On March 18, 2001, the True North Board received an oral opinion (later
confirmed in writing) from its financial advisor, Morgan Stanley & Co.
Incorporated, that, as of that date, the exchange ratio pursuant to the merger
agreement was fair from a financial point of view to the holders of shares of
True North common stock. The full text of the opinion is attached as Annex B. We
urge you to read the entire opinion carefully for the assumptions made,
procedures followed, matters considered and limits on the scope of Morgan
Stanley's review in rendering its opinion. Morgan Stanley's opinion was
addressed to the True North Board for the purpose of its evaluation of the
merger and does not constitute a recommendation to any True North stockholder as
to how to vote with respect to the merger proposal.
Material Federal Income Tax Consequences (see page 39)
The receipt of shares of Interpublic common stock in the merger
generally will be tax-free to True North stockholders for United States income
tax purposes, except for tax on cash received for fractional shares. Tax matters
are very complicated, and the tax consequences of the merger to you will depend
on the facts of your particular situation. We urge you to consult your tax
advisor for a full understanding of the tax consequences of the merger to you.
3
Anticipated Accounting Treatment (see page 37)
It is expected that the merger will qualify as a pooling of interests
for accounting purposes. This means that Interpublic and True North will be
treated for accounting purposes as if they had always been combined.
Treatment of True North Stock Options (see page 41)
Except for options held by non-employee directors, each of the
outstanding True North stock options will, in accordance with its existing
terms, become exercisable upon the merger. Any unexercised options will convert
into Interpublic stock options, subject to adjustments to the exercise price and
the number of underlying shares based on the exchange ratio.
The Special Meeting (see page 17)
The special meeting of True North stockholders will be held on , 2001.
The record date for determining True North stockholders entitled to receive
notice of and to vote at the meeting is the close of business on __, 2001. On
that date, there were outstanding shares of True North common stock. On the
record date, directors and executive officers of True North and their affiliates
owned approximately __% of the outstanding shares of True North common stock.
The affirmative vote of the holders of a majority of the outstanding
shares of True North common stock is necessary to adopt the merger agreement. No
other vote of the stockholders of True North is required for the merger to
occur.
Markets and Market Prices (see page 51)
Interpublic common stock is traded under the symbol "IPG" on the New
York Stock Exchange. True North common stock is traded under the symbol "TNO" on
the New York Stock Exchange. On March 16, 2001, the last trading day before the
public announcement of the proposed merger, the closing price per share of
Interpublic common stock was $35.297 and the closing price per share of True
North common stock was $39.313. On __, the most recent trading day for which
prices were available prior to the printing of this document, the closing price
per share of Interpublic common stock was $ __ and the closing price per share
of True North common stock was $ __. You will find additional historical share
price information for both Interpublic and True North on page 51.
Interests of True North's Directors and Management in the Merger (see page 35)
You should be aware of conflicts of interest, and of the benefits
available to directors and executive officers of True North, when considering
the True North Board's recommendation of the merger. The directors and executive
officers of True North have interests in the merger that are in addition to, or
different from, their interests as True North stockholders. The True North Board
was aware of these conflicts of interest when it approved the merger. These
interests relate to:
o rights to accelerated vesting of options issued under the True North
stock option plan;
o the termination of restrictions on outstanding True North restricted
stock;
o rights to accelerated payment of severance benefits payable under
employment agreements upon termination of employment;
o rights to directors' and officers' insurance coverage and to
indemnification with respect to acts and omissions in their capacities
as directors and officers of True North; and
o the contribution to a trust of an amount sufficient to pay, when due,
the benefits that have accrued under specified deferred compensation
plans of True North.
Furthermore, the merger agreement provides that on the day of the merger:
o David A. Bell, the Board chairman and chief executive officer of True
North, and J. Brendan Ryan, a director of True North and chief
executive officer of FCB Worldwide, a principal operating unit of True
North, will become members of the Interpublic Board; and
o David A. Bell will become vice-chairman of Interpublic.
Conditions to the Merger (see page 47)
Interpublic and True North will not complete the merger unless a number
of conditions are satisfied or waived, including:
4
o adoption of the merger agreement by True North stockholders;
o receipt of approval for listing on the New York Stock Exchange of the
shares of Interpublic common stock to be issued in the merger;
o receipt of regulatory approvals and third party consents and the
absence of legal restraints;
o effectiveness of the registration statement, which includes this
document, and the absence of any stop order; and
o issuance of opinions by attorneys for Interpublic and True North as to
the tax-free nature of the merger, except with respect to cash payments
for fractional shares.
In addition, the completion of the merger is subject to the satisfaction, or
waiver by Interpublic, of the condition that the independent auditors for
Interpublic and True North provide opinions relating to the accounting of the
business combination as a pooling of interests.
Regulatory Approvals (see page 38)
We are required to satisfy the requirements of U.S. antitrust law known
as the Hart-Scott-Rodino Antitrust Improvements Act, including the furnishing of
materials and information to the Antitrust Division of the Department of Justice
and to the Federal Trade Commission. Under that Act, the completion of the
merger may only occur after a specified waiting period ends. On April 18, 2001,
we filed the required notification and report forms with the Antitrust Division
and the FTC. The waiting period for the merger is expected to expire on May 18,
2001, absent early termination, an extension or request for additional
information.
The transaction is also subject to antitrust and other regulatory
clearances by non-U.S. authorities, including those representing the European
Union, Australia, Japan, South Africa, Canada and jurisdictions in Latin
America.
The satisfaction of these regulatory conditions may jeopardize or delay
completion of the merger or may reduce the anticipated benefits of the merger.
The merger agreement provides that Interpublic need not agree to conditions in
connection with obtaining regulatory clearances and approvals if the conditions
would have a material and adverse impact on Interpublic, True North or the
benefits that Interpublic would otherwise have derived from the merger.
Termination of the Merger Agreement (see page 48)
Interpublic and True North can jointly agree to terminate the merger
agreement at any time before completing the merger. In addition, either company
can terminate the merger agreement if:
o the other party breaches representations, warranties, covenants or
agreements contained in the merger agreement in any material respect
and the breach is not cured within thirty business days after notice of
the breach;
o a legal prohibition against the merger becomes permanent and final;
o the merger has not been completed by September 14, 2001, although, if
all governmental clearances and approvals required for the completion
of the merger have not then been obtained, that date may be extended to
December 13, 2001; or
o the True North stockholders do not adopt the merger agreement at the
special meeting.
Interpublic can also terminate the merger agreement if:
o True North fails to comply with its obligations to refrain from
soliciting or taking other specified actions in connection with
acquisition proposals to True North by third parties;
o the True North Board withdraws or adversely modifies its approval or
recommendation of the merger;
o any person or entity, other than Interpublic and its affiliates,
becomes the beneficial owner of 15% or more of the outstanding shares
of True North common stock;
o the True North Board recommends or resolves to recommend another
acquisition proposal; or
o a tender offer or exchange offer for 15% or more of the outstanding
shares of True North
5
common stock is commenced and the True North Board fails to recommend against
acceptance of that offer.
Termination Fee (see page 49)
True North would be required to pay Interpublic a termination fee of
$80,000,000 if the merger agreement is terminated under specified circumstances.
6
SELECTED FINANCIAL DATA
Selected Historical Financial Data of Interpublic
The following selected consolidated financial data as at and for each
of the five fiscal years in the period ended December 31, 2000 have been derived
from the audited consolidated financial statements of Interpublic, except for
Operating and Per Share Data for 1996 and financial data related to Financial
Position for 1997 and 1996, which are derived from unaudited consolidated
financial statements of Interpublic. The report of PricewaterhouseCoopers LLP,
independent accountants, on the financial statements, as of December 31, 2000
and 1999, and for each of the three years in the period ended December 31, 2000,
is included in Interpublic's Annual Report on Form 10-K for the year ended
December 31, 2000, incorporated into this document by reference. The
PricewaterhouseCoopers LLP report on the financial statements is based in part
on the reports of other independent accountants. You should read the selected
consolidated financial data in conjunction with the financial statements and the
notes to the financial statements for Interpublic included in its Annual Report
on Form 10-K for the year ended December 31, 2000. See "Where You Can Find More
Information" on page 70 to learn how you can obtain this report. We have
adjusted all per share amounts to reflect Interpublic's two-for-one stock split
on July 15, 1999 effected in the form of a stock dividend. In addition, we have
restated all periods before 2000 to reflect the effect of acquisitions accounted
for as poolings of interests.
As at and for the year ended December 31,
-----------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(millions of U.S. dollars, except per share data)
Operating Data
Revenue ............ $ 5,625.8 $ 4,977.8 $ 4,218.7 $ 3,610.7 $ 3,053.9
Net Income ......... 358.7(a) $ 331.3(b) 339.9 224.2(c) 228.9
Per Share Data
Basic .............. $ 1.18 $ 1.11 $ 1.15 $ 0.79 $ 0.81
Diluted ............ 1.15 1.07 1.12 0.76 0.78
Dividends .......... 0.37 0.33 0.29 0.25 0.22
Financial Position
Working capital .... $ (80.0) $ 171.0 $ 96.9 $ 244.4 $ 149.9
Total assets ....... 10,238.2 9,247.0 7,526.6 6,254.6 5,253.5
Total long-term debt 1,997.0 1,311.1 921.5 743.0 568.8
Book value per share 6.50 5.75 4.71 3.79 3.34
(a) Includes pre-tax charges of $116.1 million ($72.9 million after-tax)
relating to restructuring and other merger related costs, principally for
Lowe Lintas & Partners Worldwide, and $44.7 million ($41.6 million
after-tax) in transaction costs incurred in connection with the company's
acquisition of Deutsch, Inc.
(b) Includes pre-tax charges of $84.2 million ($51.4 million after-tax)
relating to restructuring and other merger related costs, principally for
Lowe Lintas.
(c) Includes pre-tax charges of $32.2 million ($19.7 million after-tax)
relating to special compensation charges incurred in connection with the
acquisition of Hill, Holiday, Connors, Cosmopulous, Inc.
7
Selected Historical Financial Data of True North
The following selected consolidated financial data as at and for each
of the five fiscal years in the period ended December 31, 2000 have been derived
from the audited consolidated financial statements of True North. The report of
Arthur Andersen LLP, independent accountants, as of December 31, 2000 and 1999,
and for each of the three years in the period ended December 31, 2000, as
restated, is included in True North's Annual Report on Form 10-K for the year
ended December 31, 2000, incorporated into this document by reference. You
should read the selected consolidated financial data in conjunction with the
financial statements and the notes to the financial statements for True North
included in its Annual Report on Form 10-K for the year ended December 31, 2000.
See "Where You Can Find More Information" on page 70 to learn how you can obtain
this report.
As at and for the year ended December 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
--------- -------- -------- --------- -----------
(millions of U.S. dollars, except per share data)
Operating Data
Revenue.......................... $1,556.8 $1,439.4 $1,274.3 $1,240.0 $1,012.9
Net Income (loss)................ 61.6(a) 28.2(b) 34.3(c) (55.5)(d) 33.4
Per Share Data
Basic............................ $ 1.24 $0.60 $0.75 $(1.27) $0.78
Diluted.......................... $1.21 0.59 0.72 (1.27) 0.76
Dividends........................ 0.60 0.60 0.60 0.60 0.60
Financial Position
Working capital.................. $ (202.9) $ (147.8) $ (166.1) $ (234.4) $ (106.2)
Total assets..................... 2,063.3 1,964.2 1,758.3 1,644.5 1,591.1
Total long-term debt ............ 38.4 45.6 58.7 50.3 72.0
Total liabilities................ $1,658.3 $1,639.0 $1,485.5 $1,409.7 $1,315.9
Stockholders' equity............. 405.0 325.2 272.8 234.8 275.2
Book value per share............. 8.08 6.66 5.90 5.20 6.43
(a) Includes a pre-tax charge of $17.5 million ($10.0 million after-tax or
$0.20 per diluted share) relating to the loss of the Chrysler account
and $25.7 million after-tax charges relating to Modem Media, Inc.
(equity method investment) goodwill impairment and restructuring
charges.
(b) Includes a pre-tax restructuring charge of $75.4 million ($49.5 million
after-tax or $1.03 per diluted share) relating to the combination of
True North's two independent worldwide agency networks.
(c) Includes a $12.6 million pre-tax loss ($15.8 million after-tax or $0.33
per diluted share) on the involuntary conversion of True North's
investment in Publicis S.A. and $13.4 million pre-tax gains ($7.8
million after-tax or $0.16 per diluted share) on the sale of marketable
securities.
(d) Includes pre-tax restructuring charges of $79.6 million and $56.9
million of other pre-tax charges relating to lease reserves and other
expenses ($104.1 million after-tax or $2.38 per share), each relating
to the acquisition of Bozell, Jacobs, Kenyon & Eckhardt, Inc.
8
Selected Unaudited Pro Forma Combined Condensed Financial Data
The following selected unaudited pro forma combined condensed financial
data gives effect to the merger as if it had occurred at the dates and at the
commencement of the periods indicated using the pooling of interests method of
accounting for business combinations and the agreed upon exchange ratio of 1.14
shares of Interpublic common stock for each share of True North common stock.
You should read the information presented below in conjunction with the
financial statements and the notes to the financial statements for Interpublic
included in Interpublic's Annual Report on Form 10-K for the year ended December
31, 2000 and in conjunction with the financial statements and the notes to the
financial statements for True North included in True North's Annual Report on
Form 10-K for the year ended December 31, 2000. We have incorporated
Interpublic's and True North's Annual Reports on Form 10-K for the year ended
December 31, 2000 into this document by reference. See "Where You Can Find More
Information" on page 70 to learn how to obtain these reports of Interpublic and
True North. In addition, you should read the information presented below in
conjunction with the unaudited pro forma combined condensed financial
information and the notes to that information included in this document
beginning on page 59.
The unaudited pro forma information below, while helpful in
illustrating the financial characteristics of the combination of Interpublic and
True North under one set of assumptions, does not attempt to predict or suggest
future results. Moreover, the unaudited pro forma information below does not
attempt to show what the financial condition or the results of operations of the
combined company would have been if the merger had occurred at the dates
indicated below or at the commencement of the periods indicated below.
As at and for the year ended December 31,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(millions of U.S. dollars, except per share data)
Operating Data
Revenue ............... $ 7,182.7 $ 6,417.2 $ 5,492.9 $ 4,850.7 $ 4,067.0
Net Income............. 420.3 359.5 374.2 168.7 262.3
Per Share Data
Basic ................. $ 1.17 $ 1.02 $ 1.08 $ 0.51 $ 0.79
Diluted................ 1.13 0.99 1.04 0.49 0.77
Dividends.............. 0.37 0.33 0.29 0.25 0.22
Financial Position
Working capital ....... $ (349.7) $ 23.2 $ (69.2) $ 10.0 $ 43.7
Total assets........... 12,301.5 11,211.2 9,284.9 7,899.1 6,844.6
Total long-term debt... 2,035.4 1,356.7 980.2 793.3 640.8
Book value per share... 6.59 5.76 4.80 3.91 3.47
9
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth unaudited historical per share financial
information as at and for the fiscal years ended December 31, 2000, 1999 and
1998 relating to the outstanding shares of Interpublic common stock and the
outstanding shares of True North common stock.
The following table also sets forth unaudited pro forma per share data
for Interpublic that gives effect to the merger as if it had occurred at the
dates and at the commencement of the years indicated using the pooling of
interests method of accounting for business combinations and the agreed upon
exchange ratio of 1.14 shares of Interpublic common stock for each share of True
North common stock.
The True North pro forma equivalent per share information gives effect
to the merger from the perspective of the owner of True North common stock by
multiplying the pro forma per share information of the combined company by the
exchange ratio.
You should read the information presented below in conjunction with the
financial statements and the notes to the financial statements for Interpublic
included in Interpublic's Annual Report on Form 10-K for the year ended December
31, 2000 and in conjunction with the financial statements and the notes to the
financial statements for True North included in True North's Annual Report on
Form 10-K for the year ended December 31, 2000. We have incorporated
Interpublic's and True North's Annual Reports on Form 10-K for the year ended
December 31, 2000 into this document by reference. See "Where You Can Find More
Information" on page 70 to learn how to obtain these reports of Interpublic and
True North. In addition, you should read the information presented below in
conjunction with the unaudited pro forma combined condensed financial
information and the notes to that information included in this document
beginning on page 59.
The pro forma information below, while helpful in illustrating the
financial characteristics of the combination of Interpublic and True North under
one set of assumptions, does not attempt to predict or suggest future results.
Moreover, the pro forma information below does not attempt to show what the
financial condition or the results of operations of the combined company would
have been if the merger had occurred at the dates indicated below or at the
commencement of the periods indicated below.
We have adjusted Interpublic's per share amounts to reflect
Interpublic's two-for-one stock split on July 15, 1999 effected in the form of a
stock dividend. In addition, for Interpublic, we have restated all periods
before 2000 to reflect the effect of acquisitions accounted for as poolings of
interests.
As at and for the year ended December 31,
-----------------------------------------
2000 1999 1998
-----------------------------------------
Interpublic common stock--Historical
Net earnings per share, basic...................... $ 1.18 $ 1.11 $ 1.15
Net earnings per share, diluted.................... 1.15 1.07 1.12
Cash dividends per share........................... 0.37 0.33 0.29
Book value per share at year end................... 6.50 5.75 4.71
True North common stock--Historical
Net earnings per share, basic...................... $ 1.24 $ 0.60 $ 0.75
Net earnings per share, diluted.................... 1.21 0.59 0.72
Cash dividends per share........................... 0.60 0.60 0.60
Book value per share at year end................... 8.08 6.66 5.90
Interpublic common stock--Pro Forma Equivalent
Net earnings per share, basic...................... $ 1.17 $ 1.02 $ 1.08
Net earnings per share, diluted.................... 1.13 0.99 1.04
Cash dividends per share........................... 0.37 0.33 0.29
Book value per share year end...................... 6.59 5.76 4.80
True North common stock--Pro Forma Equivalent
Net earnings per share, basic...................... $ 1.33 $ 1.16 $ 1.23
Net earnings per share, diluted.................... 1.29 1.13 1.19
Cash dividends per share........................... 0.42 0.38 0.33
Book value per share year end...................... 7.52 6.57 5.47
10
RISK FACTORS
You should consider the following matters in conjunction with the other
information included or incorporated by reference in this document in deciding
whether to vote in favor of the merger proposal.
You will receive a fixed number of shares of Interpublic common stock for each
of your shares of True North common stock despite changes in the market value of
True North common stock and Interpublic common stock.
You will receive 1.14 shares of Interpublic common stock for each of
your shares of True North common stock. The merger agreement does not provide
for any adjustment of this exchange ratio if the trading price of either True
North common stock or Interpublic common stock fluctuates, and True North is not
permitted to "walk away" from the merger solely because of changes in the market
price of Interpublic common stock. Accordingly, the market value of Interpublic
common stock that you will receive upon the merger's completion will fluctuate
with the trading price of Interpublic common stock and may decrease from the
date you submit your proxy. The market value of Interpublic common stock is
likely to fluctuate based on general market and economic conditions,
Interpublic's business and prospects and other factors.
In addition, the exchange of certificates representing your shares of
True North common stock for certificates representing shares of Interpublic
common stock will not take place immediately upon completion of the merger. You
will thus be unable to sell or otherwise transfer these shares of Interpublic
common stock for a period following completion of the merger. The market value
of the shares of Interpublic common stock you receive in the merger may be
either lower or higher at the time you receive your certificates representing
shares of Interpublic common stock, and so become able to sell those shares,
than at the time of the merger.
Provisions in the merger agreement may discourage other companies from trying to
acquire True North even though those companies might be willing to offer greater
value to True North stockholders than Interpublic has offered in the merger
agreement.
Provisions in the merger agreement relating to the termination fee and
the ability of True North to terminate the agreement may discourage other
companies from trying to acquire True North.
True North has agreed to pay a termination fee to Interpublic under
specified circumstances, including circumstances where a third party other than
Interpublic acquires or seeks to acquire True North. This provision may
discourage other companies from trying to acquire True North.
Furthermore, True North is not entitled to terminate the merger
agreement except under the following circumstances:
o Interpublic consents to the termination;
o Interpublic breaches its representations, warranties or
covenants in any material respect and fails to cure the breach
within 30 business days;
o a legal prohibition against the merger becomes permanent and
final;
o the merger has not been completed by September 14, 2001,
although, if all governmental clearances and approvals
required for the completion of the merger have not then been
obtained, that date may be extended to December 13, 2001; or
o the True North stockholders do not adopt the merger agreement
at the special meeting.
Accordingly, in the absence of any of these circumstances, True North is not
entitled to terminate the merger agreement even if a superior acquisition
proposal were made to the True North Board. This limitation on the ability of
True North to terminate the merger agreement may discourage other companies from
trying to acquire True North.
11
Those companies that are discouraged from trying to acquire True North
as a result of these provisions may have otherwise been willing to offer greater
value to True North stockholders than Interpublic has offered in the merger
agreement.
Shares of Interpublic common stock are subject to different market risks than
shares of True North common stock.
Upon completion of the merger, holders of shares of common stock of
True North will become holders of shares of common stock of Interpublic. The
business, strategy, financial condition, results of operations and common stock
of Interpublic differ in material respects from those of True North.
Accordingly, holders of shares of Interpublic common stock are subject to
different market risks than holders of shares of True North common stock. For a
description of and other information about the common stock of Interpublic and
the differences between the common stock of Interpublic and the common stock of
True North, see "Unaudited Comparative Per Share Data" on page 10, "Market
Prices and Dividends" on page 51, "Description of Interpublic Share Capital" on
page 65, "Comparative Rights of Holders of True North Common Stock and
Interpublic Common Stock" on page 66 and the registration statements of True
North that we have incorporated by reference and described under "Where You Can
Find More Information" on page 70 below. For descriptions of the businesses,
strategies, financial conditions and results of operations of Interpublic and
True North, see "Business of Interpublic" and "Business of True North" on pages
53 and 55 and the discussions in the reports on Form 10-K that we have
incorporated by reference and described under "Where You Can Find More
Information" on page 70 below.
The market price of Interpublic common stock may decline as a result of the
merger.
The market price of Interpublic common stock may decline as a result of
the merger for a number of reasons, including if:
o the integration of Interpublic and True North is unsuccessful;
o Interpublic does not achieve the perceived benefits of the
merger as rapidly or to the extent anticipated by investors
and financial or industry analysts; or
o the effect of the merger on Interpublic's financial results is
not consistent with the expectations of investors and
financial or industry analysts.
Interpublic and True North may not realize expected synergies or cost savings.
The companies may not be able to increase the scope of the services
they each provide to their respective client bases and give rise to other
synergies and cost savings described in "Recommendation of the True North Board;
Considerations of the True North Board" beginning on page 25. Interpublic and
True North are developing, but have not yet finalized, plans for obtaining
operating synergies and cost savings after the merger. The implementation of
these plans will present challenges involving the coordination of the operations
and personnel of the two companies and may give rise to the diversion of the
attention of management and unanticipated liabilities and costs. The
geographically dispersed operations of the two companies may compound these
challenges.
The performance of the combined company will be affected by its ability to
retain key personnel.
Employees, including creative, research, media, account and practice
group specialists, and their skills and relationships with clients, are among
the most important assets of Interpublic and True North. The inability to retain
management and employees after the merger may have a material adverse effect on
the combined company. Among the factors that may compound the challenge of
retaining True North employees are:
o Many of the existing employment agreements between True North
and its executive officers and key employees provide for
severance benefits in the event the officer or key employee
resigns following the merger due to specified adverse changes
in the terms of his or her employment.
12
o True North's Asset Protection Plan provides that some
employees who are not parties to employment agreements would
receive severance benefits in the event they resign due to
specified adverse changes in their employment within two years
following the adoption of the merger agreement by the True
North stockholders.
o All unvested stock options held by True North employees will
convert into options for Interpublic common stock and vest
upon completion of the merger. Substantially all of these
option holders are expected, after exercising their options,
to be free to sell their shares of Interpublic common stock
shortly following the merger.
o Upon the merger, each outstanding share of restricted True
North common stock will convert into shares of Interpublic
common stock and no longer be subject to restrictions.
Substantially all of the holders of restricted stock are
expected to be free to sell their shares of Interpublic common
stock shortly following the merger.
We may lose existing clients, retain clients on less favorable terms and impede
our ability to attract new clients as a result of the merger.
The competition in the advertising and marketing-services industry for
clients is fierce and the performance of the combined company will be affected
by its ability to retain the existing clients of Interpublic and True North and
to attract new clients. Our ability to retain existing clients and to attract
new clients may, in some cases, be limited by clients' policies on conflicts of
interest. These policies can in some cases prevent one agency and, in limited
circumstances, different agencies within the same holding company, from
performing similar services for competing products or companies. Those conflicts
could result in clients terminating their relationship with the agencies of the
combined company or reducing the projects for which they retain those agencies.
As part of an effort to assure that these clients would not leave as a result of
the merger, True North and Interpublic may need to agree to modify the terms of
their existing agreements with clients in an adverse manner. Moreover, because
of the combined company's larger number of clients, there could be a greater
likelihood of conflicts with potential new clients in the future. If the
combined company fails to maintain existing clients or attract new clients, its
business may be materially and adversely impacted.
The receipt of required regulatory approvals may jeopardize or delay completion
of the merger or may reduce the anticipated benefits of the merger.
The completion of the merger is subject to regulatory clearances and
approvals by authorities consisting primarily of antitrust regulators from the
United States, the European Union, Japan, South Africa, Canada and jurisdictions
in Latin America, as well as the foreign investment authority in Australia. We
may not obtain the requisite regulatory clearances and approvals within the time
frame that the merger agreement contemplates or without accepting conditions
that would be detrimental to the combined company. The merger agreement provides
that Interpublic need not agree to conditions in connection with obtaining
regulatory clearances and approvals if the conditions would have a material and
adverse impact on Interpublic, True North or the benefits that Interpublic would
otherwise have derived from the merger.
Directors and executive officers of True North have conflicts of interest that
may have influenced their decision to approve the merger.
You should be aware of conflicts of interest, and of the benefits
available to directors and executive officers of True North, when considering
the True North Board's recommendation of the merger. The directors and executive
officers of True North have interests in the merger that are in addition to, or
different from, their interests as True North stockholders. The True North Board
was aware of these conflicts of interest when it approved the merger. These
interests relate to:
o rights to accelerated vesting of options issued under the True
North stock option plan;
o the termination of restrictions on outstanding True North
restricted stock;
13
o rights to accelerated payment of severance benefits payable
under employment agreements upon termination of employment;
o rights to directors' and officers' insurance coverage and to
indemnification with respect to acts and omissions in their
capacities as directors and officers of True North; and
o the contribution to a trust of an amount sufficient to pay,
when due, the benefits that have accrued under specified
deferred compensation plans of True North.
Furthermore, the merger agreement provides that on the day of the merger:
o David A. Bell, the Board chairman and chief executive officer
of True North, and J. Brendan Ryan, a director and chief
executive officer of FCB Worldwide, a principal unit of True
North, will become members of the Interpublic Board; and
o David A. Bell will become vice-chairman of Interpublic.
See "Interests of True North's Directors and Management in the Merger" on page
35.
Forward-looking statements may prove inaccurate.
This document and the documents that are incorporated by reference
contain forward-looking statements about Interpublic, True North and the
combined company which Interpublic and True North believe are covered by the
Private Securities Litigation Reform Act of 1995. Statements in this document
that are not historical facts are "forward-looking statements" for the purpose
of the safe harbor provided by Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended.
Forward-looking statements include:
o financial projections and estimates;
o statements regarding plans, objectives and expectations of
Interpublic, True North or their Boards with respect to future
operations, products and services;
o statements regarding future economic performance;
o statements relating to the assumptions underlying projections,
estimates and performance; and
o statements relating to the estimated size and growth of
relevant markets.
When used in this document, the words "anticipates," "believes,"
"expects," "intends," "estimates," "plans," and similar expressions as they
relate to Interpublic, True North or the combined company or the management of
any of these companies are intended to identify these forward-looking
statements.
In making any of these statements, the expectations are believed to be
based on reasonable assumptions. However, there are numerous risks,
uncertainties and important factors, most of which are difficult to predict and
are generally beyond the control of Interpublic or True North, that could cause
actual results to differ materially from those in forward-looking statements.
These include:
o those discussed or identified from time to time in
Interpublic's or True North's public filings with the
Securities and Exchange Commission, which is referred to
throughout this document as the Commission;
o specific risks or uncertainties associated with Interpublic's
or True North's expectations with respect to:
14
o the timing, completion or tax status of the merger;
o the accounting treatment of the merger;
o the value of the merger consideration;
o growth prospects;
o market positions;
o the impact of technological change on business;
o risks of international operations;
o earnings per share;
o cost savings;
o profitability resulting from the merger;
o changes in accounting rules and principles;
o changes in the advertising, marketing and
communications budgets of clients;
o changes in management or ownership of clients;
o strategic decisions of management;
o the ability to attract new clients and retain
existing clients;
o the effect of foreign exchange rate fluctuations;
o the successful completion and integration of
acquisitions which complement and expand
Interpublic's business capabilities; and
o restructuring; and
o general economic conditions such as:
o changes in interest rates and the performance of the
markets;
o changes in domestic and foreign laws, regulations and
taxes;
o changes in competition and pricing environments;
o regional or general changes in asset valuations;
o the occurrence of significant natural disasters;
o general market and industry conditions; and
o pricing.
15
Moreover, one of Interpublic's business strategies is to acquire
businesses that complement and expand its current business capabilities.
Accordingly, Interpublic is usually engaged in evaluating potential acquisition
candidates. Interpublic is currently engaged in a number of preliminary
discussions that may result in one or more substantial acquisitions. These
acquisition opportunities require confidentiality and from time to time give
rise to bidding scenarios that require quick responses by Interpublic. Although
there is uncertainty that any of these discussions will result in definitive
agreements or the completion of any transactions, the announcements of any such
transaction may lead to increased volatility in the trading price of the shares
of Interpublic or delay completion of the merger. The success of recent or
contemplated future acquisitions will depend on the effective integration of
newly-acquired businesses into Interpublic's current activities. Important
factors for integration include realization of anticipated synergies and the
ability to retain new personnel and clients.
The actual results, performance or achievement by Interpublic, True
North or the combined company could differ materially from those expressed in,
or implied by, forward-looking statements. Accordingly, we cannot assure that
any of the events anticipated by forward-looking statements will occur, or if
they do, what impact they will have on the results of operations and financial
condition of Interpublic, True North or the combined company.
16
THE SPECIAL MEETING
Special meeting for True North Stockholders
True North will hold a special meeting of stockholders for purposes of
voting on the merger.
Date of the Meeting......................... __, 2001
Time of the Meeting.........................10:00 a.m. local time
Place of the Meeting........................ __, Chicago, Illinois
Vote Required
o Holders of a majority of the shares of True North common stock
outstanding as of the record date must approve the merger, either in
person or by proxy, before we can complete the merger.
o An abstention from voting on the merger or a broker non-vote will
have the effect of a vote against the merger.
Record Date; Voting Rights
True North fixed the close of business on __, 2001 as the record date.
Only holders of record of shares of True North common stock on that date are
entitled to notice of and to vote at the special meeting. On the record date,
there were shares of True North common stock outstanding and entitled to vote
at the special meeting held by approximately stockholders of record. On the
record date, directors and executive officers of True North and their affiliates
owned approximately __% of the outstanding shares of True North.
Participants in the True North Retirement Plan may vote the number of
shares of common stock equivalent to the interest in True North common stock
credited to their accounts under the Plan as of the record date. Participants
may vote by instruction to Fidelity Management Trust Company, the trustee for
the Plan, pursuant to an instruction card that Fidelity informs us it will mail
with this document to Plan participants. Fidelity has informed us that it will
vote shares in accordance with duly executed instructions if received on or
before __, 2001. Fidelity further informs us that if Fidelity does not receive
timely instructions from a participant, the common stock equivalents credited to
that participant's account would be voted by Fidelity in the same proportion
that Fidelity votes the common stock share equivalents for which it does receive
timely instructions. Fidelity will also vote any share equivalents that are not
specifically allocated to any individual plan participant (known as the suspense
account) in the same proportion that Fidelity votes the common stock share
equivalents for which it receives timely instructions.
Quorum
A majority of the outstanding shares entitled to vote represented in
person or by proxy will constitute a quorum at the special meeting. Abstentions
and broker non-votes will be considered present at the special meeting for the
purpose of calculating a quorum.
Proxies
o Completed Proxies. If you sign, complete and return your proxy
card and we receive the proxy card prior to or at the special
meeting, your proxy will be voted as you instructed.
o Proxies Without Instructions. If you sign and return a proxy
card but do not provide instructions as to your vote, your
proxy will be voted for the merger proposal.
o Broker Instructions. Under New York Stock Exchange rules,
brokers who hold True North common stock in street name for
customers who are the beneficial owners of those shares may
not give a proxy to vote those shares on the merger proposal
without specific instructions from those customers. If you
17
are the beneficial owner of shares held in street name by a
broker, please give instructions to your broker on how to vote
your shares or it will have the same effect as a vote against
the proposal.
o Other Matters. True North does not expect that any matter
other than the merger proposal will be raised at the special
meeting. If, however, other matters are properly raised at the
meeting, the persons named as proxies will vote in accordance
with the recommendation of the True North Board.
o Revocability of Proxies. You may revoke your proxy at any time
before the proxy is voted at the special meeting. In order to
revoke your proxy, you must deliver a signed notice of
revocation to True North's Secretary or you must submit a
later dated proxy changing your vote. Alternatively, you may
choose to attend the special meeting and vote in person.
However, simply attending the meeting will not in itself
constitute the revocation of your proxy if you do not cast a
vote at that time. If you do not hold your shares of True
North common stock in your own name, you may revoke a
previously given proxy by following the revocation
instructions provided by the bank, broker or other party who
is the registered owner of the shares.
o Voting by Telephone or Internet. In addition to voting by
properly completing and returning your proxy card, you may
vote by telephone or internet as outlined on the proxy card.
If you vote your shares by telephone or internet, your shares
will be voted at the special meeting as instructed.
o Costs of Solicitation. True North and Interpublic will each
pay one-half of the expense of printing and mailing this
document. Proxies will be solicited through the mail and
directly by officers, directors and regular employees of True
North not specifically employed for such purpose, without
additional compensation. True North will reimburse banks,
brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding these
proxy materials to their principals. True North has engaged
D.F. King & Company to assist it in connection with the
solicitation of proxies and will pay D.F. King & Company a
customary fee for its services and reimburse its expenses.
* Please do not send your stock certificates with your proxy
card. We will mail you a separate transmittal form with
instructions for the surrender of your certificates as soon as
practicable after the completion of the merger.
18
THE MERGER
Background of the Merger
The advertising and marketing communications industry has undergone
significant global consolidation in recent years. Consistent with this trend,
over the last several years True North's management and Board observed that
industry participants that achieved greater geographic and functional scale and
brand and services diversity were likely to be at a competitive advantage
relative to smaller competitors and would also be better positioned to take
advantage of long-term growth opportunities and trends.
In keeping with the industry's trend toward consolidation, in July 1997
True North entered into an agreement to acquire Bozell, Jacobs, Kenyon &
Eckhardt, Inc. In early December 1997, prior to the closing of the Bozell
acquisition, Publicis S.A., a French advertising and marketing communications
company, made a tender offer to purchase approximately 38% of the outstanding
shares of True North common stock at a price of $28.00 per share on the
condition that the Bozell acquisition be terminated. Shortly thereafter, True
North obtained an injunction against interference by Publicis in the Bozell
acquisition and Publicis withdrew its tender offer. True North closed the
acquisition of Bozell on December 30, 1997. The acquisition of Bozell almost
doubled True North's size and added the two agency brands of Bozell Worldwide
and Temerlin McClain LP to complement True North's flagship FCB Worldwide agency
brand. In September 1999, True North restructured its agencies by transferring
specified international operations of Bozell into FCB, strengthening FCB's
global reach and its ability to serve and attract multinational clients.
After the Bozell acquisition, True North continued to pursue a program
of targeted acquisitions and completed numerous transactions of smaller relative
size involving a variety of communications services businesses. In addition,
True North's management and Board became increasingly focused on more
significant strategic alternatives available to True North. True North's
management and its Board considered, among other strategies, whether True
North's business and financial performance, and its stockholders, employees and
clients, could benefit from being part of a larger, more diverse company. Such a
combination could offer, among other advantages:
o a greater concentration of business outside of North America;
o an enhanced ability to attract and serve large, multinational
clients; and
o enhanced diversification in faster growing and higher margin
non-advertising communications services businesses, such as
sales promotion, direct marketing, design and branding and
business communications services.
As a result, True North's management and its Board began to explore a
variety of alternatives, including:
o entering into a significant business combination with one or
more major advertising and marketing communications firms in a
merger among or between equals;
o entering into a transaction with a global advertising and
marketing communications firm, with True North as the acquired
entity; or
o remaining an independent entity and growing through additional
acquisitions.
From time to time beginning in 1998 and continuing through early 2001,
True North approached, or was approached by, a substantial number of the other
global advertising and marketing communications firms, including Interpublic, to
discuss significant potential transactions. Many of these expressions of
interest resulted in meetings between representatives of True North and other
parties. In connection with these discussions, True North entered into
confidentiality agreements with some of these other parties, and proprietary
information was supplied by and obtained from True North pursuant to these
confidentiality agreements. True North's management kept its Board apprised of
these developments and, with respect to matters raising material issues, acted
in accordance with the Board's guidance.
19
In November 1998 and again in March 1999, the chief executive of a
global advertising and marketing communications firm, which we refer to in this
discussion as Company A, made inquiries to True North regarding a possible
business combination with True North. In both instances, the True North Board
determined not to enter into discussions with Company A, and Company A was so
informed.
In late 1998 and early 1999, True North had preliminary discussions
regarding a possible combination with a global advertising and marketing
communications firm, which we refer to in this discussion as Company B. The
discussions did not advance at that time.
Commencing in the spring and summer of 1999, True North's management
and Board increased their focus on various strategic initiatives.
Discussions with Company B regarding a possible business combination
resumed in the late summer and fall of 1999.
True North management also had discussions with a large private equity
firm about the possibility of taking True North private in a management-led
buyout. However, by September 1999, management ceased considering this type of
transaction due to the growth models and high amount of debt that would be
required to complete it.
In August 1999, True North entered into discussions regarding a
possible combination with a global advertising and marketing communications
firm, which we refer to in this discussion as Company C. True North and Company
C entered into a confidentiality agreement dated August 26, 1999. During the
fall of 1999, discussions continued with both Company B and Company C.
In February 2000, True North entered into discussions with a global
advertising and marketing communications company, which we refer to in this
discussion as Company D, relating to Company D's possible acquisition of True
North. True North and Company D entered into a confidentiality agreement dated
February 18, 2000 and the chief executive officers and other senior management
of each of True North and Company D held a meeting on February 21, 2000. At this
meeting, the parties discussed, among other matters, whether Company D would
agree to a standstill whereby it would not be permitted to purchase shares of
True North common stock for the duration of negotiations. Company D indicated
that it would agree to such a standstill only if True North would agree to
negotiate exclusively with Company D. True North refused to agree to an
exclusivity provision, and Company D did not enter into a standstill provision.
As of February 29, 2000, True North entered into a letter agreement and
a separate indemnification agreement with Morgan Stanley & Co. Incorporated
pursuant to which Morgan Stanley was engaged to act as financial advisor to True
North to explore strategic alternatives with counterparties in the advertising
business. The provisions of the letter agreement relating to fees payable for
Morgan Stanley's services are described under "Opinion of True North's Financial
Advisor" on page 28.
Over the next several months, members of senior management of True
North held several conversations and meetings with their respective counterparts
at Company D. In addition, during this period True North's management engaged in
wide-ranging discussions with numerous other advertising and communications
services businesses. For instance, True North continued its discussions with
Company C and held meetings and had discussions with representatives of a U.S.
marketing services company, another global advertising and marketing
communications firm, and two media companies. These discussions included
potential transactions of varying structures, including, in certain cases,
possible three-party combinations. Management reported on these discussions to
the True North Board at a meeting held on July 25, 2000.
In the summer of 2000, members of senior management of True North had a
series of discussions with Company D about a potential transaction. In late July
2000, Company D presented True North with a preliminary due diligence request
list, and by early August 2000 True North began providing requested information
to Company D. On August 16, 2000, the chief executive officers and other senior
officers of each of True North and Company D held a meeting to review issues
raised by these due diligence materials and to discuss other matters, including
the potential for cost savings synergies.
20
In late August 2000, True North received an informal indication of
interest from Company D to acquire True North in a stock-for-stock transaction
at an exchange ratio that reflected a price, as of the date of the indication,
of approximately $40 per share of True North common stock. At that time, True
North was reluctant to consider a transaction at this price. At a special
meeting of the True North Board held on September 1, 2000, David Bell, chairman
and chief executive officer of True North, updated the Board on the status of
strategic alternatives then under discussion, including a potential transaction
with Company D. After discussion, the Board advised Mr. Bell to defer further
discussions with Company D so long as the price was inadequate, and Company D
was so informed in a letter from Kevin Smith, executive vice president and chief
financial officer of True North, dated September 5, 2000.
Contemporaneously, True North renewed discussions with Company B about
the possibility of a combination. The parties explored various means of
structuring a transaction.
On September 6, 2000, the Chrysler Group of DaimlerChrysler, which at
that time divided its global advertising and marketing communications work
between True North and another global advertising and marketing communications
firm, announced that it would place both of these accounts up for review. The
objective of the review was the consolidation of a substantial portion of
Chrysler Group's advertising and marketing communications services with one firm
on substantially revised business terms.
At a regular meeting of the True North Board held September 13, 2000,
Mr. Bell and Mr. Smith updated the Board on the status of discussions with
Company D and others regarding a possible merger and the Chrysler account
consolidation review. Representatives of Morgan Stanley, Sidley & Austin, True
North's outside legal counsel, and other outside advisors to True North attended
the meeting to assist the Board in reviewing strategic alternatives. Mr. Bell
and Mr. Smith presented an analysis of the impact on True North's financial
results of the two possible outcomes of the Chrysler account consolidation
review --the Chrysler account being consolidated with either True North or
Chrysler's other global advertising firm-- and a review of the advantages and
disadvantages associated with various potential strategic partners.
At this meeting, it was reported to the True North Board that, after
True North had deemed Company D's initial indication of interest to be
unattractive, representatives of True North had proposed a pricing structure
whereby True North stockholders would receive initial consideration payable in
Company D stock and, in addition, would receive a separate security which would
provide additional value only if the per share value of Company D's stock did
not appreciate to a specified level following the completion of the transaction.
A representative of Morgan Stanley then summarized for the True North
Board an estimated range of trading values for True North stock under the two
possible outcomes of the Chrysler account consolidation review. Morgan Stanley
noted that, should True North experience a loss of the Chrysler account, a
potentially significant client conflict issue would be eliminated and, as a
result, several strategic alternatives would become more viable. A
representative of Sidley & Austin then briefed the Board on its fiduciary duties
in considering the several strategic alternatives under discussion. Following
discussion, the Board directed management, with the assistance of outside
advisors, to continue discussions with Company D and others about a potential
strategic transaction.
After a meeting on September 14, 2000 between senior executives of each
of True North and Company D and their respective advisors, at which little
progress was made with respect to pricing differences, serious discussions
between True North and Company D terminated.
On November 3, 2000, Chrysler announced that it had completed its
account consolidation review and had determined to consolidate its global
advertising and marketing communications business with its other global
advertising and marketing communications firm, including some of the services
previously provided by True North. In a conference call with analysts,
shareholders, the press and others held on November 6, 2000, Mr. Bell indicated,
among other things, that True North was open to strategic opportunities that
would benefit True North's stockholders and clients and that the elimination of
Chrysler as a potential conflict issue might allow True North to pursue a
broader range of these opportunities.
True North and Company B, and their advisors, intensified discussions
regarding a potential combination. On November 7, 2000, the chief executive
officers and other senior management of True North and Company B met and
discussed valuation ranges, the Chrysler decision, management and social issues,
timing and the possibility of
21
exclusivity of negotiations. On November 16, 2000, True North entered into a
confidentiality agreement with Company B. Company B prepared a draft merger
agreement and provided it to True North on November 21, 2000. The parties began
negotiating the terms of this agreement, and each party began performing
in-depth financial and legal due diligence with respect to the other.
The True North Board held a special meeting on November 17, 2000 to
consider the discussions being held by True North's management. A representative
of Sidley & Austin again briefed the Board on its fiduciary duties and other
relevant legal matters. A representative of Morgan Stanley provided a
preliminary evaluation report and a preliminary assessment of the reaction of
the capital markets and potentially interested strategic partners to the
decision of Chrysler with respect to account consolidation. Mr. Bell and Suzanne
Bettman, executive vice president and general counsel of True North, presented
to the Board management's recommendation to continue discussions with Company B.
They also reported that Company B had requested True North to commit to
negotiate exclusively with Company B. After discussion, the Board authorized
senior management to continue negotiations in respect of a strategic combination
transaction with Company B, but determined not to agree to Company B's request
for exclusivity. Furthermore, in consideration of the benefits to True North of
proceeding expeditiously, the Board directed management to report back to the
Board by December 4, 2000.
The True North Board held another special meeting on November 30, 2000
to consider the progress of negotiations with Company B. A representative of
Sidley & Austin reported that unresolved issues included the proposed structure
of the transaction, whether the transaction would be treated as a tax-free
reorganization for U.S. federal income tax purposes, the possibility of True
North paying a significant special cash dividend prior to the closing of the
transaction, the treatment of stock options and deferred compensation
obligations, and the proposed management structure and related social issues. A
representative of Morgan Stanley discussed the proposed funding of the payment
by True North of a special dividend prior to closing. Morgan Stanley also noted
that recent movements in share prices of Company B and True North under the
proposed exchange ratio would, as of that time, result in a below-market
transaction price for True North's stockholders. Mr. Bell then reported to the
Board on discussions with other potential strategic partners. After discussion,
the True North Board determined that discussions with Company B should continue
and that management should focus on three issues in particular:
o an Internal Revenue Service ruling confirming that the
transaction between True North and Company B would qualify as
a tax-free reorganization for True North's stockholders;
o post-transaction management structure; and
o further exploration of indications of interest from other
interested parties.
On December 9, 2000, the chief executive officers and other senior
officers of each of True North and Interpublic met to discuss the interest of
Interpublic in a strategic transaction with True North. Several additional
conversations followed. On December 15, 2000, True North and Interpublic entered
into a confidentiality agreement and True North began to provide financial and
other information to Interpublic. A face-to-face due diligence session was
scheduled for early January 2001 as a result of these discussions.
The True North Board held a special meeting on December 15, 2000 to
discuss, among other things, recent meetings with Company B and other potential
strategic partners. Representatives of Sidley & Austin provided the Board a
summary of prior briefings on fiduciary duties, and Morgan Stanley presented an
overview of the proposed structure of the transaction with Company B. Sidley &
Austin reviewed the tax issue previously discussed during the November 30, 2000
Board meeting, and Morgan Stanley presented a report which included background
and strategic information, pro forma combination analysis, a proposed timeline
and an analysis of the stockholder profiles of True North and Company B. Upon
management's recommendation, and after discussion, the Board directed management
to make continued efforts to reach an agreement with Company B that would allow
an announcement of a transaction by January 15, 2001. The Board also authorized
an inquiry to the IRS regarding the tax issue, completion of a due diligence
investigation of Company B, and arrangement for funding the True North special
dividend prior to a transaction.
22
In late December 2000, True North and Company C renewed their
discussions, which had been ongoing intermittently since late 1998, relating to
a possible merger transaction between Company C and True North. On December 21,
2000, Company C conveyed a presentation outlining a possible stock-for-stock
combination that, as of that time, valued True North in the range of $40 to $45
per True North share. Company C requested that True North agree to exclusive
negotiations. True North rejected the request for exclusive negotiations.
Also in late December 2000, discussions with Company B began to falter.
Company B resisted the request of True North to condition the closing of a
transaction with Company B on obtaining a ruling from the IRS confirming the
tax-free nature of the proposed transaction to True North stockholders. In
addition, pricing, management and structure issues had not been resolved.
In early January 2001, True North also recommenced discussions with
Company A, with which it had communicated with respect to a potential merger
transaction in late 1998 and again in early 1999. The chief executive officers
and other senior officers of True North and Company A met on January 3, 2001 to
review the business of True North, and True North and Company A entered into a
confidentiality agreement dated January 3, 2001.
On January 7 and 8, 2001, senior management of True North and of
Interpublic met to review the business of True North and to discuss potential
cost-saving synergies. Senior management of True North and Company C also met to
review the business of True North. Company C, with which True North had
previously entered into a confidentiality agreement, began extensive financial
and legal due diligence on True North in mid-January 2001. A series of meetings
between management of the two companies followed, which continued into
mid-February.
The True North Board held a special meeting on January 12, 2001. Mr.
Bell, together with Mr. Smith and a representative of Morgan Stanley, reviewed
for the Board the status of discussions with each of the four most likely
potential strategic partners with which True North had recently held significant
discussions. It was noted that, although several parties had expressed interest
in a possible transaction, no firm proposal had emerged. Mr. Bell indicated that
discussions were continuing and stated that a more specific update would be
forthcoming at the January 19, 2001 regular Board meeting. At the January 19,
2001 meeting, Mr. Bell and a representative of Morgan Stanley reviewed recent
meetings and developments with respect to potential strategic partners. The
Board encouraged management and True North's advisors to continue progressing on
the various alternatives.
Between January 16, 2001 and February 7, 2001, a number of meetings
occurred between senior management of True North and of Interpublic to discuss
issues which included potential client conflicts, financial issues, social
issues and potential synergy opportunities.
During late January and early February 2001, there were a series of
discussions among True North, Company B and Company C to discuss various
potential multiple-party transactions. Ultimately, it was determined that none
of these transactions was feasible under the circumstances.
On February 4, 2001, the chief executive officers of True North and
Company A met again, and Company A began extensive financial and legal due
diligence on True North in early February 2001.
In mid-February 2001, True North determined to seek the views of the
Securities and Exchange Commission with respect to its accounting treatment for
contingent earn-out payments relating to previously completed acquisitions.
Discussions with Company C were deferred during the pendency of the Commission's
consideration of this issue.
True North prepared a draft merger agreement and provided it to Company
A on February 15, 2001. During the period between February 15 and February 27,
2001, legal counsel for each of True North and Company A exchanged comments on
the proposed merger agreement, and meetings and detailed discussions regarding
financial and business issues continued. On February 28, 2001, Company A
submitted to True North a draft bid letter expressing its interest in pursuing a
stock-for-stock transaction valued on that date at approximately $41.50 per
share of True North common stock. Extensive negotiations began on the draft
merger agreement at the end of February 2001 and continued into the beginning of
March 2001. However, as of early March 2001, a number of significant contractual
and management structure issues remained to be resolved with Company A.
23
Senior management of True North and Interpublic continued discussions
and met on February 26, 2001 and again on March 1, 2001. True North provided
Interpublic a draft merger agreement on February 28, 2001. Interpublic engaged
Goldman Sachs & Co. as its financial advisor and began conducting extensive
financial and legal due diligence on True North in early March 2001.
On February 28, 2001, at a regularly scheduled meeting of the True
North Board, Mr. Bell and a representative of Morgan Stanley reviewed recent
meetings and developments with respect to strategic partners, and the Board
discussed the draft bid letter from Company A.
In early March 2001, True North announced that the Commission had no
objection to True North's accounting for contingent earn-out payments, however,
True North did agree, in connection with a separate issue raised independently
by the Commission, to change its amortization of intangible assets arising from
acquisitions from up to 40 years to up to 20 years. Consequently, True North
restated financial statements for periods prior to December 31, 2000.
Following resolution of the Commission review, Company C expressed
renewed interest in pursuing discussions with True North. True North provided
Company C a draft merger agreement on or about March 8, 2001, and a series of
meetings and conversations occurred between True North and Company C
representatives over the following several days.
On March 9, 2001, Company C presented a non-binding proposal for a
stock-for-stock merger at an exchange ratio that reflected a price as of that
date of $42.00 per share of True North common stock.
On or about March 12, 2001 each of Interpublic and Company C submitted
comments on the draft merger agreement previously provided to them.
On March 12, 2001, the True North Board held a special meeting to be
updated on the status of discussions with potential strategic partners. The
Board discussed the various proposals and discussions at length and determined
that additional meetings would be necessary to discuss further developments.
Later that same day, Interpublic submitted to True North a term sheet for a
stock-for-stock merger proposing a fixed exchange ratio to be calculated based
upon the closing price of Interpublic's stock immediately prior to announcement
of the transaction to reflect a value as of the date of such announcement of
$38.50 per share of True North common stock.
On March 14, 2001, each of Company A, Company C and Interpublic
presented a revised, increased price proposal. Company A's revised proposal was
conditioned upon all outstanding contractual issues being resolved.
Interpublic's revised proposal reflected a fixed exchange ratio as of the date
of the proposal, rather than an exchange ratio to be determined immediately
prior to the announcement of a transaction based on a fixed price, as reflected
in Interpublic's original proposal.
On the afternoon of March 14, 2001, the True North Board held a special
meeting to discuss these three alternative proposals, as follows:
o a potential merger transaction with Company A in which True
North would become a wholly-owned subsidiary of Company A;
o a potential merger transaction with Company C in which True
North would become a wholly-owned subsidiary of Company C; and
o a potential merger transaction with Interpublic in which True
North would become a wholly-owned subsidiary of Interpublic.
Mr. Bell provided the Board with a detailed update of events since the
last Board meeting. A representative of Morgan Stanley then provided the Board
with preliminary valuation reports, a comparison of shares of common stock
versus American Depositary Receipts (because shares of one or both of Company A
and C are traded in the United States through ADRs representing these shares)
and an assessment of the likely reaction of the capital markets and
24
potentially interested parties to the various potential transactions. A
representative of Sidley & Austin outlined for the Board the current status of
contractual negotiations with each of the potential strategic partners. Mr. Bell
then presented management's recommendation that True North focus principally on
negotiations with Interpublic. After discussion, the Board determined that the
Interpublic proposal presented the most favorable pricing and other terms. The
Board instructed True North management to focus principally on negotiations with
Interpublic.
True North and its advisors then continued financial and legal due
diligence on Interpublic and met with Interpublic and its counsel, Cleary,
Gottlieb, Steen & Hamilton, to negotiate final terms of the merger agreement.
These negotiations were essentially completed during the period of March 15
through March 17, 2001. During this period, Interpublic requested True North to
commit to negotiate exclusively with Interpublic, but True North refused this
request.
On Saturday, March 17, 2001, Interpublic informed True North that the
Interpublic Board had met to evaluate the proposed acquisition of True North and
had approved the merger agreement and the merger contemplated by it.
On the evening of Sunday, March 18, 2001 the True North Board met for
several hours to evaluate the proposed merger with Interpublic. Sidley & Austin
again briefed the members of the Board on their fiduciary duties. Morgan
Stanley's presentation to the Board, which was based on closing prices as of
March 16, 2001, indicated that the exchange ratios in the most recently revised
price proposals of Company A, Company C and Interpublic reflected prices, as of
that date, of $39.17, $39.57 and $40.24, respectively, per share of True North
common stock. True North's management advised the Board that, in management's
view, a combination between Interpublic and True North would represent an
excellent "fit" from a strategic standpoint, with minimal conflicts between
their respective clients, and would produce a strong and diversified combined
company. True North's management and its advisors made a lengthy presentation on
the results of True North's financial and legal due diligence investigation of
Interpublic.
Representatives of Morgan Stanley present at the meeting presented a
financial analysis of the proposed transaction and described the basis for
Morgan Stanley's opinion that, as of March 18, 2001, the exchange ratio pursuant
to the proposed merger agreement between True North and Interpublic was fair
from a financial point of view to the holders of shares of True North common
stock. Morgan Stanley then delivered its opinion to the True North Board. See
"Opinion of True North's Financial Advisor" on page 28 and Annex B.
The True North Board, with the assistance of legal counsel, reviewed
the material terms of the proposed business combination, including the more
important provisions of the proposed merger agreement, copies of which had been
supplied to the Board prior to the meeting. The Board further recognized that
the transaction was structured as a tax-free reorganization for U.S. federal
income tax purposes and to qualify for pooling-of-interests accounting
treatment. After careful consideration of all matters, including, among other
things, True North's due diligence investigation of Interpublic, expected
synergies, the expectation of manageable client conflicts, the fact that senior
officers of True North would play a strategic role in the combined companies,
the material terms of the merger agreement and Morgan Stanley's fairness
opinion, the True North Board approved the merger agreement and the merger
contemplated by it. See "Recommendation of the True North Board; Considerations
of the True North Board" on page 25.
Late in the evening on March 18, 2001, True North and Interpublic
executed the merger agreement. The following morning, March 19, 2001, True North
and Interpublic issued a joint press release announcing the transaction.
Recommendation of the True North Board; Considerations of the True North Board
At a special meeting on March 18, 2001, the True North Board determined
by unanimous vote of those present that the merger is advisable, and that the
merger agreement and the merger are in the best interests of True North and its
stockholders. Accordingly, the Board recommends that the stockholders of True
North vote "FOR" adoption of the merger agreement at the special meeting.
In the course of reaching its decision to approve the merger agreement,
the True North Board consulted with management, as well as with outside legal
counsel and financial advisors, and considered a number of factors, including:
25
o with respect to both True North and Interpublic:
o business,
o operations,
o properties and assets,
o financial condition,
o competitive position,
o business strategy and
o prospects and risks involved in achieving prospects,
o the nature of the advertising and marketing communications
oindustry in which True North competes,
o industry conditions,
o economic conditions,
o market conditions,
o the view of the True North Board and management that:
o the advertising and marketing communications industry has
experienced significant consolidation in recent years,
o the industry participants that achieve the
greatest geographic and functional scale and
diversity are likely to be at a competitive
advantage relative to smaller competitors
and to be better positioned to take
advantage of long-term growth opportunities
and trends and
o True North's business and financial
performance would benefit from being part of
a larger, more diverse company which would
have an enhanced capacity to provide sales
promotion, direct marketing, design and
branding and business communication
services,
o the potential stockholder value that could
be expected to be generated from the various
strategic alternatives available to True
North, including the alternatives of:
o continuing as an independent entity and
o entering into a combination with another
major advertising and marketing
communications company,
o the fact that the True North Board and management had investigated and
discussed these strategic alternatives intensively over a period of
months,
o the indications of interest and history of discussions with third
parties, together with the publicity surrounding interest from third
parties in engaging in a business combination with True North,
o the effect of publicity prior to execution of the merger agreement of
a potential transaction involving True North on the market price of
True North common stock which, although not necessarily
26
influencing the True North Board's ultimate decision favorably or
unfavorably, was considered by the True North Board in its
deliberations regarding the exchange ratio,
o the view of the True North Board and management that a
combination between Interpublic and True North
o would represent an excellent "fit" from a
strategic standpoint, with minimal conflicts
between their respective clients and
o would produce a strong and diversified combined
company,
o the synergies, cost reductions and operating efficiencies that
should become available to the combined enterprise as a result
of the merger, and the many management challenges associated
with successfully integrating the business of two major
corporations,
o the presentations of True North's financial advisor concerning
financial aspects of the proposed merger and of the various
strategic alternatives available to True North,
o the opinion received from Morgan Stanley that, as of the date
of the opinion, and based on the considerations in the opinion,
the exchange ratio pursuant to the merger agreement was fair
from a financial point of view to the holders of shares of True
North common stock,
o the current and historical market prices of True North common
stock and Interpublic common stock relative to each other and
relative to those of other industry participants, and the
relative benefits associated with direct stock ownership (as
opposed to an American Depositary Receipt which offered only
indirect stock ownership),
o the fact that True North is a personal/professional services
business and management strongly recommended the merger with
Interpublic in view of the benefits of the merger to True
North's employees and clients,
o the facts that several members of True North's current senior
management team are expected to play a significant role in the
management of True North during the transition following the
merger as well as on an ongoing basis and that two current True
North directors will be appointed to the board of directors of
Interpublic,
o the expectation that the merger would qualify as a tax-free
transaction for U.S. federal income tax purposes (except with
respect to cash received for fractional shares),
o the ability to account for the merger as a pooling of interests
under generally accepted accounting principles,
o the terms of the merger agreement (including the payment of a
termination fee if the merger agreement is terminated under
specified circumstances),
o the fact that because the transaction is structured as a merger
rather than a cash sale, the merger provides True North
stockholders with the opportunity to participate in a larger,
more competitive company,
o the lack of availability of appraisal rights in connection with
the merger and
o the fact that the exchange ratio is fixed and, accordingly, the
value of the transaction could increase or decrease prior to
the completion of the merger.
27
In addition, in considering the proposed merger, the directors of True
North were aware of the interests of certain officers and directors in the
merger described under "Interests of True North's Directors and Management in
the Merger" on page 35.
The foregoing discussion of the factors considered by the True North
Board is not intended to be exhaustive, but includes the material factors
considered by the Board. In view of the wide variety of factors considered by
the Board in connection with its evaluation of the merger and the complexity of
these matters, the True North Board did not consider it practical, and did not
attempt, to quantify, rank or otherwise assign relative weights to the specific
factors it considered in reaching its decision. The True North Board conducted a
discussion of the factors described above, including asking questions of True
North's management and True North's outside advisors.
The True North Board reached a unanimous consensus of those present
that the merger was in the best interests of True North and its stockholders. In
considering the factors described above, individual members of the Board may
have given different weights to different factors.
Opinion of True North's Financial Advisor
Under an engagement letter dated February 29, 2000, True North retained
Morgan Stanley to provide various financial advisory services. In connection
with the engagement, True North requested that Morgan Stanley provide a fairness
opinion in connection with the merger. True North selected Morgan Stanley to act
as True North's financial advisor based on Morgan Stanley's qualifications,
expertise and reputation and its knowledge of the advertising and marketing
communications industry in general and the business and affairs of True North in
particular.
At a meeting of the True North Board held on March 18, 2001, Morgan
Stanley rendered to the True North Board its oral opinion, subsequently
confirmed in writing, that, as of March 18, 2001, and based upon and subject to
the various considerations, limitations and qualifications set forth in the
written opinion, the exchange ratio pursuant to the merger agreement was fair
from a financial point of view to the holders of shares of True North common
stock.
The full text of the opinion of Morgan Stanley, dated March 18, 2001,
is attached as Annex B. It sets forth, among other things, the assumptions made,
procedures followed, matters considered and limitations on the scope of the
review undertaken by Morgan Stanley in rendering its opinion. True North
stockholders are urged to, and should, read the opinion carefully and in its
entirety.
Morgan Stanley's opinion is directed to the True North Board and
addresses only the fairness from a financial point of view of the exchange ratio
to holders of shares of True North common stock as of the date of the opinion.
True North stockholders should note that the opinion does not address:
o any other aspect of the merger,
o True North's underlying business decision to pursue the merger
or
o the price at which Interpublic common stock will trade
following the merger or at any other time.
Further, the opinion does not constitute a recommendation to any holder
of shares of True North common stock as to how to vote at the True North
stockholder meeting held in connection with the merger.
The summary of the opinion of Morgan Stanley set forth below is
qualified in its entirety by reference to the full text of the written opinion,
which is attached as Annex B.
In connection with rendering its opinion, Morgan Stanley, among other
things:
o reviewed publicly available financial statements and other
business and financial information of True North and
Interpublic;
28
o reviewed internal financial statements and other financial and
operating data concerning True North and Interpublic;
o reviewed financial forecasts prepared by the managements of
True North and Interpublic;
o reviewed information relating to strategic, financial and
operational benefits anticipated from the merger, prepared by
the management of True North;
o discussed the past and current operations and financial
condition and the prospects of True North, including
information relating to strategic, financial and operational
benefits anticipated from the merger, with senior executives
of True North;
o discussed the past and current operations and financial
condition and the prospects of Interpublic, including
information relating to strategic, financial and operational
benefits anticipated from the merger, with senior executives
of Interpublic;
o reviewed the pro forma impact of the merger on Interpublic's
earnings per share, cash flows, consolidated capitalization
and financial ratios;
o reviewed the reported prices and trading activity for True
North common stock and Interpublic common stock;
o compared the financial performance of True North and
Interpublic and the prices and trading activity of True North
common stock and Interpublic common stock with that of other
publicly-traded companies comparable with True North and
Interpublic, and their securities;
o reviewed the financial terms, to the extent publicly
available, of comparable acquisition transactions;
o participated in discussions and negotiations among
representatives of True North and Interpublic and their
financial and legal advisors;
o reviewed the merger agreement and related documents; and
o performed other analyses and considered other factors as
Morgan Stanley deemed appropriate.
Morgan Stanley assumed and relied upon, without independent
verification, the accuracy and completeness of the information supplied or
otherwise made available to it by True North and Interpublic for the purposes of
its opinion. With respect to the financial forecasts, including information
relating to strategic, financial and operational benefits anticipated from the
merger, Morgan Stanley assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of True North and Interpublic. In addition, Morgan Stanley
assumed that the merger would be accounted for as a "pooling-of-interests"
business combination in accordance with U.S. generally accepted accounting
principles and the merger would be consummated in accordance with the terms set
forth in the merger agreement, including, among other things, that the merger
would be treated as a tax-free reorganization pursuant to the Internal Revenue
Code of 1986. Morgan Stanley also assumed that in connection with the receipt of
all necessary regulatory approvals for the merger, no restrictions would be
imposed that would have a material adverse effect on the benefits expected to be
derived in the merger.
Morgan Stanley did not make any independent valuation or appraisal of
the assets or liabilities of True North or Interpublic, nor was Morgan Stanley
furnished with any appraisals. Morgan Stanley relied without independent
verification on the assessment of the management of True North and Interpublic
on their ability to retain key clients and employees of True North and
Interpublic. Morgan Stanley's opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to Morgan Stanley as of, the date of its opinion.
29
The following is a summary of the material financial analyses performed
by Morgan Stanley in connection with its oral opinion and the preparation of its
written opinion dated March 18, 2001. Some of these summaries of financial
analyses include information presented in tabular format. In order to understand
fully the financial analyses used by Morgan Stanley, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
As described more fully in "Background of the Merger" on page 19, on
November 3, 2000 True North announced that a significant True North client
decided to consolidate selected advertising and marketing services historically
provided by True North with another advertising and marketing services company
which had also provided advertising and marketing services to this client. As a
result, for the purposes of its analyses, Morgan Stanley reviewed financial
forecasts prepared by the management of True North adjusted, as appropriate, to
reflect the financial effects of the consolidation (also known as the Adjusted
True North Management Projections). The Adjusted True North Management
Projections were prepared in March 2001 and reflected management's view as of
that time and were provided to Morgan Stanley for use in its analysis in
connection with the merger. For some of the pro forma combination analyses,
Morgan Stanley used publicly available equity research projections for
Interpublic that Morgan Stanley discussed with Interpublic management (also
known as the Interpublic Projections).
Historical Common Stock Performance
Morgan Stanley reviewed the price performance and trading volumes of
the common stock of each of True North and Interpublic from January 1, 1997
through March 16, 2001. The table below shows the daily high and low closing
prices of True North and Interpublic for that period, compared with a closing
price on March 16, 2001 of $39.31 per share for True North common stock and
$35.30 per share for Interpublic common stock:
January 1, 1997 through March 16, 2001
--------------------------------------
High Low
---- ---
True North............. $52.63 $17.00
Interpublic............ $58.06 $15.83
Morgan Stanley then compared the price performance of True North to
Interpublic and that of the Standard & Poor's 500 Common Stock Price Index,
which we call the S&P 500 Index, and two groups of selected advertising and
marketing communications companies with publicly-traded common stock. One group
included larger capitalization companies, such as Interpublic, Omnicom Group
Inc. and WPP Group PLC, which we refer to as the Large-Cap Companies, and the
other group included mid-capitalization companies such as Cordiant
Communications Group PLC, Grey Global Group Inc., Havas Advertising and Publicis
Groupe S.A., which we refer to as the Mid-Cap Companies. The Large-Cap Companies
and the Mid-Cap Companies were chosen because they participate in the global
advertising and marketing communications industry and possess financial and
operating characteristics that have similarities to those of True North and
Interpublic. None of the other companies used in this analysis as a comparison
is identical to True North or Interpublic.
This analysis showed that the closing market prices of True North and
Interpublic appreciated during the period from January 1, 1997 through March 16,
2001 as follows:
True North............................... 82.8%
Interpublic.............................. 118.9%
The table below shows the relative stock price appreciation of True
North, the S&P 500 Index and the Large-Cap Companies and Mid-Cap Companies from
January 1, 1997 through March 16, 2001:
True North............................... 82.8%
S&P 500 Index............................ 59.2%
Large-Cap Companies...................... 188.5%
Mid-Cap Companies........................ 176.6%
30
Comparable Company Analysis
Comparable company analysis examines a company's trading performance
relative to a group of publicly traded peers. Morgan Stanley performed a
comparable public company trading analysis pursuant to which it calculated price
to 2000 and 2001 estimated earnings multiples based on Institutional Brokers
Estimates System (also known as IBES) estimates and the multiple of aggregate
value as of March 16, 2001 to 2001 estimated earnings before interest, taxes,
depreciation and amortization (also known as EBITDA) based on recent Morgan
Stanley equity research estimates for True North. Morgan Stanley then compared
the multiples obtained for True North with multiples obtained from publicly
available information for a group of selected advertising and marketing
communications companies.
The group of selected advertising and marketing communications
companies included Omnicom, Interpublic, WPP, Cordiant, Havas, True North and
Publicis. Morgan Stanley selected these companies, other than True North,
because they are publicly traded companies with advertising and marketing
communications operations that for purposes of this analysis may be considered
similar to those of True North.
The analysis showed the following multiples:
Aggregate
Price/2000E Price/2001E Value/2001E
Earnings Earnings EBITDA
-------- -------- ------
True North.................................. 18.5 19.2 8.6
Group of selected advertising and marketing
communications companies:
Low....................................... 18.5 19.2 8.6
Median.................................... 29.4 23.8 9.9
High...................................... 34.9 30.0 13.6
Based on an analysis of the comparable companies and the corresponding
information for True North, including the Adjusted True North Management
Projections, Morgan Stanley estimated a per share value for True North common
stock between $38 and $43.
No company utilized in the comparable company analysis, other than True
North itself, is identical to True North. In evaluating the comparable
companies, Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of True North, including the
impact of competition on the business of True North and the industry generally,
industry growth and the absence of any material adverse change in the financial
condition and prospects of True North or the industry or in the financial
markets in general, which could affect the public trading value of the
companies. Mathematical analysis, such as determining the average or median, is
not in itself a meaningful method of using comparable company data.
Discounted Cash Flow Analysis
Morgan Stanley estimated the unlevered free cash flows that could be
produced by True North in fiscal years 2001 through 2011, based on a review of
the Adjusted True North Management Projections. Morgan Stanley calculated a
discounted cash flow analysis for True North assuming discount rates ranging
from 9.75% to 10.75%, based on Morgan Stanley's analysis of True North's
weighted average cost of capital, and terminal values for True North by applying
multiples of unlevered EBITDA in the year 2011 from 8.0x to 9.0x. This analysis
produced an implied equity value per share of True North common stock between
approximately $42 and $46.
Stand-Alone Discounted Equity Value Analysis
Morgan Stanley calculated the implied present value to holders of
shares of True North common stock of estimated future dividends to be received
from True North and future implied True North stock price based upon the
Adjusted True North Management Projections and assuming an equity discount rate
of 10.25% and 2003 price to earnings multiples in a range of 15x to 20x. Morgan
Stanley noted that True North's ratio of stock price to one-year
31
forward earnings had ranged, over the 1997 to early 2001 period, from 12x-27x,
and had been most consistently in a range of 15x-20x.
Based on this analysis, Morgan Stanley calculated the present value of
equity, including dividend returns, per share of True North common stock in a
range of approximately $31 to $41.
Selected Precedent Transactions Analysis
Using publicly available information, Morgan Stanley reviewed the terms
of selected announced, pending or completed transactions in the advertising
industry. These transactions are:
o the Interpublic/Deutsch, Inc. transaction,
o the Publicis S.A./Saatchi & Saatchi PLC transaction,
o the WPP Group PLC/Young & Rubicam Inc. transaction,
o The Leo Group/The MacManus Group transaction,
o the Interpublic/International Public Relations PLC
transaction,
o the Chancellor Media Corp./Martin Media LP transaction,
o the Chancellor Media Corp./Petry Media Corp. transaction,
o the Snyder Communications, Inc./Arnold Communications Inc.
transaction,
o the Omnicom Group Inc./GGT Group PLC transaction,
o the CLT-UFA S.A./Havas Intermediation S.A. transaction,
o the True North/Bozell, Jacobs, Kenyon & Eckhardt, Inc.
transaction,
o the Outdoor Systems, Inc./Van Wagner Communications, Inc.
transaction,
o the GGT Group PLC/BDDP Worldwide transaction,
o the DLJ Merchant Banking Partners L.P./Katz Media Corporation
transaction,
o the Omnicom Group Inc./Boase Massimi Pollitt PLC transaction,
o the WPP Group PLC/Ogilvy Group, Inc. transaction,
o the WPP Group PLC/JWT Group, Inc. transaction and
o the Saatchi & Saatchi Company PLC/Ted Bates Worldwide Inc.
transaction.
The table below presents the high, low and median ratios for these
transactions of aggregate value to each of the last twelve months (also known as
LTM), revenues, EBITDA and earnings before interest and taxes (also known as
EBIT) and equity value to LTM net income.
32
Aggregate Value/LTM Equity Value/LTM Net
(x) Income
-------------------------------------------- ----------------------
Revenues EBITDA EBIT (x)
-------- ------ ---- ----------------------
High 3.0 24.6 34.8 49.5
Low 0.4 7.2 10.0 13.6
Median 1.0 9.1 21.3 22.7
Based on the Adjusted True North Management Projections, Morgan Stanley
estimated per share transaction values for True North common stock ranging from
approximately $31 to $52.
No company or transaction utilized as a comparison in the precedent
transactions analysis is identical to Interpublic, True North or the merger. In
evaluating the precedent transactions, Morgan Stanley made judgments and
assumptions regarding industry performance, general business, economic, market
and financial conditions and other matters, many of which are beyond the control
of True North or Interpublic, including the impact of competition on True North
and the industry in general, industry growth and the absence of any material
adverse change in the financial condition and prospects of True North,
Interpublic or the industry or in the financial markets in general, which could
affect the public trading value of the companies and the aggregate value of the
transactions to which they are being compared. Mathematical analysis (such as
determining the average or median) is not in itself a meaningful method of using
comparable transaction data.
Exchange Ratio Analysis
Morgan Stanley reviewed the implied historical exchange ratios for the
shares of common stock of each of True North and Interpublic, determined by
dividing the price per share of True North common stock by the price per share
of Interpublic common stock over the period from January 1, 1997 to March 16,
2001. Morgan Stanley performed this analysis to compare the premium represented
by the exchange ratio with the premium represented by historical exchange ratios
prevailing in the open market. This analysis indicated the following premiums
represented by the average historical exchange ratios prevailing in the open
market:
Period Average Exchange Ratio Premium
Period Ended March 16, 2001 Ratio vs. Period Average
--------------------------- ----- ------------------
January 1, 1997....................... 0.94x 21%
LTM Average........................... 1.00 14%
Prior 90 Day Average.................. 0.97 18%
Prior 30 Day Average.................. 1.00 14%
Relative Contribution Analysis
Morgan Stanley compared the pro forma contributions of True North and
Interpublic, based on the Adjusted True North Management Projections and the
Interpublic Projections, to the combined company assuming consummation of the
merger. Morgan Stanley observed, among other things, that based on the actual
revenue, EBITDA, EBIT, net income and cash net income for fiscal 2000 for each
company, True North would have contributed between 13.2% and 19.8% to the
combined company's pro forma revenue, EBITDA, EBIT, net income and cash net
income for fiscal 2000. Morgan Stanley also observed, among other things, that
based on the projected revenue, EBITDA, EBIT, net income and cash net income for
each company, True North would contribute between 14.9% and 20.0% to the
combined company's projected revenue, EBITDA, EBIT, net income and cash net
income for fiscal 2001 and 2002. These figures were compared to the pro forma
fully diluted ownership of the combined company by holders of True North common
stock and common stock equivalents of 15.8% implied by the exchange ratio.
Pro Forma Analysis of the Merger
Morgan Stanley analyzed the pro forma effect of the merger on
Interpublic's estimated earnings per share for the fiscal years ending 2001
through 2003. The analysis was based on the Adjusted True North Management
33
Projections and the Interpublic Projections. The analysis assumed the completion
of the merger and included the value of certain benefits of the combination as
estimated by the managements of True North and Interpublic. This analysis
indicated that the impact of the merger on estimated earnings per share of
Interpublic common stock would be modestly accretive (in the range of 1.0% to
1.3%) in each year during the period (also known as the Pro Forma Interpublic
Earnings).
Observations of Interpublic Valuation on a Stand-Alone and Pro Forma Basis
Morgan Stanley noted that Interpublic common stock, as of March 16,
2001, traded at 20.8 times projected one-year forward earnings (also known as
P/E) versus its five-year historical average P/E of 25.3 times and the then
current forward earnings multiples of the other Large-Cap Companies, WPP (24.8x)
and Omnicom (30.0x). Morgan Stanley observed that based upon the Pro Forma
Interpublic Earnings, the exchange ratio and an equity discount rate of 10.25%,
the implied present value of the Interpublic common stock received by holders of
True North common stock in the merger varies based upon Interpublic's future
forward P/E in 2003 as indicated in the table below:
Implied Present Value
P/E Per True North Share
--- --------------------
Current Interpublic P/E....................... 21 $43.54
Five Year Average Interpublic P/E............. 25 $51.83
In connection with the review of the merger by the True North Board,
Morgan Stanley performed a variety of financial and comparative analyses for
purposes of rendering its opinion. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to a partial analysis or
summary description. In arriving at its opinion, Morgan Stanley considered the
results of all of its analyses as a whole and did not attribute any particular
weight to any particular analysis or factor considered by it. Morgan Stanley
believes that the summary provided and the analyses described above must be
considered as a whole and that selecting any portion of its analyses without
considering all analyses would create an incomplete view of the process
underlying its analyses and opinion. In addition, Morgan Stanley may have given
various analyses and factors more or less weight than other analyses and
factors, and Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the range of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of True North or Interpublic.
In performing its analyses, Morgan Stanley made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of True North or
Interpublic. Any estimates contained in Morgan Stanley's analyses are not
necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by these estimates.
These analyses were prepared solely as a part of Morgan Stanley's analysis of
the fairness from a financial point of view to the holders of True North common
stock of the exchange ratio pursuant to the merger agreement and were conducted
in connection with the delivery by Morgan Stanley of its opinion to the True
North Board. The analyses do not purport to be appraisals of value or to reflect
the prices at which shares of True North common stock or Interpublic common
stock might actually trade. In addition, as described above, the Morgan Stanley
opinion was one of the many factors taken into consideration by the True North
Board in making its determination to approve the merger. The exchange ratio and
other terms of the merger agreement were determined through arm's-length
negotiations between True North and Interpublic and were approved by the True
North Board. Morgan Stanley did not recommend any specific consideration to True
North or that any specific consideration constituted the only appropriate
consideration for the merger. Consequently, the Morgan Stanley analyses as
described above should not be viewed as determinative of the opinion of the
Board with respect to the value of True North common stock or of whether the
True North Board would have been willing to agree to different consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously involved in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the course of its trading, brokerage and financing activities,
Morgan Stanley or its affiliates may, at any
34
time, hold long or short positions in, and buy and sell the debt or equity
securities or senior loans of True North or Interpublic for its account or the
account of its customers. Morgan Stanley and its affiliates have, in the past,
provided financial advisory and financing services to True North and Interpublic
and have received fees for the rendering of these services. Morgan Stanley may
also provide investment banking services to the combined entity in the future.
True North has agreed to pay Morgan Stanley an advisory fee of
approximately $150,000 - $250,000 if the merger is not completed, based
primarily on the amount of time spent on the engagement by Morgan Stanley, an
exposure fee of $2.5 million, payable under specified circumstances, and a
transaction fee upon completion of the merger, against which any advisory and
exposure fees paid will be credited, of approximately $10 million.
True North has also agreed to reimburse Morgan Stanley for any
out-of-pocket expenses incurred by Morgan Stanley in connection with its
engagement and to indemnify Morgan Stanley and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Morgan Stanley or any of its affiliates against various liabilities and
expenses, including various liabilities under the federal securities laws,
related to or arising out of Morgan Stanley's engagement.
Interests of True North's Directors and Management in the Merger
Some of the directors and officers of True North have interests in the
merger that are different from, or in addition to, the interests of True North
stockholders generally. These interests, to the extent material, are described
below. The True North board was aware of these interests and considered them,
among other matters, in approving the merger agreement and the merger.
Options
The merger agreement provides that, from and after the effective time
of the merger, each outstanding True North stock option will be assumed by
Interpublic and become an option to purchase that number of Interpublic shares
determined by multiplying
o the number of shares subject to the True North option
immediately prior to the effective time of the merger, by
o the exchange ratio,
at an exercise price per Interpublic share equal to the exercise price per True
North share immediately prior to the effective time of the merger divided by the
exchange ratio. As of the effective time, each True North option converted into
an Interpublic option will be subject to the same terms and conditions as were
applicable immediately prior to the effective time under the related option
agreement and stock option plan under which it was originally granted.
Under the terms of the True North stock option plan, the vesting and
exercisability of outstanding True North options will accelerate as a result of
the merger. Under the terms of the True North outside director stock option
plan, the vesting and exercisability of outstanding stock options held by
non-employee directors will not accelerate as a result of the merger. The
following table discloses, for each True North employee director, a director who
was formerly the chief financial officer of True North and is currently a
part-time employee, the current chief financial officer of True North and for
all directors and executive officers as a group, the number of True North shares
subject to options that will be subject to accelerated vesting upon the merger.
35
Number of Non-Vested Option
Name and Title Shares Exercise Price
-------------- ------ --------------
David A. Bell 13,400 $24.00
Chairman and Chief Executive Officer 46,667 37.00
115,000 38.30
Leo-Arthur Kelmenson 22,700 24.00
Director and Chairman, FCB Worldwide 33,334 37.00
J. Brendan Ryan 10,000 20.00
Director and Chief Executive Officer, FCB 12,000 27.06
Worldwide 16,734 24.00
38,000 37.00
73,200 38.30
Donald L. Seeley (a) 8,000 20.88
Director and part-time employee 8,000 27.06
8,867 24.00
Kevin J. Smith 6,000 28.88
Executive Vice President and Chief 2,000 24.00
Financial Officer 4,000 30.75
13,334 37.00
21,600 38.30
All directors and executive officers as a group (25 821,859 $35.42(b)
persons)
(a) Represents options granted to Mr. Seeley during the term of his full-time
employment by True North.
(b) Represents the weighted average exercise price.
Restricted Stock
Upon the merger, each outstanding share of restricted True North common
stock will convert into shares of Interpublic common stock and no longer be
subject to restrictions pursuant to its terms. The following table discloses,
for four executive officers and for all executive officers as a group, the
number of shares of restricted stock for which restrictions will lapse upon the
merger.
Name Shares of Restricted Stock
---- --------------------------
David A. Bell 8,363
Leo-Arthur Kelmenson 3,971
J. Brendan Ryan 7,480
Kevin J. Smith 2,803
All executive officers as a group 66,619
(16 persons)
Employment Agreements
True North has entered into employment agreements with its executive
officers that provide, among other things, for the payment of severance benefits
in the event of termination of an executive's employment under specified
circumstances. Although the availability of severance benefits under these
employment agreements does not depend upon the occurrence of a change in
control, some benefits in these employment agreements are accelerated by the
occurrence of a change in control such as the proposed merger. For example, Mr.
Ryan's employment agreement provides that if he is terminated without cause or
if he terminates his employment for specified reasons within two years following
the merger, the cash portion of his severance payments would be payable in a
lump sum. Moreover, the employment agreements for Mr. Bell and Mr. Ryan each
provide that, in the event that severance benefits become payable to him within
two years following the merger, then these severance benefits may be reduced to
the extent
36
necessary to maximize the benefits to him after taking excise and other taxes
into account. The employment agreements for other True North executive officers
contain similar provisions to those contained in Mr. Bell's and Mr. Ryan's
agreements.
Indemnification and Insurance
Interpublic has agreed in the merger agreement that all rights under
any organizational documents of True North or any agreement of current and
former directors and officers of True North to indemnification for acts and
omissions before the merger will survive the merger.
The merger agreement also provides that, for six years following the
merger, Interpublic will maintain directors' and officers' liability insurance
coverage for the directors and officers of True North to the extent currently
maintained by True North or, if less, to the extent available at a cost not to
exceed 150 percent of the last annual premium paid prior to March 18, 2001.
Executive Benefit Trust
Within seven days after the True North stockholders approve the merger
and at the end of each 12-month period after that date, True North will transfer
cash or life insurance policies into a trust in an amount sufficient to pay,
when due, the administrative expenses of the trust and the benefits that have
accrued under True North's Part-Time Directors Employment Agreement Program,
Deferred Variable Incentive Compensation Program and Deferred Compensation Plan
(and related predecessor deferred compensation plans) pursuant to their terms.
New Positions at Interpublic
The merger agreement provides that, on the day of the merger, Mr. Bell
and Mr. Ryan will become members of the Interpublic Board and that Mr. Bell will
become vice chairman of Interpublic.
Anticipated Accounting Treatment
The merger is expected to qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting:
o the recorded assets and liabilities of Interpublic and True
North will be carried forward to the combined company at their
recorded amounts, subject to any adjustments required to
conform the accounting policies of the companies; and
o income of the combined company will include income of
Interpublic and True North for the entire fiscal year in which
the merger occurs.
Each of Interpublic and True North has agreed that it will do the best
it reasonably can to cause its independent accountants to deliver a letter to
the other relating to the qualification of the merger as a pooling of interests
for accounting purposes. In addition, each of Interpublic and True North has
agreed not to take any action that would prevent or impede the merger from
qualifying as a pooling of interests for accounting and financial reporting
purposes. The receipt of the accountants' "pooling" letters is a condition to
the merger that may be waived by Interpublic, but not by True North.
Regulatory Approvals
We set forth below a summary of the regulatory clearances and approvals
required to effect the merger. While we believe that we will obtain those
requisite regulatory clearances and approvals for the merger, we cannot assure
you that we will obtain these approvals on satisfactory terms or otherwise.
United States. The merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act and the rules and regulations
thereunder, which provide that particular transactions may not be completed
until required
37
information and materials are furnished to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and the requisite waiting
period has expired or is terminated. The required information and materials were
filed with the Antitrust Division and the FTC on April 18, 2001. The waiting
period for the merger is expected to expire on May 18, 2001, absent early
termination, an extension or request for additional information.
The Antitrust Division and the FTC frequently scrutinize the legality
under the antitrust laws of transactions like the merger. At any time before or
after the completion of the merger, the Antitrust Division or the FTC could take
any action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the completion of the merger or
seeking the divestiture of substantial assets of Interpublic or True North.
Outside the United States. The completion of the merger is also subject
to regulatory clearances and approvals by authorities outside the United States,
consisting primarily of antitrust regulators from the European Union, Japan,
South Africa, Canada and jurisdictions in Latin America, as well as the foreign
investment authority in Australia. The satisfaction of these regulatory
requirements may jeopardize or delay completion of the merger or may reduce the
anticipated benefits of the merger because governmental authorities may subject
the completion of the merger to compliance with conditions.
General. We are not aware of any governmental approvals or actions that
may be required for completion of the merger other than as described above.
Should any other approval or action be required, we currently contemplate that
the approval would be sought or action taken.
The merger agreement obligates each of Interpublic and True North to
complete the merger only if the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act has terminated or expired and if the companies have
obtained or made all other governmental approvals, clearances and filings that,
if not obtained, would have a material adverse effect or the effect of making
the merger illegal.
In addition, the merger agreement provides that Interpublic need not
agree to conditions in connection with obtaining regulatory clearances and
approvals if the conditions would have a material and adverse impact on
Interpublic, True North or the benefits that Interpublic would otherwise have
derived from the merger.
Resale of Shares of Interpublic Common Stock
Shares of Interpublic common stock issuable to True North stockholders
upon completion of the merger will have been registered under the Securities
Act. These securities may be traded freely in the United States without
restriction by those stockholders who are not deemed to be affiliates of
Interpublic or True North for purposes of the rules promulgated under the
Securities Act.
If you are an affiliate of Interpublic or True North as that term is
used in the Securities Act, you may not use this document in connection with any
resale by you of shares of Interpublic common stock that you receive as a result
of the merger.
True North has agreed in the merger agreement to use its reasonable
best efforts to cause each person who may be deemed to be an affiliate of True
North to execute and deliver to Interpublic a letter in which the person agrees,
among other things, not to sell, transfer, or otherwise dispose of any of the
shares of Interpublic common stock distributed to them in connection with the
merger, including upon exercise of the True North stock options to be assumed by
Interpublic by reason of the merger, except in compliance with Rule 145 under
the Securities Act, in a transaction that is otherwise exempt from the
registration requirements of the Securities Act or in an offering registered
under the Securities Act. The letter agreement provides further that the person
may not sell or otherwise reduce his or her risk relative to shares of
Interpublic common stock until Interpublic publishes consolidated financial
results covering at least 30 days of post-merger combined operations of True
North and Interpublic. In addition, the letter agreement prohibits sales,
pledges, transfers or other dispositions of shares of True North common stock
during the 30 days preceding the merger. During the periods described above,
subject to providing written notice to Interpublic and other restrictions, and
to the extent permitted under the pooling of interests accounting rules and
applicable securities laws, affiliates of True North will be permitted to sell
or make charitable contributions or gifts of up to 10% of the shares of
Interpublic common stock received by them or True North common stock owned by
them.
38
No Appraisal Rights
Under applicable Delaware law, you will have no appraisal rights in
connection with the merger.
Material U.S. Federal Income Tax Consequences of the Merger
It is the opinion of Sidley & Austin, counsel to True North, and of
Cleary, Gottlieb, Steen & Hamilton, counsel to Interpublic, that subject to the
accuracy of customary representations made by True North and Interpublic, and
subject to customary assumptions, the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. Accordingly,
the following material U.S. federal income tax consequences will result from the
merger:
o no gain or loss will be recognized by True North,
Interpublic's merger subsidiary or Interpublic as a result of
the merger;
o no gain or loss will be recognized by you when you receive
Interpublic common stock in exchange for True North common
stock in the merger, except with respect to cash received in
lieu of a fractional share of Interpublic common stock;
o the tax basis of the Interpublic common stock received by you
in the merger will be the same as the tax basis of your True
North common stock surrendered in the merger reduced by the
tax basis allocable to fractional shares for which cash is
received; and
o the holding period for Interpublic common stock that you
receive in the merger will include the holding period of your
shares of True North common stock if you held the True North
common stock as a capital asset at the time of the merger.
The opinions are based on the Internal Revenue Code, U.S. Treasury
regulations, current administrative rulings and practice and judicial authority,
all of which are subject to change, possibly with retroactive effect. The
Internal Revenue Service, which we refer to in this document as the Service,
will not be asked to rule on the tax consequences of the merger. Instead, True
North will rely on the opinion of Sidley & Austin and Interpublic will rely on
the opinion of Cleary, Gottlieb, Steen & Hamilton. These opinions have been
filed with the Commission, and you can obtain copies of them as described under
"Where You Can Find More Information" on page 70. An opinion of counsel is not
binding on the Service and the Service could take a position different from what
is reflected in the opinions. We cannot assure you that the opinions will be
upheld by the courts if challenged by the Service. We urge you to consult your
own tax and financial advisors regarding the U.S. federal income tax
consequences of the merger for you based on your own particular facts and
circumstances as well as any state, local, foreign or other tax consequences of
the merger.
If you receive cash for any fractional share interest in a share of
Interpublic common stock in the merger, you will be treated as though
Interpublic distributed an actual fractional share interest to you and then
redeemed the fractional share interest for cash. The difference between the cash
amount you will receive for the fractional share interest and the amount of your
tax basis in the True North common stock allocable to that fractional share
interest will generally be capital gain or loss if you hold your True North
common stock as a capital asset at the time of the merger. Capital gains
recognized by an individual holder on capital assets held for more than one year
generally are treated as long-term capital gains, which are subject to a maximum
rate of 20%.
True North stockholders will be required to retain records and file a
statement setting forth facts relating to the merger with their U.S. federal
income tax returns.
The treatment of the holder of restricted True North common stock whose
shares convert into shares of Interpublic common stock will depend on whether
the holder made an election under section 83(b) of the Code with respect to the
restricted True North common stock. If a valid section 83(b) election was made,
the holder will have the same treatment in the merger as the holders of
unrestricted True North common stock. If a valid section 83(b) election was not
made, the holder generally will recognize ordinary compensation income upon the
receipt of Interpublic common stock equal to the fair market value on the date
of exchange (plus any cash received in lieu of a fractional
39
share). A holder who has not made a valid section 83(b) election will be subject
to withholding at the applicable federal, state and local rates. A holder who
has not made a valid section 83(b) election will also have a tax basis in the
Interpublic shares equal to their fair market value on the date compensation
income with respect to the shares is recognized and a holding period that
commences on the following day.
The discussion above summarizes the material U.S. federal income tax
consequences of the merger, but may not address the particular facts and
circumstances of your situation. It does not discuss all of the consequences
that may be relevant to you if you are entitled to special treatment under the
Internal Revenue Code (as are insurance companies, dealers in securities or
currencies, traders in securities electing to mark to market, exempt
organizations, holders that hold True North common stock as part of a hedge,
straddle, constructive sale or conversion transaction or foreign persons).
The summary set forth above is not a complete analysis of all potential
tax effects of the transactions contemplated by the merger agreement or the
merger itself. For example, the summary does not discuss the tax effects of
the conversion of True North options into Interpublic options. Further, no
information is provided in this document regarding the tax consequences, if any,
of the merger or the exchange of shares in the merger under state, local,
foreign or other tax laws or under proposed changes in applicable tax laws.
New York Stock Exchange Listing of Interpublic Common Stock; De-listing and
De-registration of True North Common Stock
The listing on the New York Stock Exchange of the shares of Interpublic
common stock to be issued in the merger is a condition to the merger.
Following the merger, True North common stock will be de-listed from
the New York Stock Exchange and will be de-registered under the Securities
Exchange Act.
40
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement. This description is qualified in its entirety by reference to the
merger agreement itself, a copy of which is attached as Annex A to this
document. You should read the merger agreement in its entirety because it is the
primary legal document that governs the merger.
Effective Time of the Merger
Promptly after the satisfaction or waiver of the conditions to the
merger set forth in the merger agreement, we will file a certificate of merger
with the Secretary of State of Delaware. When this filing has been made, Veritas
Acquisition Corp., a newly formed wholly owned merger subsidiary of Interpublic,
will be merged with and into True North, and the separate corporate existence of
this merger subsidiary will cease. True North will survive the merger and exist
as a wholly owned subsidiary of Interpublic. Immediately following the merger,
the officers of True North at the effective time of the merger will continue as
the officers of True North. The directors of True North at the effective time of
the merger will be those designated by Interpublic to be directors of its merger
subsidiary. In addition, the merger agreement provides that, on the day of the
merger, David A. Bell and J. Brendan Ryan will become members of the Interpublic
Board and David A. Bell will become vice-chairman of Interpublic.
What True North Stockholders Will Receive in the Merger
Each share of True North common stock will convert into the right to
receive 1.14 shares of Interpublic common stock. This exchange ratio will be
adjusted in the event of any reclassification, stock split or stock dividend
with respect to Interpublic common stock or any change or conversion of
Interpublic common stock prior to the effective time of the merger but will not
be adjusted for any other reason.
True North Stock Options and Deferred Stock Compensation
Each outstanding True North stock option will become an option to
acquire a number of shares of Interpublic common stock equal to the number of
shares subject to the option multiplied by the exchange ratio, with the exercise
price being adjusted by dividing the exercise price immediately prior to the
merger by the exchange ratio.
At the effective time of the merger, each nonemployee director of True
North who elected to receive shares of True North common stock pursuant to the
True North deferred stock compensation program will instead receive the number
of shares of Interpublic common stock equal to the product of:
o the number of shares of True North common stock that the
nonemployee director would otherwise be entitled to receive;
and
o the exchange ratio.
Exchange of True North Common Stock
Interpublic will authorize Equiserve to act as the exchange agent to
handle the exchange of True North common stock certificates in the merger. Soon
after the closing of the merger, the exchange agent will send to each holder of
True North common stock a letter of transmittal for use in the exchange and
instructions explaining how to surrender certificates to the exchange agent.
Holders who surrender their certificates to the exchange agent, together with a
properly completed letter of transmittal, will receive the appropriate merger
consideration. Holders of unexchanged stock certificates will receive any
dividends payable by Interpublic after the merger only after they surrender
their certificates.
41
Interpublic will not issue any fractional shares of its common stock in
the merger. Each holder of True North common stock will instead receive cash
equal to the product of:
o the per share closing price on the New York Stock Exchange of
the Interpublic common stock on the date of the effective time
of the merger; and
o the fraction of shares to which the stockholder would
otherwise be entitled.
If your True North stock certificates have been lost, stolen or
destroyed, you will only be entitled to obtain Interpublic common stock or other
merger consideration by providing an affidavit of loss and, if required by
Interpublic, posting a bond in an amount sufficient to protect Interpublic
against claims related to your True North certificates.
Representations and Warranties
Representations and Warranties by True North
The merger agreement contains representations and warranties by True
North, many of which are qualified by a materiality threshold specified in the
agreement, with respect to the following:
o its corporate organization and existence;
o its capitalization;
o its subsidiaries;
o its financing and investment obligations;
o its agreements and obligations relating to Modem Media, Inc.;
o its corporate power and authority to execute, deliver and
perform its obligations under the merger agreement;
o its Board's:
o approval of the merger;
o determination that the merger is advisable and fair
to and in the best interests of True North and its
stockholders;
o recommendation that True North's stockholders approve
and adopt the merger agreement; and
o direction that the merger agreement be submitted to
True North's stockholders for approval and adoption;
o required governmental and other third party consents,
clearances, approvals, authorizations and notifications in
connection with the merger;
o compliance of the merger agreement and the merger with True
North's organizational documents, contracts and applicable
law;
o its financial statements and filings with the Commission;
42
o accuracy of information about True North in this document;
o its conduct of business in the ordinary course and the absence
of undisclosed changes;
o its compliance with its organizational documents and
applicable law;
o its contracts;
o tax matters;
o the absence of undisclosed litigation, claims or other
proceedings;
o its employee benefit plans and related matters;
o labor matters;
o its receipt of an opinion of Morgan Stanley & Co. Incorporated
that, as of March 18, 2001, the exchange ratio pursuant to the
merger agreement is fair from a financial point of view to the
holders of shares of True North common stock;
o the required vote of the holders of a majority of the
outstanding shares of True North common stock to approve the
merger;
o the absence of any action or knowledge of any fact or
circumstance that would prevent the qualification of the
merger as a "pooling of interests" for accounting and
financial reporting purposes and as a reorganization within
the meaning of Section 368 of the Internal Revenue Code;
o brokers' and finders' fees with respect to the merger;
o the exemption of the merger agreement and the merger from
triggering any rights under the Stockholder Rights Plan of
True North, which is described in "Rights Plan" on page 68;
o the inapplicability of state anti-takeover statutes to the
merger agreement; and
o its earn-out and deferred purchase price arrangements.
Representations and Warranties by Interpublic
The merger agreement contains representations and warranties by
Interpublic and its wholly owned merger subsidiary, many of which are qualified
by a materiality threshold specified in the agreement, with respect to the
following:
o its corporate organization and existence;
o its capitalization;
o its subsidiaries;
o its corporate power and authority to execute, deliver and
perform its obligations under the merger agreement;
o its Board's:
o approval of the merger; and
43
o determination that the merger is advisable and fair
to and in the best interest of Interpublic and its
stockholders;
o required governmental and other third party consents,
clearances, approvals, authorizations and notifications in
connection with the merger;
o compliance of the merger agreement and the merger with
Interpublic's organizational documents, contracts and
applicable law;
o its financial statements and filings with the Commission;
o accuracy of information about Interpublic in this document;
o the absence of undisclosed changes;
o its compliance with its organizational documents and
applicable law;
o its contracts;
o the absence of undisclosed litigation, claims or other
proceedings;
o its receipt of an opinion of Goldman, Sachs & Co. that, as of
March 18, 2001, the exchange ratio is fair, from a financial
point of view, to Interpublic;
o the absence of any requirement that the stockholders of
Interpublic approve the merger agreement or the transactions
contemplated by the merger agreement;
o the absence of any action or knowledge of any fact or
circumstance that would prevent the qualification of the
merger as a "pooling of interests" for accounting and
financial reporting purposes and as a reorganization within
the meaning of Section 368 of the Internal Revenue Code;
o brokers' and finders' fees with respect to the merger; and
o the formation of the wholly owned merger subsidiary.
Covenants and Other Agreements
Conduct of Business by True North
True North has agreed that until the merger it will:
o conduct its business in the ordinary course;
o seek to preserve its business organizations;
o seek to keep available the services of its officers and
employees;
o seek to preserve its relationships with customers, suppliers
and others with whom it has business relations;
o not pay dividends or make distributions other than regular
quarterly cash dividends consistent with past practice;
o not engage in other specified transactions relating to its
capital stock;
44
o not amend its organizational documents; and
o not take any action that would result in its inability to
satisfy conditions to the merger.
In addition, True North has agreed that until the merger it will not engage in
any of a number of material transactions specified in the agreement.
Conduct of Business by Interpublic
Interpublic has agreed that until the merger it will not:
o pay dividends or make distributions other than regular
quarterly dividends consistent with past practice;
o liquidate or dissolve itself;
o amend its organizational documents in a manner adverse to
holders of its or True North's common stock; or
o take any actions that would result in its inability to satisfy
conditions to the merger.
No Solicitation
True North has agreed in the merger agreement that it will not, and
will not authorize or knowingly allow its subsidiaries or its officers,
directors, representatives or advisors or those of its subsidiaries to:
o solicit, initiate or purposefully encourage any takeover
proposal;
o enter into any agreements with respect to any takeover
proposal;
o engage in any discussions or negotiations concerning any
takeover proposal;
o furnish any information in connection with any takeover
proposal;
o knowingly facilitate any takeover proposal or inquiries that
may lead to a takeover proposal;
o waive or amend any confidentiality, standstill or similar
agreement relating to any takeover proposal; or
o amend or grant releases or approve any transaction or redeem
any rights under the Stockholder Rights Plan of True North.
Under the merger agreement, a takeover proposal is any offer or
proposal by any third party, or any public announcement or filing by any third
party that indicates an intention to make an offer or proposal, regarding any of
the following:
o a merger, consolidation, share exchange, recapitalization or
other business combination involving True North or any of its
significant subsidiaries; or
o the acquisition of a 15% or greater equity interest in, 15% or
more of the voting securities or capital stock of, or 15% or
more of the assets of True North or any of its significant
subsidiaries.
However, True North may enter into discussions or negotiations with, or
furnish information to, a third party that makes an unsolicited, bona fide
written takeover proposal if:
45
o after taking into consideration the advice of independent
legal counsel, the True North Board determines in good faith
that these actions are necessary for the Board to comply with
its fiduciary duties;
o the takeover proposal is not subject to any financing
contingencies, or copies of bona fide customary commitments
from reputable financial institutions for all necessary
financing have been furnished to True North;
o the True North Board determines in good faith that the
takeover proposal is reasonably likely to be consummated; and
o the True North Board, after consultation with and
consideration of the advice of an independent, nationally
recognized financial advisor, determines that the takeover
proposal would be more favorable from a financial point of
view to its stockholders than the merger.
The merger agreement defines a takeover proposal that satisfies those
criteria as a superior proposal and requires, before the True North Board takes
any action with respect to a superior proposal, that it:
o deliver written notice to Interpublic at least two business
days before True North enters into discussions or negotiations
with, or furnishes information to, the party making the
proposal; and
o require the party making the proposal to enter into a
customary confidentiality agreement.
Furthermore, if the True North Board decides to enter into discussions
or negotiations with, or furnish information to, a party making a takeover
proposal, then the merger agreement requires True North to:
o notify Interpublic of this decision, and furnish Interpublic
with the material terms of the takeover proposal and the
identity of the party making the proposal, as promptly as
practicable and not later than 48 hours after this decision by
the True North Board; and
o provide Interpublic with all material changes to the proposal,
and with all information furnished to the party making the
proposal that True North had not previously furnished to
Interpublic, as promptly as practicable and not later than 48
hours after True North learns of the changes or furnishes the
information.
True North has also agreed to, and will direct its subsidiaries and its
officers, directors, employees, representatives and advisors to, cease any
activities, discussions or negotiations with any parties other than Interpublic
with respect to any takeover proposal that was ongoing at the time of the merger
agreement.
Obligation to Recommend
The True North Board has agreed to recommend to its stockholders the
adoption of the merger agreement. The merger agreement does not permit the True
North Board to withdraw or modify its recommendation unless:
o True North has complied with the restrictions on solicitation
described above;
o there is a pending unsolicited bona fide written superior
proposal;
o after taking into consideration the advice of independent
legal counsel, the True North Board determines in good faith
that this action is necessary to comply with its fiduciary
duties; and
o at least two business days before this action, True North
notifies Interpublic of its intention and provides Interpublic
with the material terms of the superior proposal and the
identity of the party making the superior proposal.
46
Expenses
Whether or not the merger is completed, all expenses incurred in
connection with the merger agreement and the transactions contemplated by the
merger agreement will be paid by the party incurring the expenses, except that
the costs of filing, printing and mailing this document and any other required
regulatory filings will be shared equally by Interpublic and True North and
except as described below under "Termination Fee" on page 49.
Consents and Approvals
Interpublic and True North have agreed to use their reasonable best
efforts to make all filings with, and obtain all consents, clearances and
approvals from, regulators and other third parties if required in connection
with the merger, including under U.S. and non-U.S. antitrust laws. In connection
with seeking any approval of a governmental entity, the efforts of Interpublic
may include divesting or holding separate assets or agreeing to governmental
conditions. However, these efforts of Interpublic need not include the
acceptance of conditions or any other actions that would have a material and
adverse impact on Interpublic, True North or the benefits that Interpublic would
otherwise have derived from the merger.
Indemnification and Insurance
See "Interests of True North's Directors and Management in the Merger"
on page 35.
Employee Matters
Interpublic has agreed to cause True North to honor all its existing
employment, bonus, severance and similar agreements following the merger. In
addition, until at least December 31, 2001, the material benefit plans of True
North, other than equity-based plans, will remain in place. From January 1, 2002
until at least June 30, 2002, employees of True North at the time of the merger
will receive from the combined company benefits, other than equity-based
benefits, that are at least as favorable as those under True North's existing
plans and these employees will be eligible to participate in equity plans of
Interpublic on a substantially equivalent basis as similarly situated employees
of Interpublic. Employees will generally receive credit for their period of
service with True North up to the merger.
Interpublic has agreed to use reasonable efforts to cause any
acquisitions of equity securities of Interpublic (including derivative
securities) contemplated by the merger by each individual who becomes a director
or officer of Interpublic to be exempt under Rule 16b-3 under the Securities
Exchange Act of 1934.
Conditions to the Merger
Conditions to Obligation of Each Party to Complete the Merger
Each of Interpublic's and True North's respective obligations to
complete the merger are subject to the satisfaction of the following conditions:
o Stockholder Approval. The True North stockholders shall have
approved and adopted the merger agreement;
o Listing. The Interpublic common stock to be issued in
connection with the merger shall have been approved for
listing on the New York Stock Exchange;
o HSR Act. The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act shall have expired or terminated;
o Governmental Consents. All governmental consents and approvals
required in connection with the merger shall have been
obtained except where the failure to obtain the consents and
approvals would not have a material adverse effect as
specified in the merger agreement or render the merger
illegal;
47
o Effectiveness of the Registration Statement. The registration
statement of which this document is a part shall have been
declared effective and the Commission shall not have issued
any stop order or have initiated or threatened to initiate
proceedings for that purpose; and
o No Order. No law, rule, regulation, executive order, decree,
injunction or other order of a governmental entity shall
prohibit the consummation of the merger.
Additional Conditions to the Obligation of Interpublic to Complete the Merger
The obligation of Interpublic to complete the merger is also subject to
the following conditions:
o Representations and Warranties. The representations and
warranties of True North in the merger agreement shall be true
and correct as of the closing of the merger in all material
respects;
o Covenants. True North shall have complied in all material
respects with all its covenants under the merger agreement;
o Tax Opinion. Interpublic shall have received the written
opinion of its counsel, Cleary, Gottlieb, Steen & Hamilton,
with respect to the tax-free nature of the merger;
o Non-governmental Consents. All non-governmental consents or
approvals required in connection with the merger shall have
been obtained except where the failure to obtain the consents
and approvals would not have a material adverse effect as
specified in the merger agreement; and
o Accounting. True North and Interpublic shall have received the
written opinion of their respective auditors, Arthur Andersen
and PricewaterhouseCoopers, as to the accounting of the
business combination as a pooling of interests.
Additional Conditions to the Obligation of True North to Complete the Merger
The obligation of True North to complete the merger is also subject to
the following conditions:
o Representations and Warranties. The representations and
warranties of Interpublic in the merger agreement shall be
true and correct as of the closing of the merger in all
material respects;
o Covenants. Interpublic shall have complied in all material
respects with all its covenants under the merger agreement;
o Tax Opinion. True North shall have received the written
opinion of its counsel, Sidley & Austin, with respect to the
tax-free nature of the merger; and
o Non-governmental Consents. All non-governmental consents or
approvals required in connection with the merger shall have
been obtained except where the failure to obtain the consents
and approvals would not have a material adverse effect as
specified in the merger agreement.
Other than the conditions pertaining to stockholder approvals and the
legality of the transaction, True North could elect to waive conditions and
complete the merger. However, if True North determines to waive any material
condition, it will consider whether to resolicit proxies or seek a new
stockholder approval and will do so if required by law.
Termination
The merger agreement may be terminated at any time prior to the closing
of the merger:
48
o by mutual written consent of True North and Interpublic;
o by either Interpublic or True North if:
o the other party breaches, in any material respect,
any representation, warranty, covenant or agreement
contained in the merger agreement and the breach is
not cured within thirty business days after notice;
o a legal prohibition against the merger becomes
permanent and final;
o the merger has not been completed by September 14,
2001, which date, if all governmental clearances and
approvals required for the completion of the merger
have not then been obtained, may be extended to
December 13, 2001; or
o the True North stockholders do not adopt the merger
agreement at the special meeting.
o by Interpublic if:
o True North fails to comply with its obligations to
refrain from soliciting or taking other specified
actions in connection with acquisition proposals to
True North by third parties;
o the True North Board withdraws or adversely modifies
its approval or recommendation of the merger;
o any person or entity, other than Interpublic and its
affiliates, becomes the beneficial owner of 15% or
more of the outstanding shares of True North common
stock;
o the True North Board recommends or resolves to
recommend another acquisition proposal; or
o a tender offer or exchange offer for 15% or more of
the outstanding shares of True North common stock
commences and the True North Board fails to recommend
against acceptance of the offer.
Except for a termination by either company as a result of the failure of the
True North stockholders to adopt the merger agreement at the special meeting,
any of the foregoing termination events may occur even if the True North
stockholders approve the merger at the special meeting.
Termination Fee
The merger agreement requires True North to pay Interpublic a
termination fee of $80,000,000 in cash if either:
o Interpublic terminates the merger agreement after:
o the True North Board withdraws or adversely modifies
its approval or recommendation of the merger;
o any person or entity, other than Interpublic and its
affiliates, becomes the beneficial owner of 15% or
more of the outstanding shares of True North common
stock;
o the True North Board recommends or resolves to
recommend another acquisition proposal; or
49
o a tender offer or exchange offer for 15% or more of the
outstanding shares of True North common stock is commenced
and the True North Board fails to recommend against
acceptance of that offer; or
o all three of the following circumstances apply:
o first, the merger agreement terminates as follows:
o Interpublic terminates after True North
breaches, in any material respect, any covenant
or agreement contained in the merger agreement
and the breach is not cured within thirty
business days after notice;
o Interpublic terminates after True North fails to
comply with its obligations to refrain from
soliciting or taking other specified actions in
connection with acquisition proposals to True
North by third parties; or
o Interpublic or True North terminates after:
o the merger has not been completed by
September 14, 2001, which date, if all
governmental clearances and approvals
required for the completion of the
merger have not then been obtained, may
be extended to December 13, 2001; or
o the True North stockholders do not
adopt the merger agreement at the
special meeting; and
o second, at or before the event that gave rise to the
termination, a third party, which, with its affiliates, has
assets of at least $100 million, makes a takeover proposal;
and
o third, at or before the first anniversary of the
termination, a third party acquisition event, as specified
in the merger agreement, occurs or True North enters into
an agreement relating to a third party acquisition event.
Amendments
Interpublic and True North may amend the merger agreement at any time
prior to the adoption of the merger agreement at the True North special meeting.
However, after adoption of the merger agreement by the True North stockholders,
the merger agreement may not be amended without stockholder approval unless
permitted by applicable law.
50
MARKET PRICES AND DIVIDENDS
Interpublic
Shares of Interpublic common stock are traded on the New York Stock
Exchange under the symbol "IPG." The following table sets forth the range of
high and low sales prices as reported on the New York Stock Exchange Composite
Tape, together with the dividends per share of common stock declared by
Interpublic, during the periods indicated. We have adjusted the information in
the table to reflect Interpublic's two-for-one stock split on July 15, 1999
effected in the form of a stock dividend.
Common Stock Price
--------------------------- Cash Dividends
High Low Declared Per Share
--------- ------- ------------------
Year ended December 31, 1998
----------------------------
First Quarter........................................... $ 31.313 $23.844 $ 0.065
Second Quarter.......................................... 32.250 27.656 0.075
Third Quarter........................................... 32.438 26.094 0.075
Fourth Quarter.......................................... 39.875 23.500 0.075
Year ended December 31, 1999
----------------------------
First Quarter........................................... $ 40.000 $34.875 $ 0.075
Second Quarter.......................................... 43.313 34.594 0.085
Third Quarter........................................... 44.063 36.500 0.085
Fourth Quarter.......................................... 58.063 35.750 0.085
Year ended December 31, 2000
----------------------------
First Quarter........................................... $ 55.563 $37.000 $ 0.085
Second Quarter.......................................... 48.250 38.000 0.095
Third Quarter........................................... 44.625 33.500 0.095
Fourth Quarter.......................................... 43.750 33.063 0.095
Year ended December 31, 2001
----------------------------
First Quarter........................................... $ 47.438 $32.047 $ 0.095
On March 16, 2001, the last trading day before Interpublic and True
North announced the merger, the closing price per share of Interpublic common
stock was $35.297. On __, 2001, the most recent trading day for which prices
were available prior to the printing of this document, the price per share of
Interpublic common stock was $ __. Past price performance is not necessarily
indicative of future price performance. You should obtain current market
quotations for Interpublic common stock.
Holders of shares of Interpublic are entitled to receive dividends from
legally available funds when, as and if declared by the Interpublic Board.
Although Interpublic currently intends to continue paying quarterly cash
dividends on the Interpublic common stock, Interpublic cannot assure you that
its dividend policy will remain unchanged after completion of the merger. The
declaration and payment of dividends after the merger will depend upon financial
covenants in borrowing facilities entered into by Interpublic, business
conditions, operating results, capital and reserve requirements and the
Interpublic Board's consideration of other relevant factors.
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True North
Shares of True North common stock are traded on the New York Stock
Exchange under the symbol "TNO." The following table sets forth the range of
high and low sales prices as reported on the New York Stock Exchange Composite
Tape, together with the dividends per share of common stock declared by True
North, during the periods indicated.
Common Stock Price
-------------------------- Cash Dividends
High Low Declared Per Share
-------- -------- ------------------
1998
----
Quarter Ended March 31.................................. $ 33.625 $ 23.563 $ 0.15
Quarter Ended June 30................................... 34.000 26.313 0.15
Quarter Ended September 30.............................. 32.500 21.625 0.15
Quarter Ended December 31............................... 29.250 18.813 0.15
1999
----
Quarter Ended March 31.................................. $ 34.125 $ 22.500 $ 0.15
Quarter Ended June 30................................... 30.000 23.063 0.15
Quarter Ended September 30.............................. 36.875 28.125 0.15
Quarter Ended December 31............................... 47.000 35.188 0.15
2000
----
Quarter Ended March 31.................................. $ 47.375 $ 34.875 $ 0.15
Quarter Ended June 30................................... 46.813 34.875 0.15
Quarter Ended September 30.............................. 52.875 35.250 0.15
Quarter Ended December 31............................... 44.063 32.563 0.15
2001
----
Quarter ended March 31.................................. $ 42.875 $ 35.000 $ 0.15
On March 16, 2001, the last trading day before Interpublic and True
North publicly announced the merger, the closing price per share of True North
common stock was $39.313. On __, 2001, the most recent trading day for
which prices were available prior to the printing of this document, the price
per share of True North common stock was $ __. Past price performance is not
necessarily indicative of future price performance. You should obtain current
market quotations for shares of True North common stock.
The pro forma equivalent price per share of True North common stock on
__, 2001 was $ __, based on the agreed upon exchange ratio of 1.14 shares of
Interpublic common stock for each share of True North common stock.
52
BUSINESS OF INTERPUBLIC
The following is a brief description of Interpublic. Additional
information regarding Interpublic is contained in its filings with the
Commission referred to in "Where You Can Find More Information" on page 70.
Interpublic is one of the world's largest organizations of advertising
agencies and communications-services companies, with more than 48,000 employees
and offices in 127 countries. Interpublic conducts business globally, using two
advertising agency systems noted below, plus a number of stand-alone local
agencies:
o McCann-Erickson WorldGroup and
o Lowe Lintas & Partners Worldwide.
The principal functions of Interpublic's advertising agencies are to
plan and create programs for their clients and to place advertising in various
media such as:
o television,
o cinema,
o radio,
o magazines,
o newspapers,
o direct mail,
o outdoor and
o interactive electronic media.
Interpublic's advertising agencies develop a communications strategy and then
create an advertising program, within the limits imposed by the client's
advertising budget, and place orders for space or time with media that have been
selected. Planning advertising programs involves:
o analyzing the market for the particular product or service,
o creating the appropriate advertising campaign to convey the
agreed-upon benefit or message and
o choosing the appropriate media to reach the desired market
most efficiently.
We conduct other businesses closely related to our advertising
business, in part through our ownership of companies as noted below:
o independent media buying through Initiative Media Worldwide
and its affiliates,
o direct and promotional marketing through Draft Worldwide,
o marketing research through NFO Worldwide,
o global public relations through Weber Shandwick Worldwide and
Golin/Haris International,
o multinational sports and event marketing through Octagon and
53
o sales meetings and targeted events through Jack Morton
Worldwide.
We also conduct related activities in other areas of marketing communications
that include:
o brand equity and corporate identity services,
o graphic design and interactive services,
o management consulting and market research,
o healthcare marketing,
o sales promotion,
o internet services,
o multicultural advertising and promotion and
o other related specialized marketing and communications
services.
Interpublic is a corporation organized under Delaware law.
54
BUSINESS OF TRUE NORTH
The following is a brief description of True North. Additional
information regarding True North is contained in its filings with the Commission
referred to in "Where You Can Find More Information" on page 70.
True North is a global advertising and marketing communications holding
company. True North and its subsidiaries operate from offices in more than 98
countries and territories through subsidiaries, affiliates and other servicing
capabilities.
The services offered by True North include:
o the planning, creation and production of advertising programs
and
o the purchase and placement of advertising in various media
such as:
o television,
o radio,
o newspapers,
o magazines,
o direct mail and
o the internet.
Other services include:
o specialty advertising,
o public relations,
o promotional services,
o directory advertising,
o marketing services and
o interactive digital media development.
True North has the following three major global brands:
o FCB Worldwide L.L.C. (advertising),
o BSMG Worldwide, Inc. (public relations) and
o Marketing Drive Worldwide, Inc. (marketing services).
In addition, True North has other brands, including:
o Bozell Group L.L.C. (advertising),
o Temerlin McClain LP (advertising),
55
o R/GA Media Group, Inc. (interactive design and
development),
o Tierney & Partners, Inc. (advertising and public
relations),
o TN Media, Inc. (media placement) and
o New America Strategies Group L.L.C. (multicultural
marketing).
True North also holds an approximately 44% interest in Modem Media, Inc., an
internet services company, and a 35.5% stake in Springer & Jacoby, a
German-based advertising agency.
True North was incorporated under the laws of the State of Delaware in
1992 and is the successor to the advertising agency of Lord & Thomas founded in
1873.
56
OWNERSHIP OF TRUE NORTH COMMON STOCK BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership, both direct
and indirect, reported to True North as of March 31, 2001, of True North common
stock and Phantom Stock Units (which represent deferred directors' fees deemed
invested in True North common stock). The information is presented for
beneficial owners of more than 5% of True North common stock, for each director
of True North, for the chief executive officer and the four other most highly
compensated executive officers of True North during the year ended December 31,
2000 and for all directors and executive officers of True North as a group. True
North knows of no persons other than those identified below who owned
beneficially more than 5% of the outstanding shares of True North common stock
as of March 31, 2001.
Number of Shares Number of
of Common Stock Percent of Phantom Stock
Name (1) Class (2) Units (3)
----------------------------------------------- --------------- ---------- ---------
David A. Bell ................................. 823,726 1.62% --
Joseph A. Califano, Jr ........................ 6,400 * --
Harris Diamond ................................ 225,183 * --
Donald M. Elliman, Jr ......................... 15,300 * 6,927
H. John Greeniaus ............................. 27,666 * --
Mannie L. Jackson ............................. 1,533 * --
Leo-Arthur Kelmenson .......................... 890,581 1.75% --
Dennis McClain ................................ 138,843 * --
Wenda Harris Millard .......................... 3,200 * --
Michael E. Murphy ............................. 14,867 * 4,162
J. Brendan Ryan ............................... 357,719 * --
Donald L. Seeley .............................. 180,494 * --
Marilyn Seymann ............................... 9,566 * 2,111
Stephen T. Vehslage ........................... 57,533 * 2,569
All directors and executive officers as a group
(25 persons) ............................... 3,960,989 7.57% 15,802
Publicis S.A. (4).............................. 4,658,000 9.23% --
133 Champs Elysees
75008 Paris, France
*less than 1%
(1) To the knowledge of True North, each holder has sole voting and investment
power with respect to the shares listed unless otherwise indicated. The
number of shares includes shares of common stock owned through the True
North Retirement Plan as of March 15, 2001. The number of shares has been
rounded to the nearest whole share. The number of shares includes shares of
common stock subject to options exercisable within 60 days of March 31,
2001 as follows: Mr. Bell 252,133 shares, Mr. Califano 5,400 shares, Mr.
Diamond 13,333 shares, Mr. Elliman 10,200 shares, Mr. Greeniaus 5,666
shares, Mr. Jackson 1,533 shares, Mr. Kelmenson 417,066 shares, Mr. McClain
2,666 shares, Ms. Millard 3,200 shares, Mr. Murphy 11,367 shares, Mr. Ryan
328,866 shares, Mr. Seeley 171,733 shares, Dr. Seymann 6,566 shares, Mr.
Vehslage 54,733 shares and all directors and executive officers as a group
1,862,689 shares. The number of shares also includes unvested restricted
stock granted in 2000 and 2001.
57
(2) Shares subject to options exercisable within 60 days of March 31, 2001 are
considered outstanding for the purpose of determining the percent of the
class held by the holder of such option, but not for the purpose of
computing the percentage held by others.
(3) Represents outside directors' deferred stock account values as of March 31,
2001.
(4) Based upon information furnished by Publicis S.A. in Form 5 filed March 5,
1999.
58
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial
statements assume a business combination between Interpublic and True North
accounted for as a pooling of interests and are based on each company's
historical audited consolidated financial statements and the notes to those
statements.
The following unaudited pro forma combined condensed balance sheet as
of December 31, 2000 is based on the historical financial statements of
Interpublic and True North as of December 31, 2000 after giving effect to the
merger as if it had occurred on December 31, 2000.
The following unaudited pro forma combined condensed statements of
income for each of the years ended December 31, 2000, 1999 and 1998 are based on
the historical financial statements of Interpublic and True North for those
periods after giving effect to the merger as if it had occurred on January 1,
1998. Since accounting policies of the combining companies are substantially
comparable, we made no adjustments to the unaudited combined condensed financial
statements to conform accounting policies.
You should read the information presented below in conjunction with the
financial statements and the notes to the financial statements for Interpublic
included in Interpublic's Annual Report on Form 10-K for the year ended December
31, 2000 and in conjunction with the financial statements and the notes to the
financial statements for True North included in True North's Annual Report on
Form 10-K for the year ended December 31, 2000. We have incorporated
Interpublic's and True North's Annual Reports on Form 10-K for the year ended
December 31, 2000 into this document by reference. See "Where You Can Find More
Information" on page 70 to learn how to obtain these reports of Interpublic and
True North.
The unaudited pro forma information below, while helpful in
illustrating the financial characteristics of the combination of Interpublic and
True North under one set of assumptions, does not attempt to predict or suggest
future results. Moreover, the unaudited pro forma information below does not
attempt to show what the financial condition or the results of operations of the
combined company would have been if the merger had occurred at the dates
indicated below or at the commencement of the periods indicated below.
59
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
For the Year Ended December 31, 1998
(Amounts in thousands except per share amounts)
Interpublic True North Pro Forma Pro Forma
Historical Historical Adjustments Combined
----------- ----------- --------- -----------
Revenue $ 4,218,657 $ 1,274,284 -- $ 5,492,941
Costs and expenses
Salaries and related expenses 2,339,894 806,602 3,146,496
Office and general expenses 1,306,167 364,524 -- 1,670,691
Restructuring and other merger related costs -- 3,278 -- 3,278
----------- ----------- --------- -----------
Total costs and expenses 3,646,061 1,174,404 -- 4,820,465
Income from operations 572,596 99,880 -- 672,476
Interest expense (64,296) (22,242) -- (86,538)
Other income, net 98,555 11,312 -- 109,867
----------- ----------- --------- -----------
Income before provision for income taxes 606,855 88,950 -- 695,805
Provision for income taxes 245,636 56,066 -- 301,702
Income of consolidated companies 361,219 32,884 -- 394,103
Income applicable to minority interests (28,503) (4,044) -- (32,547)
Equity in net income of unconsolidated affiliates 7,191 5,427 -- 12,618
----------- ----------- --------- -----------
Net Income $ 339,907 $ 34,267 $ -- $ 374,174
=========== =========== ========= ===========
Per Share Data:
Basic earnings per share $ 1.15 $ 0.75 $ 1.08
Diluted earnings per share $ 1.12 $ 0.72 $ 1.04
Weighted average shares:
Basic 294,756 45,748 346,909
Diluted 305,134 47,595 359,392
See accompanying notes to unaudited pro forma combined condensed financial
information.
60
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
For the Year Ended December 31, 1999
(Amounts in thousands except per share amounts)
Interpublic True North Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------------- --------------- ----------------- ---------------
Revenue $ 4,977,823 $1,439,414 -- $6,417,237
Costs and expenses
Salaries and related expenses 2,745,956 871,433 -- 3,617,389
Office and general expenses 1,569,188 421,733 -- 1,990,921
Restructuring and other merger related costs 84,183 75,354 -- 159,537
---------------- --------------- ----------------- ---------------
Total costs and expenses 4,399,327 1,368,520 -- 5,767,847
---------------- --------------- ----------------- ---------------
Income from operations 578,496 70,894 649,390
Interest expense (81,341) (18,128) -- (99,469)
Other income, net 103,562 18,472 -- 122,034
---------------- --------------- ----------------- ---------------
Income before provision for income taxes 600,717 71,238 -- 671,955
Provision for income taxes 243,971 41,289 -- 285,260
---------------- --------------- ----------------- ---------------
Income of consolidated companies 356,746 29,949 -- 386,695
Income applicable to minority interests (33,991) (4,161) -- (38,152)
Equity in net income of unconsolidated affiliates 8,532 2,434 -- 10,966
---------------- --------------- ----------------- ---------------
Net Income $ 331,287 $ 28,222 -- $ 359,509
================ =============== ================= ===============
Per Share Data:
Basic earnings per share $ 1.11 $ 0.60 $ 1.02
Diluted earnings per share $ 1.07 $ 0.59 $ 0.99
Weighted average shares:
Basic 297,992 47,346 351,966
Diluted 308,840 48,142 363,722
See accompanying notes to unaudited pro forma combined condensed financial
information.
61
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
For the Year Ended December 31, 2000
(Amounts in thousands except per share amounts)
Interpublic True North Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------------- -------------- ---------------- ------------------
Revenue $ 5,625,845 $1,556,843 -- $ 7,182,688
Costs and expenses
Salaries and related expenses 3,120,289 914,889 -- 4,035,178
Office and general expenses 1,672,034 448,661 -- 2,120,695
Restructuring and other merger related costs 116,131 16,910 -- 133,041
Deutsch transaction costs 44,715 -- -- 44,715
---------------- -------------- ---------------- ------------------
Total costs and expenses 4,953,169 1,380,460 -- 6,333,629
---------------- -------------- ---------------- ------------------
Income from operations 672,676 176,383 -- 849,059
Interest expense (109,111) (17,211) -- (126,322)
Other income, net 94,341 9,364 -- 103,705
---------------- -------------- ---------------- ------------------
Income before provision for income taxes 657,906 168,536 -- 826,442
Provision for income taxes 273,034 75,755 -- 348,789
---------------- -------------- ---------------- ------------------
Income of consolidated companies 384,872 92,781 -- 477,653
Income applicable to minority interests (39,809) (2,986) -- (42,795)
Equity in net income (loss) of unconsolidated
affiliates 13,595 (28,192) -- (14,597)
---------------- -------------- ---------------- ------------------
Net Income $ 358,658 $ 61,603 -- $ 420,261
================ ============== ================ ==================
Per Share Data:
Basic earnings per share $ 1.18 $ 1.24 $ 1.17
Diluted earnings per share $ 1.15 $ 1.21 $ 1.13
Weighted average shares:
Basic 303,192 49,494 359,615
Diluted 312,653 51,066 370,868
See accompanying notes to unaudited pro forma combined condensed financial
information.
62
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
At December 31, 2000
(thousands of U.S. dollars)
Interpublic True North Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------------- -------------- ------------------ ----------------
ASSETS
Current Assets
Cash and cash equivalents $ 708,312 $ 136,322 (36,800) $ 807,834
Marketable securities 39,777 180 -- 39,957
Receivables 4,687,552 1,048,793 -- 5,736,345
Expenditures billable to clients 379,507 58,422 -- 437,929
Prepaid expenses and other current assets 210,905 39,877 -- 250,782
---------------- -------------- ------------------ ----------------
Total current assets 6,026,053 1,283,594 (36,800) 7,272,847
---------------- -------------- ------------------ ----------------
Property and equipment, net 660,382 166,076 -- 826,458
Intangible assets 2,696,230 458,747 -- 3,154,977
Other assets 855,557 154,873 36,800 1,047,230
---------------- -------------- ------------------ ----------------
Total assets $10,238,222 $2,063,290 -- $12,301,512
================ ============== ================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Payable to banks $ 491,984 $ 57,276 -- $ 549,260
Accounts payable 4,590,361 1,160,974 30,000 5,781,335
Accrued expenses and deferred income 852,549 229,143 -- 1,081,692
Accrued income taxes 171,186 39,117 -- 210,303
---------------- -------------- ------------------ ----------------
Total current liabilities 6,106,080 1,486,510 30,000 7,622,590
---------------- -------------- ------------------ ----------------
Long term debt 971,957 26,730 -- 998,687
Convertible subordinated debentures and notes 533,104 -- 533,104
Deferred compensation and reserve for
termination liabilities 385,518 75,459 3,352 464,329
Accrued post-retirement benefits 48,350 6,847 55,197
Other non-current liabilities 61,051 69,608 (24,973) 105,686
Minority interests in consolidated subsidiaries 85,806 14,774 100,580
---------------- -------------- ------------------ ----------------
Total noncurrent liabilities 2,085,786 171,797 -- 2,257,583
---------------- -------------- ------------------ ----------------
Stockholders' equity
Common stock 32,013 16,656 (10,942) 37,727
Additional paid in capital 1,100,898 342,404 10,907 1,454,209
Retained earnings 1,627,163 69,704 (30,000) 1,666,867
Accumulated other comprehensive income (390,653) (20,928) -- (411,581)
Less:
Treasury stock at cost 194,758 35 (35) 194,758
Unamortized expense of restricted stock grants 128,307 2,818 -- 131,125
---------------- -------------- ------------------ ----------------
Total stockholders' equity 2,046,356 404,983 (30,000) 2,421,339
---------------- -------------- ------------------ ----------------
Total liabilities and stockholders' equity $10,238,222 $2,063,290 -- $12,301,512
================ ============== ================== ================
See accompanying notes to unaudited pro forma combined condensed financial
information.
63
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
NOTE 1: PRO FORMA ADJUSTMENTS
o The stockholders' equity accounts of Interpublic and True North have
been adjusted to reflect the issuance of approximately 57 million
shares of Interpublic common stock in the merger pursuant to an
exchange ratio of 1.14 shares of Interpublic common stock for each
share of True North common stock.
o The estimated direct costs of the merger will be approximately $30
million. The pro forma balance sheet gives effect to these direct
costs as if they had been incurred as of December 31, 2000, but the
pro forma combined condensed statements of income do not give effect
to these expenses. The direct costs of the merger consist primarily of
fees and expenses of investment bankers, attorneys and accountants,
together with SEC filing fees, financial printing and other fees.
o Since accounting policies of the combining companies are substantially
comparable, we made no adjustments to the unaudited combined condensed
financial statements to conform accounting policies. Certain
liabilities in the unaudited combined condensed balance sheet of True
North have been reclassified to conform to the format used by
Interpublic.
NOTE 2: PRO FORMA EARNINGS PER SHARE
o The pro forma earnings per share has been calculated based on the
weighted average number of shares of True North common stock adjusted
to reflect an exchange ratio of 1.14 shares of Interpublic common
stock for each share of True North common stock.
NOTE 3: RESTRUCTURING AND INTEGRATION COSTS
o The amounts presented do not include restructuring or integration
costs which will be incurred in connection with the merger of True
North and Interpublic. These costs will be incurred for employee
severance and other integration-related costs. Neither Interpublic nor
True North has finalized their estimates of the amount and nature of
the restructuring and integration costs. These amounts will be charged
to operations in the appropriate periods, and therefore, are not
reflected in the unaudited pro forma combined condensed financial
statements. The unaudited pro forma combined condensed financial
statements reflect neither the impact of these charges nor the
benefits to be realized from the expected savings.
NOTE 4: FUNDING OF CERTAIN BENEFITS
o As required under the terms of a trust established by True North, an
amount will be contributed to the trust to pay benefits that have
accrued under specified deferred compensation plans of True North. The
trust assets will be retained on the balance sheet until the benefits
are paid. The pro forma adjustment of $36.8 million reflected in the
pro forma combined condensed balance sheet reflects the amount that
would have been contributed based on benefits accrued as of December
31, 2000.
64
DESCRIPTION OF INTERPUBLIC SHARE CAPITAL
General
Interpublic is incorporated in the State of Delaware. The rights of
Interpublic stockholders are generally governed by Delaware law and the
Interpublic certificate of incorporation and by-laws. This summary is not a
complete discussion of, and is qualified by reference to, Delaware law,
including the Delaware General Corporation Law and the common and constitutional
law of Delaware, and the full texts of the Interpublic certificate of
incorporation and by-laws.
The authorized capital of Interpublic includes 550 million shares of
Interpublic common stock with a par value of $0.10 per share and up to 20
million shares of Interpublic preferred stock without par value.
Common Stock
General. As of March 27, 2001, 312,407,679 shares of Interpublic common
stock were outstanding. All outstanding shares of Interpublic common stock are
fully paid and non-assessable. Interpublic common stock is traded on the New
York Stock Exchange.
Certificates. Interpublic common stock is issued in registered form.
Every holder of Interpublic common stock is entitled to a share certificate.
Dividends. Subject to preferences applicable to any outstanding
Interpublic preferred stock, holders of Interpublic common stock are entitled to
receive ratably such dividends as may be declared by the board of directors of
Interpublic out of funds legally available for this purpose.
Meetings. Annual meetings of Interpublic stockholders are held each
year on the third Tuesday of May at 11:00 a.m. or on the next succeeding
business day. Written notice must be mailed to each stockholder entitled to vote
not less than ten nor more than 60 days before the date of the meeting. The
presence in person or by proxy of the holders of record of a majority of the
issued and outstanding shares of Interpublic entitled to vote at such meeting
constitutes a quorum for the transaction of business at meetings of the
stockholders. Special meetings of the stockholders may be called for any purpose
by the Interpublic Board and shall be called by the chairman of the Interpublic
Board or the secretary upon a written request, stating the purpose of such
meeting, submitted by a majority of the Interpublic Board or by the holders of a
majority of the outstanding shares of all classes of capital stock entitled to
vote at the meeting.
Voting Rights. The holders of Interpublic common stock are entitled to
one vote for each share held of record. Holders of Interpublic common stock may
vote by proxy.
Liquidation, Dissolution or Winding-Up. In the event of a liquidation,
dissolution or winding-up of Interpublic, after payment shall have been made to
holders of any outstanding preferred stock of the full amounts to which they
shall be entitled, the holders of Interpublic common stock are entitled, to the
exclusion of the holders of preferred stock, to share ratably according to the
number of shares held by them in all remaining assets available for distribution
to the holders of Interpublic common stock.
Transfers. Interpublic's by-laws do not allow the Interpublic Board to
refuse to register transfers of shares.
Other Rights. Holders of Interpublic common stock have no preemption,
redemption, conversion or other subscription rights.
65
Preferred Stock
The Interpublic Board has the authority, without further action by the
Interpublic stockholders, to issue up to 20 million shares of preferred stock,
without par value, in one or more series and to fix the rights, preferences,
privileges and restrictions of such preferred stock, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
and the number of shares constituting any series or the designation of the
series. Issuance of Interpublic preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could make it more difficult for a third party to acquire a majority
of the outstanding voting stock of Interpublic. There are currently no shares of
preferred stock issued or outstanding.
COMPARATIVE RIGHTS OF HOLDERS OF TRUE NORTH COMMON STOCK
AND INTERPUBLIC COMMON STOCK
True North and Interpublic are both Delaware corporations. The rights
of each company's stockholders are generally governed by Delaware law and each
company's certificate of incorporation and by-laws. Upon completion of the
merger, stockholders of True North will become stockholders of Interpublic. No
changes to the Interpublic certificate of incorporation or by-laws will be
adopted in connection with the merger.
The following is a summary comparison of the provisions governing each
company and a description of some of the differences between the rights of
holders of Interpublic common stock and the rights of holders of True North
common stock. This summary is not a complete discussion of, and is qualified by
reference to, Delaware law, including the Delaware General Corporation Law, the
common and constitutional law of Delaware, and the full texts of the
certificates of incorporation and by-laws of Interpublic and True North.
Annual Meetings of Stockholders
True North. Annual meetings of True North stockholders are to be held
each year on the second Wednesday of May at a time fixed by the True North
Board, on the next succeeding business day or at any other time determined by
the True North Board.
Interpublic. Annual meetings of Interpublic stockholders are to be held
each year on the third Tuesday of May or on the next succeeding business day.
Special Meetings of Stockholders
True North. Special meetings of True North stockholders may be called
by the True North Board, the chief executive officer or the president. The
by-laws and certificate of incorporation of True North do not provide the
stockholders of True North with an opportunity to call a special meeting.
Interpublic. Special meetings of Interpublic stockholders may be called
by the Interpublic Board. In addition, special meetings of the Interpublic
stockholders shall be called by the chairman of the Board or the secretary upon
a written request, stating the purpose of the meeting, submitted by the holders
of a majority of the outstanding shares of all classes of capital stock entitled
to vote at the meeting.
Action by Consent in Writing of Stockholders
True North. True North's certificate of incorporation expressly
prohibits action by written consent of its stockholders.
Interpublic. Interpublic does not limit action by consent in writing of
its stockholders and, as a result, holders of a majority of the outstanding
shares may act by consent in writing without a meeting of stockholders.
66
Advance Notification of Stockholder Proposals
True North. A stockholder may only bring business before an annual
meeting of True North stockholders if the secretary has received written notice
from the stockholder not less than 60 days and not more than 90 days before the
annual meeting. Alternatively, if True North has given less than 70 days' notice
of the meeting, then the stockholder may give written notice to the secretary no
later than the tenth day following the day on which True North has given notice
of the meeting. Furthermore, the notice by the stockholder to the secretary must
set forth:
o a brief description of the business that the stockholder seeks
to bring before the annual meeting;
o a brief description of the reasons for bringing the business
before the annual meeting;
o the name and address of the stockholder;
o the number of shares of True North common stock that the
holder beneficially owns; and
o any material interest of the stockholder in the business to be
brought before the annual meeting.
Interpublic. The Interpublic by-laws and certificate of incorporation
do not contain limitations on the submission of proposals by stockholders in
connection with scheduled meetings.
Number and Nomination of Directors
True North. True North's by-laws provide for the Board to set the
number of directors, which may not be less than nine nor more than 21. True
North's certificate of incorporation provides that the number of directors may
not be less than three. True North currently has a 12-member Board.
Nominations for the election of directors may be made only by the True
North Board or by a committee appointed by the True North Board or by any
stockholder entitled to vote for the election of directors at the applicable
meeting pursuant to a notice timely delivered to the Board. To be timely
delivered, the notice from the stockholder must be received by the secretary of
True North not less than 60 nor more than 90 days before the applicable meeting.
Alternatively, if True North has given less than 70 days' notice of the meeting,
then the stockholder may give written notice to the secretary no later than the
tenth day following the day on which True North has given notice of the meeting.
Furthermore, the notice by the stockholder to the secretary must include:
o a representation that the stockholder is, and will be on the
record date, a beneficial owner or holder of record of voting
stock;
o a representation that the stockholder has, and will have on
the record date, full voting power with respect to its shares
of voting stock;
o a representation that the stockholder intends to appear in
person or by proxy at the meeting and to nominate the person
or persons specified in the notice;
o the name and address of the stockholder and the person to be
nominated;
o a description of all arrangements and understandings between
the stockholder and each proposed nominee and any other person
in connection with the proposed nomination;
o the number and kinds of securities of True North held by each
proposed nominee;
o information regarding each proposed nominee as would be
required by the proxy rules promulgated by the Commission; and
67
o a consent from each proposed nominee to serve if elected.
Interpublic. The Interpublic stockholders or the Interpublic Board sets
the number of directors, which may not be less than three. Interpublic currently
has a ten-member Board. The merger agreement contemplates that, upon the
completion of the merger, the Board will be expanded to include two additional
seats to be occupied by David A. Bell and J. Brendan Ryan.
The Interpublic by-laws and certificate of incorporation do not contain
limitations on the nomination of directors by stockholders in connection with
scheduled meetings.
Removal of Directors
True North. Any director may be removed, with or without cause, by the
vote at a stockholders' meeting of the holders of a majority of the shares then
entitled to vote on the election of directors.
Interpublic. The same provisions for removal apply to the Interpublic
Board except that any director may also be removed for proper cause by the
affirmative vote of at least two-thirds of the entire board of directors.
Rights Plan
True North. In November 1998, the True North Board adopted a
Stockholder Rights Plan by declaring a dividend distribution of one right for
each outstanding share of True North's common stock. The purpose of this plan is
to give the True North Board sufficient time to respond, consistent with its
fiduciary duties, to a takeover attempt. Under the plan, as most recently
amended, if a person or group acquires 15% or more of the outstanding True North
common stock (or, in the case of acquisitions by Publicis, 22% or more), each
right will entitle its holder, excluding the person or group that acquired 15%
or more of the outstanding True North common stock, to purchase, at the right's
then-current exercise price, a number of shares of True North common stock that
have a market value of twice the right's exercise price. In the event that True
North is acquired in a merger or other business combination after a person or
group has acquired 15% or more of the outstanding True North stock (or, in the
case of acquisitions by Publicis, 22% or more), each right will entitle its
holder to purchase, at the right's then-current exercise price, a number of
shares of the acquiring company's common stock having a market value of twice
the right's exercise price. The rights are redeemable under specified
circumstances.
On March 18, 2001, the True North Board amended the plan to exempt the
merger agreement and the merger from triggering any rights under the plan. In
the merger, each right, along with the share of True North common stock with
which it is associated, will convert into Interpublic common stock and, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired.
Interpublic. Interpublic does not currently have any agreement or plan
in effect that is similar to the True North Stockholder Rights Plan.
LEGAL OPINION
The validity of the shares of Interpublic common stock offered by this
proxy statement/prospectus will be passed upon for Interpublic by Nicholas J.
Camera, Esq., Senior Vice President, General Counsel and Secretary of
Interpublic.
EXPERTS
The consolidated financial statements incorporated in this prospectus
document by reference to the Annual Report on Form 10-K of The Interpublic Group
of Companies, Inc. for the year ended December 31, 2000, except as they relate
to NFO Worldwide, Inc., as of and for the two year period ended December 31,
1999, and to Deutsch, Inc. and Subsidiary and Affiliates, as of December 31,
2000 and 1999 and for the years then ended, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
68
The audited financial statements of NFO Worldwide, Inc., as of and for
the two year period ended December 31, 1999, and of Deutsch, Inc. and Subsidiary
and Affiliates, as of December 31, 2000 and 1999 and for the years then ended,
each a wholly owned subsidiary of Interpublic, have been audited by Arthur
Andersen LLP and J.H. Cohn LLP, respectively, independent accountants. Such
financial statements, to the extent they have been included in the financial
statements of Interpublic, have been so incorporated in reliance on the reports
of such independent accountants given on the authority of said firms as experts
in auditing and accounting.
The consolidated financial statements of True North and its
subsidiaries incorporated into this document by reference to True North's Annual
Report on Form 10-K for the year ended December 31, 2000 have been so
incorporated in reliance on the report of Arthur Andersen LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
Arthur Andersen LLP is True North's independent accountant. A
representative of Arthur Andersen is expected to be available to answer
appropriate questions at the special meeting.
69
WHERE YOU CAN FIND MORE INFORMATION
Interpublic and True North file annual, quarterly and special reports,
proxy statements and other information with the Commission. You may read and
copy any of the information on file with the Commission at the Commission's
Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. Please call the Commission at 1-800-SEC-0330 for further information on
public reference rooms. Interpublic's and True North's Commission filings are
also available to the public from commercial document retrieval services, some
of their Commission filings are available at the Commission's World Wide Web
site located at http://www.sec.gov. and some of their filings are available at
http://www.interpublic.com and http://www.truenorth.com.
Interpublic common stock and True North common stock are listed on the
New York Stock Exchange. Reports and other information concerning Interpublic
and True North may be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
Interpublic filed a registration statement on Form S-4 to register with
the Commission the shares of Interpublic common stock offered by this proxy
statement/prospectus. This document is a part of that registration statement and
constitutes a prospectus of Interpublic in addition to being a proxy statement
of True North for the True North special meeting. As permitted by Commission
rules, this document does not contain all the information you can find in the
registration statement or exhibits to the registration statement.
The Commission allows us to "incorporate by reference" information into
this document, which means that we can disclose important information to you by
referring you to another document filed separately with the Commission. The
information incorporated by reference is deemed to be part of this document,
except for any information superseded by information in this document. This
document incorporates by reference the documents set forth below, including the
exhibits that these documents specifically incorporate by reference, that
Interpublic and True North have previously filed with the Commission. These
documents contain important information about Interpublic and its financial
performance and True North and its financial performance.
Interpublic Commission Filings Period or Filing Date
------------------------------ ---------------------
Current Reports on Form 8-K Filed January 11, 2001, March 1, 2001 and March 19,
2001
Annual Report on Form 10-K Year ended December 31, 2000
Definitive Proxy Statement on Schedule 14A 2001 Annual Meeting of Stockholders
True North Commission Filings Period or Filing Date
----------------------------- ---------------------
Current Reports on Form 8-K Filed January 4, 2001, March 1, 2001 (press release
dated February 28, 2001), March 12, 2001 (press
release dated March 12, 2001), March 19, 2001,
March 22, 2001 and April 9, 2001
Annual Report on Form 10-K Year ended December 31, 2000
Registration Statement on Form 8-A, as amended Filed November 5, 1998
Amended April 16, 1999, March 26, 2001 and April 17, 2001
Description of True North Common Stock contained Filed November 26, 1997
in the registration statement on Form S-4
We are also incorporating by reference any additional documents that
either Interpublic or True North files with the Commission between the date of
this document and the date of the True North special meeting.
70
Interpublic has supplied all information contained or incorporated by
reference in this document relating to Interpublic. True North has supplied all
information contained or incorporated by reference in this document relating to
True North.
You may already have been sent some of the documents incorporated by
reference, but you can obtain any of them, excluding all exhibits that have not
been specifically incorporated by reference, from Interpublic, True North or the
Commission. Documents incorporated by reference are available from Interpublic
and True North without charge.
True North stockholders may obtain documents incorporated by reference
in this document by Interpublic by requesting them in writing or by telephone at
the following address:
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
Attn: Corporate Secretary
Telephone: (212) 399-8000
True North stockholders may obtain documents incorporated by reference
into this document by True North by requesting them in writing or by telephone
at the following address:
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
Attn: Corporate Secretary
Telephone: (312) 425-6500
If you would like to request documents from Interpublic or True North,
please do so no later than __, 2001 to receive them before the True North
special meeting. Interpublic and True North will send requested documents
without charge by first-class mail within one business day after receiving the
request.
You should rely only on the information contained or incorporated by
reference in this document to vote on the merger agreement proposal. No one has
been authorized to provide you with information that is different from what is
contained in this document. This document is dated __, 2001. You should not
assume the information contained in this document is accurate as of any date
other than this date, and neither the mailing of this document to stockholders
nor the issuance of Interpublic common stock in the merger shall imply
information is accurate as of any other date.
71
ANNEX A
Execution Copy
AGREEMENT AND PLAN OF MERGER
AMONG
THE INTERPUBLIC GROUP OF COMPANIES, INC.
VERITAS ACQUISITION CORP.
AND
TRUE NORTH COMMUNICATIONS INC.
Dated as of March 18, 2001
A-1
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
Section 1.1 The Merger......................................... 1
Section 1.2 Effective Time..................................... 2
Section 1.3 Effects of the Merger; Directors and Officers...... 2
Section 1.4 Charter and Bylaws; Directors and Officers......... 2
Section 1.5 Conversion of Securities........................... 2
Section 1.6 Parent to Make Certificates Available.............. 3
Section 1.7 Dividends; Transfer Taxes; Withholding............. 4
Section 1.8 No Fractional Securities........................... 5
Section 1.9 Return of Exchange Fund............................ 5
Section 1.10 Adjustment of Exchange Ratio....................... 5
Section 1.11 No Further Ownership Rights in Company Common Stock 5
Section 1.12 Closing of Company Transfer Books.................. 6
Section 1.13 Lost Certificates.................................. 6
Section 1.14 Further Assurances................................. 6
Section 1.15 Closing............................................ 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power................... 7
Section 2.2 Capital Structure.................................. 7
Section 2.3 Authority.......................................... 8
Section 2.4 Consents and Approvals; No Violation............... 9
Section 2.5 SEC Documents and Other Reports.................... 10
Section 2.6 Registration Statement and Proxy Statement......... 10
Section 2.7 Absence of Certain Changes or Events............... 11
Section 2.8 Permits and Compliance............................. 11
Section 2.9 Actions and Proceedings............................ 12
Section 2.10 Opinion of Financial Advisor....................... 12
i
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TABLE OF CONTENTS
(continued)
Page
Section 2.11 No Required Vote of Parent Stockholders............ 12
Section 2.12 Pooling of Interests; Reorganization............... 12
Section 2.13 Brokers............................................ 12
Section 2.14 Operations of Sub.................................. 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power................... 13
Section 3.2 Capital Structure.................................. 13
Section 3.3 Authority.......................................... 15
Section 3.4 Consents and Approvals; No Violation............... 15
Section 3.5 SEC Documents and Other Reports.................... 16
Section 3.6 Registration Statement and Proxy Statement......... 16
Section 3.7 Absence of Certain Changes or Events............... 17
Section 3.8 Permits and Compliance............................. 17
Section 3.9 Tax Matters........................................ 18
Section 3.10 Actions and Proceedings............................ 19
Section 3.11 Employee Benefits.................................. 19
Section 3.12 Labor Matters...................................... 21
Section 3.13 Opinion of Financial Advisor....................... 21
Section 3.14 Required Vote of Company Stockholders.............. 21
Section 3.15 Pooling of Interests; Reorganization............... 21
Section 3.16 Brokers............................................ 21
Section 3.17 Amendment to the Rights Agreement.................. 21
Section 3.18 Takeover Statutes.................................. 22
Section 3.19 Accuracy of Earn-Out Schedule...................... 22
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.............. 22
Section 4.2 No Solicitation by the Company...................... 25
ii
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TABLE OF CONTENTS
(continued)
Page
Section 4.3 Pooling of Interests; Reorganization................ 27
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting................................. 27
Section 5.2 Preparation of the Registration Statement
and the Proxy Statement............................ 28
Section 5.3 Access to Information............................... 29
Section 5.4 Compliance with the Securities Act.................. 29
Section 5.5 Current NYSE Listing................................ 30
Section 5.6 Fees and Expenses................................... 30
Section 5.7 Company Stock Plans................................. 31
Section 5.8 Reasonable Best Efforts; Pooling of Interests....... 32
Section 5.9 Public Announcements................................ 33
Section 5.10 Real Estate Transfer and Gains Tax.................. 33
Section 5.11 State Takeover Laws................................. 33
Section 5.12 Indemnification; Directors and Officers
Insurance.......................................... 34
Section 5.13 Notification of Certain Matters..................... 34
Section 5.14 Employee Benefit Plans and Agreements............... 35
Section 5.15 Section 16(b)....................................... 36
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger............................... 36
Section 6.2 Conditions to Obligation of the Company
to Effect the Merger............................... 37
Section 6.3 Conditions to Obligations of Parent and Sub
to Effect the Merger............................... 38
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination......................................... 39
Section 7.2 Effect of Termination............................... 40
Section 7.3 Amendment........................................... 41
Section 7.4 Waiver.............................................. 41
iii
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TABLE OF CONTENTS
(continued)
Page
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties...... 41
Section 8.2 Notices............................................. 41
Section 8.3 Interpretation...................................... 42
Section 8.4 Counterparts........................................ 42
Section 8.5 Entire Agreement; No Third-Party Beneficiaries...... 42
Section 8.6 Governing Law....................................... 43
Section 8.7 Assignment.......................................... 43
Section 8.8 Severability........................................ 43
iv
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TABLE OF DEFINED TERMS
Defined Term Section
------------ -------
Agreement............................................................... Forepart
Blue Sky Laws........................................................... 2.4
Certificate of Merger................................................... 1.2
Certificates............................................................ 1.6(b)
Closing................................................................. 1.15
Code.................................................................... Recitals
Company................................................................. Forepart
Company Affiliate Letter................................................ 5.4(a)
Company Bylaws.......................................................... 1.4(a)
Company Charter......................................................... 1.4(a)
Company Common Stock.................................................... Recitals
Company Confidentiality Agreement....................................... 5.3(a)
Company Employees....................................................... 5.14(a)
Company Letter.......................................................... 3.2(a)
Company Multiemployer Plan.............................................. 3.11 (c)
Company Permits......................................................... 3.8(a)
Company Plan............................................................ 3.11(c)
Company Preferred Stock................................................. 3.2(a)
Company SEC Documents................................................... 3.5
Company Stock Option Plans.............................................. 3.2(a)
Company Stock Options................................................... 3.2(a)
Confidentiality Agreements.............................................. 5.3(b)
Constituent Corporations................................................ Forepart
D&O Insurance........................................................... 5.12(b)
DGCL.................................................................... 1.1
Effective Time.......................................................... 1.2
ERISA................................................................... 3.1(a)
ERISA Affiliates........................................................ 3.11(c)
Exchange Act............................................................ 2.4
Exchange Agent.......................................................... 1.6(a)
Exchange Fund........................................................... 1.6(a)
Exchange Ratio.......................................................... 1.5(c)
GAAP.................................................................... 6.3(d)
Gains Taxes............................................................. 5.10
Governmental Entity..................................................... 2.4
HSR Act................................................................. 2.4
Knowledge of Parent..................................................... 2.9
Knowledge of the Company................................................ 3.10
Liens................................................................... 2.2(b)
Material Adverse Effect................................................. 2.1
Merger.................................................................. Recitals
New Plans............................................................... 5.14(a)
v
A-6
NYSE.................................................................... 1.8
Old Plans............................................................... 5.14(a)
Parent.................................................................. Forepart
Parent Affiliate Letter................................................. 5.4(b)
Parent Annual Report.................................................... 2.2(b)
Parent Bylaws........................................................... 2.4
Parent Charter.......................................................... 2.4
Parent Common Stock..................................................... Recitals
Parent Letter........................................................... 2.4
Parent Permits.......................................................... 2.8(a)
Parent Preferred Stock.................................................. 2.2(a)
Parent SEC Documents.................................................... 2.5
Parent Stock Plans...................................................... 2.2(a)
Proxy Statement......................................................... 2.6
Rabbi Trust............................................................. 5.14(c)
Registration Statement.................................................. 2.3
Rights.................................................................. Recitals
Rights Agreement........................................................ Recitals
Rule 145 Affiliates..................................................... 5.4(a)
SEC..................................................................... 2.2(a)
Securities Act.......................................................... 2.3
Significant Subsidiary.................................................. 2.2(a)
State Takeover Approvals................................................ 2.4
State Takeover Statutes................................................. 3.18
Stockholder Meeting..................................................... 5.1
Sub..................................................................... Forepart
Subsidiary.............................................................. 2.1
Substitute Option....................................................... 5.7
Superior Proposal....................................................... 4.2(a)
Surviving Corporation................................................... 1.1
Takeover Proposal....................................................... 4.2(a)
Taxes................................................................... 3.9(a)
Tax Returns............................................................. 3.9(a)
Third Party............................................................. 5.6(d)
Third Party Acquisition Event........................................... 5.6(d)
vi
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 18, 2001 (this
"Agreement"), among The Interpublic Group of Companies, Inc., a Delaware
corporation ("Parent"), Veritas Acquisition Corp., a Delaware corporation and a
direct wholly owned subsidiary of Parent ("Sub"), and True North Communications
Inc., a Delaware corporation (the "Company") (Sub and the Company being
hereinafter collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
--------------------
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have each approved and declared advisable the merger of Sub with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth herein, whereby each issued and outstanding share of common stock, par
value $.33 1/3 per share, of the Company ("Company Common Stock") together with
the associated right to purchase one two-thousandth of a share of Series B
Junior Participating Preferred Stock of the Company (the "Rights") under the
Rights Agreement dated November 4, 1998 , as amended, between the Company and
First Chicago Trust Company of New York, a division of Equiserve (the "Rights
Agreement"), not owned directly or indirectly by Parent or the Company will be
converted into shares of Common Stock, par value $.10 per share, of Parent
("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company
have each determined that the Merger is in furtherance of and consistent with
their respective long-term business strategies and is in the best interest of
their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof,
----------
and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub
shall be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
1
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Section 1.2 Effective Time. The Merger shall become effective when a
--------------
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware; provided, however, that, upon mutual consent of the
-------- -------
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of Merger
is accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of
the Closing (as hereinafter defined).
Section 1.3 Effects of the Merger; Directors and Officers. The Merger shall
---------------------------------------------
have the effects set forth in this Agreement and in Section 259 of the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers.
------------------------------------------
(a) At the Effective Time, the Amended and Restated Certificate of
Incorporation, as amended, of the Company (the "Company Charter"), as in
effect immediately prior to the Effective Time, shall be amended so that
Article FOURTH of the Company Charter reads in its entirety as follows:
"The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock,
par value $.01 per share." As so amended, the Company Charter shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law. At the
Effective Time, the By-laws of the Company, as amended (the "Company
Bylaws"), as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by the Company Charter and the DGCL.
(b) The directors of Sub at the Effective Time of the Merger shall be the
directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. The officers of the Company at
the Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may
be.
(c) As of the Effective Time, Parent's board of directors shall elect David A.
Bell and J. Brendan Ryan as members of the board of directors of Parent, to
hold such office until the earlier of resignation or removal or until their
respective successors are duly elected and qualified.
(d) As of the Effective Time, Parent's board of directors shall elect David A.
Bell to become the Vice-Chairman of Parent, to hold such office until the
earlier of resignation or removal or until his successor is duly elected
and qualified.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of Sub, the Company, Parent or the
holders of any securities of the Constituent Corporations:
2
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(a) Each issued and outstanding share of common stock, par value $.01 per
share, of Sub shall be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock, together with the associated Rights,
that are held in the treasury of the Company or by any wholly owned
Subsidiary of the Company and any shares of Company Common Stock, together
with the associated Rights, owned by Parent (other than shares, if any, in
trust accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall be canceled and no capital stock
of Parent or other consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time, together with the associated Rights, (other than shares to
be canceled in accordance with Section 1.5(b)) shall be converted into 1.14
(such number being the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Parent Common Stock. All such shares of Company
Common Stock and the associated Rights, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive any dividends
and other distributions in accordance with Section 1.7, certificates
representing the shares of Parent Common Stock into which such shares are
converted and any cash, without interest, in lieu of fractional shares to
be issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 1.6.
Section 1.6 Parent to Make Certificates Available.
-------------------------------------
(a) Exchange of Certificates. Parent shall authorize Equiserve (or such other
------------------------
person or persons as shall be reasonably acceptable to Parent and the
Company) to act as Exchange Agent hereunder (the "Exchange Agent"). At or
prior to the Effective Time, Parent shall deposit with the Exchange Agent
certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) for exchange with outstanding shares of Company
Common Stock, together with the associated Rights, and cash, as required to
make payments in lieu of any fractional shares pursuant to Section 1.8
(such cash and shares of Parent Common Stock, together with any dividends
or distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall deliver the Parent Common Stock
contemplated to be issued pursuant to Section 1.5(c) out of the Exchange
Fund. The Exchange Agent shall invest any cash included in the Exchange
Fund as directed by Parent on a daily basis and promptly pay to Parent or
its designee any interest or other income resulting therefrom. Parent
shall bear the risk of any investment losses arising from such investment.
(b) Exchange Procedures. Parent shall instruct the Exchange Agent, as soon as
-------------------
practicable after the Effective Time, to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock, together with the
associated Rights, converted in the Merger (the "Certificates") a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon actual delivery
of the Certificates to the Exchange Agent, and shall contain instructions
for use in effecting the surrender of the
3
A-10
Certificates in exchange for certificates representing shares of Parent
Common Stock and cash in lieu of fractional shares). Upon surrender for
cancellation to the Exchange Agent of one or more Certificates held by any
record holder of a Certificate, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive
in exchange therefor (after taking into account all shares of Company
Common Stock then held and surrendered by such holder) a certificate
representing that number of whole shares of Parent Common Stock into which
the shares represented by the surrendered Certificate shall have been
converted at the Effective Time pursuant to this Article I, cash in lieu of
any fractional share in accordance with Section 1.8 and certain dividends
and other distributions in accordance with Section 1.7, and any Certificate
so surrendered shall forthwith be canceled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
--------------------------------------
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time, will be paid to any person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock until such person surrenders the
related Certificate or Certificates, as provided in Section 1.6, and no cash
payment in lieu of fractional shares will be paid to any such person pursuant to
Section 1.8 until such person shall so surrender the related Certificate or
Certificates. Subject to the effect of applicable law, there shall be paid to
each record holder of a new certificate representing such Parent Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock represented by such new certificate and having
a record date on or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions or cash in lieu of fractional shares be
entitled to receive interest on such dividends or other distributions or cash in
lieu of fractional shares. If any cash or certificate representing shares of
Parent Common Stock is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
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Section 1.8 No Fractional Securities. No certificates or scrip representing
------------------------
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a security holder of Parent. In lieu of any such fractional share, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article I will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the last
reported sale price per share of Parent Common Stock on The New York Stock
Exchange (the "NYSE") on the date of the Effective Time (or, if the shares of
Parent Common Stock do not trade on the NYSE on such date, the first date of
trading of shares of Parent Common Stock on the NYSE after the Effective Time)
by (ii) the fractional interest to which such holder would otherwise be
entitled. As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional share interests, the Exchange
Agent shall so notify Parent, and Parent shall deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests subject to and in accordance with the
terms of Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund
-----------------------
(including any income or proceeds thereon or any investments thereof) which
remains undistributed to the former stockholders of the Company for twelve
months after the Effective Time shall be delivered to Parent or its designee,
upon demand of Parent, and any such former stockholders who have not theretofore
complied with this Article I shall thereafter look only to Parent (subject to
abandoned property, escheat and similar laws) for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
Any such portion of the Exchange Fund remaining unclaimed by holders of shares
of Company Common Stock who are entitled thereto pursuant to Sections 1.7 and
1.8 on the third anniversary of the date of the Effective Time (or such earlier
date as shall be immediately before such date upon which such securities or
amounts would otherwise escheat to or become property of any public official or
Governmental Entity (as hereinafter defined)) shall, to the extent permitted by
law, become the property of Parent, free and clear of claims or interests of any
person previously entitled thereto. Neither Parent nor the Surviving
Corporation shall be liable to any former holder of Company Common Stock for any
such shares of Parent Common Stock, cash, dividends and distributions which are
delivered to a public official or Governmental Entity pursuant to any applicable
abandoned property, escheat or similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event of any
----------------------------
reclassification, stock split or stock dividend with respect to Parent Common
Stock or any change or conversion of Parent Common Stock into other securities
(or if a record date with respect to any of the foregoing should occur) prior to
the Effective Time, appropriate and proportionate adjustments, if any, shall be
made to the Exchange Ratio, and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All shares
---------------------------------------------------
of Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
1.8) shall be
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deemed to have been issued in full satisfaction of all rights pertaining to the
shares of Company Common Stock, together with the associated Rights, represented
by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
---------------------------------
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates shall be
canceled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or the Exchange Agent, the posting by such person of a bond, in such
reasonable amount as Parent or the Exchange Agent may direct as indemnity
against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
Section 1.14 Further Assurances. If at any time after the Effective Time the
------------------
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.15 Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York 10006, at 10:00 a.m. local time
no later than the sixth business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived (if
permissible) (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver (if
permissible) of such conditions) or at such other time and place as Parent and
the Company shall agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has the requisite corporate
power and authority to carry on its business as now being conducted. Each
Subsidiary (as hereinafter defined) of Parent is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate power to carry on its business as now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power or authority would not, individually or in
the aggregate, have a Material Adverse Effect (as hereinafter defined) on
Parent. Parent and each of its Subsidiaries are duly qualified to do business,
and are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
For purposes of this Agreement (a) "Material Adverse Effect" means, when used
with respect to Parent or the Company, as the case may be, any event, change or
effect that individually or when taken together with all other such events,
changes or effects is, or would be, materially adverse to the business,
financial condition or results of operations of Parent and its subsidiaries,
taken as a whole, or the Company and its subsidiaries, taken as a whole, as the
case may be, except to the extent resulting from or relating to (i) any changes
or events affecting the economy of any country or the advertising industry
generally (other than to the extent such changes or events adversely affect
Parent or the Company, as the case may be, in a materially disproportionate
manner in relation to the industry generally) or (ii) the loss of those clients
that have been previously discussed by the parties; and (b) "Subsidiary" means
any corporation, partnership, limited liability company, joint venture or other
legal entity of which Parent or the Company, as the case may be (either alone or
through or together with any other Subsidiary), (i) owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, limited liability
company, joint venture or other legal entity or otherwise (through contract or
other means) holds or controls 50% or more of the ordinary voting power in
respect of the election or appointment of the board of directors or other
governing body or (ii) of which such party or any of its Subsidiaries is a
general or managing partner.
Section 2.2 Capital Structure.
-----------------
(a) As of the date hereof, the authorized capital stock of Parent consists of
550 million shares of Parent Common Stock and 20 million shares of
preferred stock, no par value ("Parent Preferred Stock"). At the close of
business on February 28, 2001, (i) 315,527,074 shares of Parent Common
Stock were issued and outstanding, all of which were validly issued, fully
paid and nonassessable and free of preemptive rights and (ii) 5,461,525
shares of Parent Common Stock were held in treasury of Parent or by
Subsidiaries of Parent. As of December 31, 2000, approximately 27,516,000
shares of Parent Common Stock were reserved for issuance
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pursuant to outstanding options to purchase shares of Parent Common Stock
under Parent's 1986, 1988, 1996 and 1997 Stock Option Plans (collectively,
the "Parent Stock Plans"). As of the date hereof, the Parent Stock Plans
are the only benefit plans of Parent or its Subsidiaries under which any
securities of Parent are issuable. As of the date of this Agreement, except
as set forth above and except for the issuance of shares of Parent Common
Stock upon exercise of options issued pursuant to the Parent Stock Plans,
no shares of capital stock or other voting securities of Parent were
issued, reserved for issuance or outstanding. All of the shares of Parent
Common Stock issuable in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. As of the date of this Agreement, except for (i) this
Agreement and (ii) as set forth above, and except as disclosed in the
Parent SEC Documents (as hereinafter defined), there are no options,
warrants, calls, rights, puts or agreements to which Parent or any of its
Significant Subsidiaries (as hereinafter defined) is a party or by which
any of them is bound obligating Parent or any of its Significant
Subsidiaries to issue, deliver, sell or redeem, or cause to be issued,
delivered, sold or redeemed, any additional shares of capital stock (or
other voting securities or equity equivalents) or convertible or
exchangeable securities of Parent or any of its Significant Subsidiaries or
obligating Parent or any of its Significant Subsidiaries to grant, extend
or enter into any such option, warrant, call, right, put or agreement.
True, complete and correct copies of the Certificate of Incorporation and
Bylaws of each of Parent and Sub have been delivered to the Company. For
purposes of this Agreement, "Significant Subsidiary" means any Subsidiary
that constitutes a significant subsidiary within the meaning of Rule 1-02
of Regulation S-X of the Securities and Exchange Commission (the "SEC").
(b) Each outstanding share of capital stock (or other voting security or equity
equivalent) of each Significant Subsidiary of Parent is duly authorized,
validly issued, fully paid and nonassessable and each such share (or other
voting security or equity equivalent) is owned by Parent or another
Subsidiary of Parent, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations
on voting rights, charges and other encumbrances of any nature whatsoever
(collectively, "Liens") other than such Liens which (individually or in the
aggregate) would not have a Material Adverse Effect on Parent. Except as
disclosed in the Parent SEC Documents, Parent does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of Parent on any matter. Exhibit 21
to Parent's Annual Report on Form 10-K for the year ended December 31,
1999, as filed with the SEC (the "Parent Annual Report"), was, at the time
so filed, a true, accurate and correct statement in all material respects
of all of the information required to be set forth therein by the
regulations of the SEC.
Section 2.3 Authority. On or prior to the date of this Agreement, the Boards
---------
of Directors of Parent and Sub have unanimously (i) declared the agreement of
merger (within the meaning of Section 251 of the DGCL) contained in this
Agreement advisable and fair to and in the best interest of Parent and Sub,
respectively, and their respective stockholders, and (ii) approved and adopted
this Agreement in accordance with the DGCL. Each of Parent and Sub has all
requisite corporate power to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been
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duly authorized by all necessary corporate action on the part of Parent and Sub,
subject to the filing of appropriate Merger documents as required by the DGCL.
This Agreement and the consummation of the transactions contemplated hereby have
been approved by Parent as the sole stockholder of Sub. This Agreement has been
duly executed and delivered by Parent and Sub and (assuming the valid
authorization, execution and delivery of this Agreement by the Company and the
validity and binding effect hereof on the Company) this Agreement constitutes
the valid and binding obligation of Parent and Sub enforceable against each of
them in accordance with its terms. The issuance of Parent Common Stock in
connection with the Merger and the filing of a registration statement on Form S-
4 with the SEC by Parent under the Securities Act of 1933, as amended (together
with the rules and regulations promulgated thereunder, the "Securities Act"),
for the purpose of registering the shares of Parent Common Stock to be issued in
the Merger (together with any amendments or supplements thereto, whether prior
to or after the effective date thereof, the "Registration Statement") have been
duly authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Assuming that all consents,
------------------------------------
approvals, authorizations and other actions described in this Section 2.4 and in
Section 5.7 have been obtained and all filings and obligations described in this
Section 2.4 have been made, and except as set forth in Section 2.4 of the letter
dated the date hereof and delivered on the date hereof by Parent to the Company,
which letter relates to this Agreement and is designated the Parent Letter (the
"Parent Letter"), the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Restated Certificate
of Incorporation of Parent (the "Parent Charter") or the By-laws of Parent (the
"Parent Bylaws") or the Certificate of Incorporation or By-laws of Sub, (ii) any
provision of the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets or (iv) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform their respective obligations hereunder
or prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal or stock exchange (a
"Governmental Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent or Sub or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended, (together with the rules and regulations
promulgated thereunder, the "Exchange Act"),
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(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (iv) such
filings as may be required in connection with the taxes described in Section
5.10, (v) applicable requirements, if any, of state securities or "blue sky"
laws ("Blue Sky Laws") and the NYSE, (vi) as may be required under applicable
non-U.S. laws of general applicability and (vii) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, materially impair the ability of Parent or Sub to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has timely filed all
-------------------------------
required documents with the SEC since December 31, 1999 (including, without
limitation, financial statements, exhibits and schedules included or
incorporated by reference therein and all other documents incorporated by
reference therein, the "Parent SEC Documents"). As of their respective dates,
the Parent SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and, at the
respective times they were filed, none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of Parent
included in the Parent SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the consolidated
financial position of Parent and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein that, in either case, have not been and will not
be material in amount). Except as disclosed in the Parent SEC Documents or as
required by generally accepted accounting principles, Parent has not, between
December 31, 1999 and the date hereof, made any material change in the
accounting practices or policies applied in the preparation of any of such
financial statements.
Section 2.6 Registration Statement and Proxy Statement. None of the
------------------------------------------
information to be supplied in writing by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the proxy
statement/prospectus included therein relating to the Stockholder Meeting (as
defined in Section 5.1) (together with any amendments or supplements thereto,
the "Proxy Statement") will (i) in the case of the Registration Statement, at
the time it becomes effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or (ii) in the case of the
Proxy Statement, at the time of the mailing of the Proxy Statement and at the
time of the Stockholder Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make
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the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement will comply (with respect to Parent)
as to form in all material respects with the provisions of the Securities Act,
and the Proxy Statement will comply (with respect to Parent) as to form in all
material respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Parent SEC Documents filed with the SEC prior to the date of this Agreement or
as disclosed in Section 2.7 of the Parent Letter, since December 31, 1999 (A)
Parent and its Subsidiaries have not incurred any liability or obligation
(indirect, direct or contingent) that would result in a Material Adverse Effect
on Parent, (B) Parent and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had a
Material Adverse Effect on Parent, (C) there has been no dividend or
distribution of any kind declared, paid or made by Parent on any class of its
stock, except for regular quarterly cash dividends to shareholders of Parent
consistent with past practice and (D) there has been no Material Adverse Effect
with respect to Parent.
Section 2.8 Permits and Compliance.
----------------------
(a) Except as disclosed in the Parent SEC Documents filed before the date
hereof, each of Parent and its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, charters, easements,
variances, exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for Parent or any of its Subsidiaries to own,
lease and operate its properties or to carry on its business as it is now
being conducted (the "Parent Permits"), except where the failure to have
any of the Parent Permits would not, individually or in the aggregate, have
a Material Adverse Effect on Parent. Except as disclosed in the Parent SEC
Documents filed before the date hereof, neither Parent nor any of its
Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative
or governmental rule or regulation or (C) any order, decree or judgment of
any Governmental Entity having jurisdiction over Parent or any of its
Subsidiaries, except, in the case of clauses (B) and (C), for any
violations that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent.
(b) Except as disclosed in the Parent SEC Documents filed prior to the date of
this Agreement or as disclosed in Section 2.8 of the Parent Letter, as of
the date hereof there is no contract or agreement that is or was required
to be filed by Parent as a material contract pursuant to Item 601 of
Regulation S-K under the Securities Act. Except as set forth in the Parent
SEC Documents filed prior to the date of this Agreement or Section 2.8 of
the Parent Letter, no event of default or event that, but for the giving of
notice or the lapse of time or both, would constitute an event of default
exists or, upon the consummation by Parent or Sub of the transactions
contemplated by this Agreement, will exist under any indenture, mortgage,
loan agreement, note or other agreement or instrument for borrowed money,
any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which Parent
or any of its Subsidiaries is a party or by which Parent or any such
Subsidiary is bound or to which any of the properties, assets or operations
of Parent or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent.
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Section 2.9 Actions and Proceedings. Except as set forth in the Parent SEC
-----------------------
Documents filed prior to the date of this Agreement and except as set forth in
Section 2.9 of the Parent Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
Parent or any of its Subsidiaries, or against or involving any of the present or
former directors, officers, employees of Parent or any of its Subsidiaries, as
such, or any of its or their properties, assets or business that, individually
or in the aggregate, would have a Material Adverse Effect on Parent or, as of
the date hereof, materially impair the ability of Parent to perform its
obligations hereunder. Except as set forth in Section 2.9 of the Parent Letter
or in the Parent SEC Documents filed prior to the date hereof, there are no
actions, suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the Knowledge of Parent (as hereinafter defined),
threatened against or involving Parent or any of its Subsidiaries or any of its
or their present or former directors, officers, employees as such, or any of its
or their properties, assets or business that, individually or in the aggregate,
would have a Material Adverse Effect on Parent or, as of the date hereof,
materially impair the ability of Parent to perform its obligations hereunder.
As of the date hereof, there are no actions, suits, or other litigation, legal
or administrative proceedings or governmental investigations pending or, to the
Knowledge of Parent, threatened against Parent or any of its Subsidiaries or any
of its or their present or former officers, directors, employees, as such, or
any of its or their properties, assets or business, in each case relating to the
transactions contemplated by this Agreement. For purposes of this Agreement,
"Knowledge of Parent" means the actual knowledge of the Chief Executive Officer,
Chief Financial Officer or General Counsel of Parent.
Section 2.10 Opinion of Financial Advisor. Parent has received the opinion of
----------------------------
Goldman, Sachs & Co. to the effect that, as of the date thereof, the Exchange
Ratio is fair to Parent from a financial point of view.
Section 2.11 No Required Vote of Parent Stockholders. No vote of the
---------------------------------------
securityholders of Parent is required by law, the Parent Charter or the Parent
Bylaws or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 2.12 Pooling of Interests; Reorganization. To the Knowledge of Parent
------------------------------------
after due inquiry and consultation with PriceWaterhouseCoopers, its independent
auditors, neither Parent nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure (or has become aware of any
fact or circumstance that) would, or would be reasonably expected to, jeopardize
the treatment of the Merger as a pooling of interests for accounting purposes
under applicable accounting rules and the applicable rules and regulations of
the SEC or (ii) taken any action or failed to take any action which action or
failure (or has become aware of any fact or circumstance that) would, or would
be reasonably expected to, jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368 of the Code.
Section 2.13 Brokers. No broker, investment banker or other person, other than
-------
Goldman, Sachs & Co., the fees and expenses of which will be paid by Parent (as
reflected in the agreement between Goldman, Sachs & Co. and Parent), is entitled
to any broker's, finder's or
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other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent.
Section 2.14 Operations of Sub. Sub is a direct, wholly owned subsidiary of
-----------------
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power
or authority would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company and each of its Subsidiaries are
duly qualified to do business, and are in good standing, in each jurisdiction
where the character of their properties owned or held under lease or the nature
of their activities makes such qualification necessary, except where the failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 3.2 Capital Structure.
-----------------
(a) As of the date hereof, the authorized capital stock of the Company consists
of 90,100,000 shares of capital stock of which 90,000,000 are shares of
Company Common Stock, and 100,000 are shares of preferred stock, par value
$1 per share, of the Company ("Company Preferred Stock"). At the close of
business on March 15, 2001, (i) 50,413,400 shares of Company Common Stock
(including associated Rights) were issued and outstanding, all of which
were validly issued, fully paid and nonassessable and free of preemptive
rights, (ii) 1,092 shares of Company Common Stock were held in the treasury
or by Subsidiaries of the Company; (iii) 8,013,681 shares of Company Common
Stock were reserved for issuance pursuant to options to purchase shares of
Company Common Stock ("Company Stock Options") issued and outstanding
pursuant to (A) the Company's Stock Option Plan, (B) the Company's Outside
Director Stock Option Plan and (C) the Bozell, Jacobs, Kenyon & Eckhardt,
Inc. Stock Option Plan (collectively, the "Company Stock Option Plans")
(with a weighted average exercise price between $28 and $29); (iv) an
additional 868,912 shares of Company Common Stock were authorized
(excluding shares subject to stockholder approval) for awards, but not yet
issued; and (v) no shares of Company Preferred Stock were issued or
outstanding. Set forth in Section 3.2 of the letter dated the date hereof
and delivered on the date hereof by the Company to Parent, which letter
relates to this Agreement and is designated the Company Letter (the
"Company Letter"), is a list of each benefit plan of the Company or its
Subsidiaries under which any securities of the
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Company are issuable or reserved for issuance. All the outstanding shares
of Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. As of the date of this
Agreement, except for shares reserved or issuable in connection with the
Rights Agreement, except as set forth above, except for the issuance of
shares of Company Common Stock upon the exercise of Company Stock Options
and except as set forth in Section 3.2 of the Company Letter, no shares of
capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. As of the date hereof, except (i) as
set forth above, (ii) for options, warrants, calls, rights, puts and
agreements that relate to securities of Subsidiaries other than Significant
Subsidiaries with exercise or purchase prices that, in the aggregate, do
not exceed $25 million and that are not referenced in Section 3.2 of the
Company Letter and (iii) as set forth in Section 3.2 of the Company Letter,
there are no options, warrants, calls, rights, puts or agreements to which
the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue,
deliver, sell or redeem, or cause to be issued, delivered, sold or
redeemed, any additional shares of capital stock (or other voting
securities or equity equivalents) or convertible or exchangeable securities
of the Company or any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, right, put or agreement. True, complete and correct copies
of the Company Charter and Company Bylaws have been delivered to Parent.
(b) Each outstanding share of capital stock (or other voting security or equity
equivalent) of each Significant Subsidiary of the Company is duly
authorized, validly issued, fully paid and nonassessable, and each such
share (or other voting security or equity equivalent) is owned by the
Company or another Subsidiary of the Company, free and clear of all Liens
other than such Liens which (individually or in the aggregate) are not
material. The Company does not have any outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote)
with the stockholders of the Company on any matter. Section 3.2(b) of the
Company Letter contains a true, accurate and correct statement in all
material respects of Exhibit 21 if it were dated as of March 15, 2001.
(c) The Company and its Subsidiaries have no mandatory obligations, contingent
or otherwise, to provide financing to or make any investment in (in the
form of a mandatory loan, capital contribution or similar payment) any
person or entity (other than wholly-owned subsidiaries) except (i) in the
case of such persons and entities other than Modem Media, Inc. for
obligations (A) involving no more than $15 million in the aggregate or (B)
as disclosed in the Company SEC Documents (as hereinafter defined) or in
Section 3.2(c) of the Company Letter and (ii) in the case of Modem Media,
Inc., the guarantees referenced in Section 3.2(d) of the Company Letter.
(d) Section 3.2(d) of the Company Letter discloses all the agreements that the
Company has with Modem Media, Inc. and all guarantees, indemnities and
other forms of credit support that the Company and its Subsidiaries have
undertaken in respect of liabilities and obligations incurred by Modem
Media, Inc.
(e) Except as set forth in Section 3.2(e) of the Company Letter, neither the
Company nor any of its Subsidiaries is a party to any agreement with Modem
Media, Inc. that
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restricts the acquisition or disposition of shares of Modem Media, Inc.
other than agreements with regard to restrictions relating to compliance
with applicable securities laws.
Section 3.3 Authority. On or prior to the date of this Agreement, the Board of
---------
Directors of the Company has by unanimous vote of those present (i) declared the
agreement of merger (within the meaning of Section 251 of the DGCL) contained in
this Agreement advisable and fair to and in the best interest of the Company and
its stockholders, (ii) approved and adopted this Agreement in accordance with
the DGCL, (iii) resolved to recommend the approval and adoption of the agreement
of merger (within the meaning of Section 251 of the DGCL) contained in this
Agreement by the Company's stockholders and (iv) directed that the agreement of
merger (within the meaning of Section 251 of the DGCL) contained in this
Agreement be submitted to the Company's stockholders for approval and adoption.
The Company has all requisite corporate power to enter into this Agreement and,
subject to approval by the stockholders of the Company of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to (x) approval of this
Agreement by the stockholders of the Company and (y) the filing of appropriate
Merger documents as required by the DGCL. This Agreement has been duly executed
and delivered by the Company and (assuming the valid authorization, execution
and delivery of this Agreement by Parent and Sub and the validity and binding
effect of the Agreement on Parent and Sub) constitutes the valid and binding
obligations of the Company enforceable against the Company in accordance with
its terms. The filing of the Proxy Statement with the SEC has been duly
authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming that all consents,
------------------------------------
approvals, authorizations and other actions described in this Section 3.4 and in
Section 5.7 have been obtained and all filings and obligations described in
this Section 3.4 have been made, except as set forth in Section 3.4 of the
Company Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the Company
Charter or the Company Bylaws, (ii) any provision of the comparable charter or
organization documents of any of the Company's Subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or any of their respective properties or assets or
(iv) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii), (iii) or (iv),
any such violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to the Company or any of its Subsidiaries in
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connection with the execution and delivery of this Agreement by the Company or
is necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement except for (i) in connection, or in compliance,
with the provisions of the HSR Act and the Securities Act and the Exchange Act,
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings, authorizations, orders and approvals as may be
required to obtain the State Takeover Approvals, (iv) such filings as may be
required in connection with the taxes described in Section 5.10, (v) applicable
requirements, if any, of Blue Sky Laws and the NYSE, (vi) as may be required
under non-U.S. laws of general applicability and (vii) such other consents,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The Company has timely filed all
-------------------------------
required documents with the SEC since December 31, 1999 (including, without
limitation, financial statements, exhibits and schedules included or
incorporated by reference therein and all other documents incorporated by
reference therein, the "Company SEC Documents"). Except as set forth in Section
3.5 of the Company Letter, as of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except as set forth in
Section 3.5 of the Company Letter, the consolidated financial statements
(including, in each case, any notes thereto) of the Company included in the
Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein that, in either case, have not been and will not
be material in amount). Except as disclosed in the Company SEC Documents or as
required by generally accepted accounting principles or as set forth in Section
3.5 of the Company Letter, the Company has not, between December 31, 1999 and
the date hereof, made any material change, in the accounting practices or
policies applied in the preparation of any of such financial statements.
Section 3.6 Registration Statement and Proxy Statement. None of the
------------------------------------------
information to be supplied in writing by the Company for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will (i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
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statements therein not misleading or (ii) in the case of the Proxy Statement, at
the time of the mailing of the Proxy Statement and at the time of the
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement will comply (with respect to
the Company) as to form in all material respects with the provisions of the
Securities Act, and the Proxy Statement will comply (with respect to the
Company) as to form in all material respects with the provisions of the Exchange
Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Company SEC Documents filed with the SEC prior to the date of this Agreement or
as disclosed in Section 3.7 of the Company Letter, since December 31, 1999 (A)
the Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent) that would result in a Material
Adverse Effect on the Company, (B) the Company and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had a Material Adverse Effect on the Company, (C) there has
been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its stock except for regular quarterly cash dividends to
shareholders of the Company consistent with past practice, (D) there has been no
Material Adverse Effect with respect to the Company and (E) since September 30,
2000 through the date hereof, the Company has conducted its business in the
ordinary course in all material respects.
Section 3.8 Permits and Compliance.
----------------------
(a) Except as disclosed in the Company SEC Documents filed before the date
hereof, each of the Company and its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for the Company or any of its Subsidiaries to
own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Company Permits"), except where the failure to
have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Documents filed before the date hereof,
neither the Company nor any of its Subsidiaries is in violation of (A) the
charter, by-laws or other organizational documents of the Company or any of
its Significant Subsidiaries, (B) the charter, by-laws or other
organizational documents of any Subsidiary that is not a Significant
Subsidiary, (C) any applicable law, ordinance, administrative or
governmental rule or regulation or (D) any order, decree or judgment of any
Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries, except, in the case of clauses (B), (C) or (D), for any
violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
(b) Section 3.8 of the Company Letter contains, as of the date hereof, each
contract or agreement that would be required to be filed by the Company as
a material contract pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act if the Company were filing an annual report on 10-K. The
material contracts disclosed in Section 3.8 of the Company Letter are in
full force and effect, as of the date hereof, except as otherwise expressly
stated in
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the Company SEC Documents or Section 3.8 of the Company Letter. Except as
set forth in Section 3.8 of the Company Letter, neither the Company nor any
of its Subsidiaries is a party to or bound by any agreement evidencing, or
guarantee relating to, indebtedness for borrowed money to the extent the
aggregate principal amount outstanding thereunder exceeds $10,000,000. To
the knowledge of the Company, Section 3.8 of the Company Letter also sets
forth all agreements and contracts of the Company or any of its
Subsidiaries (i) that both (A) are not client contracts and (B) purport to
limit, curtail or restrict the ability of the Company or any of its
Subsidiaries or affiliates to compete in any geographic area or line of
business or (ii) that both (A) are client contracts and (B) from and after
the Closing would, by their own terms, purport to restrict, in any material
respect, the continuation of the current conduct of the businesses of
Parent and its Subsidiaries, as described in the Parent SEC Documents filed
before the date hereof. Except as set forth in the Company SEC Documents
filed prior to the date of this Agreement or as disclosed in Section 3.8 of
the Company Letter, no event of default or event that, but for the giving
of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by the Company of the transactions
contemplated by this Agreement will exist under any indenture, mortgage,
loan agreement, note or other agreement or instrument for borrowed money,
any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or
any such Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject, other than any
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
Section 3.9 Tax Matters. (a) Except as otherwise set forth in Section 3.9 of
-----------
the Company Letter, (i) the Company and each of its Subsidiaries have timely
filed all Tax Returns (as hereinafter defined) required to have been filed with
a national taxing authority, and all material Tax Returns required to have been
filed with other taxing authorities, or appropriate extensions therefor have
been properly obtained, and such Tax Returns are correct and complete, except to
the extent that any failure to so file or any failure to be correct and complete
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (ii) all Taxes (as hereinafter defined) shown to be due on such Tax
Returns have been timely paid or extensions for payment have been properly
obtained, except to the extent that any failure to so pay or so obtain such an
extension would not, individually or in the aggregate, have a Material Adverse
Effect on the Company; (iii) the Company and each of its Subsidiaries have
complied in all material respects with all rules and regulations relating to the
withholding of Taxes except to the extent that any failure to comply with such
rules and regulations would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; (iv) no material items that have been
contested in writing by the relevant taxing authority in connection with any
examination of the Tax Returns referred to in clause (i) are pending on the date
hereof; and (v) all material deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full or are being timely and properly contested. For purposes of this
Agreement: (i) "Taxes" means any federal, state, local, foreign or provincial
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or added minimum, ad valorem,
value added, transfer or excise tax, or other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty imposed by any Governmental Entity, and (ii) "Tax Return"
means any return, report or similar statement (including the attached schedules)
18
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required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
(b) The Company has not constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section 355(a)(1)(A) of the
Code) in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code since the effective date of Section 355(e) of the
Code, and no Subsidiary has constituted such a "distributing corporation"
or "controlled corporation" unless any Subsidiary constituting such a
"distributing corporation" or "controlled corporation" would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 3.10 Actions and Proceedings. Except as set forth in the Company SEC
-----------------------
Documents filed prior to the date of this Agreement and except as set forth in
Section 3.10 of the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
the Company or any of its Subsidiaries, or against or involving any of the
present or former directors, officers, employees of the Company or any of its
Subsidiaries, as such, or any of its or their properties, assets, or business or
any Company Plan (as hereinafter defined) that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or, as of the
date hereof, materially impair the ability of the Company to perform its
obligations hereunder. Except as set forth in the Company SEC Documents filed
prior to the date of this Agreement or in Section 3.10 of the Company Letter,
there are no actions, suits or claims or legal, administrative or arbitration
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries or any of
its or their present or former directors, officers, employees, as such, or any
of its or their properties, assets or business that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or, as of the
date hereof, materially impair the ability of the Company to perform its
obligations hereunder. As of the date hereof, there are no actions, suits, or
other litigation, legal or administrative proceedings or governmental
investigations pending or, to the Knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any of its or their present or former
officers, directors, employees or any of its or their properties, assets or
business, in each case relating to the transactions contemplated by this
Agreement. For purposes of this Agreement, "Knowledge of the Company" means the
actual knowledge of the individuals identified on Section 3.10 of the Company
Letter.
Section 3.11 Employee Benefits.
-----------------
(a) Except as would not have a Material Adverse Effect on the Company, (i) each
Company Plan has been administered and is in compliance in all material
respects with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code, the terms of such plan and all other
applicable statutes and governmental rules and regulations, (ii) with
respect to each Company Plan, no governmental audits, actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the Knowledge of the Company, threatened, and (iii) no
"reportable event" (within the meaning of Section 4043 of ERISA) has
occurred with respect to any Company Plan for which the 30-day notice
requirement has not been waived. Neither the Company nor any of its ERISA
Affiliates (as hereinafter defined) has withdrawn from any Company Plan or
Company Multiemployer Plan (as hereinafter
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defined) or instituted, or is currently considering taking, any action to
do so. No Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived. The Company has provided or made available to Parent
true and complete copies of each material Company Plan other than (i) any
such material Company Plan maintained outside of the United States
primarily for the benefit of employees working outside of the United States
and (ii) any such material Company Plan which is an employment contract,
and, with respect to any such material Company Plan which is not in written
form, a summary of the material terms of such Company Plan. With respect to
each Company Plan that is an employment contract which provides for annual
base salary in excess of $350,000, to the specific Knowledge of the Company
as of the date hereof, the Company has provided a true and complete copy
thereof to Parent. The Company will use its reasonable best efforts to
provide to Parent, between the date hereof and the Effective Time, a copy
of each Company Plan that is an employment contract which provides for
annual base salary in excess of $350,000.
(b) No event has occurred and there exists no condition or set of circumstances
in connection with which the Company or any ERISA Affiliate or Company Plan
fiduciary could be subject to any liability under the terms of such Company
Plans, ERISA, the Code or any other applicable law, other than liabilities
for benefits payable in the normal course, which would have a Material
Adverse Effect on the Company.
(c) As used herein, (i) "Company Plan" means a "pension plan" (as defined in
Section 3(2) of ERISA (other than a Company Multiemployer Plan)), a
"welfare plan" (as defined in Section 3(1) of ERISA), or any bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, holiday pay, vacation,
severance, death benefit, sick leave, fringe benefit, insurance, each
employment contract (which, to the Knowledge of the Company, is in effect
and provides for annual base salary in excess of $350,000) or other plan,
arrangement or understanding, in each case established or maintained by the
Company or any of its ERISA Affiliates or as to which the Company or any of
its ERISA Affiliates has contributed or otherwise may have any liability,
(ii) "Company Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which the Company or any of its ERISA
Affiliates is or has been obligated to contribute or otherwise may have any
liability and (iii) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is under common
control or would be considered a single employer with such person pursuant
to Section 414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to Section 4001(b) of ERISA
and the regulations promulgated thereunder.
(d) Neither the Company nor any of its Subsidiaries has disseminated in writing
or otherwise broadly or generally notified employees of any intent or
commitment (whether or not legally binding) to create any additional
Company Plan or to amend, modify or terminate any existing Company Plan
which would be reasonably expected to result in material liabilities to the
Company and its Subsidiaries.
(e) The aggregate amount required to be contributed to the Company Executive
Benefit Trust as a result of the consummation of the transactions
contemplated by this Agreement, either alone or in connection with any
other event, shall not exceed $55,000,000.
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Section 3.12 Labor Matters. As of the date hereof, neither the Company nor any
-------------
of its Subsidiaries is a party to any collective bargaining agreement. Except
as would not have a Material Adverse Effect on the Company, (i) there is no
material labor strike, dispute, slowdown or stoppage pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, and (ii) to the Knowledge of the Company, no efforts or
attempts to unionize or enter into a collective bargaining agreement are ongoing
or threatened. Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, (i) neither the Company nor any of its
Subsidiaries, nor their respective businesses has committed any unfair labor
practices or violated any applicable employment laws in connection with the
operation of the respective businesses, and (ii) there is no pending or, to the
Knowledge of the Company, threatened charge or complaint against the Company or
any of its Subsidiaries by the National Labor Relations Board or any comparable
state agency, or by any employee or class of employees or governmental agency
relating to a purported violation of any applicable employment laws.
Section 3.13 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of Morgan Stanley & Co. Incorporated to the effect that, as of the date
thereof, the Exchange Ratio is fair to the Company's stockholders from a
financial point of view.
Section 3.14 Required Vote of Company Stockholders. The affirmative vote of
-------------------------------------
the holders of a majority of the outstanding shares of Company Common Stock is
required to approve and adopt the agreement of merger (within the meaning of
Section 251 of the DGCL) contained in this Agreement. No other vote of the
securityholders of the Company is required by law, the Company Charter or the
Company Bylaws or otherwise in order for the Company to consummate the Merger
and the transactions contemplated hereby.
Section 3.15 Pooling of Interests; Reorganization. To the Knowledge of the
------------------------------------
Company after due inquiry and consultation with Arthur Andersen, its independent
auditors, neither the Company nor any of its Subsidiaries has (i) taken any
action or failed to take any action which action or failure (or has become aware
of any fact or circumstance that) would, or would be reasonably expected to,
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes under applicable accounting rules and the applicable rules and
regulations of the SEC or (ii) taken any action or failed to take any action
which action or failure (or has become aware of any fact or circumstance that)
would, or would be reasonably expected to, jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368 of the Code.
Section 3.16 Brokers. No broker, investment banker or other person, other than
-------
Morgan Stanley & Co. Incorporated, the fees and expenses of which will be paid
by the Company (as reflected in an agreement between Morgan Stanley & Co.
Incorporated and the Company dated February 29, 2000, a copy of which has been
furnished to Parent), is entitled to any broker's, finder's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
Section 3.17 Amendment to the Rights Agreement. The Board of Directors of the
---------------------------------
Company has taken all necessary action under the Rights Agreement (including any
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amendment thereof) so that (a) none of the execution or delivery of this
Agreement, the exchange of the shares of Parent Common Stock for the shares of
Company Common Stock in accordance with Article I or any other transaction
contemplated hereby will cause (i) the rights issued pursuant to the Rights
Agreement to become exercisable under the Rights Agreement, (ii) a Stock
Acquisition Date (as defined in the Rights Agreement) to occur, (iii) Parent or
the Sub to be deemed an Acquiring Person (as defined in the Rights Agreement) or
(iv) a Triggering Event (as defined in the Rights Agreement) to occur upon any
such event; and (b) the execution and delivery of this Agreement and the other
transactions contemplated hereby will be exempt from the Rights Agreement. The
Company has furnished Parent with a true and correct copy of the executed
amendment to the Rights Agreement that has the effects specified in the
preceding sentence.
Section 3.18 Takeover Statutes. The Company's Board has approved, for purposes
-----------------
of Section 203 of the DGCL, the Merger. The Board of Directors of the Company
has adopted an omnibus resolution providing that this Agreement and the
transactions contemplated hereby are exempt from the requirements of any
applicable "moratorium", "control share", "fair price", "affiliate transaction",
"business combination" or other antitakeover laws or regulations of any state
("State Takeover Statutes").
Section 3.19 Accuracy of Earn-Out Schedule. Section 3.19 of the Company Letter
-----------------------------
lists, as of March 8, 2001, the Company's good faith estimate of the material
payment obligations (whether contingent or otherwise) of the Company and its
Subsidiaries in respect of earn-outs, deferred purchase price arrangements or
similar arrangements that have arisen in connection with investments in or
acquisitions of companies, businesses or business lines, based on the most
recently available data after due inquiry.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
--------------------------------------
(a) Except as expressly permitted by clauses (i) through (xvii) of this Section
4.1(a), during the period from the date of this Agreement through the
Effective Time, the Company shall (and shall cause its Significant
Subsidiaries to and shall use reasonable best efforts to cause its other
Subsidiaries to) in all material respects carry on its business in the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it. Without limiting
the generality of the foregoing, and except as otherwise contemplated by
this Agreement or as set forth in Section 4.1 of the Company Letter, the
Company shall not (and (1) in the case of clauses (iii), (iv), (v), (vi),
(viii), (ix) and (xvi), shall cause its Subsidiaries not to and (2) in the
case of clauses (i), (ii), (vii), (x)-(xv) and (xvii), shall cause its
Significant Subsidiaries not to and shall use reasonable best efforts to
cause its other Subsidiaries not to) without the prior written consent of
Parent, which consent shall not be unreasonably withheld or delayed:
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(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, or otherwise make
any payments to its stockholders in their capacity as such other than
dividends and distributions by any Subsidiary to its parent and regular
quarterly cash dividends to shareholders of the Company consistent with
past practice, (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any shares
of its capital stock, any other voting securities or equity equivalent or
any securities convertible into, or any rights, warrants or options to
acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (A) the issuance or delivery of shares
of Company Common Stock including the associated Rights upon the exercise
of existing Company Stock Options in accordance with their terms as
currently in effect, (B) the issuance or delivery of options exercisable
for Company Common Stock under Company Stock Option Plans in the ordinary
course of business consistent with past practice and in an amount not to
exceed options to purchase 180,000 shares of Company Common Stock in the
aggregate (whether or not subject to subsequent approval of Parent's
stockholders); provided that no grants may be made to any officers,
directors or key employees whose annual base salary exceeds $350,000; (C)
the issuance or delivery of restricted stock in the ordinary course of
business consistent with past practice and in an amount not to exceed
15,500 shares, in the aggregate; (D) the issuance or delivery of shares of
Company Common Stock (including the associated Rights) pursuant to the
Company's Nonemployee Directors Deferred Stock Compensation Program or
401(k) retirement program, in each case in the ordinary course, and in
amounts not to exceed 20,000 shares and 160,000 shares, respectively, in
the aggregate, provided, that, at the request of Parent and subject to the
agreement of the Company and further subject to the requirements of
applicable law or existing contractual restrictions, in lieu of the
delivery of shares pursuant to either such plan, cash shall be delivered
and may be used to purchase such shares in the market; and (E) subject to
Section 3.17 which shall remain accurate, issuances pursuant to the Rights
Agreement;
(iii) amend its charter or by-laws or other comparable charter or organizational
documents;
(iv) acquire or agree to acquire (except for any acquisition or series of
related acquisitions that does not involve more than $3 million in the
aggregate and that, when aggregated with all other acquisitions by the
Company and its Subsidiaries between the date hereof and the Effective
Time, does not involve in excess of $15 million) (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of
or equity in, or by any other manner, any business or any corporation,
limited liability company, partnership, association or other business
organization or division thereof or (B) any assets that are material,
individually or in the aggregate, to the Company and its Subsidiaries taken
as a whole;
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(v) sell, lease (as lessor), license, mortgage, encumber or otherwise
dispose of material properties or assets, other than in connection with
sales of inventory in the ordinary course of business;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) indebtedness or
guarantees in the ordinary course of business, (B) loans, advances,
capital contributions and other investments between the Company and any
Subsidiary or between Subsidiaries and (C)immaterial advances to
employees in the ordinary course of business;
(vii) enter into, adopt or amend in any material respect any pension,
retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, bonus, group insurance or other employee benefit,
incentive, welfare or severance plan, agreement or arrangement, Company
Plan or employment or consulting agreement, except as required by
applicable law and except in the ordinary course of business;
(viii) increase the compensation payable or to become payable to employees
other than in the ordinary course of business consistent with past
practice and other than as described in Section 4.1 of the Company
Letter;
(ix) enter into any material contract (as used in item 601(b)(10) of
Regulation S-K) or amend in any material respect any material contract
(as used in item 601(b)(10) of Regulation S-K;
(x) make capital expenditures in excess of $25 million, in the aggregate;
(xi) change, in any material respect, any accounting practices or
methodologies or revalue, in any material respect, any of its assets
other than in the ordinary course consistent with past practices or as
required by generally accepted accounting principles;
(xii) make or revoke any material Tax election or settle or compromise any
material Tax liability or change (or make a request to any Taxing
authority to change) any material aspect of its method of accounting for
Tax purposes;
(xiii) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice of liabilities
reflected or reserved against in the Company's consolidated balance
sheet as of September 30, 2000 (or the notes thereto) as included in the
Company SEC Documents (or off-balance sheet liabilities incurred as of
such date in the ordinary course of business consistent with past
practice), or incurred subsequent to such date in the ordinary course of
business consistent with past practice;
(xiv) refrain from enforcing any confidentiality, standstill or similar
agreement, in each case relating to any Takeover Proposal to which the
Company is a party;
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(xv) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby;
(xvi) enter into any agreement that purports to limit or otherwise restricts
(by its own terms) in any material respect, after the Effective Time,
Parent or any of its Subsidiaries (other than the Company and its
Subsidiaries) from engaging or competing in any line of business or in
any geographic area; or
(xvii) authorize, take, or agree to take, any of the actions described in
clauses (i) through (xvi) above or any action which would be reasonably
likely to result in any of the conditions to the Merger set forth in
Article VI hereof not being satisfied;
provided that, to the extent any action is specifically permitted under this
Section 4.1(a), nothing set forth in clauses (i) through (xvii) above shall be
construed to limit any such action.
(b) Except as otherwise contemplated by this Agreement or as set forth in
Section 4.1 of the Parent Letter, Parent shall not, and shall not permit
any of its Significant Subsidiaries to, without the prior written consent
of the Company, which consent shall not be unreasonably withheld or
delayed:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, or otherwise make
any payments to its stockholders in their capacity as such, other than
dividends and distributions by any Subsidiary to its parent and regular
quarterly cash dividends to shareholders of Parent consistent with past
practice;
(ii) liquidate or dissolve Parent;
(iii) amend the charter or by-laws of Parent in any manner that would be
adverse to holders of Parent Common Stock or the holders of Company
Common Stock; or
(iv) take, propose to take, or agree in writing or otherwise to take, any of
the actions described in clauses (i) through (iii) above or any action
which would be reasonably likely to result in any of the conditions to
the Merger set forth in Article VI hereof not being satisfied.
Section 4.2 No Solicitation by the Company.
------------------------------
(a) From the date hereof until the earlier of the Effective Time or the date on
which this Agreement is terminated in accordance with the terms hereof, the
Company shall not, nor shall it authorize or knowingly allow any of its
Subsidiaries to, nor shall it authorize or knowingly allow any officer,
director or employee of or any financial advisor, attorney or other advisor
or representative of, the Company or any of its Subsidiaries to, (i)
solicit, initiate or purposefully encourage the submission of, any Takeover
Proposal (as hereafter defined), (ii) enter into any binding or non-binding
agreement with respect to any Takeover Proposal (other than a
confidentiality agreement to the extent information is permitted to be
furnished to any person pursuant to this Section 4.2(a)), (iii) participate
in any discussions or negotiations
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regarding, or furnish to any person any information with respect to or in
connection with, or take any other action to facilitate knowingly any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; (iv) amend or grant any
waiver or release under any confidentiality, standstill or similar
agreement, in each case relating to a Takeover Proposal or (v) except as
expressly contemplated by this Agreement with respect to the Merger, amend
or grant any waiver or release or approve any transaction or redeem any
rights under the Rights Agreement; provided, however, that, nothing
-------- -------
contained in this Agreement shall prevent the Company or its Board of
Directors from (i) complying with Rules 14d-9 and 14e-2 under the Exchange
Act or publicly disclosing the existence of a Takeover Proposal involving
the Company to the extent required by applicable law or (ii) furnishing
non-public information to, or entering into discussions or negotiations
with, any person or entity in connection with an unsolicited bona fide
written Takeover Proposal by such person or entity, if (x) the failure to
take such action would, in the good faith judgment of the Board of
Directors of the Company, taking into consideration the advice of
independent legal counsel of the Company, violate the fiduciary duties of
the Board of Directors of the Company to the Company's stockholders under
applicable law, (y) (1) such Takeover Proposal is not subject to any
financing contingencies or complete copies of executed, bona fide customary
commitments from reputable financial institutions for all necessary
financing shall have been furnished to the Company and (2) the Board of
Directors of the Company has determined in good faith that (A) such
Takeover Proposal, if accepted, would be reasonably likely to be
consummated taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, and (B) after
consultation with and considering the advice of independent financial
advisors of national standing and after taking into account the strategic
benefits to be derived from the Merger and the long term prospects of
Parent and its Subsidiaries and after consideration of other matters it
deems relevant, would, if consummated, result in a transaction more
favorable to the Company's stockholders from a financial point of view than
the Merger (a Takeover Proposal satisfying such criteria being a "Superior
Proposal"), and (z) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with provisions not less favorable to the Company
than those contained in the Confidentiality Agreements (as defined below)
and provides at least two full business days' advance notice to Parent to
the effect that it is proposing to take such action, together with the
information required to be provided pursuant to Section 4.2(b). For
purposes of this Agreement, "Takeover Proposal" means any offer or proposal
by any third party (or binding or non-binding agreement by any third party
with the Company with respect to, or any public announcement or SEC filing
by any third party that indicates an intention to make, such an offer or
proposal) (a) for a merger, consolidation, share exchange, recapitalization
or other business combination involving the Company or any of its
Significant Subsidiaries or (b) to acquire in any manner (including by
disposition or transfer), directly or indirectly, a 15% or greater equity
interest in, 15% or more of the voting securities or capital stock of, or
15% or more of the assets of, the Company or any of its Significant
Subsidiaries, other than the transactions contemplated by this Agreement.
(b) With respect to any Takeover Proposal as to which the Company proposes to
take any action permitted by clause (ii) of the proviso in Section 4.2(a)
above, the Company shall notify Parent of such Takeover Proposal as
promptly as practicable (but in no case later than 48 hours) after the
Company's decision to take such action, and shall provide Parent with
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the material terms of such Takeover Proposal and the identity of the person
making it and all information provided by the Company to such person in
accordance with Section 4.2(a) to the extent not previously delivered to
Parent, and shall thereafter convey to Parent, as promptly as practicable
(but in no case later than 48 hours) after the Company becomes aware
thereof, all material changes to such terms and all additional information
provided by the Company to such person to the extent not previously
delivered to Parent. Subject to Section 4.2(a), immediately after the
execution and delivery of this Agreement, the Company will, and will direct
its Subsidiaries to, and will direct its and their respective officers,
directors, employees, financial advisors, attorneys, other advisors and
representatives to, cease and terminate all existing activities,
discussions and negotiations with any parties conducted heretofore with
respect to any possible Takeover Proposal.
Section 4.3 Pooling of Interests; Reorganization. During the period from the
------------------------------------
date of this Agreement through the Effective Time, unless the other party shall
otherwise agree in writing, none of Parent, the Company or any of their
respective Subsidiaries shall (a) knowingly take or fail to take any action
which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes under accounting rules and the
applicable SEC rules and regulations or (b) knowingly take or fail to take any
action which action or failure would jeopardize the qualification of the Merger
as a reorganization within the meaning of Section 368 of the Code. Between the
date of this Agreement and the Effective Time, Parent and the Company each shall
take, or cause to be taken, all actions reasonably necessary in order for the
Merger to be treated as a pooling of interests for accounting purposes.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting. The Company will, as soon as practicable
-------------------
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of stockholders (the "Stockholder Meeting") for the purpose of
considering the approval and adoption of the agreement of merger (within the
meaning of Section 251 of the DGCL) contained in this Agreement. The Company
will, through its Board of Directors, recommend to its stockholders approval and
adoption of this Agreement, shall use all reasonable efforts to solicit such
approval by its stockholders and shall not withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent such recommendation (or
announce publicly its intention to do so), except if the Company has complied
with Section 4.2, an unsolicited bona fide written Superior Proposal is then-
outstanding, the Company provides at least two full business days' advance
notice to Parent to the effect that it is proposing to take such action,
together with the information required to be provided pursuant to Section
4.2(b), if applicable, and in the good faith judgment of the Company's Board of
Directors, taking into consideration the advice of independent legal counsel of
the Company, the making of, or the failure to withdraw or modify, such
recommendation would violate the fiduciary duties of such Board of Directors to
the Company's stockholders under applicable law. The Company agrees to submit
this Agreement to its stockholders for approval and adoption whether or not the
Board of Directors of the Company determines at any time subsequent to the date
hereof that this
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Agreement is no longer advisable and recommends that the stockholders of the
Company reject it and notwithstanding any Takeover Proposal.
Section 5.2 Preparation of the Registration Statement and the Proxy Statement.
-----------------------------------------------------------------
(a) The Company and Parent shall promptly prepare, and the Company shall file
with the SEC, the Proxy Statement and Parent shall prepare and file with
the SEC the Registration Statement, in which the Proxy Statement will be
included as a prospectus. Each of Parent and the Company shall use its
reasonable best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing. As promptly as practicable after the Registration Statement shall
have become effective, the Company shall mail the Proxy Statement to its
stockholders. Parent shall also take any action reasonably required to be
taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger (other than qualifying to do
business in any jurisdiction where it is not now so qualified or to file a
general consent to service of process in any jurisdiction), and the Company
shall furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection with any
such action. The Company and Parent shall use reasonable best efforts to
cause their accountants and counsel to deliver necessary or required
instruments in connection with the Registration Statement and the Proxy
Statement, including opinions, consents and certificates. If, at any time
prior to the Effective Time, the Company or Parent shall become aware of
any event that is required to be described in an amendment or supplement to
the Registration Statement or the Proxy Statement, then such party shall
promptly so advise the other. Each of the Company and Parent shall give the
other reasonable opportunity to review and comment on any filing (including
amendments and supplements) in connection with the Registration Statement
or the Proxy Statement before so filed and will provide the other with a
copy of each such filing. In addition, each will advise the other of any
comments (oral or written) received from the staff of the SEC in connection
with the Registration Statement or the Proxy Statement.
(b) The Company shall use all reasonable best efforts to cause to be delivered
to Parent a letter of Arthur Andersen LLP, the Company's independent
auditors, dated a date within two business days before the date on which
the Registration Statement shall become effective (and before the date on
which each posteffective amendment to the Registration Statement shall
become effective) and addressed to Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
(c) Parent shall use all reasonable best efforts to cause to be delivered to
the Company a letter of PriceWaterhouseCoopers, Parent's independent
auditors, dated a date within two business days before the date on which
the Registration Statement shall become effective (and before the date on
which each posteffective amendment to the Registration Statement shall
become effective) and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
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Section 5.3 Access to Information. (a) Subject to currently existing
---------------------
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, including those in the Confidentiality Agreement, dated December
15, 2000, between Parent and the Company, relating to information provided by
the Company, as amended or supplemented (the "Company Confidentiality
Agreement"), the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors and other representatives
of Parent reasonable access to, and permit them to make such inspections as they
may reasonably require of, during normal business hours during the period from
the date of this Agreement through the Effective Time, all of its properties,
books, contracts, commitments and records (including, without limitation, the
work papers of independent accountants, if available and subject to the consent
of such independent accountants).
(b) Subject to currently existing contractual and legal restrictions applicable
to Parent and any of its Subsidiaries or the Company and any of its
Subsidiaries, as the case may be, including those in the Company
Confidentiality Agreement and the Confidentiality Agreement, dated March
2001, between the Company and Parent relating to information provided by
Parent, as amended or supplemented (together with the Company
Confidentiality Agreement, the "Confidentiality Agreements"), each of
Parent and the Company shall, and shall cause each of its Significant
Subsidiaries to, furnish promptly to the other (A) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and
(B) all other information concerning its business, properties and personnel
as the other may reasonably request.
(c) In addition the Company shall provide Parent, as soon as reasonably
practicable following the delivery to management, such monthly financial
statements and data as are regularly prepared for distribution to Company
management, all of which shall be kept confidential pursuant to the
supplement dated March 9, 2001 to the Company Confidentiality Agreement.
(d) No investigations pursuant to this Section 5.3 shall affect or be deemed to
modify any representations or warranties hereunder. All information
obtained pursuant to this Section 5.3 shall be kept confidential in
accordance with the Confidentiality Agreements.
Section 5.4 Compliance with the Securities Act.
----------------------------------
(a) Section 5.4(a) of the Company Letter contains a list identifying all
persons who, at the time of the Stockholder Meeting, may be deemed to be
"affiliates" of the Company as that term is used in paragraphs (c) and (d)
of Rule 145 under the Securities Act and under applicable SEC accounting
releases with respect to pooling of interests accounting treatment (the
"Rule 145 Affiliates"). The Company shall use its reasonable best efforts
to cause each person who is identified as a Rule 145 Affiliate in such list
to execute and deliver to Parent within 30 days of the date hereof a
written agreement in substantially the form of Exhibit 5.4(a) hereto (the
--------------
"Company Affiliate Letter"). Prior to the Effective Time, the Company
shall amend and supplement Section 5.4(a) of the Company Letter and use its
reasonable best efforts to cause each additional person who is identified
as a Rule 145 Affiliate of the Company to execute the Company Affiliate
Letter.
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(b) Section 5.4(b) of the Parent Letter contains a list identifying those
persons who may be affiliates of Parent under applicable SEC accounting
releases with respect to pooling of interests accounting treatment. Parent
shall use its reasonable best efforts to enter into a written agreement in
substantially the form of Exhibit 5.4(b) hereto (the "Parent Affiliate
--------------
Letter") within 30 days of the date hereof with each of such persons
identified in the foregoing list. Prior to the Effective Time, Parent
shall amend and supplement Section 5.4(b) of the Parent Letter and use its
reasonable best efforts to cause each additional person who is identified
as an affiliate of Parent to execute the Parent Affiliate Letter.
Section 5.5 Current NYSE Listing. Each of Parent and the Company shall use its
--------------------
reasonable best efforts to continue the listing of the Parent Common Stock and
the Company Common Stock on the NYSE during the term of this Agreement to the
extent necessary so that appraisal rights will not be available to stockholders
of the Company under Section 262 of the DGCL.
Section 5.6 Fees and Expenses.
-----------------
(a) Except as provided in this Section 5.6 and Section 5.10, whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby including, without
limitation, the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses and all filing fees payable to
Governmental Entities (including, without limitation, filing fees under the
Securities Act, the Exchange Act and the HSR Act) shall be shared equally
by Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary, if (i)(A)
this Agreement is terminated by the Company or Parent pursuant to Section
7.1.(d)(i) or 7.1(e) or by Parent pursuant to Section 7.1(b), (B) a
Takeover Proposal (or the intent to make a Takeover Proposal), whether or
not conditional, was publicly announced or made to the Company or its Board
either publicly or privately or to its stockholders generally by a person
or entity that, together with its affiliates and controlling persons or
entities, has assets of not less than $100 million at any time from and
after the date hereof and on or before the date of the event that gave rise
to such termination and (C) at any time on or before the first anniversary
of any such termination a Third Party Acquisition Event (as defined below)
occurs or the Company shall enter into any letter of intent, agreement in
principle, definitive acquisition agreement or other similar agreement with
respect to a Third Party Acquisition Event or (ii) this Agreement is
terminated by Parent pursuant to Section 7.1(f), then, in each case, the
Company shall (without prejudice to any other rights that Parent may have
against the Company for a breach of this Agreement) pay to Parent a fee of
$80 million in cash, such payment to be made promptly, but in no event
later than, in the case of clause (i), the closing of such Third Party
Acquisition Event or the signing of such agreement, as the case may be, or,
in the case of clause (ii), the first day following such termination.
(c) All payments under this Section 5.6 shall be made by wire transfer of
immediately available U.S. dollar funds to an account designated by Parent.
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(d) The Company acknowledges that the agreements contained in Section 5.6(b)
and (c) are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Parent would not have entered
into this Agreement; accordingly, if the Company fails to pay any amount
when, due pursuant to Sections 5.6(b) and (c) and, in order to obtain such
payment, Parent brings a suit or action which results in a judgment against
the Company, then the Company shall pay to Parent its costs and expenses
(including attorneys' fees) in connection with such suit or action.
As used in this Agreement, a "Third Party Acquisition Event" means (i)
a transaction or series of transactions pursuant to which any person or group
(as such term is defined under the Exchange Act), other than Parent or Sub, or
any affiliate thereof ("Third Party"), acquires more than 25% of the equity
securities or voting power of the Company or any of its Significant
Subsidiaries, pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger, consolidation, share exchange or other business combination involving
the Company or any of its Significant Subsidiaries pursuant to which any Third
Party acquires ownership of more than 25% of the outstanding equity securities
or voting power of the Company or any of its Significant Subsidiaries or of the
entity surviving such merger or business combination or resulting from such
consolidation, (iii) any other transaction or series of transactions pursuant to
which any Third Party acquires control of assets of the Company or any of its
Significant Subsidiaries (including, for this purpose, outstanding equity
securities of Significant Subsidiaries of such party) having a fair market value
equal to more than 25% of the fair market value of all the consolidated assets
of the Company and its Subsidiaries, taken as a whole, immediately prior to such
transaction or series of transactions, or (iv) any transaction or series of
transactions pursuant to which any Third Party acquires control of the Board of
Directors of the Company or by which nominees of any Third Party are elected or
appointed to a majority of the seats on the Board of Directors of the Company.
Section 5.7 Company Stock Plans. (a) Not later than the Effective Time, each
-------------------
Company Stock Option which is outstanding immediately prior to the Effective
Time pursuant to a Company Stock Option Plan shall become and represent an
option to purchase the number of shares of Parent Common Stock (a "Substitute
Option") (decreased to the nearest full share) determined by multiplying (i) the
number of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time by (ii) the Exchange Ratio, at an
exercise price per share of Parent Common Stock (rounded up to the nearest cent)
equal to the exercise price per share of Company Common Stock immediately prior
to the Effective Time divided by the Exchange Ratio. After the Effective Time,
except as provided above in this Section 5.7, each Substitute Option shall be
exercisable upon the same terms and conditions as were applicable under the
related Company Stock Option immediately prior to or at the Effective Time. The
Company shall, if so requested by Parent, use reasonable best efforts to obtain
any consents that may be required in connection with implementing the provisions
of this Section 5.7 (it being understood that, in connection with any such
consents that may be so required, the Company will have satisfied its obligation
under this Agreement relating thereto if it has used reasonable best efforts to
obtain such consents, whether or not successful) or provide any notice or take
any other similar action reasonably requested in connection therewith. As soon
as reasonably practicable, and in no event later than ten days after the
Effective Time, Parent shall file a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to Parent Common Stock subject
to such Substitute Options, or shall cause such
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Substitute Options to be deemed to be issued pursuant to a Parent Stock Plan for
which shares of Parent Common Stock have been previously registered pursuant to
an appropriate registration form.
(b) As of the Effective Time, the right of each nonemployee director of the
Company who has elected to receive shares of Company Common Stock pursuant
to the deferred stock compensation program maintained by the Company shall
become and represent a right to receive the number of shares of Parent
Common Stock (decreased to the nearest whole share) determined by
multiplying (i) the number of shares of Company Common Stock which would be
issuable to such nonemployee director if he or she ceased serving as a
director immediately prior to the Effective Time by (ii) the Exchange
Ratio. Such shares of Parent Common Stock shall be issued to such
nonemployee director as soon as practicable after the Effective Time.
Section 5.8 Reasonable Best Efforts; Pooling of Interests.
---------------------------------------------
(a) Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties agrees to use reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) obtaining all necessary
actions or non-actions, waivers, consents and approvals from all
Governmental Entities and the making of all necessary registrations and
filings (including filings with Governmental Entities) and taking all
reasonable steps (subject to clause (c) below, including, in the case of
Parent, divesting or holding separate any assets or agreeing to any
governmental conditions), as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental
Entity (including those in connection with the HSR Act), (ii) obtaining all
necessary consents, approvals or waivers from third parties, (iii)
defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, (iv) each of Parent and the Company agreeing to
take, together with their respective accountants, all actions reasonably
necessary in order to obtain a favorable determination (if required) from
the SEC that the Merger may be accounted for as a pooling of interests in
accordance with generally accepted accounting principles and (v) the
execution and delivery of any additional instruments reasonably necessary
to consummate the transactions contemplated by this Agreement. No party to
this Agreement shall consent to any voluntary delay of the consummation of
the Merger at the behest of any Governmental Entity without the consent of
the other parties to this Agreement, which consent shall not be
unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any action, or
enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue in any material respect
or result in a material breach of any covenant made by it in this Agreement
or which could reasonably be expected to impede, interfere with or prevent
in any material respect the Merger.
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(c) Notwithstanding anything herein to the contrary, Parent shall not be
obligated (i) to enter into any "hold-separate" agreement or other
agreement with respect to the disposition of any assets or businesses of
the Parent or any of its Subsidiaries or the Company or any of its
Subsidiaries (if such agreements would, individually or in the aggregate,
have a material and adverse impact on the business of Parent or the Company
or on the benefits that would have otherwise been derived by Parent from
the Merger or if such agreement would impose or give rise to any of the
conditions of the type described in clause (ii) below with the impact
described in clause (ii) below) in order to obtain clearance from the
Federal Trade Commission or the Antitrust Division of the Department of
Justice or any other antitrust or competition authorities to proceed with
the consummation of the transactions contemplated hereby or (ii) to
consummate the transactions contemplated hereby in the event that both (A)
any consent, approval or authorization of any Governmental Entity obtained
or sought to be obtained in connection with this Agreement is conditioned
upon the imposition of any restrictions upon (or the making of any
accommodation (financial or otherwise) in respect of the transactions
contemplated hereby or) the conduct of the business of the Surviving
Corporation or of Parent or its Subsidiaries (including any agreement not
to compete in any geographic area or line of business) or results, or would
result in, the abrogation or diminishment of any authority or license
granted by any Governmental Entity and (B) such restrictions,
accommodations and abrogations would, individually or in the aggregate,
have a material and adverse impact on the business of Parent or the Company
or on the benefits that would otherwise have been derived by Parent from
the Merger. Parent's exercise of its rights under this paragraph (c) shall
not in any way prejudice the rights of Parent under this Agreement in
respect of Closing conditions and termination rights.
Section 5.9 Public Announcements. Parent and the Company will not issue any
--------------------
press release with respect to the transactions contemplated by this Agreement or
otherwise issue any written public statements with respect to such transactions
without prior consultation with the other party, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange or the rules of the NYSE.
Section 5.10 Real Estate Transfer and Gains Tax. Parent and the Company agree
----------------------------------
that either the Company or the Surviving Corporation will pay any state or local
tax which is attributable to the transfer of the beneficial ownership of the
Company's or its Subsidiaries' real property, if any (collectively, the "Gains
Taxes"), and any penalties or interest with respect to the Gains Taxes, payable
in connection with the consummation of the Merger. The Company and Parent agree
to cooperate with the other in the filing of any returns with respect to the
Gains Taxes, including supplying in a timely manner a complete list of all real
property interests held by the Company and its Subsidiaries and any information
with respect to such property that is reasonably necessary to complete such
returns. The portion of the consideration allocable to the real property of the
Company and its Subsidiaries shall be determined by Parent in its reasonable
discretion.
Section 5.11 State Takeover Laws. If any "fair price," "business combination"
-------------------
or "control share acquisition" statute or other similar statute or regulation
shall become applicable to the transactions contemplated hereby, Parent and the
Company and their respective Boards of Directors shall use their reasonable best
efforts to grant such approvals and take such actions as are necessary so that
the transactions contemplated hereby and thereby may be
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consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby.
Section 5.12 Indemnification; Directors and Officers Insurance.
-------------------------------------------------
(a) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless all past and present
officers, directors, employees and agents of the Company and of its
Subsidiaries to the full extent such persons are currently indemnified by
the Company for acts or omissions occurring at or prior to the Effective
Time pursuant to the Company Charter, the Company Bylaws and any existing
agreements. Without limiting the generality of the foregoing, in the event
any person entitled to indemnification under this Section 5.12(a) becomes
involved in any claim, action, proceeding or investigation after the
Effective Time, Parent shall, or shall cause the Surviving Corporation to,
periodically advance to such person his or her reasonable legal and other
reasonably incurred expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to such person
providing an undertaking to reimburse all amounts so advanced in the event
of a final nonappealable determination by a court of competent jurisdiction
that such person is not entitled thereto.
(b) Parent shall provide, or shall cause the Surviving Corporation to provide,
for an aggregate period of not less than six (6) years from the Effective
Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring on or
prior to the Effective Time (the "D&O Insurance") that is substantially
similar (with respect to limits and deductibles and scope) to the Company's
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that the
-------- -------
Parent and the Surviving Corporation shall not be required to pay an annual
premium for the D&O Insurance in excess of 150% of the last annual premium
paid prior to the date of this Agreement.
(c) The provisions of this Section 5.12 are intended for the benefit of, and
shall be enforceable by, each person entitled to indemnification under this
Section 5.12, his or her heirs and his or her personal representatives.
Section 5.13 Notification of Certain Matters. Parent shall use its reasonable
-------------------------------
best efforts to give prompt notice to the Company, and the Company shall use its
reasonable best efforts to give prompt notice to Parent, of: (i) the
occurrence, or non-occurrence, of any event of which it is aware and which would
be reasonably likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect, or (ii) any
failure of Parent or the Company, as the case may be, to comply in a timely
manner with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
-------- -------
pursuant to this Section 5.13 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
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Section 5.14 Employee Benefit Plans and Agreements.
-------------------------------------
(a) From the Effective Time through December 31, 2001, Parent shall cause the
Company and its Subsidiaries to continue to maintain the material benefit
plans and programs provided to employees of the Company and its
Subsidiaries immediately prior to the Effective Time (excluding any such
plans (or any portion of any such plan) providing for equity-related
benefits) and subject to the requirements of applicable law; provided,
however, that the performance criteria under any such plan or program that
provides for performance-based incentive compensation shall be modified or
adjusted appropriately to reflect the transactions contemplated by this
Agreement and prevent a change in the incentive compensation opportunities
thereunder. For a period of not less than six months following December
31, 2001, Parent shall cause to be provided, to employees of the Company or
its Subsidiaries as of the Effective Time (including each such person who
is on vacation, temporary layoff, approved leave of absence, sick leave or
short or long-term disability) (collectively the "Company Employees"),
employee benefits (excluding for this purpose equity-related benefits) that
are, in the aggregate, at least as favorable as those benefits provided to
such Company Employees immediately prior to the Effective Time and such
Company Employees shall be eligible to participate in equity plans of
Parent on a substantially equivalent basis as similarly situated employees
of Parent and its affiliates. Nothing herein shall require the Company or
its Subsidiaries to make matching or profit-sharing contributions in
Company Common Stock under the Company Retirement Plan. For purposes of
vesting, eligibility to participate and benefit accrual (other than accrual
under a defined benefit pension plan) under the employee benefit plans of
Parent and its Subsidiaries providing benefits to any Company Employees
after the Effective Time (collectively the "New Plans"), each Company
Employee shall be credited with his or her years of service with the
Company and its Subsidiaries before the Effective Time, to the same extent
as such Company Employee was entitled, before the Effective Time, to credit
for such service under any similar Company benefit plan in which such
Company Employee participated or was eligible to participate immediately
prior to the Effective Time; provided that the foregoing shall not apply to
the extent that its application would result in a duplication of benefits
or for newly established plans and programs in which employees of Parent
and its Subsidiaries participate and for which prior service of employees
of Parent and its Subsidiaries is not taken into account. In addition,
without limiting the generality of the foregoing: (i) each Company
Employee shall be immediately eligible to participate, without any waiting
time, in any and all New Plans to the extent coverage under such New Plans
replaces coverage under a comparable Company employee benefit plan or
compensation arrangement or agreements in which such Company Employee
participated immediately before the Effective Time (collectively the "Old
Plans") and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Company Employee, Parent shall
cause all pre-existing condition exclusions of such New Plans to be waived
for such employee and his or her dependents, unless such conditions would
not have been waived under the comparable plans of the Company and its
Subsidiaries in which such employee participated or in which such employee
would have been eligible to participate immediately prior to the Effective
Time and Parent shall cause any eligible expenses incurred by such employee
and his or her covered dependents during the portion of the plan year of
the Old Plan ending on the date of such employee's participation in the
corresponding New Plans to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-
pocket
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requirements applicable to such employee and his or her covered dependents
for the applicable plan year as if such amounts had been paid in accordance
with such New Plan.
(b) Except as otherwise provided by this Section, nothing in this Agreement
shall be interpreted as limiting the power of the Surviving Corporation to
amend or terminate any particular Company Plan or any other particular
employee benefit plan, program, agreement or policy or as requiring the
Surviving Corporation to offer to continue the employment of any employee
(other than as required by the terms of any written employment contract or
benefit plan).
(c) Parent shall take all reasonable steps to ensure that (i) the obligations
of the Company or the Surviving Corporation to fund the Company's Executive
Benefit Trust (the "Rabbi Trust") within seven days after the approval of
the Merger by the stockholders of the Company shall be honored, provided
that if the Effective Time does not occur within this seven-day period, the
Company shall be entitled to fund such obligations, and that (ii) the
obligations of the Company or the Surviving Corporation under the Rabbi
Trust shall be honored following the Effective Time.
(d) From the Closing, Parent shall cause to be honored by the Company, the
Surviving Corporation and their Subsidiaries all employment agreements,
bonus agreements, severance agreements and any other similar agreements
with the persons who are directors, officers and employees of the Company
and its Subsidiaries.
Section 5.15 Section 16(b). The Parent shall use reasonable best efforts to
-------------
cause, before the Effective Time, any acquisitions of equity securities of
Parent (including derivative securities) contemplated by this Agreement by each
individual who becomes a director or officer of Parent to be exempt under Rule
16b-3 promulgated under the Exchange Act.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved by the
--------------------
requisite vote of stockholders of the Company in accordance with applicable
law and the Company Charter and the Company Bylaws.
(b) Quotation of Stock. The Parent Common Stock issuable in the Merger shall
------------------
have been authorized for quotation on the NYSE, subject to official notice
of issuance.
(c) HSR. The waiting period (and any extension thereof) applicable to the
---
consummation of the Merger under the HSR Act shall have expired or been
terminated.
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(d) Authorizations and Consents. All authorizations, consents, orders,
---------------------------
declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental Entity, which
the failure to obtain, make or occur would have the effect of making the
Merger or any of the transactions contemplated hereby illegal or would
have, individually or in the aggregate, a Material Adverse Effect on Parent
(assuming the Merger had taken place) or on the Company, shall have been
obtained, shall have been made or shall have occurred.
(e) Registration Statement. The Registration Statement shall have become
----------------------
effective in accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the
SEC. All necessary state securities or Blue Sky authorizations (including
State Takeover Approvals) shall have been received.
(f) No Order. No court or other Governmental Entity having jurisdiction over
--------
the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making the Merger or any of the transactions contemplated hereby
illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the Merger. The
------------------------------------------------------------
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each of Parent
----------------------------------------------------------
and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time, each of the representations and warranties of Parent
and Sub contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and the Company shall have received a certificate signed on
behalf of Parent by its Chief Executive Officer and its Chief Financial
Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of its counsel,
-----------
Sidley & Austin, in form and substance reasonably satisfactory to the
Company, dated the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion,
(i) the Merger will constitute a tax-free reorganization within the meaning
of Section 368 of the Code and (ii) for U.S. federal income tax purposes,
the shareholders of the Company will recognize no gain or loss upon the
conversion of their shares of Company Common Stock into shares of Parent
Common Stock pursuant to the Merger, except with respect to cash, if any,
received in lieu of fractional shares of Parent Common Stock.
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In rendering such opinion, Sidley & Austin may rely upon representations
contained herein and may receive and rely upon representations from Parent, the
Company, and others, including representations from Parent substantially similar
to the representations in the Parent Tax Certificate attached to the Parent
Letter and representations from the Company substantially similar to the
representations in the Company Tax Certificate attached to the Company Letter.
(c) Consents. Parent shall have obtained the consent or approval of each
--------
person that is not a Governmental Entity whose consent or approval shall be
required in connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement by which Parent or any of its Subsidiaries is bound, except as to
which the failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent
(assuming the Merger has taken place).
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger.
----------------------------------------------------------------
The obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment at or Prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The Company
----------------------------------------------------------
shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true
and correct on and as of the Effective Time as if made on and as of such
date (other than representations and warranties which address matters only
as of a certain date which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and Parent shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer and its Chief Financial Officer
to such effect.
(b) Tax Opinion. Parent shall have received an opinion of its counsel, Cleary,
-----------
Gottlieb, Steen & Hamilton, in form and substance reasonably satisfactory
to Parent, dated the Effective Time, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such
opinion, (i) the Merger will constitute a tax-free reorganization within
the meaning of Section 368 of the Code and (ii) for U.S. federal income tax
purposes, the shareholders of the Company will recognize no gain or loss
upon the conversion of their shares of Company Common Stock into shares of
Parent Common Stock pursuant to the Merger, except with respect to cash, if
any, received in lieu of fractional shares of Parent Common Stock.
In rendering such opinion, Cleary, Gottlieb, Steen & Hamilton may rely upon
representations contained herein and may receive and rely upon representations
from Parent, the Company, and others, including representations from Parent
substantially similar to the representations in the Parent Tax Certificate
attached to the Parent Letter and representations from the Company substantially
similar to the representations in the Company Tax Certificate attached to the
Company Letter.
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(c) Consents. The Company shall have obtained the consent or approval of each
--------
person that is not a Governmental Entity whose consent or approval shall be
required in connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument by which the Company or any of its Subsidiaries is
bound, except as to which the failure to obtain such consents and approvals
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
(d) Accounting. The Company shall have received the written opinion, dated as
----------
of the Effective Time, of Arthur Andersen that the Company is eligible to
be a party to a business combination accounted for as a pooling of
interests in accordance with U.S. generally accepted accounting principles
("GAAP") and applicable published rules and regulations of the SEC. Parent
shall have received the written opinion, dated as of the Effective Time, of
PriceWaterhouseCoopers that Parent is eligible to be a party to a business
combination accounted for as a pooling of interests in accordance with GAAP
and applicable published rules and regulations of the SEC, and that the
Merger will qualify for pooling of interests accounting. Each of such
written opinions will be in form and substance reasonably satisfactory to
the Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have failed to
comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the date
of such termination, which failure to comply has not been cured within
thirty business days following receipt by such other party of written
notice from the non-breaching party of such failure to comply (it being
understood (i) that any breach of Section 4.2 or 5.1 shall be considered
material for purposes of this Section 7.1(b) and (ii) that a breach of
Section 4.2 or the penultimate sentence of Section 5.1 is not capable of
cure and therefore the 30-day cure period shall not apply in the case of
any such breach);
(c) by either Parent or the Company if there has been (i) a breach by the other
party (in the case of Parent, including any breach by Sub) of any
representation or warranty that is not qualified as to materiality which
has the effect of making such representation or warranty not true and
correct in all material respects or (ii) a breach by the other party (in
the case of Parent, including any breach by Sub) of any representation or
warranty that is qualified as to materiality, in each case which breach has
not been cured within thirty business days following receipt by the
breaching party from the non-breaching party of written notice of the
breach;
(d) by Parent or the Company if: (i) the Merger has not been effected on or
prior to the close of business on the 180th day after the date hereof
(provided that if either Parent
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or the Company determines that additional time is necessary in connection
with obtaining any consent, registration, approval, permit or authorization
required to be obtained from any Governmental Entity, such date may be
extended by Parent or the Company from time to time by written notice to
the other party to a date not beyond the 270th day after the date hereof if
the extending party in good faith believes that such consent, registration,
approval, permit or authorization can be obtained by such date); provided,
--------
however, that the right to terminate this Agreement pursuant to this
-------
Section 7.1(d)(i) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date; or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
(e) by Parent or the Company if the stockholders of the Company do not approve
and adopt the agreement of merger (within the meaning of Section 251 of the
DGCL) contained in this Agreement at the Stockholder Meeting or at any
adjournment or postponement thereof; provided, however, that the Company
-------- -------
may not terminate this Agreement pursuant to this Section 7.1(e) if the
Company has not complied with its obligations under Sections 4.2, 5.1 and
5.2 or has otherwise breached in any material respect its obligations under
this Agreement in any manner that could reasonably have caused the failure
of the stockholder approval to be obtained at the Stockholder Meeting; or
(f) by Parent if (without regard to whether or not a breach of this Agreement
has occurred) (i) the Board of Directors of the Company shall not have
recommended, or shall have resolved not to recommend, or shall have
adversely qualified, adversely modified or withdrawn its recommendation of
the Merger or declaration that the Merger is advisable and fair to and in
the best interest of the Company and its stockholders, or shall have
resolved to do so (even if permitted by Section 5.1), (ii) any person
(other than Parent or its affiliates) acquires or becomes the beneficial
owner of 15% or more of the outstanding shares of Company Common Stock,
(iii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company any Takeover Proposal involving the Company or
shall have resolved to do so or (iv) a tender offer or exchange offer for
15% or more of the outstanding shares of capital stock of the Company is
commenced, and the Board of Directors of the Company fails, within 10
business days of 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).
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the Confidentiality Agreements
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and the entirety of Section 5.6, which shall survive the termination); provided,
--------
however, that nothing contained in this Section 7.2 shall relieve any party
-------
hereto from any liability for any willful breach of a representation or warranty
contained in this Agreement or the breach of any covenant contained in this
Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto, by
---------
or pursuant to action taken by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
at the Stockholder Meeting, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
------
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
Attention: General Counsel
Facsimile No.: (212) 399-8119
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with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10024
Attention: Barry M. Fox, William A. Groll and
Ethan A. Klingsberg
Facsimile No.: (212) 225-3999
(b) if to the Company, to
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
Attention: General Counsel
Facsimile No.(312) 425-6589
with a copy to:
Sidley & Austin
Bank One Plaza
10 S. Dearborn Street
Chicago, Illinois 60603
Attention: Thomas A. Cole and
Imad I. Qasim
Facsimile No.: (312) 853-7036
Section 8.3 Interpretation. When a reference is made in this Agreement to a
--------------
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, list of defined terms and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts, all
------------
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
----------------------------------------------
the Confidentiality Agreements constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement, except as provided
in the next sentence, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. The parties hereto expressly
intended the provisions of Section 5.12 to confer a benefit upon and be
enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in, or intended to be benefited by such provision.
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Section 8.6 Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Any transfer in violation of Section 8.7 shall be
null and void.
Section 8.8 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
* * * *
43
A-50
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By:/s/ Nicholas J. Camera
----------------------
Name: Nicholas J. Camera
Its: Senior Vice President, Secretary
and General Counsel
VERITAS ACQUISITION CORP.
By:/s/ Nicholas J. Camera
----------------------
Name: Nicholas J. Camera
Its: Senior Vice President, Secretary
and General Counsel
TRUE NORTH COMMUNICATIONS INC.
By:/s/ David A. Bell
-----------------
Name: David A. Bell
Its: Chairman and Chief Executive
Officer
44
A-51
Exhibit 5.4(a)
[FORM OF COMPANY AFFILIATE LETTER TO PARENT]
[Date]
[Parent Address]
Dear Sir or Madam:
Reference is made to the provisions of the Agreement and Plan of
Merger, dated as of [ ], 2001 (together with any amendments thereto, the
"Merger Agreement"), among [________________________], a Delaware corporation
("Parent"), [_____], a Delaware corporation and a direct wholly owned subsidiary
of Parent ("Sub") and [________________________], a Delaware corporation (the
"Company"), pursuant to which Sub will be merged with and into the Company, with
the Company continuing as the surviving corporation (the "Merger"). This letter
constitutes the undertakings of the undersigned contemplated by the Merger
Agreement, as is being furnished pursuant to Section 5.4(a) thereto.
I understand that I may be deemed to be an "affiliate" of the Company,
as such term is defined for purposes of paragraphs (c) and (d) of Rule 145
("Rule 145") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Execution of this letter shall not be construed as an
admission of "affiliate" status nor as a waiver of any rights that I may have to
object to any claim that I am an "affiliate" on or after the date of this
letter.
If in fact I were to be deemed an "affiliate" of the Company under
paragraphs (c) and (d) of Rule 145, my ability to sell, transfer or otherwise
dispose of any shares of the common stock, par value $0.10 per share, of Parent
(the "Parent Shares") received by me in exchange for any shares of common stock,
par value $.33 1/3 per share, of the Company (the "Company Shares") pursuant to
the Merger may be restricted.
I hereby represent, warrant and covenant to Parent that:
I will not sell, pledge, transfer or otherwise dispose of any of the
Parent Shares except (i) pursuant to an effective registration statement under
the Securities Act, or (ii) as permitted by, and in accordance with, Rule 145 or
another applicable exemption under the Securities Act and the rules and
regulations promulgated thereunder;
Except as permitted by Staff Accounting Bulletin No. 76 issued by the
Securities and Exchange Commission, I will not (i) sell, pledge, transfer or
dispose of, or otherwise reduce my risk relative to, any Company Shares during
the 30-day period prior to the Effective Time (as defined in the Merger
Agreement) or (ii) sell, pledge, transfer or dispose of, or otherwise reduce my
risk (within the meaning of the Securities and Exchange Commission's Financial
Reporting Release No. 1, "Codification of Financial Reporting Policies", Section
201.01 47 F.R. 21028 (April 15, 1982)) relative to, any Parent Shares until
after such time as consolidated financial results (including combined sales and
net income) covering at least 30 days of post-merger combined operations of
Parent and the Company have been published by Parent in the form of a
1
A-52
quarterly earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-K, 10-Q, or 8-K, or any other
public filing or announcement which includes the combined results of operations.
Parent shall notify the "affiliates" of the publication of such results.
I understand that during the period described in the paragraph
immediately above, subject to providing written notice to Parent and the other
restrictions set forth above, and to the extent permitted under the "pooling of
interest" accounting rules and applicable securities laws, I will be permitted
to sell up to 10% of the Parent Shares (the "10% Shares") received by me or the
Company Shares owned by me or to make charitable contributions or bona fide
gifts of the Parent Shares received by me or the Company Shares owned by me,
subject to the same restrictions. I agree that I will give Parent not less than
five (5) business days notice prior to making any sales, charitable
contributions or gifts as contemplated under this paragraph, that I will provide
any information reasonably requested by Parent or Parent's accounting firm
regarding any such sale, charitable contribution or gift, and that I will
refrain from making such sales, charitable contributions or gifts if Parent
determines, after consultation with its accounting firm, that such transaction
could preclude the Merger from being accounted for as a "pooling of interest."
The 10% Shares shall be calculated in accordance with SEC Accounting Series
Release No. 135 as amended by Staff Accounting Bulletin No. 76.
I hereby acknowledge that Parent is under no obligation to register
the sale, transfer, pledge or other disposition of the Parent Shares or to take
any other action necessary for the purpose of making an exemption from
registration available.
I understand that Parent will issue stop transfer instructions to its
transfer agents with respect to the Parent Shares and that a restrictive legend
will be placed on certificates delivered to me evidencing the Parent Shares in
substantially the following form:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and
may not be sold or otherwise disposed of unless registered under the
Securities Act pursuant to a Registration Statement in effect at the time
or unless the proposed sale or disposition can be made in compliance with
Rule 145 or without registration in reliance on another exemption
therefrom."
The term Parent Shares as used in this letter shall mean and include
not only the common stock of Parent as presently constituted, but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all or
any part of such Parent Shares.
I hereby acknowledge that Parent and its independent public
accountants will be relying upon this letter in connection with the
determination that the Merger will qualify and be accounted for as a "pooling of
interests", and that I understand the requirements of this letter and the
limitations imposed upon the transfer, sale or other disposition of the Company
Shares and the Parent Shares.
2
A-53
By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
It is understood and agreed that certificates with the legend set
forth above will be substituted by delivery of certificates without such legend
if (i) one year shall have elapsed from the date the undersigned acquired the
Parent Shares received in the Merger and the provisions of Rule 145(d)(2) are
then available to the undersigned, (ii) two years shall have elapsed from the
date the undersigned acquired the Parent Shares received in the Merger and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, or (iii)
the Parent has received either a written opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Parent, or a "no action" letter
obtained by the undersigned from the staff of the Commission, to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
Very truly yours,
[Name]
Accepted and Agreed:
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By:
--------------------------------
Name:
Title:
3
A-54
Exhibit 5.4(a)
[FORM OF PARENT AFFILIATE LETTER TO PARENT]
[Date]
[Parent]
Dear Sir/Madam:
Reference is made to the provisions of the Agreement and Plan of
Merger, dated as of [ ], 2001 (together with any amendments thereto, the
"Merger Agreement"), among [_____________________], a Delaware corporation
("Parent"), [_____], a Delaware corporation and a direct wholly owned subsidiary
of Parent ("Sub") and [Company], a Delaware corporation (the "Company"),
pursuant to which Sub will be merged with and into the Company, with the Company
continuing as the surviving corporation (the "Merger"). This letter constitutes
the undertakings of the undersigned contemplated by the Merger Agreement, as is
being furnished pursuant to Section 5.4(b) thereto.
I hereby represent, warrant and covenant to the Company that:
Except as permitted by Staff Accounting Bulletin No. 76 issued by the
Securities and Exchange Commission, I will not (i) sell, pledge, transfer or
dispose of, or otherwise reduce my risk relative to any shares of common stock,
par value $.10 per share, of the Parent ("Parent Shares") during the 30-day
period prior to the Effective Time (as defined in the Merger Agreement) or (ii)
sell, pledge, transfer or dispose of, or otherwise reduce my risk (within the
meaning of the Securities and Exchange Commission's Financial Reporting Release
No. 1., "Codification of Financial Reporting Policies", Section 201.01 47 F.R.
21028 (April 15, 1982)) relative to, any Parent Shares until after such time as
consolidated financial results (including combined sales and net income)
covering at least 30 days of post-merger combined operations of Parent and the
Company have been published by Parent in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a report
to the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the combined results of operations. Parent shall
notify the "affiliates" of the publication of such results.
The term Parent Shares as used in this letter shall mean and include
not only the common stock of Parent as presently constituted, but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all or
any part of such Parent Shares.
I hereby acknowledge that the Parent and its independent public
accountants will be relying upon this letter in connection with the
determination that the Merger will qualify and be accounted for as a "pooling of
interests", and that I understand the requirements of this letter and the
limitations imposed upon the transfer, sale or other disposition of Parent
Shares.
4
A-55
Very truly yours,
[Name]
Accepted and Agreed:
THE INTERPUBLIC GROUP OF COMPANIES, INC.
By:
--------------------------------
Name:
Title:
5
A-56
Annex B
[Morgan Stanley logo]
March 18, 2001
Board of Directors
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
Members of the Board:
We understand that True North Communications Inc. ("True North" or the
"Company"), The Interpublic Group of Companies, Inc. ("IPG"), and Veritas
Acquisition Corp., a wholly-owned subsidiary of IPG ("Merger Sub") have entered
into an agreement and plan of merger dated March 18, 2001 (the "Agreement")
which provides, among other things, for the merger (the "Merger") of Merger Sub
with and into True North. Pursuant to the Merger, among other things, True North
will become a wholly-owned subsidiary of IPG and each outstanding share of True
North common stock, par value $.33 1/3 per share, together with the associated
right to purchase one two-thousandth of a share of Series B Junior Participating
Preferred Stock of the Company (collectively, the "True North Common Stock"),
not owned directly or indirectly by IPG or the Company, will be converted into
the right to receive 1.14 (the "Exchange Ratio") shares of IPG Common Stock, par
value $.10 ("IPG Common Stock"). The terms and conditions of the Merger are more
fully set forth in the Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Agreement is fair from a financial point of view to the holders of shares of
True North Common Stock (other than IPG and its affiliates).
For purposes of the opinion set forth herein, we have, among other things:
(a) reviewed certain publicly available financial statements and other
business and financial information of the Company and IPG,
respectively;
(b) reviewed certain internal financial statements and other financial and
operating data concerning the Company and IPG, respectively;
(c) reviewed certain financial forecasts prepared by the management of the
Company and IPG, respectively;
(d) reviewed information relating to certain strategic, financial and
operational benefits anticipated from the Merger, prepared by the
management of the Company;
(e) discussed the past and current operations and financial condition and
the prospects of the Company, including information relating to certain
strategic, financial and operational benefits anticipated from the
Merger, with senior executives of the Company;
(f) discussed the past and current operations and financial condition and
the prospects of IPG, including information relating to certain
strategic, financial and operational benefits anticipated from the
Merger with senior executives of IPG;
(g) reviewed the pro forma impact of the Merger on IPG's earnings per
share, cash flows, consolidated capitalization and financial ratios;
(h) reviewed the reported prices and trading activity for True North Common
Stock and IPG Common Stock;
(i) compared the financial performance of the Company and IPG and the
prices and trading activity of True North Common Stock and IPG Common
Stock with that of certain other publicly-traded companies comparable
with the Company and IPG, respectively, and their securities;
(j) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
B-1
(k) participated in discussions and negotiations among representatives of
the Company and IPG and their financial and legal advisors;
(l) reviewed the Agreement and certain related documents; and
(m) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information supplied or otherwise made available to us
by the Company and IPG for the purposes of this opinion. With respect to the
financial forecasts, including information relating to certain strategic,
financial and operational benefits anticipated from the Merger, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company and IPG. In addition, we have assumed that the Merger will be accounted
for as a "pooling-of-interests" business combination in accordance with U.S.
Generally Accepted Accounting Principles and the Merger will be consummated in
accordance with the terms set forth in the Agreement, including, among other
things, that the Merger will be treated as a tax-free reorganization pursuant to
the Internal Revenue Code of 1986. We have also assumed that in connection with
the receipt of all necessary regulatory approvals for the proposed Merger, no
restrictions will be imposed that would have a material adverse effect on the
benefits expected to be derived in the Merger. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company, nor have we
been furnished with any such appraisals. We have relied without independent
verification on the assessment of the management of the Company and IPG on their
ability to retain key clients and employees of the Company and IPG. Our opinion
is necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and IPG and have
received fees for the rendering of these services. In the ordinary course of our
businesses, we and our affiliates may actively trade the debt and equity
securities of the Company and IPG for our account or for the accounts of
customers and, accordingly, we or our affiliates may at any time hold long or
short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company only and may not be used for any other purpose without
our prior written consent, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the transaction with
the Securities and Exchange Commission so long as this opinion is reproduced in
such filing in full and any description of or reference to us or summary of this
opinion and the related analyses in such filing is in a form acceptable to us
and our counsel. In addition, this opinion does not in any manner address the
prices at which IPG Common Stock will trade at any time, including following
consummation of the Merger, and Morgan Stanley expresses no opinion or
recommendation as to how the stockholders of the Company should vote at the
stockholders' meeting held in connection with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date hereof
that the Exchange Ratio pursuant to the Agreement is fair from a financial point
of view to the holders of shares of True North Common Stock (other than IPG and
its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Francis J. Oelerich III
---------------------------------
Francis J. Oelerich III
Managing Director
B-2
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of Title 8 of the General Corporation Law of the State of
Delaware ("GCL") gives a corporation power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, provided
that such director, officer, employee or agent acted in good faith and in a
manner reasonably believed to be in or not opposed by the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that such director, officer, employee or agent had no reasonable cause to
believe his or her conduct was unlawful. The same Section also gives a
corporation power to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. Section 145 of the GCL further provides that, to the extent
that a director, officer, employee or agent of a corporation has been successful
on the merits or otherwise in defense of any such action, suit or proceeding, or
in defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
The Registrant's by-laws contain specific authority for indemnification
by the Registrant of current and former directors, officers, employees or agents
of the Registrant on terms that have been derived from Section 145 of Title 8 of
the GCL.
II-1
Item 21. Exhibits
The following exhibits are filed as part of this Registration
Statement:
2.1 Agreement and Plan of Merger by and among The Interpublic
Group of Companies, Inc., Veritas Acquisition Corp. and True
North Communications Inc., dated as of March 18, 2001
(included as Annex A to the proxy statement/prospectus)
3.1 The Restated Certificate of Incorporation of The Interpublic
Group of Companies, Inc. (incorporated by reference herein
from Exhibit 3(i) to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999)
3.2 By-laws of The Interpublic Group of Companies, Inc.
(incorporated by reference herein from Exhibit 4.2 to
Registrant's registration statement on Form S-3/A filed on
July 31, 2000)
5.1* Opinion of Nicholas J. Camera, Esq. as to the legality of the
issuance of the shares of common stock offered hereby
8.1* Opinion of Sidley & Austin as to U.S. tax matters
8.2* Opinion of Cleary, Gottlieb, Steen & Hamilton as to U.S. tax
matters
23.1 Consent of PricewaterhouseCoopers LLP (relating to financial
statements of The Interpublic Group of Companies, Inc.)
23.2 Consent of Arthur Andersen LLP (relating to financial
statements of True North Communications Inc.)
23.3 Consent of Arthur Andersen LLP (relating to financial
statements of NFO Worldwide, Inc. and subsidiaries included in
the financial statements of The Interpublic Group of
Companies, Inc.)
23.4 Consent of J.H. Cohn LLP (relating to financial statements of
Deutsch, Inc. and subsidiary and affiliates included in the
financial statements of The Interpublic Group of Companies,
Inc.)
23.5* Consent of Nicholas J. Camera, Esq. of The Interpublic Group
of Companies, Inc. (included in the opinion filed as Exhibit
5.1)
23.6* Consent of Sidley & Austin (included in the opinion filed as
Exhibit 8.1)
23.7* Consent of Cleary, Gottlieb, Steen & Hamilton (included in the
opinion filed as Exhibit 8.2)
--------
* To be filed by pre-effective amendment
II-2
24.1 Powers of Attorney for certain directors of the Registrant
(included in Part II of this Registration Statement)
99.1 Consent of Morgan Stanley & Co. Incorporated
99.2 Consent of David A. Bell as a person named as about to become
a director of Registrant
99.3 Consent of J. Brendan Ryan as a person named as about to
become a director of Registrant
99.4* Form of proxy for special meeting of stockholders of True
North Communications Inc.
--------
* To be filed by pre-effective amendment
II-3
Item 22. Undertakings
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in the
Registration Statement;
(2) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering;
(4) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(5) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed
II-4
underwriters, in addition to the information called for by the other
items of the applicable form;
(6) that every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(7) insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction on the question whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue;
(8) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of
this Form, within one business day of receipt of such request; and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to the request; and
(9) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the Registration
Statement when it became effective.
II-5
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 19th day of
April, 2001.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
(REGISTRANT)
By: /s/ NICHOLAS J. CAMERA
--------------------------------
Nicholas J. Camera
Senior Vice President,
General Counsel and Secretary
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John J. Dooner, Jr., Sean F. Orr and
Nicholas J. Camera, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and to perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as he might or would do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agent or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ John J. Dooner, Jr. Chairman of the Board, President and Chief Executive April 19, 2001
------------------------------
John J. Dooner, Jr. Officer (Principal Executive Officer)
/s/ Sean F. Orr Executive Vice President, Chief Financial Officer April 19, 2001
------------------------------
Sean F. Orr (Principal Financial Officer) and Director
/s/ Frederick Molz Vice President and Controller (Principal Accounting Officer) April 19, 2001
------------------------------
Frederick Molz
/s/ Frank J. Borelli Director April 19, 2001
------------------------------
Frank J. Borelli
/s/ Reginald K. Brack Director April 19, 2001
------------------------------
Reginald K. Brack
II-6
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Jim M. Considine Director April 19, 2001
------------------------------
Jim M. Considine
/s/ James R. Heekin Director April 19, 2001
------------------------------
James R. Heekin
/s/ Frank B. Lowe Director April 19, 2001
------------------------------
Frank B. Lowe
/s/ Michael A. Miles Director April 19, 2001
------------------------------
Michael A. Miles
/s/ Leif H. Olsen Director April 19, 2001
------------------------------
Leif H. Olsen
II-7
Exhibit Index
Exhibits identified in parentheses below as on file with the Commission
are incorporated herein by reference as exhibits hereto.
The following exhibits are filed as part of this Registration
Statement:
Exhibit
Number Description
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2.1 Agreement and Plan of Merger by and among The Interpublic Group of
Companies, Inc., Veritas Acquisition Corp. and True North
Communications Inc., dated as of March 18, 2001 (included as Annex A
to the proxy statement/prospectus)
3.1 The Restated Certificate of Incorporation of The Interpublic Group
of Companies, Inc. (incorporated by reference herein from Exhibit
3(i) to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999)
3.2 By-laws of The Interpublic Group of Companies, Inc. (incorporated by
reference herein from Exhibit 4.2 to Registrant's registration
statement on Form S-3/A filed on July 31, 2000)
5.1* Opinion of Nicholas J. Camera, Esq. as to the legality of the
issuance of the shares of common stock offered hereby
8.1* Opinion of Sidley & Austin as to U.S. tax matters
8.2* Opinion of Cleary, Gottlieb, Steen & Hamilton as to U.S. tax matters
23.1 Consent of PricewaterhouseCoopers LLP (relating to financial
statements of The Interpublic Group of Companies, Inc.)
23.2 Consent of Arthur Andersen LLP (relating to financial statements of
True North Communications Inc.)
23.3 Consent of Arthur Andersen LLP (relating to financial statements of
NFO Worldwide, Inc. and subsidiaries included in the financial
statements of The Interpublic Group of Companies, Inc.)
23.4 Consent of J.H. Cohn LLP (relating to financial statements of
Deutsch, Inc. and subsidiary and affiliates included in the
financial statements of The Interpublic Group of Companies, Inc.)
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* To be filed by pre-effective amendment
II-8
23.5* Consent of Nicholas J. Camera, Esq. of The Interpublic Group of
Companies, Inc. (included in the opinion filed as Exhibit 5.1)
23.6* Consent of Sidley & Austin (included in the opinion filed as Exhibit
8.1)
23.7* Consent of Cleary, Gottlieb, Steen & Hamilton (included in the
opinion filed as Exhibit 8.2)
24.1 Powers of Attorney for certain directors of the Registrant (included
in Part II of this Registration Statement)
99.1 Consent of Morgan Stanley & Co. Incorporated
99.2 Consent of David A. Bell as a person named as about to become a
director of Registrant
99.3 Consent of J. Brendan Ryan as a person named as about to become a
director of Registrant
99.4* Form of proxy for special meeting of stockholders of True North
Communications Inc.
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* To be filed by pre-effective amendment
II-9