As Filed with the Securities and Exchange Commission on May 9, 2001.
Registration No. 333-59254
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--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 1
To
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 Brown & Wood
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
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Proposed
Proposed Maximum
Maximum Aggregate Amount of
Title of Each Class of Securities Amount to be Offering Price Offering Price Registration
to be Registered Registered (1) Per Share (2) Fee (3)
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Shares of Common Stock 67,644,272 N/A 2,342,449,946.64 $585,612.49
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(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 1/3, (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.
(3) Pursuant to Rule 457(b) under the Securities Act of 1933, as amended, the
amount of the fee, $585,612.49, paid upon the initial filing of this
Registration Statement has been credited against the registration fee
payable hereunder.
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.
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[LOGO OF TRUE NORTH COMMUNICATIONS INC.]
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 Tuesday, June 19, 2001, at 10:00 a.m.,
Chicago time, at The University of Chicago, Graduate School of Business
Conference Center--Sixth Floor, 450 North Cityfront Plaza Drive, 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 May 8, 2001, the closing price
of Interpublic common stock was $35.406 per share and the closing price of True
North Common Stock was $39.703 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 13.
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,
/s/ David A. Bell
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 May 10, 2001 and was first mailed to
True North stockholders on or about May 11, 2001.
(True North Communications Inc. Logo)
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On June 19, 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 Tuesday, June 19, 2001, at 10:00 a.m.,
Chicago time, at The University of Chicago, Graduate School of Business
Conference Center--Sixth Floor, 450 North Cityfront Plaza Drive, Chicago,
Illinois.
You are cordially invited to attend the special meeting. The purposes of the
special meeting are:
. 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.
. 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 May 7, 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,
/s/ Dale F. Perona
Dale F. Perona
Senior Vice President and Secretary
Date: May 10, 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................................................ 5
Regulatory Approvals.................................................... 5
Termination of the Merger Agreement..................................... 6
Termination Fee......................................................... 6
SELECTED FINANCIAL DATA................................................... 7
Selected Historical Financial Data of Interpublic....................... 7
Recent Developments--Interpublic........................................ 8
Selected Historical Financial Data of True North........................ 9
Recent Developments--True North......................................... 10
Selected Unaudited Pro Forma Combined Condensed Financial Data.......... 11
UNAUDITED COMPARATIVE PER SHARE DATA...................................... 12
RISK FACTORS.............................................................. 13
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.................................................................. 13
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........................ 13
Shares of Interpublic common stock are subject to different market risks
than shares of True North common stock................................. 14
The market price of Interpublic common stock may decline as a result of
the merger............................................................. 14
Interpublic and True North may not realize expected synergies or cost
savings................................................................ 14
The performance of the combined company will be affected by its ability
to retain key personnel................................................ 15
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.... 15
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................................................................. 15
Directors and executive officers of True North have conflicts of
interest that may have influenced their decision to approve the
merger................................................................. 16
Forward-looking statements may prove inaccurate......................... 16
THE SPECIAL MEETING....................................................... 19
Special meeting for True North Stockholders............................. 19
Vote Required........................................................... 19
Record Date; Voting Rights.............................................. 19
Quorum.................................................................. 19
Proxies................................................................. 19
THE MERGER................................................................ 21
Background of the Merger................................................ 21
Recommendation of the True North Board; Considerations of the True North
Board.................................................................. 28
Opinion of True North's Financial Advisor............................... 30
Interests of True North's Directors and Management in the Merger........ 37
Anticipated Accounting Treatment........................................ 40
Regulatory Approvals.................................................... 40
Resale of Shares of Interpublic Common Stock............................ 41
No Appraisal Rights..................................................... 41
Material U.S. Federal Income Tax Consequences of the Merger............. 42
New York Stock Exchange Listing of Interpublic Common Stock; De-listing
and De-registration of True North Common Stock......................... 43
THE MERGER AGREEMENT...................................................... 44
Effective Time of the Merger............................................ 44
What True North Stockholders Will Receive in the Merger................. 44
True North Stock Options and Deferred Stock Compensation................ 44
Exchange of True North Common Stock..................................... 44
Representations and Warranties.......................................... 45
Covenants and Other Agreements.......................................... 47
Conditions to the Merger................................................ 50
Termination............................................................. 51
Termination Fee......................................................... 51
Amendments.............................................................. 52
ii
TABLE OF CONTENTS
(continued)
Page
----
MARKET PRICES AND DIVIDENDS.............................................. 53
Interpublic............................................................ 53
True North............................................................. 54
BUSINESS OF INTERPUBLIC.................................................. 55
BUSINESS OF TRUE NORTH................................................... 57
OWNERSHIP OF TRUE NORTH COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.............................................................. 58
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION............. 59
DESCRIPTION OF INTERPUBLIC SHARE CAPITAL................................. 65
General................................................................ 65
Common Stock........................................................... 65
Preferred Stock........................................................ 65
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.......................... 66
Number and Nomination of Directors..................................... 67
Removal of Directors................................................... 67
Rights Plan............................................................ 68
LEGAL OPINION............................................................ 68
EXPERTS.................................................................. 68
WHERE YOU CAN FIND MORE INFORMATION...................................... 69
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, by completing the proxy card being mailed with this
document, you will instruct the trustee for the plan, Fidelity Management
Trust Company, to vote your 401(k) plan shares. Voting instructions must be
received on or before June 14, 2001.
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 June 19, 2001, at 10:00 a.m. local
time at The University of Chicago, Graduate School of Business Conference
Center--Sixth Floor, 450 North Cityfront Plaza Drive, 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, if the stockholders approve the merger proposal, expect to
complete it shortly after appropriate regulatory approvals have been
obtained. 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
Telephone: (312) 425-6570 call collect:
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 69.
The Companies (see pages 55 and 57)
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 44)
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 28)
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 30)
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 42)
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
3
urge you to consult your tax advisor for a full understanding of the tax
consequences of the merger to you.
Anticipated Accounting Treatment (see page 40)
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 44)
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 19)
The special meeting of True North stockholders will be held on June 19, 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 May 7, 2001.
On that date, there were 50,832,347 outstanding shares of True North common
stock. On the record date, directors and executive officers of True North and
their affiliates owned approximately 4.0% 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 53)
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. The per share closing prices for Interpublic common stock
and True North common stock on March 16, 2001, the last trading day before the
public announcement of the merger, and May 8, 2001, the most recent trading day
for which prices are available prior to the printing of this document, are set
forth below. The table also sets forth the pro forma equivalent per share value
for shares of True North common stock, obtained by multiplying the closing
price per share of Interpublic common stock by the exchange ratio of 1.14.
True North
Interpublic True North closing
closing closing price
price price per share
Date per share per share equivalent
---- ----------- ---------- ----------
March 16, 2001................................ $35.297 $39.313 $40.239
May 8, 2001................................... $35.406 $39.703 $40.363
You will find additional historical share price information for both
Interpublic and True North commencing on page 53.
Interests of True North's Directors and Management in the Merger (see page 37)
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:
. rights to accelerated vesting of options issued under the True North stock
option plan;
. the termination of restrictions on outstanding True North restricted
stock;
. existing employment agreements between True North and its executive
officers which provide for the payment of severance benefits in the event
the officer resigns following the merger due to specified adverse changes
in the terms of the executive's employment;
. rights to accelerated payment of severance benefits payable under
employment agreements upon termination of employment;
. True North's Asset Protection Plan, which provides that specified
executive officers who are not parties to employment agreements would
receive severance benefits in the event they resign due to specified
adverse changes in their employment or are terminated without cause within
two years following the adoption of the merger agreement by the True North
stockholders;
. rights to directors' and officers' insurance coverage and to
indemnification with respect
4
to acts and omissions in their capacities as directors and officers of
True North; and
. 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:
. 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
. David A. Bell will become vice-chairman of Interpublic.
Conditions to the Merger (see page 50)
Interpublic and True North will not complete the merger unless a number of
conditions are satisfied or waived, including:
. adoption of the merger agreement by True North stockholders;
. receipt of approval for listing on the New York Stock Exchange of the
shares of Interpublic common stock to be issued in the merger;
. receipt of regulatory approvals and third party consents and the absence
of legal restraints;
. effectiveness of the registration statement, which includes this document,
and the absence of any stop order; and
. 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 40)
The Hart-Scott-Rodino Antitrust Improvements Act and the rules promulgated
under this Act by the Federal Trade Commission require, in connection with the
merger, the provision of notifications and information to the Antitrust
Division of the Department of Justice and the FTC and the satisfaction of
specified waiting period requirements. On April 18, 2001, Interpublic and True
North filed the required pre-merger notification and report forms with the
Antitrust Division and the FTC. The waiting period in connection with this
filing is expected to expire on May 18, 2001, absent an early termination,
extension or request for additional information. We may not complete the merger
until the satisfaction of this waiting period requirement. Additional filings
and clearances under this Act may be required in connection with the receipt by
a True North stockholder of Interpublic stock with a value in excess of $50
million and the indirect acquisition by Interpublic of a minority investment
held by True North.
The transaction is also subject to antitrust and other regulatory clearances
by non-U.S. authorities, including those representing the European Union, South
Africa, Canada and Israel.
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.
5
Termination of the Merger Agreement (see page 51)
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:
. 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;
. a legal prohibition against the merger becomes permanent and final;
. 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
. the True North stockholders do not adopt the merger agreement at the
special meeting.
Interpublic can also terminate the merger agreement if:
. 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;
. the True North Board withdraws or adversely modifies its approval or
recommendation of the merger;
. 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;
. the True North Board recommends or resolves to recommend another
acquisition proposal; or
. 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.
Termination Fee (see page 51)
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 69 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
Recent Developments--Interpublic
On April 26, 2001, Interpublic announced results for the first quarter of
2001. Interpublic reported a net loss of $38.4 million or $0.12 per share in
the first quarter of 2001 versus net income of $42.9 million or $0.14 per share
in the first quarter of 2000. In the first quarter of 2001, Interpublic
recorded a $160.1 million pretax charge ($0.33 per share) to recognize the
impairment of investments primarily in publicly-traded companies, including
marchFIRST, Inc. which declared bankruptcy in early April. In the first quarter
of 2000, Interpublic recorded $36.1 million ($0.07 per share) in restructuring
charges related to Lowe Lintas.
Interpublic also announced revised expectations for 2001 financial
performance. Due to the challenging economic environment, higher net interest
expense and tax rates in 2001 versus 2000 and due to a higher number of shares
outstanding, Interpublic expects to generate earnings per share of $1.40 to
$1.45 in 2001, compared to $1.51 in 2000, assuming no deterioration in economic
activity.
You should read the entire announcement, including the financial data, about
the first quarter. This announcement is included in the current report on Form
8-K filed with the Commission by Interpublic on April 27, 2001 and incorporated
into this document by reference. In addition, you should read the Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001 that Interpublic
expects to file no later than May 15, 2001, which will also be incorporated
into this document by reference. See "Where You Can Find More Information" on
page 69 to learn how you can obtain these reports.
8
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 69 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.
9
Recent Developments--True North
On May 1, 2001, True North announced its results for the first quarter ended
March 31, 2001. True North reported net income of $9.7 million or $0.19 per
diluted share in the first quarter of 2001 compared to net income of $7.0
million or $0.14 per diluted share in the first quarter of 2000. The net income
and earnings per diluted share amounts for the first quarter of 2001 include
the impact of three unusual items:
. $1.6 million in merger related pre-tax expenses or $(0.02) per diluted
share,
. a $0.4 million net gain on the sales of two operations or $0.01 per
diluted share, and
. a $0.5 million net gain in unusual items from Modem Media or $0.01 per
diluted share.
You should read the entire announcement, including the financial data, about
the first quarter. This announcement is included in the current report on Form
8-K filed with the Commission by True North on May 1, 2001 and incorporated
into this document by reference. In addition, you should read the Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001 that True North
expects to file no later than May 15, 2001, which will also be incorporated
into this document by reference. See "Where You Can Find More Information" on
page 69 to learn how you can obtain these reports.
10
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 69 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 discussed in Note 3 to the Pro Forma Combined Condensed Financial
Information on page 64, it is expected that restructuring and integration costs
will be incurred once the merger has been completed. The amount and nature of
these costs have not been finalized and neither the costs associated with
restructuring and integration nor any related savings has been included in the
Pro Forma Combined Condensed Financial Data.
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...... 6.51 5.68 4.72 3.84 3.40
11
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 69 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........................... 6.51 5.68 4.72
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
12
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:
. Interpublic consents to the termination;
. Interpublic breaches its representations, warranties or covenants in any
material respect and fails to cure the breach within 30 business days;
. a legal prohibition against the merger becomes permanent and final;
. 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
. the True North stockholders do not adopt the merger agreement at the
special meeting.
13
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.
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 12, "Market
Prices and Dividends" on page 53, "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 69 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
55 and 57 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 69 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:
. the integration of Interpublic and True North is unsuccessful;
. 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
. 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 28. 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.
14
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:
. 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.
. 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.
. 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.
. 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, South Africa, Canada and Israel. We may not
be able to 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. In addition, we
have been advised that we may complete the merger before we have obtained
regulatory approvals and clearances in Colombia, Slovakia and Turkey so long as
we postpone integration and other changes to the operations of Interpublic and
True North in these three jurisdictions until after we have obtained the
applicable approvals and clearances there. 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.
15
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:
. rights to accelerated vesting of options issued under the True North
stock option plan;
. the termination of restrictions on outstanding True North restricted
stock;
. existing employment agreements between True North and its executive
officers which provide for the payment of severance benefits in the
event the officer resigns following the merger due to specified adverse
changes in the terms of the executive's employment;
. rights to accelerated payment of severance benefits payable under
employment agreements upon termination of employment;
. True North's Asset Protection Plan, which provides that specified
executive officers who are not parties to employment agreements would
receive severance benefits in the event they resign due to specified
adverse changes in their employment or are terminated without cause
within two years following the adoption of the merger agreement by the
True North stockholders;
. 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
. 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:
. 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
. David A. Bell will become vice-chairman of Interpublic.
See "Interests of True North's Directors and Management in the Merger" on page
37.
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:
. financial projections and estimates;
. statements regarding plans, objectives and expectations of Interpublic,
True North or their Boards with respect to future operations, products
and services;
. statements regarding future economic performance;
. statements relating to the assumptions underlying projections, estimates
and performance; and
. 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.
16
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:
. 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;
. specific risks or uncertainties associated with Interpublic's or True
North's expectations with respect to:
. the timing, completion or tax status of the merger;
. the accounting treatment of the merger;
. the value of the merger consideration;
. growth prospects;
. market positions;
. the impact of technological change on business;
. risks of international operations;
. earnings per share;
. cost savings;
. profitability resulting from the merger;
. changes in accounting rules and principles;
. changes in the advertising, marketing and communications budgets of
clients;
. changes in management or ownership of clients;
. strategic decisions of management;
. the ability to attract new clients and retain existing clients;
. the effect of foreign exchange rate fluctuations;
. the successful completion and integration of acquisitions which
complement and expand Interpublic's business capabilities; and
. restructuring; and
. general economic conditions such as:
. changes in interest rates and the performance of the markets;
. changes in domestic and foreign laws, regulations and taxes;
. changes in competition and pricing environments;
. regional or general changes in asset valuations;
. the occurrence of significant natural disasters;
. general market and industry conditions; and
. pricing.
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
17
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.
18
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..... June 19, 2001
Time of the Meeting..... 10:00 a.m. local time
Place of the Meeting.... The University of Chicago, Graduate School of Business
Conference Center--Sixth Floor,
450 North Cityfront Plaza Drive, Chicago, Illinois
Vote Required
. 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.
. 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 May 7, 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 50,832,347 shares of True North common stock outstanding and
entitled to vote at the special meeting held by approximately 2,350
stockholders of record. On the record date, directors and executive officers of
True North and their affiliates owned approximately 4.0% 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 the proxy card being mailed 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 June 14, 2001.
Fidelity further informs us that if Fidelity does not receive timely
instructions, 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
. 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.
. 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.
. 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.
19
If you 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.
. 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.
. 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.
. 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.
. 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.
20
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:
. a greater concentration of business outside of North America;
. an enhanced ability to attract and serve large, multinational clients;
and
. 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:
. entering into a significant business combination with one or more major
advertising and marketing communications firms in a merger among or
between equals;
. entering into a transaction with a global advertising and marketing
communications firm, with True North as the acquired entity; or
. 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.
21
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 30.
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
22
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.
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 (which, on May 1,
2001, became Sidley Austin Brown & Wood), 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 Brown & Wood 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
23
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 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 Brown & Wood 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 Brown & Wood 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:
. 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;
. post-transaction management structure; and
. 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 Brown & Wood provided the
Board a summary of prior briefings on fiduciary duties, and Morgan Stanley
presented an
24
overview of the proposed structure of the transaction with Company B. Sidley
Austin Brown & Wood 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.
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.
25
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.
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
26
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:
. a potential merger transaction with Company A in which True North would
become a wholly-owned subsidiary of Company A;
. a potential merger transaction with Company C in which True North would
become a wholly-owned subsidiary of Company C; and
. 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 potentially
interested parties to the various potential transactions. A representative of
Sidley Austin Brown & Wood 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
Brown & Wood 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 30 and Annex B.
27
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 this page 28.
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:
. with respect to both True North and Interpublic:
. business,
. operations,
. properties and assets,
. financial condition,
. competitive position,
. business strategy and
. prospects and risks involved in achieving prospects,
. the nature of the advertising and marketing communications industry in
which True North competes,
. industry conditions,
. economic conditions,
. market conditions,
. the view of the True North Board and management that:
. the advertising and marketing communications industry has
experienced significant consolidation in recent years,
. 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
28
. 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,
. the potential stockholder value that could be expected to be generated
from the various strategic alternatives available to True North,
including the alternatives of:
. continuing as an independent entity and
. entering into a combination with another major advertising and
marketing communications company,
. the fact that the True North Board and management had investigated and
discussed these strategic alternatives intensively over a period of
months,
. 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,
. 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 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,
. the view of the True North Board and management that 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,
. 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,
. 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,
. 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,
. 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),
. 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,
. 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,
. 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),
. the ability to account for the merger as a pooling of interests under
generally accepted accounting principles,
29
. the terms of the merger agreement (including the payment of a
termination fee if the merger agreement is terminated under specified
circumstances),
. 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,
. the lack of availability of appraisal rights in connection with the
merger and
. 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.
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 37.
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:
. any other aspect of the merger,
. True North's underlying business decision to pursue the merger or
. the price at which Interpublic common stock will trade following the
merger or at any other time.
30
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:
. reviewed publicly available financial statements and other business and
financial information of True North and Interpublic;
. reviewed internal financial statements and other financial and operating
data concerning True North and Interpublic;
. reviewed financial forecasts prepared by the managements of True North
and Interpublic;
. reviewed information relating to strategic, financial and operational
benefits anticipated from the merger, prepared by the management of True
North;
. 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;
. 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;
. reviewed the pro forma impact of the merger on Interpublic's earnings
per share, cash flows, consolidated capitalization and financial ratios;
. reviewed the reported prices and trading activity for True North common
stock and Interpublic common stock;
. 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;
. reviewed the financial terms, to the extent publicly available, of
comparable acquisition transactions;
. participated in discussions and negotiations among representatives of
True North and Interpublic and their financial and legal advisors;
. reviewed the merger agreement and related documents; and
. 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
31
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.
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 21, 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.
32
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%
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.
33
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 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:
. the Interpublic/Deutsch, Inc. transaction,
. the Publicis S.A./Saatchi & Saatchi PLC transaction,
. the WPP Group PLC/Young & Rubicam Inc. transaction,
. The Leo Group/The MacManus Group transaction,
. the Interpublic/International Public Relations PLC transaction,
. the Chancellor Media Corp./Martin Media LP transaction,
. the Chancellor Media Corp./Petry Media Corp. transaction,
. the Snyder Communications, Inc./Arnold Communications Inc. transaction,
. the Omnicom Group Inc./GGT Group PLC transaction,
. the CLT-UFA S.A./Havas Intermediation S.A. transaction,
. the True North/Bozell, Jacobs, Kenyon & Eckhardt, Inc. transaction,
. the Outdoor Systems, Inc./Van Wagner Communications, Inc. transaction,
. the GGT Group PLC/BDDP Worldwide transaction,
. the DLJ Merchant Banking Partners L.P./Katz Media Corporation
transaction,
. the Omnicom Group Inc./Boase Massimi Pollitt PLC transaction,
. the WPP Group PLC/Ogilvy Group, Inc. transaction,
. the WPP Group PLC/JWT Group, Inc. transaction and
. the Saatchi & Saatchi Company PLC/Ted Bates Worldwide Inc. transaction.
34
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.
Aggregate Value/LTM
(x)
-------------------- Equity Value/LTM
Revenues EBITDA EBIT Net Income (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 Ended Exchange Ratio
March 16, Period Average Premium vs.
2001 Ratio 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.
35
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 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 Per True
P/E 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
36
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 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
. the number of shares subject to the True North option immediately prior
to the effective time of the merger, by
. 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 as of April 30, 2001, for each True
37
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.
Number of Non-Vested Exercise
Name and Title Option Shares 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
Worldwide 12,000 27.06
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
Financial Officer 2,000 24.00
4,000 30.75
13,334 37.00
21,600 38.30
All directors and executive officers as a
group (25 persons) 821,859 $35.42(b)
--------
(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 as
of April 30, 2001, 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.
Shares of
Name 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 (16 persons)........... 66,617
Employment Agreements
True North has entered into employment agreements with many of its executive
officers (including Messrs. Bell, Kelmenson, Ryan and Smith) that provide,
among other things, for the payment of severance benefits in the event of
termination of the executive's employment under specified circumstances.
Although the
38
availability of severance benefits under these employment agreements is not
automatically triggered upon the occurrence of a change in control, many of
these agreements contain constructive termination provisions that would permit
the executives to leave True North and trigger their severance benefits
(generally comprised of base salary, incentive compensation and other benefits
for up to three years) based upon specified adverse changes in their
employment. These adverse changes generally include a material diminution in
duties and responsibilities, a material adverse change in title, office or
reporting responsibilities, a decrease in base salary and any material change
in the geographic location of the executive's employment. In addition, in Mr.
Ryan's agreement an adverse change also includes the failure to continue to
nominate Mr. Ryan for membership on the board of directors of the publicly-held
company that ultimately controls FCB Worldwide.
Some benefits in the employment agreements with executive officers of True
North are accelerated in the event an executive's employment terminates under
specified circumstances following 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, rather than in periodic
installments. 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 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.
Asset Protection Plan
True North maintains an Asset Protection Plan for the benefit of specified
key employees (including three executive officers) who are not parties to
employment agreements with True North. The Asset Protection Plan provides for
the payment of severance benefits if the employee's employment terminates under
specified circumstances within 24 months after the adoption of the merger
agreement by the True North stockholders. If during this period the employee's
employment is terminated without cause or the employee resigns due to certain
adverse changes in his or her employment, then the employee will receive a lump
sum severance payment equal to the employee's accrued base salary and a pro
rata bonus for the year of termination, plus a multiple of the employee's
annual base salary and the average of specified prior bonuses, which for the
covered executive officers would be equal to one times their respective base
salaries and average bonuses. The employee would also be entitled to continued
health and life benefits over a specified period of time following termination
of employment, which for the covered executive officers would continue for up
to one year following termination.
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
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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:
. 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
. 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 Hart-Scott-Rodino Antitrust Improvements Act and the
rules promulgated under this Act by the Federal Trade Commission require, in
connection with the merger, the provision of notifications and information to
the Antitrust Division of the Department of Justice and the FTC and the
satisfaction of specified waiting period requirements. On April 18, 2001,
Interpublic and True North filed the required pre-merger notification and
report forms with the Antitrust Division and the FTC. The waiting period in
connection with this filing is expected to expire on May 18, 2001, absent an
early termination, extension or request for additional information. We may not
complete the merger until the satisfaction of this waiting period requirement.
Additional filings and clearances under this Act may be required in connection
with the receipt by a True North stockholder of Interpublic stock with a value
in excess of $50 million and the indirect acquisition by Interpublic of a
minority investment held by True North.
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, South
Africa, Canada and Israel.
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In addition, we have been advised that we may complete the merger before we
have obtained regulatory approvals and clearances in Colombia, Slovakia and
Turkey so long as we postpone integration and other changes to the operations
of Interpublic and True North in these three jurisdictions until after we have
obtained the applicable approvals and clearances there.
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.
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.
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.
No Appraisal Rights
Under applicable Delaware law, you will have no appraisal rights in
connection with the merger.
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Material U.S. Federal Income Tax Consequences of the Merger
It is the opinion of Sidley Austin Brown & Wood, 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:
. no gain or loss will be recognized by True North, Interpublic's merger
subsidiary or Interpublic as a result of the merger;
. 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;
. 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
. 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 Brown & Wood 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 69. 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 share). A holder
who has not made a valid section 83(b) election will be subject
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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.
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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:
. the number of shares of True North common stock that the nonemployee
director would otherwise be entitled to receive; and
. 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.
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:
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. 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
. 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:
. its corporate organization and existence;
. its capitalization;
. its subsidiaries;
. its financing and investment obligations;
. its agreements and obligations relating to Modem Media, Inc.;
. its corporate power and authority to execute, deliver and perform its
obligations under the merger agreement;
. its Board's:
. approval of the merger;
. determination that the merger is advisable and fair to and in the
best interests of True North and its stockholders;
. recommendation that True North's stockholders approve and adopt the
merger agreement; and
. direction that the merger agreement be submitted to True North's
stockholders for approval and adoption;
. required governmental and other third party consents, clearances,
approvals, authorizations and notifications in connection with the
merger;
. compliance of the merger agreement and the merger with True North's
organizational documents, contracts and applicable law;
. its financial statements and filings with the Commission;
. accuracy of information about True North in this document;
. its conduct of business in the ordinary course and the absence of
undisclosed changes;
. its compliance with its organizational documents and applicable law;
. its contracts;
. tax matters;
. the absence of undisclosed litigation, claims or other proceedings;
. its employee benefit plans and related matters;
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. labor matters;
. 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;
. the required vote of the holders of a majority of the outstanding
shares of True North common stock to approve the merger;
. 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;
. brokers' and finders' fees with respect to the merger;
. 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;
. the inapplicability of state anti-takeover statutes to the merger
agreement; and
. 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:
. its corporate organization and existence;
. its capitalization;
. its subsidiaries;
. its corporate power and authority to execute, deliver and perform its
obligations under the merger agreement;
. its Board's:
. approval of the merger; and
. determination that the merger is advisable and fair to and in the
best interest of Interpublic and its stockholders;
. required governmental and other third party consents, clearances,
approvals, authorizations and notifications in connection with the
merger;
. compliance of the merger agreement and the merger with Interpublic's
organizational documents, contracts and applicable law;
. its financial statements and filings with the Commission;
. accuracy of information about Interpublic in this document;
. the absence of undisclosed changes;
. its compliance with its organizational documents and applicable law;
. its contracts;
. the absence of undisclosed litigation, claims or other proceedings;
. 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;
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. the absence of any requirement that the stockholders of Interpublic
approve the merger agreement or the transactions contemplated by the
merger agreement;
. 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;
. brokers' and finders' fees with respect to the merger; and
. 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:
. conduct its business in the ordinary course;
. seek to preserve its business organizations;
. seek to keep available the services of its officers and employees;
. seek to preserve its relationships with customers, suppliers and others
with whom it has business relations;
. not pay dividends or make distributions other than regular quarterly
cash dividends consistent with past practice;
. not engage in other specified transactions relating to its capital
stock;
. not amend its organizational documents; and
. 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:
. pay dividends or make distributions other than regular quarterly
dividends consistent with past practice;
. liquidate or dissolve itself;
. amend its organizational documents in a manner adverse to holders of
its or True North's common stock; or
. 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:
. solicit, initiate or purposefully encourage any takeover proposal;
. enter into any agreements with respect to any takeover proposal;
. engage in any discussions or negotiations concerning any takeover
proposal;
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. furnish any information in connection with any takeover proposal;
. knowingly facilitate any takeover proposal or inquiries that may lead
to a takeover proposal;
. waive or amend any confidentiality, standstill or similar agreement
relating to any takeover proposal; or
. 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:
. a merger, consolidation, share exchange, recapitalization or other
business combination involving True North or any of its significant
subsidiaries; or
. 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:
. 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;
. 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;
. the True North Board determines in good faith that the takeover proposal
is reasonably likely to be consummated; and
. 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:
. 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
. 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:
. 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
. 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.
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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:
. True North has complied with the restrictions on solicitation described
above;
. there is a pending unsolicited bona fide written superior proposal;
. 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
. 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.
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 51.
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 37.
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 best 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.
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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:
. Stockholder Approval. The True North stockholders shall have approved
and adopted the merger agreement;
. 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;
. HSR Act. The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired or terminated;
. 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;
. 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
. 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:
. 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;
. Covenants. True North shall have complied in all material respects with
all its covenants under the merger agreement;
. 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;
. 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
. 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:
. 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;
. Covenants. Interpublic shall have complied in all material respects with
all its covenants under the merger agreement;
. Tax Opinion. True North shall have received the written opinion of its
counsel, Sidley Austin Brown & Wood, with respect to the tax-free nature
of the merger; and
50
. 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:
. by mutual written consent of True North and Interpublic;
. by either Interpublic or True North if:
. 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;
. a legal prohibition against the merger becomes permanent and final;
. 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
. the True North stockholders do not adopt the merger agreement at the
special meeting.
. by Interpublic if:
. 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;
. the True North Board withdraws or adversely modifies its approval or
recommendation of the merger;
. 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;
. the True North Board recommends or resolves to recommend another
acquisition proposal; or
. 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:
. Interpublic terminates the merger agreement after:
. the True North Board withdraws or adversely modifies its approval or
recommendation of the merger;
. 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;
51
. the True North Board recommends or resolves to recommend another
acquisition proposal; or
. 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
. all three of the following circumstances apply:
. first, the merger agreement terminates as follows:
. 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;
. 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
. Interpublic or True North terminates after:
. 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
. the True North stockholders do not adopt the merger agreement
at the special meeting; and
. second, at or before the event that gave rise to the termination and
on or after the date of the merger agreement, a third party, which,
with its affiliates, has assets of at least $100 million, makes a
takeover proposal; and
. 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.
52
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 May 8, 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 $35.406. 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.
53
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
-------------------- Declared Per
High Low 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 May 8, 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 $39.703. 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 March
16, 2001 was $40.239, based on the agreed upon exchange ratio of 1.14 shares of
Interpublic common stock for each share of True North common stock. On May 8,
2001, the pro forma equivalent price per share of True North common stock was
$40.363.
54
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 69.
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:
. McCann-Erickson WorldGroup and
. 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:
. television,
. cinema,
. radio,
. magazines,
. newspapers,
. direct mail,
. outdoor and
. 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:
. analyzing the market for the particular product or service,
. creating the appropriate advertising campaign to convey the agreed-upon
benefit or message and
. 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:
. independent media buying through Initiative Media Worldwide and its
affiliates,
. direct and promotional marketing through Draft Worldwide,
. marketing research through NFO Worldwide,
. global public relations through Weber Shandwick Worldwide and
Golin/Haris International,
. multinational sports and event marketing through Octagon and
. sales meetings and targeted events through Jack Morton Worldwide.
We also conduct related activities in other areas of marketing
communications that include:
. brand equity and corporate identity services,
. graphic design and interactive services,
55
. management consulting and market research,
. healthcare marketing,
. sales promotion,
. internet services,
. multicultural advertising and promotion and
. other related specialized marketing and communications services.
Interpublic is a corporation organized under Delaware law.
56
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 69.
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:
. the planning, creation and production of advertising programs and
. the purchase and placement of advertising in various media such as:
. television,
. radio,
. newspapers,
. magazines,
. direct mail and
. the internet.
Other services include:
. specialty advertising,
. public relations,
. promotional services,
. directory advertising,
. marketing services and
. interactive digital media development.
True North has the following three major global brands:
. FCB Worldwide L.L.C. (advertising),
. BSMG Worldwide, Inc. (public relations) and
. Marketing Drive Worldwide, Inc. (marketing services).
In addition, True North has other brands, including:
. Bozell Group L.L.C. (advertising),
. Temerlin McClain LP (advertising),
. R/GA Media Group, Inc. (interactive design and development),
. Tierney & Partners, Inc. (advertising and public relations),
. TN Media, Inc. (media placement) and
. 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.
57
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 April 30, 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 April 30, 2001.
Number of Number of
Shares of Percent of Phantom
Name Common Stock (1) Class (2) Stock Units (3)
---- ---------------- ---------- ---------------
David A. Bell..................... 813,671 1.60% --
Joseph A. Califano, Jr. .......... 6,400 * --
Harris Diamond.................... 189,241 * --
Donald M. Elliman, Jr. ........... 15,300 * 7,103
H. John Greeniaus................. 27,666 * --
Mannie L. Jackson................. 1,533 * --
Leo-Arthur Kelmenson.............. 890,425 1.74% --
Dennis McClain.................... 138,975 * --
Wenda Harris Millard.............. 3,200 * --
Michael E. Murphy................. 14,867 * 4,291
J. Brendan Ryan................... 357,745 * --
Donald L. Seeley.................. 184,514 * --
Marilyn Seymann................... 9,566 * 2,255
Stephen T. Vehslage............... 57,533 * 2,645
All directors and executive offi-
cers as a group (25 persons)..... 3,908,139 7.44% 16,294
Publicis S.A. (4)................. 4,658,000 9.20% --
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 April 30, 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 April 30,
2001 as follows: Mr. Bell 252,133 shares, Mr. Califano 5,399 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 3,199 shares, Mr. Murphy 11,367 shares, Mr. Ryan
328,866 shares, Mr. Seeley 175,733 shares, Dr. Seymann 6,566 shares, Mr.
Vehslage 54,733 shares and all directors and executive officers as a group
1,870,287 shares. The number of shares also includes unvested restricted
stock granted in 2000 and 2001.
(2) Shares subject to options exercisable within 60 days of April 30, 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 April 30,
2001.
(4) Based upon information furnished by Publicis S.A. in a Statement of
Beneficial Ownership of Securities on 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 69 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 ex-
penses...................... 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 compa-
nies........................ 361,219 32,884 -- 394,103
Income applicable to minority
interests................... (28,503) (4,044) -- (32,547)
Equity in net income of un-
consolidated 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
. 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.
. 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.
. 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
. 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
. 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,
office reorganization, investment realignment 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
. 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 30, 2001, 316,434,315 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.
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
65
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.
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
66
which True North has given notice of the meeting. Furthermore, the notice by
the stockholder to the secretary must set forth:
. a brief description of the business that the stockholder seeks to bring
before the annual meeting;
. a brief description of the reasons for bringing the business before the
annual meeting;
. the name and address of the stockholder;
. the number of shares of True North common stock that the holder
beneficially owns; and
. 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:
. a representation that the stockholder is, and will be on the record
date, a beneficial owner or holder of record of voting stock;
. a representation that the stockholder has, and will have on the record
date, full voting power with respect to its shares of voting stock;
. 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;
. the name and address of the stockholder and the person to be nominated;
. a description of all arrangements and understandings between the
stockholder and each proposed nominee and any other person in connection
with the proposed nomination;
. the number and kinds of securities of True North held by each proposed
nominee;
. information regarding each proposed nominee as would be required by the
proxy rules promulgated by the Commission; and
. 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.
67
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.
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.
68
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,
March 19, 2001 and April 27, 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, April 9,
2001, May 1, 2001 and May 7, 2001
Annual Report on Form 10-K Year ended December 31, 2000
Registration Statement on Form 8-A, as Filed November 5, 1998
amended Amended April 16, 1999,
March 26, 2001 and April 17, 2001
Description of True North Common Stock con- Filed November 26, 1997
tained 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.
69
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 June 12, 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 May 10, 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.
70
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
ARTICLE I
THE MERGER
Page
----
Section 1.1 The Merger.................................................. 1
Section 1.2 Effective Time.............................................. 1
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...................... 3
Section 1.8 No Fractional Securities.................................... 4
Section 1.9 Return of Exchange Fund..................................... 4
Section 1.10 Adjustment of Exchange Ratio................................ 4
Section 1.11 No Further Ownership Rights in Company Common Stock......... 5
Section 1.12 Closing of Company Transfer Books........................... 5
Section 1.13 Lost Certificates........................................... 5
Section 1.14 Further Assurances.......................................... 5
Section 1.15 Closing..................................................... 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power............................ 6
Section 2.2 Capital Structure........................................... 6
Section 2.3 Authority................................................... 7
Section 2.4 Consents and Approvals; No Violation........................ 7
Section 2.5 SEC Documents and Other Reports............................. 8
Section 2.6 Registration Statement and Proxy Statement.................. 9
Section 2.7 Absence of Certain Changes or Events........................ 9
Section 2.8 Permits and Compliance...................................... 9
Section 2.9 Actions and Proceedings..................................... 10
Section 2.10 Opinion of Financial Advisor................................ 10
Section 2.11 No Required Vote of Parent Stockholders..................... 10
Section 2.12 Pooling of Interests; Reorganization........................ 10
Section 2.13 Brokers..................................................... 10
Section 2.14 Operations of Sub........................................... 10
i
A-2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Page
----
Section 3.1 Organization, Standing and Power.......................... 11
Section 3.2 Capital Structure......................................... 11
Section 3.3 Authority................................................. 12
Section 3.4 Consents and Approvals; No Violation...................... 12
Section 3.5 SEC Documents and Other Reports........................... 13
Section 3.6 Registration Statement and Proxy Statement................ 14
Section 3.7 Absence of Certain Changes or Events...................... 14
Section 3.8 Permits and Compliance.................................... 14
Section 3.9 Tax Matters............................................... 15
Section 3.10 Actions and Proceedings................................... 15
Section 3.11 Employee Benefits......................................... 16
Section 3.12 Labor Matters............................................. 17
Section 3.13 Opinion of Financial Advisor.............................. 17
Section 3.14 Required Vote of Company Stockholders..................... 17
Section 3.15 Pooling of Interests; Reorganization...................... 17
Section 3.16 Brokers................................................... 17
Section 3.17 Amendment to the Rights Agreement......................... 18
Section 3.18 Takeover Statutes......................................... 18
Section 3.19 Accuracy of Earn-Out Schedule............................. 18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.................... 18
Section 4.2 No Solicitation by the Company............................ 21
Section 4.3 Pooling of Interests; Reorganization...................... 22
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting....................................... 22
Preparation of the Registration Statement and the Proxy
Section 5.2 Statement................................................. 22
Section 5.3 Access to Information..................................... 23
Section 5.4 Compliance with the Securities Act........................ 24
ii
A-3
Page
----
Section 5.5 Current NYSE Listing...................................... 24
Section 5.6 Fees and Expenses......................................... 24
Section 5.7 Company Stock Plans....................................... 25
Section 5.8 Reasonable Best Efforts; Pooling of Interests............. 26
Section 5.9 Public Announcements...................................... 27
Section 5.10 Real Estate Transfer and Gains Tax........................ 27
Section 5.11 State Takeover Laws....................................... 27
Section 5.12 Indemnification; Directors and Officers Insurance......... 27
Section 5.13 Notification of Certain Matters........................... 28
Section 5.14 Employee Benefit Plans and Agreements..................... 28
Section 5.15 Section 16(b)............................................. 29
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Conditions to Each Party's Obligation to Effect the
Section 6.1 Merger.................................................... 29
Conditions to Obligation of the Company to Effect the
Section 6.2 Merger.................................................... 30
Conditions to Obligations of Parent and Sub to Effect the
Section 6.3 Merger.................................................... 31
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination............................................... 32
Section 7.2 Effect of Termination..................................... 33
Section 7.3 Amendment................................................. 33
Section 7.4 Waiver.................................................... 33
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties............ 34
Section 8.2 Notices................................................... 34
Section 8.3 Interpretation............................................ 34
Section 8.4 Counterparts.............................................. 34
Section 8.5 Entire Agreement; No Third-Party Beneficiaries............ 35
Section 8.6 Governing Law............................................. 35
Section 8.7 Assignment................................................ 35
Section 8.8 Severability.............................................. 35
iii
A-4
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)
NYSE................................................................... 1.8
Old Plans.............................................................. 5.14(a)
Parent................................................................. Forepart
Parent Affiliate Letter................................................ 5.4(b)
Parent Annual Report................................................... 2.2(b)
iv
A-5
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)
v
A-6
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.
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).
1
A-7
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:
(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
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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 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
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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.
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
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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 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 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,
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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 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
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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"),
(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
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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 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
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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.
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 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.
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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 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.
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(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 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,
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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 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.
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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
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 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
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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) 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
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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 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
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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.
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
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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 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:
(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
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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;
(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;
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(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;
(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.
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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
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
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such action, and shall provide Parent with 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 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
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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.
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
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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.
(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
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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.
(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 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.
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(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.
(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
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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
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
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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.
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
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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 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.
(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
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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.
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).
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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.
(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.
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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 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
32
A-38
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 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.
33
A-39
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
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
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.
34
A-40
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.
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.
* * * *
35
A-41
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.
/s/ Nicholas J. Camera
By: _________________________________
Name: Nicholas J. Camera
Its: Senior Vice President,
Secretary and General Counsel
Veritas Acquisition Corp.
/s/ Nicholas J. Camera
By: _________________________________
Name: Nicholas J. Camera
Its: Senior Vice President,
Secretary and General Counsel
True North Communications Inc.
/s/ David A. Bell
By: _________________________________
Name: David A. Bell
Its: Chairman and Chief Executive
Officer
36
A-42
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;
B-1
(j) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(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
/s/ Francis J. Oelerich III
By: _________________________________
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 Brown & Wood 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 Brown & Wood (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 the Registrant's Registration Statement on Form S-4 filed on
April 19, 2001)
24.2 Power of Attorney for J. Phillip Samper, director of the Registrant
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.
--------
* Previously filed.
II-2
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
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
II-3
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-4
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 Amendment No. 1 to
the 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
9th day of May, 2001.
The Interpublic Group Of Companies,
Inc. (Registrant)
/s/ Nicholas J. Camera
By: _________________________________
Nicholas J. Camera
Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, May 9, 2001
___________________________________________ President and Chief
John J. Dooner, Jr. Executive Officer
(Principal Executive
Officer)
* Executive Vice President, May 9, 2001
___________________________________________ Chief Financial Officer
Sean F. Orr (Principal Financial
Officer) and Director
* Vice President and May 9, 2001
___________________________________________ Controller (Principal
Frederick Molz Accounting Officer)
* Director May 9, 2001
___________________________________________
Frank J. Borelli
* Director May 9, 2001
___________________________________________
Reginald K. Brack
* Director May 9, 2001
___________________________________________
Jim M. Considine
* Director May 9, 2001
___________________________________________
James R. Heekin
* Director May 9, 2001
___________________________________________
Frank B. Lowe
II-5
Signature Title Date
--------- ----- ----
* Director May 9, 2001
___________________________________________
Michael A. Miles
* Director May 9, 2001
___________________________________________
Leif H. Olsen
* Director May 9, 2001
___________________________________________
J. Phillip Samper
/s/ Nicholas J. Camera May 9, 2001
*By: ______________________________________
Nicholas J. Camera
As Attorney-in-Fact
II-6
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
------- -----------
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 Brown & Wood 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 Brown & Wood (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 the Registrant's Registration Statement on Form S-4
filed on April 19, 2001)
24.2 Power of Attorney for J. Phillip Samper, director of the Registrant
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.
--------
* Previously filed.