Exhibit 99.2
MEMORANDUM OF AGREEMENT
This is a Memorandum of Agreement (this "Agreement") dated February 19, 1997
among Publicis S.A., Publicis Communication, and Publicis.FCB Europe
(collectively, "Publicis"), on the one hand and True North Communications Inc.,
▇▇▇▇▇, Cone & ▇▇▇▇▇▇▇ Communications Inc. and FCB International, Inc.
(collectively, "True North"), on the other hand, with respect to the following
matters:
1. Publicis and True North agree to resolve all of the outstanding disputes
between them upon the terms set forth in this Agreement.
2. (a) Publicis and True North agree to create two separate agency networks,
one owned and controlled by Publicis and the other owned and
controlled by True North. The two networks would each have the
capacity to offer to their respective clients top quality service and
would each have the ability to function globally and independently of
one another.
(b) As between Publicis and True North, True North will be the sole owner
of and have the sole right to use the names "▇▇▇▇▇, Cone and ▇▇▇▇▇▇▇"
and "FCB" throughout the world, and Publicis will be the sole owner of
and have the sole right to use the name "Publicis" throughout the
world.
Page 2
3. (a) Within sixty days following the execution of this Agreement, Publicis
agrees to sell, transfer and assign to True North all of the interests
held by Publicis in the following four agencies: FCB London, FCB Paris,
FCB Lisbon and Gnomi FCB Athens. In 1996, these four agencies represented
approximately US$42 million in revenue and US$4.8 million in net profit
(after tax and management fees).
(b) Simultaneously with the transactions described in the immediately
preceding paragraph 3(a) Publicis agrees to merge or otherwise combine
the operations of Publicis.FCB Europe and Publicis Communication.
(c) Following that merger and the transfer of the FCB Agencies, True North
will no longer have a direct interest in Publicis.FCB Europe and will
own 26.5 per cent of the combined entity.
4. (a) True North authorizes and consents to any and all transactions designed
to combined or merge Publicis Communication with Publicis.FCB Europe
under the terms of this Agreement, and to any and all transactions
designed to transfer the Publicis global agency network owned by Publicis
S.A. so that such global network is owned by Publicis Communication. In
connection with the current restructuring, it is agreed that all of the
material transactions between Publicis Communication and Publicis S.A.
will be done on an arm's length basis.
(b) After this restructuring, Publicis Communication will be the holding
company of the worldwide network for Publicis, and all other agencies
already owned by Publicis S.A. will be merged with Publicis
Communication. True North authorizes and consents to any and all
transactions intended to achieve that objective.
Page 3.
(c) If, at any time, Publicis Communication issues equity in a
transaction that results in True North's owning less than 20 per
cent of Publicis Communication, and the shares of Publicis
Communication are not then listed on a major European stock
exchange, Publicis agrees that it shall use its best efforts to
cause to be listed (within 120 days following the date on which
True North owns less than 20 per cent of Publicis Communication)
on a major European stock exchange the equity of Publicis
Communication.
The offering and listing, if any, of Publicis Communication
shares shall be carried out such that True North shall be
permitted to sell at least 50 per cent of the shares of Publicis
Communication held by it immediately prior to the consummation of
the offering.
If the listing of Publicis Communication has not occurred on or
prior to the 120th day following the date on which True North
owned less than 20 per cent of Publicis Communication, True North
will have the right, at its sole discretion, to sell 100 per cent
of the shares of Publicis Communication then owned by it to
Publicis S.A. Of those shares, 75 per cent shall be purchased at
the fair market value of the block of shares sought to be sold by
True North, as established pursuant to the procedures set forth
in the last two sentences of the first paragraph of Section 12 of
this Agreement, and 25 per cent shall be purchased at the formula
set forth in the second paragraph of Section 12 of this
Agreement.
Page 4.
(d) If the listing of Publicis Communication has not yet occured as of
the date that True North's ownership of Publicis Communication is
diluted below 20 per cent, True North may, in its sole discretion
notify Publicis that it elects to maintain its 20 per cent
ownership of Publicis Communication rather than sell in a public
offering (or to Publicis) as contemplated by paragraph 4(c) of
this Agreement. If True North so notifies Publicis, the provisions
of paragraph 4(c) of this Agreement shall not apply as to the
particular event that would have diluted True North's ownership of
Publicis Communication below 20 per cent, and True North shall
have the right to purchase sufficient additional shares of
Publicis Communication so that it maintains its 20 percent
ownership thereof. If the listing of Publicis Communication has
not yet occurred as of the date that True North's ownership of
Publicis Communication is diluted below 20 per cent, True North's
discretion to elect either paragraph 4(c) or 4(d) under this
Agreement shall apply to successive subsequent events that would
dilute True North's interest in Publicis Communication below 20
per cent.
The per share price to be paid by True North for such additional
shares shall be the fair value of the per share consideration
received by Publicis in connection with the event that caused True
North's ownership to be diluted below 20 per cent.
(e) As long as True North owns 10 per cent or more of Publicis
Communication, Publicis Communication will provide all financial
and other information reasonably requested by True North for
purposes of True North's compliance with U.S. income tax laws and
other U.S. regulatory requirements, will cause its independent
auditors to complete their annual audit and provide the resuls to
True North before February 15 each year, and will provide True
North with unaudited quarterly consolidated financial results
before April 30, July 30, and October 30 each year.
Page 5.
(f) As long as Publicis owns 10 per cent or more of True North, True
North will provide all financial and other information reasonably
requested by Publicis for purposes of Publicis' compliance with
French and European income tax laws and other French and European
regulatory requirements, will cause its independent auditors to
complete their annual audit and provide the results to Publicis
before February 15 each year, and will provide Publicis with
unaudited quarterly consolidated financial results before April
30, July 30, and October 30 each year.
5. Publicis authorizes and consents to any and all transactions by True North
in Europe designed to establish an independent True North network in
Europe.
6. Subject to controlling local law and existing contractual obligations, True
North agrees to sell, transfer and assign to Publicis its entire 6 per cent
equity stake in "Park Advertising Pty" which owns 100 per cent of the
"Partnership" agency in South Africa, and True North will use its best
efforts to assist in the transfer of Park Advertising Pty shares to
Publicis by third parties.
7. Subject to controlling local law and existing contractual obligations and
within sixty days following the execution of this Agreement, True North
agrees to use its best efforts to create, or to enter into agreements to
create, separate agencies (which shall be spun-off from existing True North
agencies) which will handle the Nestle and L'Oreal accounts in Thailand,
India and Argentina. These new agencies shall be spun-off fro the Prakit
agency in Thailand, the ▇▇▇▇ agency in India and the Pragma agency in
Argentina. Immediately following the spin-off of these newly-created
agencies, True North will exercise its best efforts to have the other
shareholders in these agencies sell, transfer and assign to Publicis not
less than a controlling stake in each spun-off agency.
Page 6.
8. Within sixty days following the execution of this Agreement, True North
agrees to sell, transfer and assign to Publicis not less than a majority
stake in the Mojo agency in each of Australia and New Zealand. True North
also agrees to sell, transfer and assign to Publicis all the shares that
True North owns in BMZ Germany.
9. The sale of stakes agreed in paragraphs 6,7 and 8 of this Agreement will be
made by True North (or other shareholders) in exchange for payments by
Publicis. For each stake so purchased, Publicis agrees to pay True North
the appropriate pro rata share of (i) the net equity of the entity being
purchased as at December 31, 1996 and (ii) a negotiated amount not
exceeding 75 per cent of the revenue of each such entity in fiscal year
1996. The sale price for the spun-off agencies contemplated by Section 7 of
this Agreement shall be based on pro forma net equity and revenue amounts
for fiscal year 1996.
10. (a) Although the amount of any fees due and owing is in dispute, as a
demonstration of goodwill, as a condition to closing the transaction
contemplated in paragraph 3 herein, True North agrees to pay to
Publicis all amounts due to Publicis with respect to "coordination and
development fees". Such amounts accrued to date for the years 1992,
1993, 1994 and 1995 total US$2.3 million.
(b) True North and Publicis further agree to pay regularly when due all
future coordination fees of one per cent of ▇▇▇▇▇▇▇▇ for qualified
international accounts.
11. Publicis agrees to use its use its best efforts to cause to be listed on a
major European stock exchange the equity of Publicis Communication prior to
December 31, 1998. Publicis agrees to seek to cause such listing to occur
in 1997. The offering and listing of Publicis Communication shares shall be
carried out such that True North shall be permitted to sell in any such
offering at least 50 per cent of the shares of Publicis Communication held
by it immediately prior to the consummation of the offering. The intention
of the parties is to provide True North with a means of selling its stake
in Publicis Communication in a public market.
Page 7.
12. If the listing of Publicis Communication has not occurred on or prior to
December 31, 1998, True North will have the right, at its sole discretion,
to sell up to 20 per cent of the shares of Publicis Communication to
Publicis S.A. at the fair market value of the block of shares sought to be
sold by True North. The fair market value to be paid by Publicis S.A. will
be established within 60 days of True North's requesting an appraisal by a
panel consisting of three globally-recognized investment banks. One of said
banks shall be appointed by Publicis, one by True North and the third shall
be agreed and appointed by the two banks previously selected by each of the
parties.
For the remaining shares held by True North (6.5 per cent) in Publicis
Communication, a put and call option exercisable at any time up to March
31, 1999 will be granted to True North and Publicis respectively at a price
that would result from the application of the following formula for
determining the total value of Publicis Communication: the sum of (1) the
average of (a) 60 percent of the revenue for the immediately preceding two
full calendar years and (b) eleven times net income (after tax and before
goodwill amortization) for the immediately preceding two full calendar
years and (2) net tangible assets (net equity less intangible assets).
13. Both parties agree to continue their collaboration by entering into an
agreement to service their respective clients in the countries where either
of the parties is not yet established. This agreement will have a three-
year term, and will be renewable by either party for one additional three-
year term.
14. Those clients of one of the parties handled by the other party in the prior
"spheres of influence" under the Alliance, will be transferred to the party
having the worldwide agreement with the clients concerned. Such transfer
will be effected as promptly as possible after the relevant party has at
its disposal agencies capable of serving the transferred clients. The
relevant employees will be given the opportunity to move to the other
agency.
Page 8.
15. The two parties agree to explore the possibility of creating a common
media-buying company on a global basis or some other means of cooperating
on the buying of media space worldwide, which would provide media-buying
services for Publicis in the United States and for True North in Europe.
16. Simultaneously with the execution of the definitive agreements, both
parties agree to irrevocably terminate any adversarial proceedings between
them, including any present or future litigation or arbitration which
arises out of events occurring prior to the date of such definitive
agreements.
17. This Agreement is subject to the approval of the Boards of Directors of
each Publicis S.A. and True North Communications Inc. No public
announcement or other disclosure of this Agreement or the terms hereof will
be made until the Boards of Directors of each Publicis S.A. and True North
Communications Inc. shall have approved this Agreement.
18. Except as to those public disclosures required by law, the parties shall
agree in advance on any and all communication or release of information
concerning this Agreement to third parties. The parties will use best
efforts to coordinate and exchange in advance proposed communications
required by law. After execution of this Agreement, neither party will
publicly criticize the other and/or any actions taken by the other party.
19. Due to the complexities of the transactions contemplated in this Agreement
it is not possible at this time for the parties to prepare and execute the
definitive documentation concerning all the agreements set forth herein.
The parties understand and agree that
Page 9.
the transactions referred to herein are mutually dependent on each other
and that certain of such transactions will require the execution of
definitive legal documents. The parties intend, nonetheless, that (x) the
agreements set forth in paragraphs 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 17,
18, 21, 22 and 24 hereof shall constitute binding legally enforceable
agreements of each of Publicis and True North, and (y) that the definitive
legal documents will be negotiated in good faith and will be based on the
agreed principles set forth herein.
20. The parties acknowledge and agree that the transactions contemplated by
paragraphs 3, 6, 7, 8, 9 and 10(a) of this Agreement shall, to the extent
practicable, be consummated simultaneously. If such transactions cannot
reasonably be completed contemporaneously, the parties agree that they will
enter into escrow or other similar arrangements intended to effect a
simultaneous closing.
21. So long as True North is a 10 per cent or greater stockholder of Publicis
Communication any significant transactions effected by Publicis
Communication shall be on an arm's length basis, except for the merger or
other combination of Publicis.FCB Europe and Publicis Communication.
As soon as practicable, but no later than sixty days after execution of the
definitive documentation concerning the agreements set forth herein, as
long as True North owns 10 per cent or more of Publicis Communication, and
before any transaction to transfer Publicis S.A. agencies to Publicis
Communication, Publicis Communication will have three members of its Board
of Directors who have no prior significant relationship with Publicis, True
North or the directors or senior officers of either. Publicis Communication
will consult with True North prior to the appointment of the three
independent directors. A majority of the three independent directors must
approve any transaction (other than those specifically contemplated by this
Agreement) of Publicis Communication, including transactions with Publicis
S.A. or affiliates of Publicis S.A. that a majority of them deem
significant.
Page 10.
A party owning 18 per cent or more of the outstanding voting
stock of the other party shall be entitled to be represented on
the board of the other party under circumstances that recognize
that each may have information that should be kept confidential
from the other.
22. With respect to any transaction preceding the completion of the
initial public offering, concerning the acquisition by Publicis
Communication of any entity or interest therein presently owned
by Publicis S.A. or acquired by Publicis S.A. before the
formation of the entity combining Publicis.FCB Europe and
Publicis Communication, True North shall have the right to
maintain its 26.5 per cent interest in such entity by
contributing 26.5 per cent of Publicis Communication actual cost
of any such acquisitions financed through the issuance of
Publicis Communication stock by purchasing Publicis Communication
stock for cash on the same valuation basis as in the transaction
that resulted in the dilution of such 26.5 per cent interest.
23. It is the parties' understanding that the concurrence of a client
to a transfer of its account from one agency to another is the
way the advertising business works (and it is the parties'
assumption that neither party will attempt to obstruct such
concurrence.)
24. For a period of three years after the signing of the definitive
documentation concerning the agreements set forth herein, as long
as Publicis owns 10 per cent or more of True North's stock,
Publicis, within thirty days after receiving a written request
form True North, will furnish True North with a pooling letter,
in a conventional form, and, if reasonable requested, will take
such other action in support of the transaction (other than a
commitment to vote for the transaction) as would be customary
with respect to an acquisition or other similar business
transaction in which True North may participate, provided that
the pooling letter may be withdrawn if any of the following
conditions is not met within ninety days after the pooling letter
has been furnished:
Page 11.
(a) True North has obtained a fairness opinion from a
nationally-recognized investment bank with regard to the
contemplated transaction;
(b) A majority of the outside directors of True North has voted
to approve the terms and conditions of the contemplated
transaction; and
(c) True North has obtaianed pooling letters (or similar
action) by all other non-deminimis affiliates of True
North.
Not later than ninety days after Publicis has furnished the
pooling letter, True North shall call a meeting of the True
North shareholders, to be held within a futher sixty days, to
vote on the contemplated transaction. If a majority vote of the
outstanding shares of True North in favor of the contemplated
transaction is not obtained at such meeting, Publicis may
withdraw its pooling letter.
The obligation of Publicis to furnish a pooling letter pursuant
to this paragraph shall expire at the end of the earlier of (a)
True North's successful completion of a significant transaction
involving the pooling method of accounting or (b) three years
after the signing of the definitive documentation concerning the
agreements set forth herein.
TRUE NORTH COMMUNICATIONS INC. PUBLICIS S.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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