10-K 1 ANNUAL REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-K ANNUAL REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended: December 31, 1994 Commission File Number: 1-10551 ---------------------- OMNICOM GROUP INC. (Exact name of registrant as specified in its charter) New York 13-1514814 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 437 Madison Avenue, New York, NY 10022 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 415-3600 Securities Registered Pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- -------------------- Common Stock, $.50 Par Value New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At March 15, 1995, there were 36,115,328 shares of Common Stock outstanding; the aggregate market value of the voting stock held by nonaffiliates at March 15, 1995 was approximately $1,947,100,000. Indicate the number of shares outstanding of each of the registrant's classes of stock, as of the latest practicable date. Class Outstanding at March 15, 1995 Common Stock, $.50 Par Value 36,115,328 Preferred Stock, $1.00 Par Value NONE DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the Registrant's definitive proxy statement relating to its annual meeting of shareholders scheduled to be held on May 22, 1995 are incorporated by reference into Part III of this Report. ================================================================================
OMNICOM GROUP INC. ------------------ Index to Annual Report on Form 10-K Year Ended December 31, 1994 Page PART I Item 1. Business ..................................................................................... 1 Item 2. Properties.................................................................................... 4 Item 3. Legal Proceedings............................................................................. 5 Item 4. Submission of Matters to a Vote of Security Holders........................................... 5 Executive Officers of the Company....................................................................... 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 6 Item 6. Selected Financial Data....................................................................... 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................................... 7 Item 8. Financial Statements and Supplementary Data................................................... 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................................................................ 10 PART III Item 10. Directors and Executive Officers of the Registrant............................................ 11 Item 11. Executive Compensation........................................................................ 11 Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 11 Item 13. Certain Relationships and Related Transactions................................................ 11 The information called for by Items 10, 11, 12 and 13, to the extent not included in this document, is incorporated herein by reference to such information to be included under the captions "Election of Directors," "Executive Compensation," "Directors' Compensation" and "Certain Transactions with Management" in the Company's definitive proxy statement which is expected to be filed by April 7, 1995. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............................. 12
PART I Item 1. Business Omnicom Group Inc., through its wholly and partially-owned companies (hereinafter collectively referred to as the "Agency" or "Company"), operates advertising agencies which plan, create, produce and place advertising in various media such as television, radio, newspaper and magazines. The Agency offers its clients such additional services as marketing consultation, consumer market research, design and production of merchandising and sales promotion programs and materials, direct mail advertising, corporate identification, and public relations. The Agency offers these services to clients worldwide on a local, national, pan-regional or global basis. Operations cover the major regions of North America, the United Kingdom, Continental Europe, the Middle East, Africa, Latin America, the Far East and Australia. In 1994 and 1993, 54% and 52%, respectively, of the Agency's billings came from its non-U.S. operations. (See "Financial Statements and Supplementary Data") According to the unaudited industry-wide figures published in the trade journal, Advertising Age, in 1994 Omnicom Group Inc. was ranked as the third largest advertising agency group worldwide. The Agency operates three separate, independent agency networks: The BBDO Worldwide Network, the DDB Needham Worldwide Network and the TBWA International Network. The Agency also operates independent agencies, Altschiller & Company and Goodby, Silverstein & Partners, and certain marketing service and specialty advertising companies through Diversified Agency Services ("DAS"). The BBDO Worldwide, DDB Needham Worldwide and TBWA International Networks General BBDO Worldwide, DDB Needham Worldwide and TBWA International, by themselves and through their respective subsidiaries and affiliates, independently operate advertising agency networks worldwide. Their primary business is to create marketing communications for their clients' goods and services across the total spectrum of advertising and promotion media. Each of the agency networks has its own clients and competes with each other in the same markets. The BBDO Worldwide, DDB Needham Worldwide and TBWA International agencies typically assign to each client a group of advertising specialists which may include account managers, copywriters, art directors and research, media and production personnel. The account manager works with the client to establish an overall advertising strategy for the client based on an analysis of the client's products or services and its market. The group then creates and arranges for the production of the advertising and/or promotion and purchases time, space or access in the relevant media in accordance with the client's budget. BBDO Worldwide Network The BBDO Worldwide Network operates in the United States through BBDO Worldwide which is headquartered in New York and has full-service offices in New York, New York; Los Angeles and San Francisco, California; Atlanta, Georgia; Chicago, Illinois; Detroit, Michigan; and Minneapolis, Minnesota. The BBDO Worldwide Network operates internationally through subsidiaries in Austria, Belgium, Brazil, Canada, China, Croatia, Denmark, Finland, France, Germany, Greece, Hong Kong, Italy, Malaysia, Mexico, the Netherlands, Peru, Poland, Portugal, Puerto Rico, Russia, Singapore, Spain, Sweden, Taiwan, Thailand and the United Kingdom; and through affiliates located in Argentina, Australia, Chile, Costa Rica, the Czech Republic, Egypt, El Salvador, Guatemala, Honduras, Hungary, India, Israel, Lebanon, Kuwait, New Zealand, Norway, Panama, the Philippines, Romania, Saudi Arabia, the Slovak Republic, Switzerland, Turkey, the United Kingdom, United Arab Emirates and Venezuela; and through a joint venture in Japan. The BBDO Worldwide Network uses the services of associate agencies in Colombia, Dominican Republic, Ecuador, Indonesia, Korea, Nicaragua, Pakistan and Uruguay. DDB Needham Worldwide Network The DDB Needham Worldwide Network operates in the United States through DDB Needham Worldwide which is headquartered in New York and has full-service offices in New York, New York; Los Angeles, California; Dallas, Texas; Chicago, Illinois; and Seattle, Washington; and through Griffin Bacal Inc. which is headquartered in New York. 1 The DDB Needham Worldwide Network operates internationally through subsidiaries in Australia, Austria, Belgium, Bulgaria, Canada, China, the Czech Republic, Denmark, France, Germany, Greece, Hong Kong, Hungary, Italy, Japan, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Singapore, the Slovak Republic, Spain, Sweden, Taiwan, Thailand and the United Kingdom; and through affiliates located in Brazil, Costa Rica, Egypt, Estonia, Finland, Germany, India, Korea, Malaysia, Switzerland and Thailand. The DDB Needham Worldwide Network uses the services of associate agencies in Miami, Florida and in Argentina, Bahrain, Belize, Bolivia, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Indonesia, Ireland, Israel, Kuwait, Lebanon, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Romania, Russia, Saudi Arabia, Slovenia, South Africa, Trinidad, Turkey, United Arab Emirates, Uruguay and Venezuela. Griffin Bacal Inc. operates internationally through subsidiaries in Canada and the United Kingdom and through a branch in Mexico. TBWA International Network TBWA International B.V., a corporation organized under the laws of the Netherlands, is the holding company for the TBWA International Network. The TBWA International Network operates in the United States through TBWA Advertising and Graf Bertel Buczek which are both headquartered in New York, New York and through TBWA Wolfe Freeman Advertising, Inc. in St. Louis, Missouri. The TBWA International Network operates internationally through subsidiaries in Belgium, Denmark, France, Germany, Greece, Italy, the Netherlands, South Africa, Spain and the United Kingdom; and through affiliates located in Mexico, Portugal, South Africa, Sweden and Switzerland. The TBWA International Network uses the services of associate agencies in Austria, the Czech Republic, Hungary, India, Japan, the Middle East, the Netherlands, Norway, Poland and Turkey. Diversified Agency Services DAS is the Company's Marketing Services and Specialty Advertising division whose agencies' mission is to provide customer driven marketing communications coordinated to the client's benefit. The division offers marketing services including sales promotion, public relations, direct and database marketing, corporate and brand identity, graphic arts, merchandising/point-of-purchase promotion; and specialty advertising including financial, healthcare and recruitment advertising. DAS agencies headquartered in the United States include: Harrison, Star, Wiener & Beitler, Inc., Interbrand Schechter Inc., Kallir, Philips, Ross, Inc., RC Communications, Inc., Merkley Newman Harty Inc., Lyons/Lavey/Nickel/Swift, Inc. and Shain Colavito Pensabene Direct, Inc., in New York; Doremus & Company, Gavin Anderson & Company Worldwide, Inc., Porter Novelli, Inc., Bernard Hodes Advertising, Inc. and Rapp Collins Worldwide Inc., all in various cities and headquartered in New York; Baxter, Gurian & Mazzei, Inc., in Beverly Hills, California; Frank J. Corbett, Inc., in Chicago, Illinois; Thomas A. Schutz Co., Inc. in Morton Grove, Illinois; The GMR Group, in Fort Washington, Pennsylvania; Optima Direct Inc., in Vienna, Virginia; Rainoldi, Kerzner & Radcliffe, Inc., in San Francisco, California and Alcone Sims O'Brien, Inc., in Irvine, California and Mahwah, New Jersey. DAS operates in the United Kingdom through subsidiaries which include Colour Solutions Ltd., Countrywide Communications Group Ltd., CPM International Ltd., European Political Consultancy Group Ltd., Granby Marketing Services Ltd., Interbrand (UK) Ltd., MacMillan Davies Advertising, Ltd., MacMillan Davies Consultants, Ltd., Paling Ellis/KPR, Ltd., Premier Magazines Ltd., Product Plus London Ltd., Specialist Publications (UK) Ltd., The Anvil Consultancy Ltd. and WWAV Rapp Collins Group, Ltd. In addition, DAS operates internationally with subsidiaries and affiliates in Australia, Belgium, Canada, France, Germany, Hong Kong, Ireland, Italy, Japan, Korea, Mexico, South Africa and Spain. Omnicom Group Inc. As the parent company of BBDO Worldwide, DDB Needham Worldwide, TBWA International, the DAS Group, Goodby, Silverstein & Partners and Altschiller & Company, the Company, through its wholly-owned subsidiary Omnicom Management Inc. provides a common financial and administrative base for the operating groups. The Company oversees the operations of each group through regular meetings with their respective top-level management. The Company sets operational goals for each of the groups and evaluates performance through the 2 review of monthly operational and financial reports. The Company provides its groups with centralized services designed to coordinate financial reporting and controls, real estate planning and to focus corporate development objectives. The Company develops consolidated services for its agencies and their clients. For example, the Company participated in forming The Media Partnership, which consolidates certain media buying activities in Europe in order to obtain cost savings for clients. Clients The clients of the Agency include major industrial, financial and service industry companies as well as smaller, local clients. Among its clients are Anheuser-Busch, Apple Computer, Chrysler Corporation, Delta Airlines, Gillette, GTE, Henkel, McDonald's, PepsiCo., Visa U.S.A., Volkswagen and The Wm. Wrigley Jr. Company. The Agency's ten largest clients accounted for approximately 18% of 1994 billings. The majority of these have been clients for more than ten years. The Agency's largest client accounted for less than 5% of 1994 billings. Revenues Commissions charged on media billings are the primary source of revenues for the Agency. Commission rates are not uniform and are negotiated with the client. In accordance with industry practice, the media source typically bills the Agency for the time or space purchased and the Agency bills its client for this amount plus the commission. The Agency typically requires that payment for media charges be received from the client before the Agency makes payments to the media. In some instances a member of the Omnicom Group, like other advertising agencies, is at risk in the event that its client is unable to pay the media. The Agency's advertising networks also generate revenues in arranging for the production of advertisements and commercials. Although, as a general matter, the Agency does not itself produce the advertisements and commercials, the Agency's creative and production staff directs and supervises the production company. The Agency bills the client for production costs plus a commission. In some circumstances, certain production work is done by the Agency's personnel. In some cases, fees are generated in lieu of commissions. Several different fee arrangements are used depending on client and individual agency needs. In general, fee charges relate to the cost of providing services plus a markup. The DAS Group primarily charges fees for its various specialty services, which vary in type and scale, depending upon the service rendered and the client's requirements. Advertising agency revenues are dependent upon the marketing requirements of clients and tend to be highest in the second and fourth quarters of the fiscal year. Other Information For additional information concerning the contribution of international operations to commissions and fees and net income see Note 5 of the Notes to Consolidated Financial Statements. The Agency is continuously developing new methods of improving its research capabilities, to analyze specific client requirements and to assess the impact of advertising. In the United States, approximately 146 people on the Agency's staff were employed in research during the year and the Agency's domestic research expenditures approximated $20,395,000. Substantially all such expenses were incurred in connection with contemporaneous servicing of clients. The advertising business is highly competitive and accounts may shift agencies with comparative ease, usually on 90 days' notice. Clients may also reduce advertising budgets at any time for any reason. An agency's ability to compete for new clients is affected in some instances by the policy, which many advertisers follow, of not permitting their agencies to represent competitive accounts in the same market. As a result, increasing size may limit an agency's potential for securing certain new clients. In the vast majority of cases, however, the separate, independent identities of BBDO Worldwide, DDB Needham Worldwide, TBWA International, the independent agencies within the DAS Group, Goodby, Silverstein & Partners and Altschiller & Company have enabled the Agency to represent competing clients. 3 BBDO Worldwide, DDB Needham Worldwide, TBWA International, the DAS Group, Goodby, Silverstein & Partners and Altschiller & Company have sought, and as part of the Agency's operating segments will seek, new business by showing potential clients examples of advertising campaigns produced and by explaining the variety of related services offered. The Agency competes in the United States and internationally with a multitude of full service and special service agencies. In addition to the usual risks of the advertising agency business, international operations are subject to the risk of currency exchange fluctuations, exchange control restrictions and to actions of governmental authorities. Employees The business success of the Agency is, and will continue to be, highly dependent upon the skills and creativity of its creative, research, media and account personnel and their relationships with clients. The Agency believes its operating groups have established reputations for creativity and marketing expertise which attract, retain and stimulate talented personnel. There is substantial competition among advertising agencies for talented personnel and all agencies are vulnerable to adverse consequences from the loss of key individuals. Employees are generally not under employment contracts and are free to move to competitors of the Agency. The Company believes that its compensation arrangements for its key employees, which include stock options, restricted stock and retirement plans, are highly competitive with those of other advertising agencies. As of December 31, 1994, the Agency, excluding unconsolidated companies, employed approximately 16,100 persons, of which approximately 6,700 were employed in the United States and approximately 9,400 were employed in its international offices. Government Regulation The advertising business is subject to government regulation, both within and outside the United States. In the United States, federal, state and local governments and their agencies and various consumer groups have directly or indirectly affected or attempted to affect the scope, content and manner of presentation of advertising. The continued activity by government and by consumer groups regarding advertising may cause further change in domestic advertising practices in the coming years. While the Company is unable to estimate the effect of these developments on its U.S. business, management believes the total volume of advertising in general media in the United States will not be materially reduced due to future legislation or regulation, even though the form, content, and manner of presentation of advertising may be modified. In addition, the Company will continue to ensure that its management and operating personnel are aware of and are responsive to the possible implications of such developments. Item 2. Properties Substantially all of the Company's offices are located in leased premises. The Company has continued a program to consolidate leased premises. Management has obtained subleases for most of the premises vacated. Where appropriate, management has established reserves for the difference between the cost of the leased premises that were vacated and anticipated sublease income. Domestic The Company's corporate office occupies approximately 25,000 sq. ft. of space at 437 Madison Avenue, New York, New York under a lease expiring in the year 2010. BBDO Worldwide occupies approximately 285,000 sq. ft. of space at 1285 Avenue of the Americas, New York, New York under a lease expiring in the year 2012, which includes options for additional growth of the agency. DDB Needham Worldwide occupies approximately 162,000 sq. ft. of space at 437 Madison Avenue, New York, New York under leases expiring in the year 2010, which include options for additional growth of the agency. TBWA International occupies approximately 61,000 sq. ft. of space at 292 Madison Avenue, New York, New York under a lease expiring in the year 2005, which includes options for additional growth of the agency. The Agency's other full-service offices in Atlanta, Beverly Hills, Chicago, Dallas, Detroit, Irvine, Los Angeles, Mahwah, Minneapolis, Morton Grove, New York, San Francisco, Seattle and St. Louis and service offices at various other locations occupy approximately 1,798,000 sq. ft. of space under leases with varying expiration dates. 4 International The Company's international subsidiaries in Australia, Austria, Belgium, Canada, China, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Puerto Rico, Singapore, the Slovak Republic, South Africa, Spain, Sweden, Taiwan, Thailand and the United Kingdom occupy premises under leases with various expiration dates. Item 3. Legal Proceedings The Agency has no material pending legal proceedings, other than ordinary routine litigation incidental to its business. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the last quarter of 1994. Executive Officers of the Company The individuals named below are Executive Officers of the Company:
Name Position Age ---- -------- --- Bruce Crawford.............. President, Chief Executive Officer of Omnicom Group Inc. 66 Fred J. Meyer .............. Chief Financial Officer of Omnicom Group Inc. 64 Dennis E. Hewitt............ Treasurer of Omnicom Group Inc. 50 Dale A. Adams............... Controller of Omnicom Group Inc. 36 Raymond E. McGovern......... Secretary, General Counsel of Omnicom Group Inc. 67 Allen Rosenshine............ Chairman, Chief Executive Officer of BBDO Worldwide Inc. 56 James A. Cannon ............ Vice Chairman, Chief Financial Officer of BBDO Worldwide Inc. 56 Keith L. Reinhard........... Chairman, Chief Executive Officer of DDB Needham Worldwide Inc. 60 William G. Tragos........... Chairman, Chief Executive Officer of TBWA International B.V. 60 John D. Wren................ Chairman, Chief Executive Officer of Diversified Agency Services 42
Dennis E. Hewitt was promoted to Treasurer of the Companyicn Jof BByO Worldwide Inc. 56 James A. Cannon ............ Vice Chairman, Chief Financial Offid to Controller of the Company in July 1992. Mr. Adams joined the Company in July 1991 after ten years with Coopers & Lybrand, where he served as a general practice manager from 1987 until joining the Company. Raymond E. McGovern has served as Secretary and General Counsel of the Company since September 1986, having previously served as Secretary and General Counsel of BBDO Worldwide Inc. (then named BBDO International, Inc.) for more than 10 years. Similar information with respect to the remaining Executive Officers of the Company will be found in the Company's definitive proxy statement expected to be filed April 7, 1995. The Executive Officers of the Company are elected annually following the Annual Meeting of the Shareholders of their respective employers. 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Price Range of Common Stock and Dividend History The Company's Common Stock is listed on the New York Stock Exchange under the symbol "OMC". The table below shows the range of reported last sale prices on the New York Stock Exchange Composite Tape for the Company's common stock for the periods indicated and the dividends paid per share on the common stock for such periods. Dividends Paid Per Share of High Low Common Stock ----- --- -------------- 1993 First Quarter ..................... 47 1/2 38 3/8 $ .310 Second Quarter .................... 47 1/4 38 1/4 .310 Third Quarter ..................... 46 1/4 37 .310 Fourth Quarter .................... 46 1/2 41 1/2 .310 1994 First Quarter ..................... 49 7/8 43 3/4 .310 Second Quarter .................... 49 1/2 44 7/8 .310 Third Quarter ..................... 51 1/2 48 .310 Fourth Quarter .................... 53 3/4 49 .310 The Company is not aware of any restrictions on its present or future ability to pay dividends. However, in connection with certain borrowing facilities entered into by the Company and its subsidiaries (see Note 7 of the Notes to Consolidated Financial Statements), the Company is subject to certain restrictions on its current ratio, the ratio of net cash flow to consolidated indebtedness, and the ratio of total consolidated indebtedness to total consolidated capitalization. On January 23, 1995 the Board of Directors declared a regular quarterly dividend of $.31 per share of common stock, payable April 4, 1995 to holders of record on March 20, 1995. Approximate Number of Equity Security Holders Approximate Number of Record Holders Title of Class on March 15, 1995 -------------- --------------------- Common Stock, $.50 par value.......................... 2,557 Preferred Stock, $1.00 par value ..................... None 6 Item 6. Selected Financial Data The following table sets forth selected financial data of the Company and should be read in conjunction with the consolidated financial statements which begin on page F-1.
(Dollars in Thousands Except Per Share Amounts) ------------------------------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- For the year: Commissions and fees................... $1,756,205 $1,516,475 $1,385,161 $1,236,158 $1,178,233 Income before change in accounting principles............. 108,134 85,345 65,498 57,052 52,009 Net income ............................ 80,125 85,345 69,298 57,052 52,009 Earnings per common share before change in accounting principles: Primary.............................. 3.15 2.79 2.31 2.08 2.01 Fully diluted........................ 3.07 2.62 2.20 2.01 1.94 Cumulative effect of change in accounting principles: Primary.............................. (0.81) -- 0.14 -- -- Fully diluted........................ (0.81) -- 0.11 -- -- Earnings per common share after change in accounting principles: Primary.............................. 2.34 2.79 2.45 2.08 2.01 Fully diluted........................ 2.34 2.62 2.31 2.01 1.94 Dividends declared per common share................................ 1.24 1.24 1.21 1.10 1.07 At year end: Total assets........................... 2,852,204 2,289,863 1,951,950 1,885,894 1,748,529 Long-term obligations: Long-term debt....................... 187,338 278,312 235,129 245,189 278,960 Deferred compensation and other liabilities................... 95,973 56,933 51,919 31,355 25,365
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations In 1994, domestic revenues from commissions and fees increased 11.4 percent. The effect of acquisitions, net of divestitures, accounted for a 1.4 percent increase. The remaining 10.0 percent increase was due to net new business gains and higher spending from existing clients. In 1993, domestic revenues from commissions and fees increased 9.0 percent. The effect of acquisitions, net of divestitures, accounted for a 3.9 percent increase. The remaining 5.1 percent increase was due to net new business gains and higher spending from existing clients. In 1992, domestic revenues increased 2 percent, primarily as a result of net new business gains and higher spending from existing clients. In 1994, international revenues increased 20.3 percent. The effect of acquisitions, net of divestitures, accounted for an 8.7 percent increase in international revenues. The weakening of the U.S. dollar increased international revenues by 2.3 percent. The remaining 9.3 percent increase was due to net new business gains and higher spending from existing clients. In 1993, international revenues increased 10.0 percent. The effect of the acquisition of TBWA International B.V. and several marketing services companies in the United Kingdom, net of divestitures, accounted for an 18.1 percent increase in international revenues. The strengthening of the U.S. dollar against several major international currencies relevant to the Company's non-U.S. operations decreased revenues by 11.7 percent. The increase in revenues, due to net new business gains and higher spending from existing clients, was 3.6 percent. 7 In 1992, international revenues increased 25 percent, of which the effect of the acquisition of McKim Baker Lovick BBDO in Canada and the purchase of additional shares in several companies which were previously affiliates of the Company accounted for 14 percent. The remaining increase was due to net new business gains and higher spending from existing clients. Currency exchange rates did not significantly impact the revenues for the year. In 1994, worldwide operating expenses increased 15.2 percent. Acquisitions, net of divestitures during the year, accounted for a 5.4 percent increase in worldwide operating expenses. The weakening of the U.S dollar increased worldwide operating expenses by 1.2 percent. The remaining increase was caused by normal salary increases and growth in out-of-pocket expenditures to service the increased revenue base. Net currency exchange gains did not significantly impact operating expenses for the year. In 1993, worldwide operating expenses increased 8.8 percent. Acquisitions, net of divestitures during the year, accounted for an 11.7 percent increase in worldwide operating expenses. The strengthening of the U.S. dollar against several international currencies decreased worldwide operating expenses by 5.9 percent. The remaining increase was caused by normal salary increases and growth in out-of-pocket expenditures to service the increased revenue base. Net currency exchange gains did not significantly impact operating expenses for the year. In 1992, worldwide operating expenses increased 12.5 percent. Acquisitions, net of divestitures during the year, accounted for 5.0 percent of the increase. The special charge accounted for 0.5 percent of the increase. The remaining increase was caused by normal salary increases and growth in out-of-pocket expenditures to service the increased revenue base. Net currency exchange gains did not significantly impact total operating expenses for the year. Interest expense in 1994 decreased by $6.4 million. This decrease reflects lower average borrowings and interest rates on borrowings, primarily due to the conversion of the Company's 6.5% Convertible Subordinated Debentures in July 1994 and the full year effect of the conversion of the Company's 7% Convertible Subordinated Debentures in October 1993. Interest and dividend income decreased by $2.7 million in 1994. This decrease was primarily due to lower average funds invested during the year and declining interest rates in certain countries. Interest expense in 1993 was comparable to 1992. Interest and dividend income decreased in 1993 by $2.2 million. This decrease was primarily due to lower average amounts of cash and marketable securities invested during the year and lower average interest rates on amounts invested. Interest expense in 1992 was comparable to 1991. Interest and dividend income decreased by $1.4 million in 1992. This decrease was primarily due to lower average funds invested during the year and declining interest rates in certain countries. In 1994, the effective tax rate decreased to 40.9 percent. The decrease reflects a lower international effective tax rate primarily caused by fewer international operating losses with no associated tax benefit and tax planning strategies implemented in certain non-U.S. countries. In 1993, the effective tax rate decreased to 42.0 percent. This decrease primarily reflects a lower international effective tax rate caused by fewer international operating losses with no associated tax benefit, partially offset by an increased domestic federal tax rate. In 1992, the effective tax rate of 43.6 percent was comparable to the 1991 effective tax rate of 44 percent. In 1994, consolidated net income before the change in accounting principle increased by 26.7 percent. This increase was the result of revenue growth, margin improvement and an increase in equity income, partially offset by an increase in minority interest expense. Operating margin, which excludes net interest expense, increased to 11.7 percent in 1994 from 11.2 percent in 1993. This increase was the result of greater growth in commission and fee revenue than the growth in operating expenses. The increase in equity income was primarily due to the acquisition of certain minority interests and improved net income at companies which are less than 50 percent owned. The increase in minority interest expense was primarily due to greater earnings by companies where minority interests exist and the additional minority interests resulting from acquisitions. In 1994, the incremental impact of divestitures, net of acquisitions, accounted for a 1.7 percent decrease in consolidated net income, while the weakening of the U.S dollar against several international currencies increased consolidated net income by 1.1 percent. 8 In 1993, consolidated net income increased 23.2 percent. This increase is the result of revenue growth, margin improvement, an increase in equity income and a decrease in minority interest expense. Operating margin increased to 11.2 percent in 1993 from 10.6 percent in 1992. This increase was the result of greater growth in commission and fee revenue than the growth in operating expenses. The increase in equity income was the result of improved net income at companies which are less than 50 percent owned. The decrease in minority interest expense was primarily due to the acquisition of certain minority interests in 1993 and lower earnings by companies in which minority interests exist. In 1993, the incremental impact of acquisitions, net of divestitures, accounted for 0.8 percent of the increase in consolidated net income, while the strengthening of the U.S. dollar against several international currencies decreased consolidated net income by 5.7 percent. Consolidated net income increased 21 percent in 1992. This increase was the result of revenue growth and margin improvement. Operating margin, after the first quarter special charge discussed below, decreased to 10.6 percent in 1992 from 10.9 percent in 1991. This decrease was the result of the special charge offset by greater growth in commissions and fees than the growth in operating expenses. In 1992, the incremental impact of acquisitions, net of divestitures, accounted for 6 percent of the increase in consolidated net income. At December 31, 1994, accounts receivable increased by $238.4 million from December 31, 1993. This increase was primarily due to acquisitions and an increased volume of activity resulting from business growth. At December 31, 1994, accounts payable increased by $367.7 million from December 31, 1993. This increase was primarily due to acquisitions, an increased volume of activity resulting from business growth, and differences in the dates on which payments to media and other suppliers became due in 1994 compared to 1993. At December 31, 1992, the translation, into U.S. dollars, of the assets and liabilities of the Company's international subsidiaries decreased cumulative translation adjustment by $70.9 million compared to December 31, 1991. This decrease was primarily the result of a stronger U.S. dollar exchange rate for certain international currencies at December 31, 1992 as compared to December 31, 1991. Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits." The cumulative after tax effect of the adoption of this statement decreased net income by $28.0 million. In 1992, the Company adopted two new accounting principles which had a net favorable cumulative after tax effect of $3.8 million. At the same time, the Company recorded a special charge to provide for future losses related to certain leased property. The combination of the favorable impact of the adoption of the new accounting principles and the after tax impact of the special charge had no effect on 1992 consolidated net income. The Company's international operations are subject to the risk of currency exchange rate fluctuations. This risk is generally limited to the net income of the operations as the revenues and expenses of the operations are generally denominated in the same currency. When economically beneficial to do so, the Company or its international operations enter into hedging transactions to minimize the risk of adverse currency exchange rate fluctuations on the net income of the operation. The Company's major international markets are the United Kingdom, France, Germany, the Netherlands, Spain, Italy and Canada. The Company's operations are also subject to the risk of interest rate fluctuations. As part of managing the Company's exposure to changes in currency exchange and market interest rates, the Company periodically enters into derivative financial instruments with major well known banks acting as principal counterparty. In order to minimize counterparty risk, the Company only enters into derivative contracts with major well known banks that have credit ratings equal to or better than the Company's. Additionally, these contracts contain provisions for net settlement. As such, the contracts settle based on the spread between the currency rates and interest rates contained in the contracts and the current market rates. This minimizes the risk of an insolvent counterparty being unable to pay the Company and, at the same time, having the creditors of the counterparty demanding the notional principal amount from the Company. The Company's derivative activities are limited in volume and confined to risk management activities related to the Company's worldwide operations. A reporting system is in place which evaluates the impact on the Company's earnings resulting from changes in interest rates, currency exchange rates and other relevant market risks. This system is structured to enable senior management to initiate prompt remedial action, if appropriate. 9 At December 31, 1994, the Company had forward exchange contracts outstanding with an aggregate notional principal amount of $346 million, most of which were denominated in the Company's major international market currencies. These contracts effectively hedge certain of the Company's assets and liabilities which are recorded in a currency different from that in which they will settle. The terms of these contracts are generally three months or less. The Company had no other derivative contracts outstanding at December 31, 1994. At December 31, 1993, the Company had entered into various cross currency interest rate swap transactions. The notional principal amount of these swap transactions totaled $70.6 million comprising contracts denominated in German Deutsche Marks, French Francs, Australian Dollars and Spanish Pesetas. The swaps were principally used to reduce the Company's risk related to currency fluctuations and to convert the effective interest rate on borrowings of certain international subsidiaries from fixed rates to a lower floating U.S. interest rate. In addition, the Company had one U.S. dollar interest rate swap outstanding at December 31, 1993 with a notional principal amount of $50 million, for the purpose of converting a portion of the floating U.S. interest rates mentioned previously to fixed interest rates. These contracts were closed out during 1994 for a gain of $2.4 million which is being amortized into income over the original term of the swap agreements. The current economic conditions in the Company's major markets would indicate varying growth rates in advertising expenditures in 1995. The Company anticipates relatively favorable growth rates in its major international markets. Capital Resources and Liquidity Cash and cash equivalents increased $53 million during 1994 to $228 million at December 31, 1994. The Company's positive net cash flow provided by operating activities was enhanced by an improvement in the relationship between the collection of accounts receivable and the payment of obligations to media and other suppliers. After annual cash outlays for dividends paid to shareholders and minority interests and the repurchase of the Company's common stock for employee programs, the balance of the cash flow was used to fund acquisitions, make capital expenditures and repay debt obligations. On June 1, 1994, the Company issued a Notice of Redemption for its 6.5% Convertible Subordinated Debentures due 2004. Prior to the July 27,1994 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company at a conversion price of $28.00 per common share. The Company maintains relationships with a number of banks worldwide, which have extended unsecured committed lines of credit in amounts sufficient to meet the Company's cash needs. At December 31, 1994, the Company had $370 million in committed lines of credit, comprised of a $250 million revolving credit agreement expiring on June 30, 1997 and $120 million in unsecured credit lines, principally outside of the United States. Of the $370 million in committed lines, $32 million were used at December 31, 1994. Management believes the aggregate lines of credit available to the Company are adequate to support its short-term cash requirements for dividends, capital expenditures and maintenance of working capital. On January 4, 1995, an indirect wholly-owned subsidiary of the Company issued Deutsche Mark 200 million Floating Rate Bonds (approximately $130 million), due January 5, 2000. The bonds bear interest at a per annum rate equal to Deutsche Mark three month LIBOR plus 0.65%. The Company anticipates that the year end cash position, together with the future cash flows from operations and funds available under existing credit facilities and borrowings will be adequate to meet its long-term cash requirements as presently contemplated. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data required by this item appear beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 10 PART III Item 10. Directors and Executive Officers of the Registrant Information with respect to the directors of the Company is incorporated by reference to the Company's definitive proxy statement expected to be filed by April 7, 1995. Information regarding the Company's executive officers is set forth in Part I of this Form 10-K. Item 11. Executive Compensation Incorporated by reference to the Company's definitive proxy statement expected to be filed by April 7, 1995. Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated by reference to the Company's definitive proxy statement expected to be filed by April 7, 1995. Item 13. Certain Relationships and Related Transactions Incorporated by reference to the Company's definitive proxy statement expected to be filed by April 7, 1995. 11 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page ---- (a) 1. Financial Statements: Report of Management............................................................................. F-1 Report of Independent Public Accountants......................................................... F-2 Consolidated Statements of Income for the three years ended December 31, 1994.................... F-3 Consolidated Balance Sheets at December 31, 1994 and 1993........................................ F-4 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 1994........................................................................ F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 1994........................................................................ F-6 Notes to Consolidated Financial Statements....................................................... F-7 Quarterly Results of Operations (Unaudited)...................................................... F-18 2. Financial Statement Schedules: For the three years ended December 31, 1994: Schedule VIII--Valuation and Qualifying Accounts............................................... S-1
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits: (3)(i) Articles of Incorporation. Incorporated by reference to the 1986 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1987. (ii) By-laws. Incorporated by reference to the 1987 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1988. (4) Instruments Defining the Rights of Security Holders, Including Indentures. 4.1 Copy of Registrant's 4.5%/6.25% Step-Up Convertible Subordinated Debentures due 2000, filed as Exhibit 4.3 to Omnicom Group Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, is incorporated herein by reference. 4.2 Copy of Subscription Agreement, dated December 14, 1994 by and among the Registrant, BBDO Canada Inc. and Morgan Stanley GMBH and the other Managers listed therein, in connection with the issuance of DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 of BBDO Canada Inc., including form of Guaranty by Registrant. 4.3 Paying Agency Agreement dated January 4, 1995 by and among the Registrant, BBDO Canada Inc. and Morgan Stanley GMBH in connection with the issuance of DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 of BBDO Canada Inc. 12 (10) Material Contracts. Management Contracts, Compensatory Plans, Contracts or Arrangements. 10.1 Standard Form of Severance Compensation Agreement incorporated by reference to BBDO International Inc.'s Form S-1 Registration Statement filed with the Securities and Exchange Commission on September 28, 1973, is incorporated herein by reference. 10.2 Copy of Registrant's 1987 Stock Plan, filed as Exhibit 10.26 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1987, is incorporated herein by reference. 10.3 Copy of Registrant's Profit-Sharing Retirement Plan dated May 16, 1988, filed as Exhibit 10.24 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1988, is incorporated herein by reference. 10.4 Copy of Employment Agreement dated March 20, 1989, between Peter I. Jones and Boase Massimi Pollitt plc, filed as Exhibit 10.22 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989, is incorporated herein by reference. 10.5 Standard Form of the Registrant's 1988 Executive Salary Continuation Plan Agreement, filed as Exhibit 10.24 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989, is incorporated herein by reference. 10.6 Standard Form of the Registrant's Indemnification Agreement with members of Registrant's Board of Directors, filed as Exhibit 10.25 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989, is incorporated herein by reference. 10.7 Copy of DDB Needham Worldwide Joint Savings Plan, effective as of May 1, 1989, filed as Exhibit 10.26 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989, is incorporated herein by reference. 10.8 Amendment to Registrant's Profit-Sharing Retirement Plan, listed as Exhibit 10.3 above, adopted February 4, 1991, filed as Exhibit 10.28 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1990, is incorporated herein by reference. 10.9 Amendment to Registrant's Profit-Sharing Retirement Plan listed as Exhibit 10.3 above, adopted on December 7, 1992, filed as Exhibit 10.13 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1992, is incorporated herein by reference. 10.10 Amendment to Registrant's Profit-Sharing Retirement Plan listed as Exhibit 10.3 above, adopted on July 1, 1993, filed as Exhibit 10.10 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1993, incorporated herein by reference. 10.11 Copy of Severance Agreement dated July 6, 1993, between Keith Reinhard and DDB Needham Worldwide Inc., filed as Exhibit 10.11 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1993, incorporated herein by reference. 10.12 Copy of Employment Agreement dated May 26, 1993, between William G. Tragos and TBWA International B.V., filed as Exhibit 10.13 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1993, incorporated herein by reference. 10.13 Copy of Deferred Compensation Agreement dated October 12, 1984, between William G. Tragos and TBWA Advertising Inc., filed as Exhibit 10.14 to Omnicom Group Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1993, incorporated herein by reference. 13 10.14 Amendments to Registrant's 1987 Stock Plan, listed as Exhibit 10.2 above, approved by the Registrant's shareholders on May 24, 1994. Other Material Contracts. 10.15 Copy of $250,000,000 Second Amended and Restated Credit Agreement, dated as of July 15, 1994, between Omnicom Finance Inc., Swiss Bank Corporation and the financial institutions party thereto, filed as Exhibit 10.16 to Omnicom Group Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, is incorporated herein by reference. (21) Subsidiaries of the Registrant......................... S-2 (23) Consents of Experts and Counsel. 23.1 Consent of Independent Public Accountants.............. S-12 (24) Powers of Attorney from Bernard Brochand, Robert J. Callander, Leonard S. Coleman, Jr., John R. Purcell, Gary L. Roubos, Quentin I. Smith, Jr., Robin B. Smith, and Egon P. S. Zehnder. (27) Financial Data Schedule (filed in electronic format only). (b) Reports on Form 8-K: No reports on Form 8-K were filed during the fourth quarter of the year ended December 31, 1994. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OMNICOM GROUP INC. Date: March 28, 1995 By: /s/ FRED J. MEYER ------------------------------- Fred J. Meyer Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ BRUCE CRAWFORD President and Chief March 28, 1995 -------------------------------------------- Executive Officer and Director (Bruce Crawford) /s/ FRED J. MEYER Chief Financial Officer March 28, 1995 -------------------------------------------- and Director (Fred J. Meyer) /S/ DALE A. ADAMS Controller (Principal March 28, 1995 -------------------------------------------- Accounting Officer) (Dale A. Adams) /s/ RAYMOND E. MCGOVERN Secretary and General March 28, 1995 -------------------------------------------- Counsel (Raymond E. McGovern) /s/ BERNARD BROCHAND* Director March 28, 1995 -------------------------------------------- (Bernard Brochand) /s/ ROBERT J. CALLANDER* Director March 28, 1995 -------------------------------------------- (Robert J. Callander) /s/ JAMES A. CANNON Director March 28, 1995 -------------------------------------------- (James A. Cannon) /s/ LEONARD S. COLEMAN, JR.* Director March 28, 1995 -------------------------------------------- (Leonard S. Coleman, Jr.) /s/ PETER I. JONES Director March 28, 1995 -------------------------------------------- (Peter I. Jones) /s/ JOHN R. PURCELL* Director March 28, 1995 -------------------------------------------- (John R. Purcell) /s/ KEITH L. REINHARD Director March 28, 1995 -------------------------------------------- (Keith L. Reinhard) /s/ ALLEN ROSENSHINE Director March 28, 1995 -------------------------------------------- (Allen Rosenshine) /s/ GARY L. ROUBOS* Director March 28, 1995 -------------------------------------------- (Gary L. Roubos) /s/ QUENTIN I. SMITH, JR.* Director March 28, 1995 -------------------------------------------- (Quentin I. Smith, Jr.) /s/ ROBIN B. SMITH* Director March 28, 1995 -------------------------------------------- (Robin B. Smith) /s/ WILLIAM G. TRAGOS Director March 28, 1995 -------------------------------------------- (William G. Tragos) /s/ JOHN D. WREN Director March 28, 1995 -------------------------------------------- (John D. Wren) /s/ EGON P.S. ZEHNDER* Director March 28, 1995 -------------------------------------------- (Egon P.S. Zehnder) *By /s/ BRUCE CRAWFORD -------------------------------------------- Bruce Crawford Attorney-in-fact
15 REPORT OF MANAGEMENT The management of Omnicom Group Inc. is responsible for the integrity of the financial data reported by Omnicom Group and its subsidiaries. Management uses its best judgment to ensure that the financial statements present fairly, in all material respects, the consolidated financial position and results of operations of Omnicom Group. These financial statements have been prepared in accordance with generally accepted accounting principles. The system of internal controls of Omnicom Group, augmented by a program of internal audits, is designed to provide reasonable assurance that assets are safeguarded and records are maintained to substantiate the preparation of accurate financial information. Underlying this concept of reasonable assurance is the premise that the cost of control should not exceed the benefits derived therefrom. The financial statements have been audited by independent public accountants. Their report expresses an independent informed judgment as to the fairness of management's reported operating results and financial position. This judgment is based on the procedures described in the second paragraph of their report. The Audit Committee meets periodically with representatives of financial management, internal audit and the independent public accountants to assure that each is properly discharging their responsibilities. In order to ensure complete independence, the Audit Committee communicates directly with the independent public accountants, internal audit and financial management to discuss the results of their audits, the adequacy of internal accounting controls and the quality of financial reporting. /s/ BRUCE CRAWFORD /s/ FRED J. MEYER -------------------------------------- ----------------------------------- Bruce Crawford Fred J. Meyer President and Chief Executive Officer Chief Financial Officer F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Omnicom Group Inc.: We have audited the accompanying consolidated balance sheets of Omnicom Group Inc. (a New York corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Omnicom Group Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As discussed in Note 13 to the consolidated financial statements, effective January 1, 1994, the Company changed its methods of accounting for postemployment benefits and certain investments in debt and equity securities. Effective January 1, 1992, the Company changed its methods of accounting for income taxes and postretirement benefits other than pensions. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule on page S-1 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP New York, New York February 20, 1995 F-2
OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, (Dollars in Thousands Except Per Share Data) -------------------------------------------- 1994 1993 1992 ---- ---- ---- COMMISSIONS AND FEES.......................................... $ 1,756,205 $1,516,475 $1,385,161 OPERATING EXPENSES: Salaries and Related Costs............................... 1,009,069 879,808 798,189 Office and General Expenses.............................. 542,538 467,468 433,884 Special Charge........................................... -- -- 6,714 --------- --------- --------- 1,551,607 1,347,276 1,238,787 --------- --------- --------- OPERATING PROFIT.............................................. 204,598 169,199 146,374 NET INTEREST EXPENSE: Interest and Dividend Income............................. (11,928) (14,628) (16,810) Interest Paid or Accrued................................. 34,770 41,203 40,888 --------- --------- --------- 22,842 26,575 24,078 --------- --------- --------- INCOME BEFORE INCOME TAXES AND CHANGE IN ACCOUNTING PRINCIPLES................................................. 181,756 142,624 122,296 INCOME TAXES.................................................. 74,337 59,871 53,268 --------- --------- --------- INCOME AFTER INCOME TAXES AND BEFORE CHANGE IN ACCOUNTING PRINCIPLES............................. 107,419 82,753 69,028 EQUITY IN AFFILIATES.......................................... 18,322 13,180 9,598 MINORITY INTERESTS............................................ (17,607) (10,588) (13,128) --------- --------- --------- INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLES....................................... 108,134 85,345 65,498 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES....................................... (28,009) -- 3,800 --------- --------- --------- NET INCOME.................................................... $ 80,125 $ 85,345 $ 69,298 ========= ========= ========= NET INCOME PER COMMON SHARE: Income Before Change in Accounting Principles: Primary................................................. $ 3.15 $ 2.79 $ 2.31 Fully Diluted........................................... $ 3.07 $ 2.62 $ 2.20 Cumulative Effect of Change in Accounting Principles: Primary................................................. $ (0.81) -- $ 0.14 Fully Diluted........................................... $ (0.81) -- $ 0.11 Net Income: Primary................................................. $ 2.34 $ 2.79 $ 2.45 Fully Diluted........................................... $ 2.34 $ 2.62 $ 2.31
The accompanying notes to consolidated financial statements are an integral part of these statements. F-3
OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS A S S E T S December 31, (Dollars in Thousands) -------------------------- 1994 1993 ---- ---- CURRENT ASSETS: Cash and cash equivalents.................................................... $ 228,251 $ 174,833 Investments available-for-sale, at market, which approximates cost........... 28,383 38,003 Accounts receivable, less allowance for doubtful accounts of $19,278 and $17,298 (Schedule VIII)...................................... 1,139,882 901,434 Billable production orders in process, at cost............................... 65,115 59,415 Prepaid expenses and other current assets.................................... 140,304 100,791 ---------- ---------- Total Current Assets....................................................... 1,601,935 1,274,476 FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less accumulated depreciation and amortization of $221,491 and $188,868........... 172,153 160,543 INVESTMENTS IN AFFILIATES ...................................................... 164,524 112,232 INTANGIBLES, less accumulated amortization of $133,572 and $93,105............... 758,460 603,494 DEFERRED TAX BENEFITS............................................................ 21,104 18,522 DEFERRED CHARGES AND OTHER ASSETS ............................................... 134,028 120,596 ---------- ---------- $2,852,204 $2,289,863 ========== ========== L I A B I L I T I E S A N D S H A R E H O L D E R S ' E Q U I T Y CURRENT LIABILITIES: Accounts payable............................................................. $1,425,829 $1,058,095 Current portion of long-term debt............................................ 3,576 21,892 Bank loans .................................................................. 8,939 26,155 Advance billings............................................................. 148,036 90,422 Other accrued taxes.......................................................... 63,025 32,953 Other accrued liabilities.................................................... 274,308 254,378 Accrued taxes on income...................................................... 51,667 29,974 Dividends payable............................................................ 11,262 10,349 ---------- ---------- Total Current Liabilities.................................................. 1,986,642 1,524,218 ---------- ---------- LONG-TERM DEBT ................................................................. 187,338 278,312 DEFERRED COMPENSATION AND OTHER LIABILITIES ..................................... 95,973 56,933 MINORITY INTERESTS .............................................................. 41,549 28,214 COMMITMENTS AND CONTINGENT LIABILITIES (Note 10) SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value, 7,500,000 shares authorized, none issued................................................................... -- -- Common stock, $.50 par value, 75,000,000 shares authorized, 38,643,165 and 35,071,932 shares issued in 1994 and 1993, respectively... 19,322 17,536 Additional paid-in capital................................................... 356,199 252,408 Retained earnings............................................................ 325,321 287,416 Unamortized restricted stock................................................. (25,631) (21,807) Cumulative translation adjustment............................................ (27,671) (65,257) Treasury stock, at cost, 2,511,187 and 1,901,977 shares in 1994 and 1993, respectively....................................................... (106,838) (68,110) ---------- ---------- Total Shareholders' Equity.............................................. 540,702 402,186 ---------- ---------- $2,852,204 $2,289,863 ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-4 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Three Years Ended December 31, 1994 (Dollars in Thousands)
Common Stock Additional Unamortized Cumulative Total ---------------------- Paid-in Retained Restricted Translation Treasury Shareholders' Shares Par Value Capital Earnings Stock Adjustment Stock Equity ---------- --------- -------- --------- ----------- ----------- -------- ------------- Balance December 31, 1991, as previously reported........... 30,221,806 $15,111 $153,548 $219,181 $(10,977) $ 33,037 $(43,682) $366,218 Pooling of interests adjustment.. 159,720 80 91 (6,062) (5,891) ---------- ------- -------- -------- -------- --------- -------- -------- Balance January 1, 1992, as restated...................... 30,381,526 15,191 153,639 213,119 (10,977) 33,037 (43,682) 360,327 Net income....................... 69,298 69,298 Dividends declared............... (33,628) (33,628) Amortization of restricted shares 5,993 5,993 Shares issued under employee stock plans................... 1,227 (10,323) 16,691 7,595 Shares issued for acquisitions... 150,168 75 220 295 Retirement of shares............. (143,101) (71) (3,416) 3,487 -- Cumulative translation adjustment (70,906) (70,906) Repurchases of shares............ (30,082) (30,082) ---------- ------- -------- -------- -------- --------- -------- ------- Balance December 31, 1992, as previously reported........... 30,388,593 15,195 155,086 245,373 (15,307) (37,869) (53,586) 308,892 Pooling of interests adjustment.. 1,349,260 674 124 (6,309) (1,834) (7,345) ---------- ------- -------- -------- -------- --------- -------- ------- Balance January 1, 1993, as restated...................... 31,737,853 15,869 155,210 239,064 (15,307) (39,703) (53,586) 301,547 Net income....................... 85,345 85,345 Dividends declared............... (36,993) (36,993) Amortization of restricted shares 7,096 7,096 Shares issued under employee stock plans................... 5,709 (13,596) 15,413 7,526 Shares issued for acquisitions... 7,303 21,948 29,251 Conversion of 7% Debentures...... 3,334,079 1,667 84,186 85,853 Cumulative translation adjustment (25,554) (25,554) Repurchases of shares............ (51,885) (51,885) ---------- ------- -------- -------- -------- --------- -------- ------- Balance December 31, 1993........ 35,071,932 17,536 252,408 287,416 (21,807) (65,257) (68,110) 402,186 Net income....................... 80,125 80,125 Dividends declared............... (42,220) (42,220) Amortization of restricted shares 9,535 9,535 Shares issued under employee stock plans................... 4,474 (13,359) 16,796 7,911 Shares issued for acquisitions... 1,103 11,932 13,035 Conversion of 6.5% Debentures.... 3,571,233 1,786 98,214 100,000 Cumulative translation adjustment 37,586 37,586 Repurchases of shares............ (67,456) (67,456) ---------- ------- -------- -------- -------- --------- -------- -------- Balance December 31, 1994........ 38,643,165 $19,322 $356,199 $325,321 $(25,631) $(27,671) $(106,838) $540,702 ========== ======= ======== ======== ======== ======== ========= ========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-5 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, (Dollars in Thousands) --------------------------------------------- 1994 1993 1992 --------- --------- --------- Cash Flows From Operating Activities: Net income ................................................................ $ 80,125 $ 85,345 $ 69,298 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of tangible assets ........................ 37,767 34,574 33,706 Amortization of intangible assets ....................................... 25,012 18,950 16,102 Minority interests ...................................................... 17,342 10,588 13,128 Earnings of affiliates in excess of dividends received .................. (10,484) (6,823) (3,765) (Increase) decrease in deferred taxes ................................... (6,443) 2,197 (921) Provisions for losses on accounts receivable ............................ 7,864 4,742 2,545 Amortization of restricted shares ....................................... 9,535 7,096 5,993 Increase in accounts receivable ......................................... (138,031) (35,416) (29,360) Decrease (increase) in billable production .............................. 2,439 6,665 (8,318) (Increase) decrease in other current assets ............................. (27,564) 19,949 (12,011) Increase in accounts payable ............................................ 262,403 73,389 81,697 Increase (decrease) in other accrued liabilities ........................ 54,989 (3,498) 26,185 Increase (decrease) in accrued taxes on income .......................... 16,457 1,918 (3,830) Other ................................................................... 7,814 (10,479) (8,753) -------- --------- --------- Net Cash Provided By Operating Activities .................................... 339,225 209,197 181,696 -------- --------- --------- Cash Flows From Investing Activities: Capital Expenditures ...................................................... (38,529) (33,646) (34,881) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired .................................... (150,660) (80,577) (59,651) Proceeds from sales of equity interests in subsidiaries and affiliates .............................................................. 499 558 1,840 Payments for purchases of investments available-for-sale and other investments ................................................... (8,153) (49,733) (5,353) Proceeds from sales of investments available-for-sale and other investments ................................................... 24,149 17,396 30,504 -------- --------- --------- Net Cash Used In Investing Activities ........................................ (172,694) (146,002) (67,541) -------- --------- --------- Cash Flows From Financing Activities: Net repayments under lines of credit ...................................... (21,931) (14,167) (9,302) Proceeds from issuances of debt obligations ............................... 33,293 147,283 7,836 Repayment of principal of debt obligations ................................ (28,832) (31,980) (41,371) Share transactions under employee stock plans ............................. 7,911 7,526 7,594 Dividends and loans to minority stockholders .............................. (8,061) (8,033) (9,128) Dividends paid ............................................................ (41,307) (35,470) (32,623) Purchase of treasury shares ............................................... (67,456) (51,885) (30,082) -------- --------- --------- Net Cash (Used in) Provided by Financing Activities .......................... (126,383) 13,274 (107,076) -------- --------- --------- Effect of exchange rate changes on cash and cash equivalents ............................................................. 13,270 (14,095) (8,331) -------- --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents ......................... 53,418 62,374 (1,252) Cash and Cash Equivalents At Beginning of Period ............................. 174,833 112,459 113,711 -------- --------- --------- Cash and Cash Equivalents At End of Period ................................... $ 228,251 $ 174,833 $ 112,459 ========= ========= ========= Supplemental Disclosures: Income taxes paid .......................................................... $ 66,480 $ 58,893 $ 58,292 ========= ========= ========= Interest paid .............................................................. $ 26,972 $ 38,290 $ 32,729 ========= ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-6 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Recognition of Commission and Fee Revenue. Substantially all revenues are derived from commissions for placement of advertisements in various media and from fees for manpower and for production of advertisements. Revenue is generally recognized when billed. Billings are generally rendered upon presentation date for media, when manpower is used, when costs are incurred for radio and television production and when print production is completed. Principles of Consolidation. The accompanying consolidated financial statements include the accounts of Omnicom Group Inc. and its domestic and international subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated. Reclassifications. Certain prior year amounts have been reclassified to conform with the 1994 presentation. Billable Production. Billable production orders in process consist principally of costs incurred in producing advertisements and marketing communications for clients. Such amounts are generally billed to clients when costs are incurred for radio and television production and when print production is completed. Treasury Stock. The Company accounts for treasury share purchases at cost. The reissuance of treasury shares is accounted for at the average cost. Gains or losses on the reissuance of treasury shares are generally accounted for as additional paid-in capital. Foreign Currency Translation. The Company's financial statements were prepared in accordance with the requirements of Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation." Under this method, net transaction gains of $4.0 million, $5.0 million and $8.1 million are included in 1994, 1993 and 1992 net income, respectively. Earnings Per Common Share. Primary earnings per share is based upon the weighted average number of common shares and common share equivalents outstanding during each year. Fully diluted earnings per share is based on the above and if dilutive, adjusted for the assumed conversion of the Company's Convertible Subordinated Debentures and the assumed increase in net income for the after tax interest cost of these debentures. For the year ended December 31, 1994 the 4.5%/6.25% Step-Up Convertible Subordinated Debentures were assumed to be converted for the full year; and the 6.5% Convertible Subordinated Debentures were assumed to be converted through July 27, 1994, when they were converted into common stock. For the year ended December 31, 1993, the 6.5% Convertible Subordinated Debentures were assumed to be converted for the full year; the 7% Convertible Subordinated Debentures were assumed to be converted through October 8, 1993 when they were converted into common stock; and the 4.5%/6.25% Step-Up Convertible Subordinated Debentures were assumed to be converted from their September 1, 1993 issuance date. For the year ended December 31, 1992, the 6.5% and 7% Convertible Subordinated Debentures were assumed to be converted for the full year. The number of shares used in the computations were as follows: 1994 1993 1992 ---- ---- ---- Primary EPS computation .......... 34,369,200 30,607,900 28,320,400 Fully diluted EPS computation .... 38,949,600 37,563,500 35,332,400 For purposes of computing fully diluted earnings per share on net income and the cumulative effect of the change in accounting principle, for the year ended December 31, 1994, the Company's Convertible Subordinated Debentures were not reflected in the computations as their inclusion would have been anti-dilutive. Severance Agreements. Arrangements with certain present and former employees provide for continuing payments for periods up to 10 years after cessation of their full-time employment in consideration for agreements by the employees not to compete and to render consulting services in the post employment period. Such payments, which are determined, subject to certain conditions and limitations, by earnings in subsequent periods, are expensed in such periods. F-7 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Depreciation of Furniture and Equipment and Amortization of Leasehold Improvements. Depreciation charges are computed on a straight-line basis or declining balance method over the estimated useful lives of furniture and equipment, up to 10 years. Leasehold improvements are amortized on a straight-line basis over the lesser of the terms of the related lease or the useful life of these assets. Intangibles. Intangibles represent acquisition costs in excess of the fair value of tangible net assets of purchased subsidiaries. Intangibles are amortized on a straight-line basis over periods not exceeding forty years. Each year, the intangibles are written off if, and to the extent, they are determined to be impaired. Intangibles are considered to be impaired if the future anticipated undiscounted income of the subsidiary is less than the net unamortized cost of the intangibles. Deferred Taxes. Deferred tax liabilities and tax benefits relate to the recognition of certain revenues and expenses in different years for financial statement and tax purposes. Cash Flows. The Company's cash equivalents are primarily comprised of investments in short-term interest-bearing deposits and money market instruments with maturity dates of three months or less. The following supplemental schedule summarizes the fair value of assets acquired, cash paid, common shares issued and the liabilities assumed in conjunction with the acquisition of equity interests in subsidiaries and affiliates, for each of the three years ended December 31: (Dollars in thousands) 1994 1993 1992 ---- ---- ---- Fair value of non-cash assets acquired .... $265,865 $287,177 $173,974 Cash paid, net of cash acquired ........... (150,660) (80,577) (59,651) Common shares issued ...................... (13,035) (21,906) 5,596 -------- -------- -------- Liabilities assumed ....................... $102,170 $184,694 $119,919 ======== ======== ======== During 1994, the Company issued 3,571,233 shares of common stock upon conversion of $100 million of its 6.5% Convertible Subordinated Debentures. During 1993, the Company issued 3,334,079 shares of common stock upon conversion of $85.9 million of its 7% Convertible Subordinated Debentures. Concentration of Credit Risk. The Company provides advertising and marketing services to a wide range of clients who operate in many industry sectors around the world. The Company grants credit to all qualified clients, but does not believe it is exposed to any undue concentration of credit risk to any significant degree. Derivative Financial Instruments. Gains and losses on derivative financial instruments which are hedges of existing assets or liabilities are included in the carrying amount of those assets or liabilities and are ultimately recognized in income as part of those carrying amounts. Interest received and/or paid arising from swap agreements which qualify as hedges are recognized in income when the interest is receivable or payable. Derivative financial instruments which do not qualify as hedges are revalued to the current market rate and any gains or losses are recorded in income in the current period. 2. Acquisitions During 1994 the Company made several acquisitions within the advertising industry whose aggregate cost, in cash or by issuance of the Company's common stock, totaled $190.4 million for net assets, which included intangible assets of $221.5 million. Due to the nature of the advertising industry, companies acquired generally have minimal tangible net assets. The majority of the purchase price is paid for ongoing client relationships and other intangibles. Included in both figures are contingent payments related to prior year acquisitions totaling $32.2 million. Pro forma combined results of operations of the Company as if the acquisitions had occurred on January 1, 1993 do not materially differ from the reported amounts in the consolidated statements of income for each of the two years in the period ended December 31, 1994. Certain acquisitions entered into in 1994 and prior years require payments in future years if certain results are achieved. Formulas for these contingent future payments differ from acquisition to acquisition. Contingent future payments are not expected to be material to the Company's results of operations or financial position. F-8 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In May 1993, the Company completed its acquisition of a third agency network, TBWA International B.V. The acquisition was accounted for as a pooling of interests and, accordingly, the results of operations for TBWA International B.V. have been included in these consolidated financial statements since January 1, 1993. Prior year consolidated financial statements were not restated as the impact on such years was not material. 3. Bank Loans and Lines of Credit Bank loans generally resulted from bank overdrafts of international subsidiaries which are treated as loans pursuant to bank agreements. The weighted average interest rate on the borrowings outstanding as of December 31, 1994 and 1993 was 9.1% and 6.5%. At December 31, 1994 and 1993, the Company had unsecured committed lines of credit aggregating $370 million and $359 million, respectively. The unused portion of credit lines was $338 million and $332 million at December 31, 1994 and 1993, respectively. The lines of credit are generally extended at the banks' lending rates to their most credit worthy borrowers. Material compensating balances are not required within the terms of these credit agreements. At December 31, 1993, the committed lines of credit included $200 million under a two and one-half year revolving credit agreement. Due to the long term nature of this credit agreement, borrowings under the agreement would be classified as long-term debt. As of July 15, 1994, the $200 million revolving credit agreement was replaced by a $250 million revolving credit agreement expiring June 30, 1997. Borrowings under this credit agreement would also be classified as long-term debt. There were no borrowings under these revolving credit agreements at December 31, 1994 and 1993. These revolving credit agreements include a facility for issuing commercial paper backed by a bank letter of credit. During the years ended December 31, 1994, 1993 and 1992, the Company issued commercial paper with an average original maturity of 33, 32 and 31 days, respectively. The Company had no commercial paper borrowings outstanding as of December 31, 1994, 1993, and 1992. The maximum outstanding during the year was $230 million, $194 million and $120 million, in 1994, 1993, and 1992, respectively. The gross amount of issuance and redemption during the year was $1,587 million, $1,337 million and $1,012 million in 1994, 1993 and 1992, respectively. 4. Employee Stock Plans Under the terms of the Company's 1987 Stock Plan, as amended (the "1987 Plan"), 4,750,000 shares of common stock of the Company are reserved for restricted stock awards and non-qualified stock options to key employees of the Company. Under the terms of the 1987 Plan, the option price may not be less than 100% of the market value of the stock at the date of the grant. Options become exercisable 30% on each of the first two anniversary dates of the grant date with the final 40% becoming exercisable three years from the grant date. Under the 1987 Plan, 305,000, 285,000 and 242,500 non-qualified options were granted in 1994, 1993 and 1992, respectively. A summary of changes in outstanding options for the three years ended December 31, 1994 is as follows:
Years Ended December 31, ---------------------------------------------- 1994 1993 1992 --------- --------- --------- Shares under option (at prices ranging from $16.875 to $40.0625) -- Beginning of year................................ 1,072,400 998,000 1,043,900 Options granted (at prices ranging from $35.0625 to $48.4375)............................. 305,000 285,000 242,500 Options exercised (at prices ranging from $16.875 to $40.0625)......................... (183,400) (197,800) (274,200) Options forfeited.................................... -- (12,800) (14,200) --------- --------- --------- Shares under option (at prices ranging from $16.875 to $48.4375) -- End of year.......... 1,194,000 1,072,400 998,000 ========= ========= ========= Shares exercisable................................... 633,750 562,650 443,400 Shares reserved...................................... 928,221 1,502,882 589,422
F-9 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Under the 1987 Plan, 314,580 shares, 337,200 shares and 314,775 shares of restricted stock of the Company were awarded in 1994, 1993 and 1992, respectively. All restricted shares granted under the 1987 Plan were sold at a price per share equal to their par value. The difference between par value and market value on the date of the sale is charged to shareholders' equity and then amortized to expense over the period of restriction. Under the 1987 Plan, the restricted shares become transferable to the employee in 20% annual increments provided the employee remains in the employ of the Company. Restricted shares may not be sold, transferred, pledged or otherwise encumbered until the restrictions lapse. Under most circumstances, the employee must resell the shares to the Company at par value if the employee ceases employment prior to the end of the period of restriction. A summary of changes in outstanding shares of restricted stock for the three years ended December 31, 1994 is as follows: Years Ended December 31, ---------------------------------- 1994 1993 1992 ---- ---- ---- Beginning balance........................ 740,436 629,752 619,024 Amount granted......................... 314,580 337,200 314,775 Amount vested.......................... (230,603) (201,712) (278,942) Amount forfeited....................... (42,331) (24,804) (25,105) ------- ------- -------- Ending balance........................... 782,082 740,436 629,752 ======= ======= ======= The charge to operations in connection with these restricted stock awards for the years ended December 31, 1994, 1993 and 1992 amounted to $9.5 million, $7.1 million and $6.0 million, respectively. 5. Segment Reporting The Company operates advertising agencies and offers its clients additional marketing services and specialty advertising through its wholly-owned and partially-owned businesses. A summary of the Company's operations by geographic area as of December 31, 1994, 1993 and 1992, and for the years then ended is presented below: (Dollars in Thousands) United States International Consolidated --------- ------------- ------------ 1994 Commissions and Fees.............. $ 858,575 $ 897,630 $1,756,205 Operating Profit ................. 108,482 96,116 204,598 Net Income ....................... 32,593 47,532 80,125 Identifiable Assets............... 1,004,698 1,847,506 2,852,204 1993 Commissions and Fees.............. $ 770,611 $ 745,864 $1,516,475 Operating Profit ................. 92,095 77,104 169,199 Net Income ....................... 40,814 44,531 85,345 Identifiable Assets............... 827,032 1,462,831 2,289,863 1992 Commissions and Fees.............. $ 706,902 $ 678,259 $1,385,161 Operating Profit.................. 70,558 75,816 146,374 Net Income........................ 33,223 36,075 69,298 Identifiable Assets............... 675,508 1,276,442 1,951,950 F-10 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Investments in Affiliates The Company has approximately 45 unconsolidated affiliates accounted for under the equity method. The equity method is used when the Company has an ownership of less than 50% and exercises significant influence over the operating and financial policies of the affiliate. The following table summarizes the balance sheets and income statements of the Company's unconsolidated affiliates, primarily in Europe, Australia and Asia, as of December 31, 1994, 1993, 1992, and for the years then ended: (Dollars in Thousands) 1994 1993 1992 ---- ---- ---- Current assets....................... $1,208,976 $308,741 $312,423 Non-current assets................... 146,899 73,772 64,901 Current liabilities.................. 1,196,807 235,389 259,508 Non-current liabilities.............. 162,328 29,596 8,302 Minority interests................... 9,699 1,149 1,110 Gross revenues....................... 568,171 290,814 288,416 Costs and expenses................... 451,688 238,039 243,661 Net income........................... 86,001 33,574 27,752 The increase in the summarized balance sheets and income statements of the Company's unconsolidated affiliates in 1994 is due to the growth of the Company's existing equity affiliates and the inclusion of Aegis Group plc, in which the Company had acquired a minority interest. The Company's equity in the net income of these affiliates amounted to $18.3 million, $13.2 million and $9.6 million for 1994, 1993 and 1992, respectively. The Company's equity in the net tangible assets of these affiliated companies was approximately $65.8 million, $58.1 million and $56.2 million at December 31, 1994, 1993 and 1992, respectively. Included in the Company's investments in affiliates is the excess of acquisition costs over the fair value of tangible net assets acquired. These acquisition costs are being amortized on a straight-line basis over periods not exceeding forty years. 7. Long-Term Debt Long-term debt outstanding as of December 31, 1994 and 1993 consisted of the following:
(Dollars in Thousands) 1994 1993 ---- ---- 4.5%/6.25% Step-Up Convertible Subordinated Debentures with a scheduled maturity in 2000.............................................. $143,750 $ 143,750 6.5% Convertible Subordinated Debentures with a scheduled maturity in 2004................................................................. -- 100,000 Cross currency fixed to floating rate swaps, at floating LIBOR rates, maturing at various dates through 1997 (Note 12)........................ -- 11,435 Sundry notes and loans payable to banks and others at rates from 6% to 25%, maturing at various dates through 2004...................... 47,164 35,518 Loan Notes, at various rates with a scheduled maturity in 1994............. -- 9,501 -------- -------- 190,914 300,204 Less current portion....................................................... 3,576 21,892 -------- -------- Total long-term debt..................................................... $187,338 $278,312 ======== ========
F-11 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) During the third quarter of 1993, the Company issued $143,750,000 of 4.5%/6.25% Step-Up Convertible Subordinated Debentures with a scheduled maturity in 2000. The average annual interest rate through the year 2000 is 5.42%. The debentures are convertible into common stock of the Company at a conversion price of $54.88 per share subject to adjustment in certain events. The debentures are not redeemable prior to September 1, 1996. Thereafter, the Company may redeem the debentures initially at 102.984% and at decreasing prices thereafter to 100% at maturity, in each case together with accrued interest. The debentures also may be repaid at the option of the holder at anytime prior to September 1, 2000 if there is a Fundamental Change, as defined in the debenture agreement, at the repayment prices set forth in the debenture agreement, subject to adjustment, together with accrued interest. On June 1, 1994, the Company issued a Notice of Redemption for its 6.5% Convertible Subordinated Debentures with a scheduled maturity in 2004. Prior to the July 27, 1994 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company at a conversion price of $28.00 per common share. On August 9, 1993, the Company issued a Notice of Redemption for its 7% Convertible Subordinated Debentures with a scheduled maturity in 2013. Prior to the October 1993 redemption date, debenture holders elected to convert all of their outstanding debentures into common stock of the Company at a conversion price of $25.75 per common share. In the third quarter of 1989, a wholly-owned subsidiary of the Company issued interest bearing Loan Notes in connection with the acquisition of Boase Massimi Pollitt plc. The Loan Notes were repaid on June 30, 1994 at their nominal amount together with accrued interest. On July 15, 1994, the Company amended and restated the revolving credit agreement originally entered into in 1988. This $250 million revolving credit agreement is with a consortium of banks and expires on June 30, 1997. This credit agreement includes a facility for issuing commercial paper backed by a bank letter of credit. The agreement contains certain financial covenants regarding current ratio, ratio of total consolidated indebtedness to total consolidated capitalization, ratio of net cash flow to consolidated indebtedness, and limitation on investments in and loans to affiliates and unconsolidated subsidiaries. At December 31, 1994 the Company was in compliance with all of these covenants. Aggregate maturities of long-term debt in the next five years are as follows: (Dollars in Thousands) 1995................................................ $ 3,576 1996................................................ 14,812 1997................................................ 2,043 1998................................................ 650 1999................................................ 460 On January 4, 1995, an indirect wholly-owned subsidiary of the Company issued Deutsche Mark 200 million Floating Rate Bonds (approximately $130 million). The bonds are unsecured, unsubordinated obligations of the issuer and are unconditionally and irrevocably guaranteed by the Company. The bonds bear interest at a per annum rate equal to Deutsche Mark three month LIBOR plus 0.65% and may be redeemed at the option of the issuer on January 5, 1997 or any interest payment date thereafter at their principal amount plus any accrued but unpaid interest. Unless redeemed earlier, the bonds will mature on January 5, 2000 and will be repaid at par. The proceeds of this issuance were used for general corporate purposes, including the reduction of outstanding sundry notes and loans payable to banks and other outstanding credit obligations. F-12 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Income Taxes Income before income taxes and the provision for taxes on income consisted of the amounts shown below: Years Ended December 31, (Dollars in Thousands) 1994 1993 1992 ---- ---- ---- Income before income taxes: Domestic ......................... $ 85,992 $ 65,571 $ 47,535 International .................... 95,764 77,053 74,761 --------- --------- --------- Totals ........................ $ 181,756 $ 142,624 $ 122,296 ========= ========= ========= Provision for taxes on income: Current: Federal ....................... $ 30,645 $ 16,428 $ 17,143 State and local ............... 8,445 6,531 6,215 International ................. 36,138 35,071 29,067 --------- --------- --------- 75,228 58,030 52,425 --------- --------- --------- Deferred: Federal ....................... (4,922) 2,979 (3,702) State and local ............... (1,285) 139 (1,375) International ................. 5,316 (1,277) 5,920 --------- --------- --------- (891) 1,841 843 --------- --------- --------- Totals ................. $ 74,337 $ 59,871 $ 53,268 ========= ========= ========= The Company's effective income tax rate varied from the statutory federal income tax rate as a result of the following factors: 1994 1993 1992 ---- ---- ---- Statutory federal income tax rate .............. 35.0% 35.0% 34.0% State and local taxes on income, net of federal income tax benefit ................. 2.6 3.0 2.6 International subsidiaries' tax rate (less than) in excess of federal statutory rate ....... (0.8) 0.1 1.3 Losses of international subsidiaries without tax benefit ........................ -- 0.2 1.0 Non-deductible amortization of goodwill ........ 4.3 3.9 3.7 Other .......................................... (0.2) (0.2) 1.0 ---- ---- ---- Effective rate ................................. 40.9% 42.0% 43.6% ==== ==== ==== The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." Deferred income taxes are provided for the temporary difference between the financial reporting basis and tax basis of the Company's assets and liabilities. Deferred tax benefits result principally from recording certain expenses in the financial statements which are not currently deductible for tax purposes. Deferred tax liabilities result principally from expenses which are currently deductible for tax purposes, but have not yet been expensed in the financial statements. The Company has recorded deferred tax benefits as of December 31, 1994 and 1993 of $56.6 million and $56.7 million, respectively. The Company has recorded deferred tax liabilities as of December 31, 1994 and 1993 of $20.5 million and $29.3 million, respectively. F-13 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Deferred tax benefits (liabilities) as of December 31, 1994 and 1993 consisted of the amounts shown below (dollars in millions): 1994 1993 ---- ---- Acquisition liabilities .......................... $12.1 $13.0 Lease reserves ................................... 2.0 5.0 Severance and compensation reserves .............. 22.7 8.7 Tax loss carryforwards ........................... 3.7 9.6 Foreign currency transactions .................... (1.6) 0.5 Tax benefit leases ............................... (0.8) (4.5) Amortization and depreciation .................... (2.4) (7.2) Deductible intangibles ........................... (3.6) (2.1) Other, net ....................................... 4.0 4.4 ----- ----- $36.1 $27.4 ===== ===== Net current deferred tax benefits as of December 31, 1994 and 1993 were $15.0 million and $8.9 million, respectively and were included in prepaid expenses and other current assets. Net non-current deferred tax benefits as of December 31, 1994 and 1993 were $21.1 million and $18.5 million, respectively. In 1993, legislation was enacted which increased the U.S. statutory tax rate from 34% to 35%. The effect of statutory rate changes during 1994 and 1993 in federal, state, local and international jurisdictions was not material to net income. There were no material valuation allowances recognized as of December 31, 1994 and 1993. A provision has been made for additional income and withholding taxes on the earnings of international subsidiaries and affiliates that will be distributed. 9. Employee Retirement Plans The Company's international and domestic subsidiaries provide retirement benefits for their employees primarily through profit sharing plans. Company contributions to the plans, which are determined by the boards of directors of the subsidiaries, have been in amounts up to 15% (the maximum amount deductible for federal income tax purposes) of total eligible compensation of participating employees. Profit sharing expense amounted to $34.7 million, $25.8 million and $20.8 million in 1994, 1993 and 1992, respectively. Some of the Company's international subsidiaries have pension plans. These plans are not required to report to governmental agencies pursuant to the Employee Retirement Income Security Act of 1974 (ERISA). Substantially all of these plans are funded by fixed premium payments to insurance companies who undertake legal obligations to provide specific benefits to the individuals covered. Pension expense amounted to $2.6 million, $2.4 million and $2.7 million in 1994, 1993 and 1992, respectively. Certain subsidiaries of the Company have an executive retirement program under which benefits will be paid to participants or their beneficiaries over 15 years from age 65 or death. In addition, other subsidiaries have individual deferred compensation arrangements with certain executives which provide for payments over varying terms upon retirement, cessation of employment or death. Some of the Company's domestic subsidiaries provide life insurance and medical benefits for retired employees. Eligibility requirements vary by subsidiary, but generally include attainment of a specified combined age plus years of service factor. Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106 "Employers' Accounting For Post Retirement Benefits Other Than Pensions" ("SFAS No. 106"). SFAS No. 106 requires that the expected cost of post retirement benefits be charged to expense during the years that the eligible employees render service. The expense related to these benefits was not material to the 1994, 1993 and 1992 consolidated results of operations. 10. Commitments At December 31, 1994, the Company was committed under operating leases, principally for office space. Certain leases are subject to rent reviews and require payment of expenses under escalation clauses. Rent expense was $138.0 million in 1994, $128.8 million in 1993 and $117.3 million in 1992 after reduction by rents received from subleases of $10.2 million, $10.0 million and F-14 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) $14.1 million, respectively. Future minimum base rents under terms of noncancellable operating leases, reduced by rents to be received from existing noncancellable subleases, are as follows: (Dollars in Thousands) Gross Rent Sublease Income Net Rent ---------- --------------- -------- 1995 ............................. $116,474 $ 10,080 $106,394 1996 ............................. 107,973 8,577 99,396 1997 ............................. 95,624 5,907 89,717 1998 ............................. 82,107 4,628 77,479 1999 ............................. 75,772 3,998 71,774 Thereafter ....................... 417,994 13,716 404,278 Where appropriate, management has established reserves for the difference between the cost of leased premises that were vacated and anticipated sublease income. 11. Fair Value of Financial Instruments During 1994 the Company adopted Statement of Financial Accounting Standards No. 119 "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments." The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1994. (Dollars in Thousands) Carrying Fair Amount Value -------- -------- Cash, cash equivalents and investments available-for-sale $256,634 $256,634 Long-term investments .................................... 5,532 5,532 Long-term debt ........................................... 190,914 192,352 Financial Commitments: Forward exchange contracts ............................ -- 123 Guarantees ............................................ -- 10,065 Letters of credit ..................................... -- 19,879 The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash equivalents and investments available-for-sale: Cash equivalents and investments available-for-sale consist principally of investments in short-term, interest bearing instruments and are carried at fair market value, which approximates cost. Long-term investments: Included in deferred charges and other assets are long-term investments carried at cost, which approximates estimated fair value. Long-term debt: The fair value of the Company's convertible subordinated debenture issue was determined by reference to quotations available in markets where that issue is traded. These quotations primarily reflect the conversion value of the debentures into the Company's common stock. These debentures are redeemable by the Company, at prices explained in Note 7, which are less than the quoted market prices used in determining the fair value. The fair value of the Company's remaining long-term debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. Financial commitments: The estimated fair value of derivative positions are based upon quotations received from independent, third party banks and represent the net amount payable to terminate the position, taking into consideration market rates and F-15 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) counterparty credit risk. The fair values of guarantees, principally related to affiliated companies, and letters of credit were based upon the face value of the underlying instruments. 12. Financial Instruments and Market Risk The Company periodically utilizes derivative financial instruments to reduce certain market risks to which the Company is exposed. These market risks primarily consist of the impact of changes in currency exchange rates on assets and liabilities of non-U.S. operations and the impact of changes in interest rates on debt. The Company's derivative activities are limited in volume and confined to risk management activities. Senior management at the Company actively participate in the quantification, monitoring and control of all significant risks. A reporting system is in place which evaluates the impact on the Company's earnings resulting from changes in interest rates, currency exchange rates and other relevant market risks. This system is structured to enable senior management to initiate prompt remedial action, if appropriate. Adequate segregation of duties exists with regard to the execution, recording and monitoring of derivative activities. Additionally, senior management reports periodically to the Audit Committee of the Board of Directors concerning derivative activities. Since 1993, the Audit Committee has established limitations on derivative activities. These limitations have been reviewed annually, most recently on March 23, 1995. The Audit Committee has reconfirmed, for the year 1995, the limitations originally established in 1993. At December 31, 1994, the Company had no swap agreements outstanding. At December 31, 1993, the Company had cross currency swap agreements and a U.S. dollar interest rate swap agreement outstanding with commercial banks as follows:
(Dollars in thousands) Aggregate Company Company Notional Amount Receives Pays --------------- -------- -------- Cross currency fixed to floating rate swaps ............................ $70,600 8.97% 3.51% U.S. dollar floating to fixed rate swap ................................ $50,000 3.22% 4.99%
The cross currency swap agreements were comprised of contracts denominated in German Deutsche Marks, French Francs, Australian Dollars and Spanish Pesetas. These contracts effectively changed a portion of the Company's non-U.S. dollar denominated debt to floating rate U.S. dollar denominated debt, which reduced the Company's risk related to currency fluctuations and interest rates. The U.S. dollar interest rate swap agreement converted a portion of the Company's floating rate debt to a fixed rate. These agreements were closed out during 1994 for a gain of $2.4 million which is being amortized into income over the original term of the swap agreements. The Company enters into forward exchange contracts to hedge certain assets and liabilities which are recorded in a currency different from that in which they will settle. Gains and losses on these positions are deferred and included in the basis of the transaction upon settlement. The terms of these contracts are generally three months or less. The table below summarizes by major currency the notional principal amounts of the Company's forward exchange contracts outstanding at December 31, 1994. The "buy" amounts represent the U.S. dollar equivalent of commitments to purchase the respective currency, and the "sell" amounts represent the U.S. dollar equivalent of commitments to sell the respective currency. (Dollars in thousands) Notional Principal Amount ----------------------------- Currency Company Buys Company Sells -------- ------------ ------------- German Deutsche Mark ..................... $ 18,380 $ 82,509 French Franc ............................. 61,345 22,364 U.S. Dollar .............................. 32,146 12,220 Dutch Guilder ............................ 20,644 14,574 Spanish Peseta ........................... 12,653 17,831 Belgian Franc ............................ 10,429 6,469 Canadian Dollar .......................... 765 7,970 Hong Kong Dollar ......................... 4,021 4,017 Other .................................... 7,433 9,947 -------- -------- Total ................................ $167,816 $177,901 ======== ======== F-16 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The derivative financial instruments existing at December 31, 1994 and 1993 were entered into for the purpose of hedging certain specific currency and interest rate risks. As a result of these financial instruments, the Company reduced financial risk in exchange for foregoing any gain (reward) which might have occurred if the markets moved favorably. In using derivative financial instruments, management exchanged the risks of the financial markets for counterparty risks. In order to minimize counterparty risk the Company only enters into contracts with major well known banks that have credit ratings equal to or better than the Company's. Additionally, these contracts contain provisions for net settlement. As such, the contracts settle based on the spread between the currency rates and interest rates contained in the contracts and the current market rates. This minimizes the risk of an insolvent counterparty being unable to pay the Company the notional principal amount owed to the Company and, at the same time, having the creditors of the counterparty demanding the notional principal amount from the Company. 13. Adoption of New Accounting Principles and Special Charge Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"). This Statement establishes accounting standards for employers who provide benefits to former or inactive employees after employment but before retirement (referred to in this Statement as "postemployment benefits"). Those benefits include, but are not limited to, salary continuation, supplemental unemployment benefits, severance benefits, disability-related benefits, job training and counseling, and continuation of benefits such as health care benefits and life insurance coverage. The cumulative after tax effect of the adoption of SFAS No. 112 resulted in a reduction to net income of $28.0 million. Effective January 1, 1994, the Company also adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). This Statement addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. In compliance with SFAS No. 115, the Company classifies these investments as investments available-for-sale. At December 31, 1994, the Company's investments consisted principally of time deposits with financial institutions. These investments, with scheduled maturities of less than one year, are valued at estimated fair value, which approximates cost. These investments are generally redeemed at face value upon maturity and, as such, gains or losses on disposition are immaterial. There are no material unrealized holding gains or losses as of December 31, 1994. Effective January 1, 1992, the Company adopted SFAS No. 106 and SFAS No. 109. The cumulative after tax effect of the adoption of these Statements increased net income by $3.8 million, substantially all of which related to SFAS No. 109. Due to the continued weakening of the commercial real estate market in certain domestic and international locations and the reorganization of certain operations, the Company provided a special charge of $6.7 million pretax for losses related to future lease costs. F-17 OMNICOM GROUP INC. AND SUBSIDIARIES QUARTERLY RESULTS OF OPERATIONS (Unaudited) The following table sets forth a summary of the unaudited quarterly results of operations for the two years ended December 31, 1994 and 1993, in thousands of dollars except for per share amounts.
First Second Third Fourth -------- -------- -------- -------- Commissions & Fees 1994..................................... $376,538 $425,198 $422,274 $532,195 1993..................................... 339,139 381,758 339,531 456,047 Income Before Income Taxes 1994..................................... 31,592 58,227 29,855 62,082 1993..................................... 24,738 49,274 19,581 49,031 Income Taxes 1994..................................... 13,163 23,808 12,314 25,052 1993..................................... 10,390 20,678 8,228 20,575 Income After Income Taxes 1994..................................... 18,429 34,419 17,541 37,030 1993..................................... 14,348 28,596 11,353 28,456 Equity in Affiliates 1994..................................... 2,089 3,863 3,432 8,938 1993..................................... 1,692 2,674 1,769 7,045 Minority Interests 1994..................................... (1,598) (4,784) (2,823) (8,402) 1993..................................... (1,584) (4,008) (276) (4,720) Income Before Change in Accounting Principle 1994.................................... 18,920 33,498 18,150 37,566 1993.................................... 14,456 27,262 12,846 30,781 Cumulative Effect of Change in Accounting Principle 1994..................................... (28,009) -- -- -- 1993..................................... -- -- -- -- Net Income 1994..................................... (9,089) 33,498 18,150 37,566 1993..................................... 14,456 27,262 12,846 30,781 Primary Earnings Per Share Before Change in Accounting Principle 1994..................................... 0.58 1.02 0.52 1.04 1993..................................... 0.50 0.90 0.43 0.95 Fully Diluted Earnings Per Share Before Change in Accounting Principle 1994..................................... 0.58 0.95 0.52 1.02 1993..................................... 0.49 0.82 0.43 0.87
F-18 Schedule VIII OMNICOM GROUP INC. AND SUBSIDIARIES SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS For the Three Years Ended December 31, 1994
==================================================================================================================================== Column A Column B Column C Column D Column E ------------------------------------------------------------------------------------------------------------------------------------ Additions Deductions --------- ---------------------------------- Balance at Charged Removal of Balance Beginning to Costs Uncollectible Translation at End of Description of Period and Expenses Receivables (1) Adjustments Period ------------------------------------------------------------------------------------------------------------------------------------ (Dollars in Thousands) Valuation accounts deducted from assets to which they apply-- allowance for doubtful accounts: December 31, 1994 ...................... $17,298 $ 7,864 $ 6,489 $ (605) $19,278 December 31, 1993 ...................... 12,825 4,742 (686) 955 17,298 December 31, 1992 ...................... 15,634 2,545 4,092 1,262 12,825
---------- (1) Net of acquisition date balances in allowance for doubtful accounts of companies acquired of $1,330, $4,581, and $589 in 1994, 1993, and 1992, respectively. S-1 EX-4 2 EX-4.2 Dated December 14, 1994 BBDO CANADA INC. - and - OMNICOM GROUP INC. - and - MORGAN STANLEY GMBH and the other Managers ------------------------------------------------- SUBSCRIPTION AGREEMENT DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 ----------------------------------------------- HENGELER MUELLER WEITZEL WIRTZ Frankfurt am Main -2- SUBSCRIPTION AGREEMENT dated December 14, 1994 between (1) BBDO CANADA INC. (the "Issuer"), (2) OMNICOM GROUP INC. (the "Guarantor"), and (3) MORGAN STANLEY GMBH (the "Lead Manager"), CITIBANK AKTIENGESELLSCHAFT, KIDDER PEABODY INTERNATIONAL PLC, MERRILL LYNCH BANK AG, SCHWEIZERISCHER BANKVEREIN (DEUTSCHLAND) AG (together with the Lead Manager, the "Managers"). The parties hereby record the arrangements between them in respect of an issue of DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 of the Issuer (the "Bonds") to be guaranteed by the Guarantor. ss. 1 Agreement to Issue; the Bonds; the Agreements (1) The Issuer agrees to issue the Bonds on January 4, 1995 (the "Closing Date"), and the Guarantor agrees to issue the Guarantee on the Closing Date. (2) The terms and conditions applicable to the Bonds are set forth in the Terms and Conditions of the Bonds (the "Conditions") attached hereto as Schedule 1. The Bonds will initially be represented by a single temporary global note payable to bearer without interest coupons (the "Temporary Global Bond") substantially in the form set out in Schedule 2. The Temporary Global Bond will be deposited with Deutscher Kassenverein AG, Frankfurt am Main ("DKV"), as common depositary (in such capacity the "Common Depositary") for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") and Cedel S.A. ("Cedel"). On or after the date (the "Exchange Date") which is 40 days after the Closing Date and upon presentation of certificates of non-US and non-Canadian beneficial ownership, the Temporary Global Bond will be exchangeable for a single permanent global note payable to bearer without interest coupons (the "Permanent Global Bond") substantially in the form set out in Schedule 3. The Permanent Global Bond will be deposited with DKV. Definitive certificates representing individual Bonds and interest coupons will not be issued. (3) The guarantee to be given by the Guarantor ("the Guarantee") shall be substantially in the form set out in Schedule 4. -3- (4) Concurrently with the signing of this Agreement the Issuer and the Guarantor are entering into an agency agreement (the "Agency Agreement") with Morgan Stanley GmbH as issuing and paying agent (the "Paying Agent"). This Agreement and the Agency Agreement are together referred to as the "Agreements". ss. 2 Purchase (1) Each of the Managers agrees to purchase on the Closing Date at the issue price of 99.48% of the principal amount of the Bonds (the "Issue Price") such principal amount of Bonds as corresponds to its commitment as set out in Schedule 5. (2) The rights and obligations of the Managers under this Agreement are several and not joint. Each of the Managers shall acquire sole title to the Bonds subscribed by it and there shall be no joint or fractional co-ownership in the Bonds by the Managers. ss. 3 Disclosure The Issuer and the Guarantor confirm that they have prepared an Offering Memorandum in the English language dated January 4, 1995 (the "Offering Memorandum") in relation to the Bonds and hereby authorize the Managers to distribute the Offering Memorandum in connection with the offering and sale of the Bonds, copies of it in preliminary or draft form having already been distributed with the consent of the Issuer and the Guarantor. ss. 4 Stabilization (1) To the extent permitted by applicable laws, the Lead Manager for its own account may over-allot and effect transactions in the open market or otherwise in connection with the distribution of the Bonds with a view to stabilizing or maintaining the market price of the Bonds at levels other than those which might otherwise prevail. In doing so the Lead Manager shall act as principal and not as agent of the Issuer or the Guarantor. The Issuer shall not in any event be obligated to issue more than DM 200,000,000 in principal amount of the Bonds. (2) As between the Issuer, the Guarantor and the Lead Manager, any loss resulting from stabilization shall be borne, and any profit arising therefrom shall be retained, by the Lead Manager. -4- ss. 5 Selling Terms (1) Each Manager agrees to be bound by the terms and provisions set out in Schedule 6. (2) Each Manager agrees to indemnify the Issuer and the Guarantor and each other Manager, and each of their respective directors, officers and employees, against any loss, liability, cost, expense, claim or action (including all reasonable costs, charges or expenses paid or incurred in disputing or defending any of the foregoing) which any of them may incur or which may be made against any of them arising out of, in relation to or in connection with, any failure by such Manager to observe the terms and provisions set out in Schedule 6. ss. 6 Listing (1) The Issuer confirms that it has authorised the Lead Manager to make or cause to be made an application for the Bonds to be listed on the Luxembourg Stock Exchange (the "Stock Exchange"). (2) Each of the Issuer and the Guarantor agrees to supply to the Lead Manager for delivery to the Stock Exchange copies of the Offering Memorandum and such other documents, information and undertakings as may be required for the purpose of obtaining such listing. (3) The Issuer and the Guarantor, jointly and severally, agree to use their best endeavours to maintain such listing for as long as any of the Bonds are outstanding and to pay all fees and supply all further documents, information and undertakings and publish all advertisements or other material as may be necessary or advisable for such purpose. However, if such listing becomes impossible, the Issuer and the Guarantor will obtain, and each will thereafter use its best endeavours to maintain a quotation for, or listing of, the Bonds on such other stock exchange as is commonly used for the quotation or listing of debt securities as they may, with the approval of the Lead Manager, decide. ss. 7 Warranties of the Issuer and the Guarantor (1) The Issuer and the Guarantor, jointly and severally, warrant to the Managers and each of them that:- (a) each of them is duly incorporated and validly existing under the laws of Ontario and the State of New York, respectively, with full power and authority to conduct its business as described in the Offering Memorandum; -5- (b) the Agreements have been duly authorised, executed and delivered by the Issuer and the Guarantor and constitute valid, legally binding and enforceable obligations of the Issuer and the Guarantor; (c) the Bonds have been duly authorised by the Issuer and, when duly executed, authenticated, issued and delivered, will constitute valid, legally binding and enforceable obligations of the Issuer; (d) the Guarantee has been duly authorised by the Guarantor and, when duly executed and delivered, will constitute valid, legally binding and enforceable obligations of the Guarantor; (e) all consents or approvals of, or registrations or filings with, or other action by any court, governmental authority or regulatory body required for the execution and delivery of the Agreements, the issue of the Bonds, the giving of the Guarantee, the carrying out of the other transactions contemplated by the Agreements or the compliance by the Issuer and the Guarantor with the terms of the Bonds, the Guarantee and the Agreements, as the case may be, have been, or will have been by the Closing Date, obtained and are, or will be, in full force and effect on the Closing Date; (f) the execution and delivery of the Agreements, the issue of the Bonds, the giving of the Guarantee, the carrying out of the other transactions contemplated by the Agreements and compliance with their terms do not and will not (i) conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the articles of incorporation, charter, by-laws (or other comparable corporate charter documents) of the Issuer or the Guarantor, or any indenture, trust deed, mortgage or other agreement or instrument to which the Issuer or the Guarantor or any of their respective subsidiaries is a party or by which any of them or any of their respective properties is bound, or (ii) infringe any existing applicable law, rule, regulation, judgment, order or decree of any governmental authority or court, domestic or foreign, having jurisdiction over the Issuer, the Guarantor or any of their respective properties; (g) the Offering Memorandum, as of the date hereof, is accurate in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the Offering Memorandum will be, as of the Closing date, accurate in all material respects and will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances existing at the -6- Closing Date, not misleading, provided, however, that the Issuer and the Guarantor make no representation or warranty as to statements or omissions from the list of Managers on the cover page of the Offering Memorandum, or under the caption "Subscription and Sale; Selling Restrictions" in the Offering Memorandum, which statements were made in reliance upon and in conformity with information furnished in writing to the Issuer and the Guarantor by the Managers specifically for inclusion therein; (h) (i) the financial statements of the Issuer for the two years ended December 31, 1993 and 1992 were prepared in accordance with generally accepted accounting principles from time to time approved by the Canadian Institute of Chartered Accountants consistently applied, except as disclosed therein, and present fairly the financial position of the Issuer as at the dates, and the results of operations and changes in financial position of the Issuer for the periods, in respect of which they have been prepared, and (ii) since the date of the last audited financial statements of the Issuer there has been no change (nor any development or event involving a prospective change of which the Issuer is, or might reasonably be expected to be, aware) which is materially adverse to the condition (financial or other), results of operations or general affairs of the Issuer; (i) (i) the consolidated financial statements of the Guarantor and its consolidated subsidiaries taken as a whole (the "Consolidated Group") for the three years ended December 31, 1993, 1992 and 1991 and the nine month periods ended September 30, 1994 and 1993 were prepared in accordance with accounting principles generally accepted in, and pursuant to the relevant laws of the United States of America consistently applied, except as disclosed therein, and present fairly the financial position of the Guarantor and of the Consolidated Group as at the dates, and the results of operations and changes in financial position of the Guarantor and of the Consolidated Group for the periods, in respect of which they have been prepared, and (ii) since the date of the last audited consolidated financial statements of the Consolidated Group there has been no change (nor any development or event involving a prospective change of which the Guarantor is, or might reasonably be expected to be, aware) which is materially adverse to the condition (financial or other), results of operations or general affairs of the Guarantor or of the Consolidated Group respectively; (j) there are no pending actions, suits or proceedings against the Issuer or the Guarantor or any of their respective subsidiaries or any of their respective properties which, if determined adversely to the Issuer or the Guarantor or any such subsidiary, could individually or in the aggregate have an adverse effect on the condition (financial or -7- other), results of operations or general affairs of the Issuer or the Guarantor or the Consolidated Group or would materially adversely affect the ability of the Issuer or the Guarantor to perform their obligations under the Agreements or the Bonds or the Guarantee or which are otherwise material in the context of the issue of the Bonds and, to the best of the Issuer's and the Guarantor's knowledge, no such actions, suits or proceedings are threatened or contemplated; (k) no event has occurred or circumstance arisen which, had the Bonds already been issued, might (whether or not with the giving of notice and/or the passage of time and/or the fulfilment of any other requirement) constitute an event of early termination under the Conditions; (l) neither the Issuer nor the Guarantor is an "investment company" within the meaning of the U.S. Investment Company Act of 1940, as amended; and (m) neither the Issuer nor the Guarantor nor their respective affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts (as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")) with respect to the Bonds and it and they have complied and will comply with the offering restrictions requirement of such Regulation. (2) The Issuer and the Guarantor jointly and severally undertake to indemnify each Manager and its directors, officers and employees, and any affiliate of such Manager (each an "indemnified person"), against any loss, liability, cost, expense, claim or action (including all reasonable costs, charges and expenses paid or incurred in disputing or defending any of the foregoing), which such Manager may incur or which may be made against it arising out of, in relation to or in connection with, any inaccuracy or alleged inaccuracy of any of the warranties contained in subsection (1) or in connection with any inaccurate statement or alleged inaccurate statement contained in the Offering Memorandum or any omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading. The Issuer and the Guarantor expressly acknowledge that they shall not be released from such obligation by reason of the fact that the Lead Manager has assisted in the drafting of the Offering Memorandum. The Issuer and the Guarantor shall not indemnify any indemnified person in respect of any inaccuracy or alleged inaccuracy of any of the warranties as to statements in or omissions from the list of the Managers on the cover page of the Offering Memorandum or the statements under the caption "Subscription and Sale; Selling Restrictions" in the Offering Memorandum. -8- ss. 8 Agreements of the Issuer and the Guarantor The Issuer and the Guarantor, jointly and severally agree with the Managers that:- (a) the Issuer, failing whom the Guarantor, will bear and pay all stamp and other taxes and duties (including interest and penalties) payable pursuant to the laws applicable in Canada, the United States of America and the Federal Republic of Germany on or in connection with the issue and purchase by the Managers of the Bonds and the execution or delivery of the Agreements and the Guarantee; (b) the Issuer and the Guarantor shall notify the Lead Manager on behalf of the Managers if, at any time prior to payment of the net subscription amount to the Issuer, anything occurs which renders or may render untrue or incorrect in any respect any of the warranties given by the Issuer or the Guarantor; and (c) if at any time prior to completion, in the view of the Lead Manager, of the distribution of the Bonds any event shall occur as a result of which, in the judgement of the Issuer or the Guarantor, it is necessary to amend or supplement the Offering Memorandum (as then amended or supplemented) in order to make the statements therein, in the light of the circumstances when the Offering Memorandum is delivered, not misleading, the Issuer and the Guarantor shall forthwith prepare and furnish, at their own expense, to the Managers either amendments to the Offering Memorandum or supplemental information so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Offering Memorandum is delivered, be misleading. ss. 9 Closing Conditions (1) The Managers shall be obligated to pay for, and take delivery of the Bonds only (A) if: (i) as of the Closing Date, the warranties and agreements of the Issuer and the Guarantor herein contained are true and correct in all material respects and have been duly complied with (to the extent that such compliance is due on or before the Closing Date), (ii) subsequent to the date hereof and as of the Closing Date, there shall not have occurred any downgrading, nor shall any notice have been given of (1) any intended or potential downgrading or (2) any review or possible change that does not indicate an improvement in the rating, accorded any of the outstanding debt securities of the Issuer or the Guarantor by either Moody's Investor Services, Inc. or Standard & Poor's Rating Group, and (B) subject to: -9- (a) receipt by the Lead Manager on behalf of the Managers on the Closing Date of a certificate of the Issuer dated the Closing Date and signed on behalf of the Issuer certifying that as of the Closing Date, the warranties contained in ss. 7(1) are true and correct as if made on the Closing Date and that the Issuer has complied with all agreements herein contained (to the extent that such compliance is due on or before the Closing Date); (b) receipt by the Lead Manager on behalf of the Managers on the Closing Date of a certificate of the Guarantor dated the Closing Date and signed on behalf of the Guarantor certifying that as of the Closing Date, the warranties contained in ss. 7(1) are true and correct as if made on the Closing Date and that the Guarantor has complied with all agreements herein contained (to the extent that such compliance is due on or before the Closing Date); (c) receipt by the Lead Manager on behalf of the Managers on the Closing Date of legal opinions dated the Closing Date, in the form agreed, from: (i) Gowling Strathy & Henderson, legal advisers to the Issuer and the Guarantor as to Canadian law; (ii) Davis and Gilbert, legal advisers to the Issuer and the Guarantor as to U.S. law; (iii)Davis Polk & Wardwell, legal advisers to the Managers as to U.S. law; and (iv) Hengeler Mueller Weitzel Wirtz, legal advisers to the Managers as to German law; (d) receipt by the Lead Manager not later than two Frankfurt banking days before the Closing Date of the Guarantee duly executed on behalf of the Guarantor for delivery on the Closing Date; (e) receipt by the Lead Manager on behalf of the Managers not later than two Frankfurt banking days before the Closing Date of the Permanent Global Bond duly executed by and on behalf of the Issuer for delivery to DKV on or after the Exchange Date; (f) receipt by the Lead Manager on behalf of the Managers not later than three Frankfurt banking days before the Closing Date of the documents listed in Schedule 7; (g) the Stock Exchange having agreed on or before the Closing Date to list the Bonds; -10- (h) receipt by the Lead Manager on behalf of the Managers not later than two Frankfurt banking days before the Closing Date of the duly executed Temporary Global Bond, for authentication and delivery pursuant to ss. 10; and (i) receipt by the Lead Manager on behalf of the Managers of a copy of the Agency Agreement as executed, delivered and exchanged by the parties thereto. (2) The Lead Manager on behalf of the Managers may, at its discretion and upon terms as it deems appropriate, waive compliance with the whole or any part of subsection (1). ss. 10 Delivery and Payment Not later than 10:00 a.m. (Frankfurt time) on the Closing Date (or such other time on the Closing Date as may be agreed between the Lead Manager on behalf of the Managers and the Issuer) the Issuer will issue and deliver to the Managers or their order the Temporary Global Bond duly executed and authenticated, to be held as agreed between the Issuer, the Lead Manager and the Common Depository. Against such delivery the Managers shall pay, or cause payment of, the net subscription amount (being the Issue Price pursuant to ss. 2(1) less the commissions pursuant to ss. 11(1) and less the Expenses Amount pursuant to ss. 11(2)) in Deutsche Mark to such account maintained in the Federal Republic of Germany as the Issuer may specify to the Lead Manager not later than five days before the Closing Date. ss. 11 Commissions and Expenses (1) The Issuer, failing whom the Guarantor, shall pay to the Managers on the Closing Date total commissions of 0.45 % of the principal amount of the Bonds in consideration of the obligations of the Managers to purchase the Bonds. (2) In addition to the commissions payable pursuant to subsection (1) and to its own expenses in connection with the issue, sale and offering of the Bonds, the Issuer, failing whom the Guarantor, shall pay to the Lead Manager on the Closing Date a lump sum amount (the "Expenses Amount") as separately agreed upon between the Issuer and the Lead Manager in lieu of reimbursement of the following expenses and fees (including value added tax thereon, if any): (a) all expenses incurred in connection with the preparation, printing and delivery of the Offering Memorandum, the Agreements, the Temporary Global Bond, the Permanent Global Bond, the Guarantee and all other documents relating to the issue, subscription and offering of the Bonds, (b) the fees and expenses incurred in connection with the obtaining and maintaining of the listing of the Bonds on the Stock Exchange, including the costs of all necessary publications, if any, -11- (c) all expenses incurred in connection with the services of the legal advisers to the Managers in Canada, the United States of America and the Federal Republic of Germany in connection with the issue and subscription of the Bonds, (d) all expenses incurred in connection with all advertising in relation to the issue and offering of the Bonds on which the Issuer and the Lead Manager may agree, (e) all other expenses which the Managers have incurred or will incur in connection with the issue, purchase and offering of the Bonds, and (f) the fees and expenses (including value added tax thereon) of the Paying Agent and any further paying agents in connection with the preparation and signing of the Agreements, the issue of the Bonds and the performance of their duties under the Agency Agreement. ss. 12 Termination (1) The Lead Manager on behalf of the Managers may, by written notice to the Issuer given at any time prior to payment of the the net subscription amount for the Bonds, terminate this Agreement: (a) if in the opinion of the Lead Manager, circumstances shall be such as: (i) to prevent or to a material extent restrict payment for the Bonds in the manner contemplated in this Agreement; or (ii) to a material extent prevent or restrict settlement of transactions in the Bonds in the market or otherwise; or (b) if in the opinion of the Lead Manager, there shall have been: (i) any change in national or international political, legal, tax or regulatory conditions; or (ii) any calamity or emergency, which has in its view caused a substantial deterioration in the price and/or value of the Bonds. (2) Upon such termination no party shall be under any liability to any other in respect of this Agreement, except that (a) all indemnity provisions in this Agreement shall continue in full force and effect, and (b) the Issuer and the Guarantor shall remain liable under ss. 11 for the payment of the lower of (i) the Expenses Amount or (ii) the costs and expenses already incurred or incurred in consequence of such termination. -12- ss. 13 Communications (1) Any document or information furnished or supplied in accordance with this Agreement shall, if not otherwise provided for herein, either be in the German or English language. (2) All communications required to be given or given hereunder shall be given by airmail letter or by telex, cable or facsimile transmission. (3) Subject to written notice of change of address, all communications hereunder shall be given to the following addresses: (a) If to the Issuer: BBDO Canada Inc. 2 Bloor Street West Toronto, Ontario M4W 3R6 Canada Telefax: 416 960 1618 Attention: Chief Financial Officer (b) If to the Guarantor: Omnicom Group Inc. 437 Madison Avenue New York, N.Y. 10022 U.S.A. Telefax: 212 415 3530 Attention: Chief Financial Officer (c) If to the Managers: Morgan Stanley GmbH Rahmhofstra(beta)e 2 - 4 60313 Frankfurt am Main Federal Republic of Germany Telefax: 69 2166 1399 Telex: 412 648 Attention New Issues Department ss. 14 The Schedules; Severability (1) Schedules 1 to 7 form part of this Agreement. (2) Should any provision of this Agreement be or become invalid in whole or in part, the other provisions of this Agreement shall remain in force. Any invalid provision shall be replaced by a valid provision which accomplishes as far as -13- legally possible the economic effects of the invalid provision. ss. 15 Governing Law and Place of Performance (1) This Agreement shall in all respects be governed by and construed in accordance with German law. (2) Place of performance for the obligations of all parties hereto shall be Frankfurt am Main. ss. 16 Place of Jurisdiction (1) Any action or other legal proceedings arising out of or in connection with this Agreement ("Proceedings") shall be brought in the District Court (Landgericht) in Frankfurt am Main. The Issuer and the Guarantor hereby appoint Wei(beta) & Hasche, Rechtsanwalte, Brienner Stra(beta)e 11/V, D-80333 Munich, as their agent for service of process with respect to any proceedings brought before any German court. (2) Subsection (1) shall not limit the right of any of the Managers to bring Proceedings against the Issuer and/or the Guarantor arising out of or in connection with this Agreement in any competent court of law. ss. 17 Counterparts This Agreement is executed in ten counterparts in the English language. With respect to Schedules 1 through 4 the German language version shall be binding. The English translations of such Schedules are for convenience only. One executed counterpart each is issued to the Issuer, the Guarantor and to each of the Managers. Each executed counterpart shall be an original. This Agreement has been entered into on the date first above written. -14- BBDO CANADA INC. By: Quattro OMNICOM GROUP INC. By: Hewitt MORGAN STANLEY GMBH By: Wirth Brugger CITIBANK AKTIENGESELLSCHAFT KIDDER PEABODY INTERNATIONAL PLC MERRILL LYNCH BANK AG SCHWEIZERISCHER BANKVEREIN (DEUTSCHLAND) AG By: Brugger (by virtue of powers of attorney) Schedule 1 (English Translation) TERMS AND CONDITIONS OF THE BONDS ss.1 Form and Denomination (1) The issue of BBDO Canada Inc. (the "Issuer") in the aggregate principal amount of two hundred million Deutsche Marks (DM 200,000,000) is divided into 20,000 bonds payable to bearer in the principal amount of DM 10,000 each (the "Bonds") and ranking pari passu among themselves. (2) The Bonds shall be represented initially by a single temporary global bond (the "Temporary Global Bond") payable to bearer, without interest coupons, which will be deposited with a common depositary outside the United States of America for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") and Cedel societe anonyme ("Cedel") on or about January 4, 1995. The Issuer shall exchange the Temporary Global Bond for a permanent global bond (the "Permanent Global Bond"), payable to bearer, without interest coupons, on or after the date (the "Exchange Date") which is 40 days after January 4, 1995, upon receipt by the Issuer, or its agent, of a certificate (a "Certificate of Non-U.S. and Non-Canadian Beneficial Ownership") signed by Euroclear or Cedel, as the case may be, which certificate must be based on written certifications provided to it and signed by its account holders, in a form to be provided by the Issuer, or its agent, to the effect that the beneficial interest in the Temporary Global Bond is owned by a person that is not a "United States person" as defined in the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder or a person who has purchased for resale to any United States person and not a resident Canadian (as defined in the Canada Business Corporations Act (Canada)) or a person who has purchased for resale to any resident Canadian. Such certifications by the account holders must be provided to Euroclear or Cedel, as the case may be, by the date on which the exchange occurs and must be dated not earlier than 15 days prior to the Exchange Date. The Issuer shall procure that the Permanent Global Bond shall be so delivered in exchange for only that portion of the Temporary Global Bond in respect of which there shall have been presented to the Issuer, or its agent, a Certificate of Non-U.S. and Non-Canadian Beneficial Ownership. A holder of Bonds (a "Bondholder") must exchange its share of the Temporary Global Bond for an interest in the Permanent Global Bond before interest on Bonds can be collected. Definitive certificates representing individual Bonds shall not be issued. (3) The Permanent Global Bond will be kept in custody by Deutscher Kassenverein AG, Frankfurt am Main ("DKV") until all obligations of the Issuer under the Bonds have been satisfied. The Bonds shall be transferable in the form of co-ownership interests in accordance with the applicable rules of DKV, and outside the Federal Republic of Germany, in accordance with the applicable rules of Euroclear and Cedel. ss.2 Status, Negative Pledge and Guarantee (1) The Bonds constitute direct, unconditional, unsecured and unsubordinated obligations of the Issuer and rank pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, except as otherwise provided by mandatory rules of law. (2) As long as any Bonds are outstanding, but only up to the time all amounts of principal and interest have been placed at the disposal of the Paying Agent (as defined in ss.6(4)(a) of these Terms and Conditions of the Bonds), the Issuer undertakes not to provide any security upon any or all of its present or future assets for any other indebtedness represented by notes, bonds, debentures or other securities issued pursuant to an offering by which such securities are intended primarily to be publicly distributed outside the United States and Canada without at the same time having the Bondholders share equally and rateably in such security. (3) Omnicom Group Inc. (the "Guarantor"), pursuant to a guarantee agreement dated January 4, 1995 (the "Guarantee"), has unconditionally and irrevocably guaranteed the due and punctual payment, in accordance with the provisions of these Terms and Conditions of the Bonds, of the amounts corresponding to the principal of and interest payable by the Issuer under the Bonds. The Guarantee constitutes a contract in favour of the Bondholders from time to time as third party beneficiaries pursuant to ss.328(1) of the German -2- Civil Code giving rise to the right of each such Bondholder to require performance of the Guarantee directly from the Guarantor and to enforce the Guarantee directly against the Guarantor. The Guarantee provides, inter alia, that the obligations of the Guarantor thereunder shall extend to the obligations of any New Issuer in respect of the Bonds by virtue of a substitution pursuant to ss.10 of these Terms and Conditions of the Bonds. Copies of the Guarantee are available free of charge at the specified offices of the Paying Agent and the Luxembourg Paying Agent (as defined in ss.6 below). ss.3 Interest (1) The Bonds shall bear interest at the per annum rate equal to Deutsche Mark LIBOR (as defined below) plus .65% as from January 4, 1995. Interest shall be payable quarterly in arrears on each Interest Payment Date. Interest shall be calculated on the basis of the actual number of days in the applicable Interest Period divided by 360 days. (2) The Bonds shall cease to bear interest as of the beginning of the day on which they become due for redemption. Should the Issuer fail to redeem the Bonds when due or, where the due date is a Saturday, Sunday or legal holiday at the place of performance as set forth in ss.13 (2) of these Terms and Conditions of the Bonds, on the next succeeding banking day, interest shall continue to accrue beyond the due date until the actual redemption of the Bonds, but not beyond the fourteenth day after a notice has been published by the Paying Agent to the effect that the necessary funds for redemption have been provided to the Paying Agent, at the rate of interest prevailing on the due date for redemption. (3) "Deutsche Mark LIBOR" means, with respect to any Reset Date, as defined below, the rate (expressed as a percentage per annum) for deposits in Deutsche Marks for a three-month period that appears on Telerate Page 3570 (as defined below) as of 11:00 a.m., London time, on the applicable Interest Determination Date (as defined below). If such rate does not appear on Telerate Page 3750 as of 11:00 a.m., London time, on the applicable Interest Determination Date, then the Paying Agent will request the principal London office of each of four major reference banks in the London interbank market selected by the Paying Agent to provide such bank's offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in Deutsche Marks for a three-month period as of 11:00 a.m., London time, on such Interest Determination Date and in a Representative Amount (as defined below). If at least two such quotations are so provided, LIBOR will be the arithmetic mean of such quotations. If fewer than two such quotations are provided, the Paying Agent will request each of three major banks in New York City to provide such bank's rate (expressed as a percentage per annum) for loans in Deutsche Marks to leading European banks for a three-month period as of approximately 11:00 a.m., New York City time, on the applicable Interest Determination Date and in a Representative Amount. If at least two such rates are so provided, LIBOR will be the arithmetic mean of such rates. If fewer than two such rates are so provided, the LIBOR will be LIBOR in effect of the preceding Reset Date. (4) The annual rate of interest to which the rate is determined in accordance with ss.3(1) above is equivalent for the purposes of the Interest Act (Canada) to the rate so determined multiplied by the number of days in the applicable calendar year and divided by 360. "Interest Payment Date" shall mean each January 5, April 5, July 5 and October 5, unless any such date would otherwise fall on a day which is not a London Business Day, in which case the Interest Payment Date shall be the immediately following London Business Day, unless it would thereby fall into the next calendar month, in which case the Interest Payment Date shall be the immediately preceding London Business Day. "Interest Period" shall mean the period beginning on and including January 4, 1995 to but excluding the first Interest Payment Date and each successive period from and including an Interest Payment Date to but excluding the next Interest Payment Date. "Interest Determination Date" shall mean the second London Business Day preceding the Reset Date. "London Business Day" shall mean any day on which dealings in deposits in Deutsche Marks are transacted in the London interbank market. "Representative Amount" means a principal amount of not less than DM 1,000,000 that is representative for a single transaction in the relevant market at the relevant time. -3- "Reset Date" shall mean the first day of any Interest Period. "Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service (or such other page as may replace Page 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for Deutsche Mark deposits). All percentages resulting from any calculation in respect of the Bonds will be rounded to the nearest one hundred thousandth of a percentage point (with five one-millionths of a percentage point rounded upwards) (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all monetary amounts used in or resulting from such calculation will be rounded to the nearest pfennig (with one-half pfennig rounded upwards). ss.4 Redemption and Purchase (1) The Issuer undertakes to redeem the Bonds at their principal amount on the Interest Payment Date falling in January, 2000. (2) The Issuer may, at its option, redeem all of the Bonds, but not less than all, at their principal amount on the Interest Payment Date falling in January, 1997 or any Interest Payment Date thereafter together with the interest accrued to the date of redemption, on giving not less than 60 days' notice by publication in accordance with ss.12 of these Terms and Conditions of the Bonds. (3) The Issuer may at any time purchase Bonds at any price in the open market or otherwise and Bonds so purchased may be cancelled or resold. ss.5 Redemption for Tax Reasons If, as a result of any change of the legal provisions applicable in Canada or any change in the application or official interpretation of such legal provisions, which change becomes effective on or after January 4, 1995: (a) the Issuer shall become obligated to pay additional amounts pursuant to ss.7 of these Terms and Conditions of the Bonds, or (b) the Guarantor shall become obligated to pay additional amounts pursuant to the provisions of the Guarantee, in the event that the Guarantor is called upon to pay, and effects payment, under the Guarantee, then the Issuer may at its option, on giving not less then 30 days notice by publication pursuant to ss.12 of these Terms and Conditions of the Bonds, redeem all, but not less than all, of the Bonds at their principal amount together with unpaid interest accrued to the date of redemption; provided, however, that no such redemption may be made as of a date which is more than three months before the date on which the Issuer or the Guarantor shall become obligated to make payments pursuant to subclauses (a) or (b) for the first time. ss.6 Payments (1) All payments of principal and interest in respect of the Bonds shall be made in freely convertible and transferable legal tender of the Federal Republic of Germany. (2) All payments of principal and interest in respect of the Bonds shall be made by the Issuer to the Paying Agent for on-payment to DKV. Payment to DKV or to its order shall to the extent of the amounts so paid, constitute the discharge of the Issuer from its corresponding liabilities under the Bonds. (3) The Issuer may, solely at its option, deposit with the Local Court (Amtsgericht) in Frankfurt am Main principal or interest not claimed by Bondholders within 12 months after the respective due date even though the respective Bondholders may not be in default of acceptance, with or without waiver of the right to withdraw such deposit. Provided that, if the Issuer makes such deposit(s) and waives its right to withdraw same, the affected Bondholders shall have no claim against the Issuer or the Guarantor in respect thereof. -4- (4) (a) Morgan Stanley GmbH shall be the Paying Agent. (b) The Issuer may at any time, by giving not less than 30 days' notice by publication in accordance with ss.12 of these Terms and Conditions of the Bonds, appoint another leading bank maintaining its head office or a branch in Frankfurt am Main as paying agent. (c) The Paying Agent may at any time resign from such office. Such resignation shall become effective only upon the appointment by the Issuer of a leading bank maintaining its head office or a branch in Frankfurt am Main and the giving of not less than 30 days' notice of such appointment by publication in accordance with ss.12 of these Terms and Conditions of the Bonds. (5) The Paying Agent shall act exclusively as agent of the Issuer and does not have any relationship of agency or trust with the Bondholders. (6) So long as the Bonds are listed on the Luxembourg Stock Exchange, the Issuer will maintain a paying agent in Luxembourg. The Luxembourg Paying Agent will be Kredietbank S.A. Luxembourgeoise. The Issuer may at any time appoint another paying agent in Luxembourg by giving not less than 30 days' notice by publication in accordance with ss.12 of these Terms and Conditions of the Bonds. ss.7 Taxes All payments of principal and interest in respect of the Bonds shall be made by the Issuer to the Paying Agent for on-payment to DKV without withholding or deduction for or on account of any present or future taxes or other duties of whatever nature imposed, levied or collected by or in Canada unless the Issuer is required by law to make such withholding or deduction. In such event, the Issuer shall pay such additional amounts of principal and interest as will be necessary in order that DKV receives the same amounts of principal and interest under the Bonds which it would have received had no such withholding or deduction been required to be made; provided, however, that no such additional amounts shall be payable to DKV insofar as such additional amounts would be payable only because Bondholders for whom the payments of principal or interest are designated have a relation to Canada other than the mere fact that they are Bondholders. ss.8 Presentation Period The presentation period for the Bonds (ss.801(1) German Civil Code) shall be ten years commencing on the date on which the Bonds are due for redemption. ss.9 Early Termination (1) Any Bondholder may declare his Bonds due and demand immediate repayment thereof at their principal amount together with interest accrued to the date of repayment if: (a) the Issuer is in default for more than 30 days in the payment of any amounts due in accordance with the Terms and Conditions of the Bonds; or (b) subject to the provisions of subsection (3) below, the Issuer violates any other obligation under the Terms and Conditions of the Bonds and such violation continues for more than 30 days after receipt by the Paying Agent of a written reminder from a Bondholder; or (c) subject to the provisions of subsection (3) below, the Guarantor violates any obligation under the Guarantee and such violation continues for more than 30 days after the receipt by the Paying Agent of a written reminder from a Bondholder; or (d) subject to the provisions of subsection (3) below, any indebtedness of the Issuer or the Guarantor from monies borrowed exceeding in aggregate DM 35,000,000 (or equivalent in other currency) shall not be paid when due or shall become due prior to its stated maturity resulting from a default which permits any creditor of the Issuer to accelerate such indebtedness; or (e) any resolution or order is made which results in the dissolution, winding-up or liquidation of the Issuer; or (f) any resolution or order is made which results in the dissolution, winding-up or liquidation of the Guarantor; or -5- (g) if the Issuer makes an authorized assignment into bankruptcy or if a bankruptcy petition is filed or presented against the Issuer and such petition is not defeated within 30 days, or if a receiver or receiver and manager is appointed over all or substantially all of the assets of the Issuer and such appointment is not terminated within 30 days, or if the Issuer files a notice of intention or files a proposal under the Bankruptcy and Insolvency Act (Canada) or if the Issuer takes or proposes to take the benefit of any provision of the Companies' Creditors Arrangement Act (Canada) as now or hereafter in force; or (h) if the Guarantor shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Guarantor and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Guarantor, or the Guarantor commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Guarantor, or there is commenced against the Guarantor any such proceeding which remains undismissed for a period of 60 days, or the Guarantor is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Guarantor suffers any appointment of any custodian or the like for it or all or substantially all of its property to continue undischarged or unstayed for a period of 60 days; or any corporate action is taken by the Guarantor for the purpose of effecting any of the foregoing. The right to declare Bonds due shall terminate if the situation giving rise to it has been cured before the right is exercised. (2) Any notice declaring Bonds due shall be made by means of a written notice to be delivered by hand or registered mail to the Paying Agent together with proof that such Bondholder at the time of such notice is a holder of the relevant Bonds by means of a certificate of the Bondholder's Custodian (as defined in ss.13 below) pursuant to ss.13(5)(a) of these Terms and Conditions of the Bonds. (3) The events specified in subsection (1)(b), (c) and (d) above declaring Bonds due, shall become effective only when the Paying Agent has received such notices from holders of at least DM 35,000,000 in aggregate principal amount of the Bonds. ss.10 Substitution of Issuer (1) The Issuer may at any time without the consent of the Bondholders substitute in its stead either the Guarantor or any other company which is directly or indirectly wholly-owned by the Issuer or the Guarantor (the "New Issuer") as principal debtor in respect of any and all obligations arising under or in connection with the Bonds if: (a) the New Issuer assumes any and all obligations of the Issuer arising under or in connection with the Bonds; (b) other than in the case of the Guarantor being the New Issuer, the Issuer, in a guarantee subject to the laws of the Federal Republic of Germany which is satisfactory as to form and contents to the Paying Agent, unconditionally and irrevocably guarantees the obligations so assumed by the New Issuer; (c) other than in the case of the Guarantor being the New Issuer, the provision of the Guarantee pursuant to which the obligations of the Guarantor under the Guarantee extend to the obligation of the New Issuer in respect of the Bonds continues to be in full force and effect; (d) the New Issuer has obtained any and all authorizations required in its country of domicile for such substitution and the fulfillment of any and all obligations arising under or in connection with the Bonds; and -6- (e) the New Issuer is in the position to fulfill any and all payment obligations arising under or in connection with the Bonds in freely convertible and transferable legal tender of the Federal Republic of Germany without being required to withhold or deduct any taxes or other duties of whatever kind, and to transfer to the Paying Agent any and all amounts required for such end. Any such substitution may not be made if, as a result of the substitution, the rating accorded by Moody's Investor Service, Inc. or Standard & Poor's Rating Group to any debt securities issued or guaranteed by the Issuer or to the Bonds is likely to be downgraded. (2) Notice of any such substitution shall be given by publication in accordance with ss.12 of these Terms and Conditions of the Bonds. (3) In the event of such substitution any reference in these Terms and Conditions of the Bonds to the Issuer shall from then on be a reference to the New Issuer and any reference to Canada in ss.5 and ss.7 shall from then on be a reference to the country or countries in which the New Issuer has its domicile or residence for tax purposes. Further, in the event of such substitution the following shall apply: (a) In ss.7 of these Terms and Conditions of the Bonds, in addition to the reference in the preceding sentence to the country or countries in which the New Issuer has its domicile or residence for tax purposes, an alternative reference shall be made to Canada; (b) In ss. 9(1)(c), (d) and (e) of these Terms and Conditions of the Bonds in addition to the reference to the "Issuer", an alternative reference shall be made to the original Issuer in its capacity as guarantor. ss.11 Further Issues The Issuer reserves the right from time to time without the consent of the Bondholders to issue additional Bonds with identical terms, so that the same shall be consolidated, form a single issue with and increase the aggregate principal amount of the Bonds. The term "Bonds" shall in the event of such an increase, also comprise such additionally issued Bonds. ss.12 Notices All notices relating to the Bonds shall be published in the Bundesanzeiger (German Federal Gazette) and, so long as the Bonds are listed on the Luxembourg Stock Exchange, in the Luxemburger Wort. ss.13 Governing Law and Miscellaneous (1) The Bonds, both as to form and contents, and the rights and obligations of the Bondholders, the Issuer, the Guarantor, and the Paying Agent shall in all respects be governed by the law of the Federal Republic of Germany. (2) Place of performance shall be Frankfurt am Main. (3) Any action or other legal proceedings arising out of or in connection with the Bonds ("Proceedings") shall be brought in the District Court (Landgericht) in Frankfurt am Main. The Issuer hereby appoints Weiss & Hasche in Munich with current address at Briennerstrasse 11/V, 80333 Munich, as its agent for service of process with respect to any Proceedings brought before any German court. The Bondholders may pursue their claims against the Issuer also in any other court of competent jurisdiction. (4) The German courts shall have exclusive jurisdiction over the annulment of lost or destroyed Bonds. (5) Any Bondholder may in any proceedings against the Issuer or to which the Bondholder and the Issuer are parties protect and enforce in its own name its rights arising under its Bonds on the basis of (a) a certificate issued by its Custodian, as defined below, (i) stating the full name and address of the Bondholder, (ii) specifying an aggregate principal amount of Bonds credited on the date of such statement to such Bondholder's securities account maintained with such Custodian and (iii) confirming that the Custodian has given a written notice to DKV containing the information pursuant to (i) and (ii) and bearing an acknowledgment of DKV and the relevant DKV accountholder and (b) a copy of the -7- Global Bond certified as being a true copy by a duly authorized officer of DKV. For purposes of the foregoing, "Custodian" means any bank or other financial institution of recognized standing authorized to engage in securities custody business with which the Bondholder maintains a securities account in respect of any Bonds and includes DKV, Cedel and Euroclear. (6) For so long as any of the Bonds are represented by the Temporary Global Bond or the Permanent Global Bond held on behalf of Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear and/or Cedel, each person who is for the time being shown in the records of Euroclear and/or Cedel as the holder of a particular nominal amount of such Bonds (in which regard any certificate or other document issued by Euroclear or Cedel as to the nominal amount of such Bonds standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer and the Paying Agent as a holder of such nominal amount of such Bonds for all purposes other than for the payment of principal and interest on such Bonds. As against the Issuer and any Paying Agent, the right to any such principal and interest shall be vested solely in the bearer of the Temporary Global Bond and the Permanent Global Bond pursuant to the Terms and Conditions. The Temporary Global Bond and the Permanent Global Bond shall only be transferable in accordance with the regulations of Euroclear and/or Cedel, as the case may be. Schedule 2 FORM OF THE TEMPORARY GLOBAL BOND THIS BOND HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. SUBJECT TO CERTAIN EXCEPTIONS, THE BONDS MAY NOT BE OFFERED OR SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO U.S. PERSONS. THIS BOND IS NOT QUALIFIED FOR SALE IN CANADA. THIS BOND MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY IN CANADA OR ANY PROVINCE OR TERRITORY THEREOF. THIS BOND IS A TEMPORARY GLOBAL BOND, WITHOUT COUPONS, EXCHANGEABLE FOR A PERMANENT GLOBAL BOND, WITHOUT COUPONS. THE TERMS AND CONDITIONS OF THE BONDS ATTACHED HERETO APPLY TO THIS BOND EXCEPT FOR PROVISIONS REFERRING TO THE PERMANENT GLOBAL BOND. BBDO CANADA INC. DM 200,000,000 TEMPORARY GLOBAL BEARER BOND for Deutsche Mark Floating Rate Bonds of 1995 due January 5, 2000 (the "Bonds") in an aggregate principal amount of two hundred million Deutsche Mark (DM 200,000,000) divided into 20,000 Bonds in the principal amount of DM 10,000 each unconditionally and irrevocably guaranteed by OMNICOM GROUP INC. BBDO Canada Inc. (the "Issuer") hereby undertakes to pay to the bearer hereof upon presentation and surrender of this Temporary Global Bond on the maturity date of the Bonds the principal sum represented by this Temporary Global Bond or a portion or portions hereof, in freely convertible and transferable legal tender of the Federal Republic of Germany. Until this Temporary Global Bond is exchanged for Bonds represented by the permanent global bond in the form attached hereto (the "Permanent Global Bond"), the holder hereof shall not be entitled to receive any payments of interest in respect of the Bonds. -2- On or after the date which is 40 days after the date hereof (the "Exchange Date"), the Bonds represented by this Temporary Global Bond may be exchanged in whole or in part (free of charge) for Bonds represented by a Permanent Global Bond in the form attached hereto upon notice being given by Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") and/or Cedel, societe anonyme ("Cedel") acting on the instructions of any holder of an interest in this Temporary Global Bond. The Issuer shall procure that Bonds represented by the Permanent Global Bond shall be so delivered in exchange for only those Bonds represented by this Temporary Global Bond in respect of which there shall have been presented to Morgan Stanley GmbH as agent for the Issuer (the "Agent") by Euroclear or Cedel a certificate substantially to the following effect: "BBDO CANADA INC. Deutsche Mark 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 (the "Securities") This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in the Temporary Global Security in respect of the Securities, as of the date hereof ________ principal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States persons"), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165 - 12(c)(1)(v) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of -3- 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. If the Securities are of the category contemplated in Section 230.903(c)(3) of Regulation S under the Securities Act of 1933, as amended (the "Act"), then this is also to certify with respect to the principal amount of Securities set forth above that, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organizations entitled to portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the Agency or other Agreement. We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the Temporary Global Security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest)) are no longer true and cannot be relied upon as the date hereof. We further certify that none of the Securities are beneficially owned by residents of the Province of Ontario or any other Province or Territory of Canada. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States and of the Provinces of Canada or any Territory thereof including the Province of Ontario. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: _____________ 199 * -4- Yours faithfully, [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Brussels office, as operator of the Euroclear System] or [CEDEL societe anonyme] By: ________________ --------------- * Not earlier than the Exchange Date." Any person who would, but for the provisions hereof, otherwise be entitled to receive a Bond or Bonds represented by the Permanent Global Bond shall not be entitled to require the exchange of an appropriate part of this Temporary Global Bond for such Bond or Bonds unless and until he shall have delivered or caused to be delivered to Euroclear or Cedel, as the case may be, a certificate or certificates in substantially the form set out below. Copies of the form of certificate will be available at the offices of Euroclear in Brussels, Cedel in Luxembourg and each of the paying agents. "BBDO CANADA INC. Deutsche Mark 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 (the "Securities") This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States persons"), (ii) are owned by United States person(s) that (a) are foreign branches of a United States financial institution (as defined in U.S. Treasury Regulations Section 1.165-12(c)(l)(v)) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the issuer or the issuer's agent that it will comply with the -5- requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the relations thereunder), or (iii) are owned by United States or foreign financial institutions(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Securities is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) this is to further certify that such financial institution has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. If the Securities are of the category contemplated in Section 230.903(c)(3) of Regulation S under the Securities Act of 1933, as amended (the "Act"), then this is also to certify that, except as set forth below, (i) in the case of debt securities, the Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the Act; or (ii) in the case of equity securities, the Securities are owned by (x) non-U.S. person(s) (and such persons(s) are not acquiring the securities for the account or benefit of U.S. person(s))or (y) U.S. persons(s) who purchased the Securities in a transaction which did not require registration under the Act. If this certification is being delivered in connection with the exercise of warrants pursuant to Section 230.902(m) of Regulation S under the Act, then this is further to certify that, except as set forth below, the Securities are being exercised by and on behalf of non-U.S. person(s). As used in this paragraph the term "U.S. person" has the meaning given to it by Regulation S under the Act. As used herein, "United States" means the United States of America (including the States and the District of Columbia) and its "possessions" which include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to U.S. __________ or such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities -6- (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify. We further certify that none of the Securities are beneficially owned by residents of the Province of Ontario or any other Province or Territory of Canada. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States and of the Provinces of Canada or any Territory thereof including the Province of Ontario. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Date: __________ 199_* By: ------------------------------------------- As, or as agent for, the beneficial owner(s) of the Securities to which this certificate relates. --------- * Not earlier than 15 days prior to the Exchange Date." On an exchange of the whole of this Temporary Global Bond, this Bond shall be surrendered to the Agent. On an exchange of part only of this Temporary Global Bond, this Bond shall be endorsed to reflect the reduction of the principal amount evidenced hereby. The attached Terms and Conditions of the Bonds form part of this Temporary Global Bond. Dated: January 4, 1995 Toronto, Canada BBDO CANADA INC. By: _____________________ Authorized Officer -------------------------- Authentication Signature for and on behalf of Morgan Stanley GmbH Schedule 4 FORM OF THE GUARANTEE (English Translation) GUARANTEE of OMNICOM GROUP INC. in favour of the holders of the DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 (the "Bonds") issued by BBDO CANADA INC. (the "Issuer") WHEREAS: Omnicom Group Inc. (the "Guarantor") wishes to guarantee by this Guarantee the payment of principal and interest under the Bonds. IT IS HEREBY AGREED as follows: (1) The Guarantor unconditionally and irrevocably guarantees to the Bondholders from time to time the due and punctual payment in freely negotiable and convertible legal tender of the Federal Republic of Germany of the principal of, and interest on, the Bonds, and any other amounts which are expressed to be payable under the Bonds, in accordance with the Terms and Conditions of the Bonds (the "Conditions"), as and when the same shall become due in accordance with the Conditions. (2) This Guarantee constitutes a direct, unconditional and unsecured obligation of the Guarantor and ranks pari passu with all its other unsecured and unsubordinated obligations, except for obligations accorded preference by mandatory provisions of law. The Guarantor agrees that this Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of all or any portion of the obligations must be restored by the Bondholders upon the bankruptcy or reorganisation of the Issuer or similar proceedings for relief of debtors under the laws of any jurisdiction hereinafter initiated by or -2- against the Issuer, or as a result of or in connection with proceedings under fraudulent conveyance law hereinafter initiated against the Issuer. (3) All payments under this Guarantee shall be made free and clear of and without deduction for any present and future tax, assessment or other governmental charge imposed upon such payments by the United States of America (the "United States") or any political subdivision or taxing authority thereof or therein. If the Guarantor shall be required by law to deduct any tax, assessment or other governmental charge from or in respect of any sum payable under this Guarantee to any Bondholder, (i) the sum payable shall be increased by such additional amounts (the "Additional Amounts"), as may be necessary, so that after making all the required deductions, such Bondholder will receive an amount equal to the sum it would have received had no such deduction been made, (ii) the Guarantor shall make such deduction and (iii) the Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with the applicable law. However, the Guarantor shall not be required to make any such payment of Additional Amounts for or on account of: (a) Any tax, assessment or other governmental charge which would not have been imposed but for the existence of any present or former connection between such Bondholder (or between a fiduciary, settlor or beneficiary of, or possessor of a power over such Bondholder, if such Bondholder is an estate or a trust; or a member or shareholder of such Bondholder, if such Bondholder is a trust, a partnership or a corporation) and the United States, the Commonwealth of Puerto Rice or any territory or possession of the United States or area subject to its jurisdiction including, without limitation, such Bondholder (or such fiduciary, settlor, beneficiary, possessor, member or shareholder) being or having been a citizen or resident thereof; (b) Any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge; (c) Any tax, assessment or other governmental charge imposed by reason of such Bondholder's past or present status (i) as a personal holding company or foreign personal holding company with respect to the United States, (ii) as a corporation which accumulates earnings to avoid United States federal income tax, (iii) as a controlled foreign corporation with respect to the United States, (iv) as the owner, actually or constructively, of ten percent, or more of the total combined voting power of all classes of stock of the Guarantor entitled to vote, (v) as a private foundation or other exempt organization or (vi) as a bank receiving interest described -3- in Section 881(c)3(A) of the United States Internal Revenue Code of 1986, as amended; (d) Any tax, assessment or other governmental charge that would not have been imposed but for a failure to comply with any applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of a Bond if, without regard to any tax treaty, such compliance is required by statute or regulation of the United States as a precondition to relief or exemption from such tax, assessment or other governmental charge; (e) Any tax, assessment or governmental charge that would not have been so imposed for the presentation by the Bondholder of the Bond for payment on a date more than 30 days after the date on which such payment first becomes due; (f) Any tax, assessment or governmental charge that are payable otherwise than by withholding by the Guarantor from the payment of the principal of or, as the case may be, redemption amount in respect of or interest on the relevant Bond; or (g) Any combination of items (a), (b), (c), (d), (e) or (f) above; nor shall Additional Amounts be paid (i) to any Bondholder who is not the beneficial owner of the Bond if the beneficial owner thereof would not have been entitled to payment of Additional Amounts had such beneficial owner been the Bondholder, or (ii) to any Bondholder who is a United States person. (4) The obligations of the Guarantor under this Guarantee (i) shall be separate and independent from the obligations of the Issuer under the Bonds, (ii) shall exist irrespective of the legality, validity, binding effect or enforceability of the Bonds, and (iii) shall not be affected by any event, condition or circumstance of whatever nature, whether factual or legal, save the full, definitive and irrevocable satisfaction of any and all payment obligations expressed to be assumed under the Bonds. The Guarantor irrevocably waives any and all rights or claims to indemnity, subrogation, reassessment, exoneration, reimbursement or contribution which it had, has or hereafter may have in respect of any payment under this Guarantee until the Bondholders are paid in full. -4- (5) The obligations of the Guarantor under this Guarantee shall without any further act or thing being required to be done or to occur extend to the obligations of any New Issuer which is not the Guarantor arising in respect of any Bond by virtue of a substitution pursuant to the applicable provisions of the Conditions. (6) This Guarantee and all agreements herein contained constitute a contract in favour of the Bondholders from time to time as third party beneficiaries pursuant to ss. 328(1) of the German Civil Code giving rise to the right of each such holder to require performance of the obligations undertaken herein directly from the Guarantor and to enforce such obligations directly against the Guarantor. (7) Morgan Stanley GmbH with which the agreements herein contained are made does not act as fiduciary agent or in any similar capacity for the Bondholders. (8) Terms used and not otherwise defined herein shall have the meanings attributed to them in the Conditions. (9) This Guarantee is governed by, and shall be construed in accordance with, the laws of the Federal Republic of Germany. (10) If any provision of this Guarantee is or shall become invalid in whole or in part, the other provisions hereof shall remain in force. The invalid provision shall be deemed substituted by a valid provision which accomplishes as far as legally possible the economic purposes of the invalid provision. (11) This Guarantee is written in the German language and translated into the English language. The German language version shall be legally binding and controlling in each and every respect. (12) The original copy of this Guarantee shall be delivered to, and kept by, Morgan Stanley GmbH. (13) Place of performance for all obligations of the Guarantor hereunder is Frankfurt am Main. (14) Any action or other legal proceedings arising out of or in connection with this Guarantee ("Proceedings") shall be brought in the District Court (Landgericht) in Frankfurt am Main. The Guarantor hereby appoints Wei(beta) & Hasche, Rechtsanwalte, Brienner Stra(beta)e 11/V, D-80333 Munich, as its agent for service of process with respect to any Proceedings brought before any German court. The Bondholders may pursue their claims against the Guarantor also in any other court of competent jurisdiction. -5- (15) Any Bondholder may in any proceedings against the Guarantor or to which such Bondholder and the Guarantor are parties protect and enforce in his own name his rights arising under this Guarantee on the basis of a copy of this Guarantee certified as being a true copy by a duly authorised officer of Morgan Stanley GmbH, without the need for production in such proceedings of this Guarantee. January 4, 1995 OMNICOM GROUP INC. We accept the terms of the above Guarantee without recourse, warranty or liability. January 4, 1995 MORGAN STANLEY GMBH Schedule 5 THE COMMITMENTS OF THE MANAGERS Principal Amount of Notes DM -- Morgan Stanley GmbH 175,000,000 Citibank Aktiengesellschaft 5,000,000 Kidder Peabody International PLC 5,000,000 Merrill Lynch Bank AG 5,000,000 Schweizerischer Bankverein (Deutschland) AG 10,000,000 ----------- Total 200,000,000 =========== Schedule 6 SELLING TERMS In connection with the purchase, offering and sale of the Notes each of the Managers represents that it has observed and undertakes that it will observe the following restrictions on the offering and sale of the Notes and the distribution of documents relating to the Notes: (1) No action has been or will be taken in any jurisdiction by the Managers or the Issuer that would permit a public offering of the Notes, or possession or distribution of the Offering Memorandum, any amendment or supplement thereto issued in connection with the offering of the Notes or any other offering material, in any country or jurisdiction where action for that purpose is required. Each Manager will comply with all applicable laws and regulations in each jurisdiction in which it, directly or indirectly, purchases, offers, sells or delivers the Notes or has in its possession or distributes the Offering Memorandum, any amendment or supplement thereto or any other offering material, in all cases at its own expense. No Manager is authorized to make any representation or use any information in connection with the issue, subscription and sale of the Notes other than as contained in the Offering Memorandum or any amendment or supplement thereto. (2) the Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act. Each of the Managers has offered and sold the Notes, and will offer and sell the Notes (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S under the Securities Act. Accordingly, none of the Managers, their affiliates or any persons acting on the Managers' or their affiliates' behalf have engaged or will engage in any directed selling efforts with respect to the Notes, and the Managers and their affiliates have complied and will comply with the offering restrictions requirement of Regulation S. Each of the Managers agrees that, at or prior to confirmation of sale of the Notes, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Notes from any Manager during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered -2- and sold within the United States or to, or for the account or benefit of U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S under the Securities Act. Terms used above have the meaning given to them by Regulation S." Terms used in this paragraph have the meanings given to them by Regulation S. Except as contemplated by this Agreement, the Managers have not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Notes, except with their affiliates or with the prior written consent of the Issuer. (3) In addition, each of the Managers (i) except to the extent permitted under U.S. Treas. Reg. Section 1.163-5(c)(2)(i)(D) (the "D Rules"), (a) has not offered or sold, and during the restricted period will not offer or sell, Notes in bearer form to a person who is within the United States or its possessions or to a United States person, and (b) has not delivered and will not deliver within the United States or its possessions definitive Notes in bearer form that are sold during the restricted period; (ii) represents and agrees that it has and throughout the restricted period will have in effect procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling the Notes in bearer form are aware that such Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules; (iii) if it is a United States person, represents that it is acquiring the Notes in bearer form for purposes of resale in connection with their original issuance and, if it retains Notes in bearer form for its own account, will only do so in accordance with the requirements of U.S. Treas. Reg. Section 1.163-5(c)(2)(i)(D)(6); and (iv) with respect to each affiliate that acquires from any Manager Notes in bearer form for the purpose of offering or selling such Notes during the restricted period, agrees either (A) that it will repeat and confirm the representations and agreements contained in clauses (i), (ii) and (iii) on -3- behalf of such affiliate or (B) agrees that it will obtain from such affiliate for the benefit of the Issuer the representations and agreements contained in clauses (i), (ii) and (iii). Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and regulations thereunder, including the D Rules. (4) Each of the Managers represents and agrees that (i) it has not offered or sold, and will not offer or sell, in the United Kingdom of Great Britain and Northern Ireland (the "United Kingdom") by means of any document, any of the Notes, other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent or in circumstances which do not constitute an offer to the public within the meaning of the Companies Act 1985 of the United Kingdom, (ii) it has complied, and will comply, with all applicable provisions of the Financial Services Act 1986 of the United Kingdom (the "Financial Services Act") with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom, (iii) it has only issued or passed on and will only issue or pass on to any person in the United Kingdom any document received by it in connection with the issue of the Notes if that person is of a kind described in Article 9(3) of the Financial Services Act (Investment Advertisements) (Exemptions) Order 1988 or is a person to whom the document may otherwise lawfully be issued or passed on. (5) the Notes are being issued under the "Euro-Securities" exemption as defined in ss. 4(2) Wertpapier-Verkaufsprospektgesetz and accordingly a selling prospectus in respect of the Notes has not been prepared. Each of the Managers represents and agrees that it has not publicly promoted, and will not publicly promote, the distribution of Notes. (6) Each of the Managers acknowledges, represents and agrees that: (i) the Notes are not qualified for sale in Canada; (ii) it has not and will not offer or sell the Notes directly or indirectly in Canada or to, or for the account of, any resident of Canada in contravention of the securities laws of Canada or any province or territory thereof; (iii) there are restrictions on the transfer or resale of the Notes to residents of Canada and no such transfer or resale should take place except in strict compliance with the securities laws of Canada or the province or territory of Canada in which such person is resident; and (iv) it is unlikely that the Issuer will ever become a reporting issuer in any province or territory of Canada. Schedule 7 DOCUMENTS TO BE FURNISHED PURSUANT TO ss. 9(1)(f) (A) Documents relating to the Issuer: 1. Two certified copies of the Certificate and Articles of Incorporation certified by the Director of the Companies Branch of the Ministry of Consumer and Commercial Relations (Ontario). 2. a Certificate of Status issued by the Ministry of Consumer and Commercial Relations (Ontario). 3. two certified copies of the By-laws of the Issuer certified by the Secretary of the Issuer. 4. two certified copies of the resolutions of the Directors of the Issuer authorizing the issuance of the Notes and the Agreements and the execution and delivery thereof. 5. if applicable, powers of attorney by duly authorized officers of the Issuer authorizing an appropriate officer or officers to execute and deliver on behalf of the Issuer each of the Notes and the Agreements, and any and all additional documents as may be necessary or appropriate to effectuate any or all of the obligations of the Issuer pursuant to the Notes, the Agreements or any ancillary documents. 6. a certificate of incumbency indicating the authority of each of the officers of the Issuer executing the Notes, the Agreements or any ancillary documents or any power of attorney (referred to in paragraph 5 above), on behalf of the Issuer. 7. letter of appointment of Wei(beta) & Hasche, Rechtsanwalte, Brienner Stra(beta)e 11/V, D-80333 Munich, as agent for service of process for the Issuer in the Federal Republic of Germany. (B) Documents relating to the Guarantor: 1. Two copies of the Certificate of Incorporation of the Guarantor certified by the Secretary of the State of New York; 2. a certificate of the Secretary of the State of New York as to the good standing of the Guarantor; 3. two copies of the By-laws of the Guarantor certified by the Secretary or Assistant Secretary of the Guarantor; -2- 4. two certified copies of the resolutions of the Board of Directors of the Guarantor authorizing the Notes, the execution and delivery of the Agreements and the Guarantee, and performance of the Guarantor's obligations thereunder; 5. if applicable, powers of attorney signed by duly authorised officers of the Guarantor authorising an appropriate person or persons to execute and deliver on behalf of the Guarantor the Agreements and the Guarantee, and any other documents, notices, letters or other communications to be given by the Guarantor in connection with the Notes; 6. a certificate of the Secretary or Assistant Secretary of the Guarantor as to the incumbency of the officers of the Guarantor signing the documents or any power or attorney provided for in paragraph 5 above on behalf of the Guarantor; 7. letter of appointment of Wei(beta) & Hasche, Rechtsanwalte, Brienner Stra(beta)e 11/V, D-80333 Munich, as agent for service of process for the Guarantor in the Federal Republic of Germany. EX-4 3 EX-4.3 Dated January 4, 1995 BBDO CANADA INC. - and - OMNICOM GROUP INC. - and - MORGAN STANLEY GMBH -------------------------------------------- PAYING AGENCY AGREEMENT DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 -------------------------------------------- HENGELER MUELLER WEITZEL WIRTZ Frankfurt am Main -2- PAYING AGENCY AGREEMENT dated January 4, 1995 between (1) BBDO CANADA INC. (the "Issuer"), (2) OMNICOM GROUP INC. (the "Guarantor"), and (3) MORGAN STANLEY GMBH as paying agent (the "Bank"). The Issuer and the Guarantor and a syndicate of financial institutions (the "Managers") under the lead management of the Bank have entered into a Subscription Agreement (the "Subscription Agreement") dated December 14, 1994, pursuant to which the Issuer has agreed to issue, and the Managers have agreed to purchase, DM 200,000,000 Floating Rate Bonds of 1995 due January 5, 2000 (the "Bonds") which will be guaranteed as to payment of all sums payable in respect of the Bonds by the Guarantor. ss. 1 Definitions In this Agreement the terms defined in the Subscription Agreement and the Terms and Conditions of the Bonds (the "Conditions") exhibited to the Subscription Agreement in Schedule 1 thereof shall have the same meaning herein unless otherwise required by the context, and "Paying Agent" means the Bank in its capacity as Paying Agent in respect of the Bonds and any successor of the Bank in such capacity appointed in accordance with ss. 6(3) of the Conditions, "Luxembourg Paying Agent" means the financial institution mentioned in ss. 6(5) of the Conditions in its capacity as paying agent in respect of the Bonds for the time of its appointment and any other financial institution appointed from time to time as paying agent in accordance with ss. 6(3) of the Conditions, and (c) "Agents" means the Paying Agent and the Luxembourg Paying Agent. ss. 2 Appointment of Agents (1) Each of the Issuer and the Guarantor hereby appoint the Bank as its Paying Agent in respect of the Bonds and the Guarantee and the Paying Agent accepts its appointment hereunder. The Paying Agent shall have the rights and duties set out in the Conditions and in this Agreement and such rights and duties as are reasonably incidental thereto. (2) The Issuer and the Guarantor hereby ratify (i) the appointment by the Paying Agent, in the name and on behalf of the Issuer and the Guarantor, of the Luxembourg Paying Agent mentioned in ss. 6(5) of the Conditions and (ii) the -3- making by the Paying Agent, in the name and on behalf of the Issuer and the Guarantor, of the necessary arrangements with the Luxembourg Paying Agent regarding its services as paying agent. The Paying Agent warrants to the Issuer and the Guarantor that those arrangements are appropriate for the purpose and that each Paying Agent has agreed to be liable to the Issuer and the Guarantor in terms comparable to those set out in ss. 10(2) hereof. ss. 3 The Bonds and the Guarantee (1) Form. The Temporary Global Bond, the Permanent Global Bond (together the "Global Bonds") and the Guarantee shall be substantially in the respective form set out in the Subscription Agreement. (2) The Global Bonds. The Global Bonds shall be signed manually on behalf of the Issuer by two duly authorized signatories of the Issuer or by a duly authorized attorney of the Issuer. The Issuer shall make the duly signed Global Bonds available to the Paying Agent not later than two Frankfurt banking days before the Closing Date. The Paying Agent shall authenticate the signed Temporary Global Bond and deliver it, value the Closing Date, to Deutscher Kassenverein AG for the account of the Managers. On or after the date which is 40 days after the Closing Date the Paying Agent shall authenticate the Permanent Global Bond and deliver it to Deutscher Kassenverein AG in accordance with the provisions of the Temporary Global Bond and the Permanent Global Bond. (3) The Guarantee. The Guarantor shall make available to the Paying Agent the duly signed Guarantee for delivery on the Closing Date not later than two Frankfurt banking days before the Closing Date. The Paying Agent shall hold the Guarantee until all obligations under the Bonds and under the Guarantee have been fulfilled, and thereafter for so long as any claim against the Issuer or the Guarantor in relation to the Bonds or the Guarantee has been finally adjudicated, settled or discharged. Upon the request of any Bondholder, the Paying Agent shall make available to such Bondholder a copy of the Guarantee certified by the Paying Agent to be a true copy of the original. ss. 4 Payments (1) Payment by Issuer and Guarantor. Not later than 10:00 a.m. (Frankfurt time) on the respective due date for the payment of principal, interest or otherwise, the Issuer, failing whom the Guarantor, shall pay to the Paying Agent in same day funds the monies required for the payment of principal, interest or otherwise in such currency as at the time of payment shall be legal tender in the Federal Republic of Germany. The Issuer, failing whom the Guarantor, shall -4- confirm to the Paying Agent not later than 10:00 a.m. (Frankfurt time) on the second banking day in Frankfurt am Main before the respective due date for any such payment that it has issued irrevocable payment instructions for such payment to be made. The Paying Agent shall contact the Issuer and the Guarantor not later than ten banking days before the respective due date with regard to such payment. Any payment hereunder shall be made to a redemption account in Frankfurt am Main as the Paying Agent may from time to time notify to the Issuer. Such redemption account will bear no interest. As used in this Agreement, "banking day" means any day on which banks are open for business in Frankfurt am Main. (2) Advances. If the monies required for the payment of principal, interest or otherwise are not, or not fully, received by the Paying Agent at the time and in the manner provided for in subsection (1) and if the Paying Agent has received the confirmation mentioned in subsection (1), the Paying Agent shall be entitled, but not in any event be obliged, to advance the necessary funds and to charge interest on the amount of such advance at the rate applied by it from time to time on overdraft facilities extended to prime borrowers. The Guarantor hereby guarantees the repayment of any such advance extended to the Issuer. (3) Notification. If the Paying Agent has not by 12:00 a.m. (Frankfurt time) on the second banking day before the respective due date received the confirmation referred to in subsection (1), it shall forthwith notify the Issuer and the Guarantor thereof. ss. 5 Cancellation On the exchange of the whole of the Temporary Global Bond for Bonds represented by the Permanent Global Bond the Paying Agent shall collect and cancel the Temporary Global Bond. Upon full and final payment of principal, interest and any other moneys payable in respect of the Bonds, the Paying Agent shall collect and cancel the Permanent Global Bond. The Paying Agent shall deliver the cancelled Global Bonds to the Issuer. The Paying Agent shall bear no further responsibility for the Global Bonds so cancelled. ss. 6 Notices (1) At the request of the Issuer the Paying Agent shall cause to be published in accordance with ss. 12 of the Conditions any notice to be given to the Bondholders in accordance with the Conditions or necessary to comply with the -5- requirements of any stock exchange on which the Bonds are listed. (2) If the Paying Agent has not received the full amount of the monies payable to the Bondholders in respect of the Bonds on or prior to the date on which such monies are payable to it in accordance with ss. 4(1) and if such monies have not been advanced by the Paying Agent under ss. 4(2), the Paying Agent shall notify the Issuer and the Guarantor thereof and publish a notice thereof in accordance with ss. 12 of the Conditions. (3) If the Issuer shall elect to redeem the Bonds under ss. 5 of the Conditions it shall not less than 30 days prior to the latest date for the publication of the notice of redemption to be given to Bondholders, notify the Paying Agent of such intention stating the date on which the Bonds are to be redeemed. ss. 7 Documents The Issuer shall provide to the Paying Agent for distribution among the Agents (i) sufficient copies of the Guarantee, and (ii) sufficient copies of any other document required by the Conditions, the Offering Memorandum or the Listing Prospectus or any stock exchange on which the Bonds are listed to be available for issue or delivery to, or inspection by, Bondholders. Upon request of any person, the Paying Agent shall, and shall procure that the other Agents will, make copies of the documents mentioned in (i) and (ii) so available to such person. ss. 8 Other Provisions (1) No Agency or Trust Relationship. The Agents are acting solely as agents for the Issuer and do not have any relationship of agency or trust with the Bondholders. The Paying Agent shall be released from the restrictions set out in ss. 181 German Civil Code. (2) No Lien. The Paying Agent shall not, and shall procure that the other Agents will not, have any lien, right of retention, right of set-off or similar right in respect of any monies paid or payable to or by it hereunder against the Issuer, the Guarantor, any Bondholder or any other person. (3) No Liability for Interest. No Agent shall have any liability to any person for interest on any monies held by it pursuant to this Agreement. (4) Taking of Advise. The Paying Agent may consult on any legal matter with any legal adviser satisfactory to it and any advise or written opinion of such legal -6- adviser shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advise or opinion. (5) Document Believed to be Genuine. The Paying Agent shall be protected and shall incur no liability for or in respect of any action taken or omitted to be taken or loss suffered by it in reliance upon any Global Bond, notice, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper party or parties. ss. 9 Commissions and Expenses (1) Commissions. The Issuer, failing whom the Guarantor, shall in respect of the services of the Agents pursuant to this Agreement pay to the Paying Agent the commissions and fees as separately agreed between the Issuer and the Paying Agent. The Issuer and the Guarantor shall have no responsibility with respect to the apportionment of such monies as between the Paying Agent and the other Agents. (2) Expenses. The Issuer, failing whom the Guarantor, shall pay to the Paying Agent all reasonable out-of-pocket expenses (including legal, publication, insurance, telex and postage expenses) properly incurred by the Agents in connection with their services. Subsection (1), sentence 2 shall apply analogously. ss. 10 Indemnities (1) By Issuer. The Issuer, failing whom the Guarantor, shall indemnify each of the Agents against any loss, liability, expense or claim (including all reasonable expenses paid or incurred in disputing or defending any of the foregoing) which it may incur or which may be made against it arising out of or in relation to or in connection with its appointment or the performance of its functions, except such as may result from a violation by it of its obligations under or pursuant to this Agreement for which the Agent is responsible under general provisions of German law. (2) By Paying Agent. The Paying Agent shall indemnify the Issuer and the Guarantor against any loss, liability, expense or claim (including, but not limited to, all reasonable expenses paid or incurred in disputing or defending any of the foregoing) which the Issuer or the Guarantor may incur or which may -7- be made against them as a result of the violation by the Paying Agent of its obligations under this Agreement for which it is responsible under general provisions of German law. ss. 11 Change of Agents The change of Agents shall be governed by the provisions of ss. 6(3) and (5) of the Conditions ss. 12 Communications (1) Any document or information furnished or supplied under this Agreement shall be in the German or English language. (2) All communications given hereunder shall be given by letter, or by telex, cable or facsimile transmission to be confirmed by letter. (3) Subject to written notice of change of address, all communications hereunder shall be given to the following addresses: (a) If to the Issuer: BBDO Canada Inc. 2 Bloor Street West Toronto, Ontario M4W 3R6 Canada Telefax: 416 960 1618 Attention: Chief Financial Officer with a copy to the Guarantor in accordance with the details given below. (b) If to the Guarantor: Omnicom Group Inc. 437 Madison Avenue New York, N.Y. 10022 U.S.A. Telefax: 212 415 3530 Attention: Chief Financial Officer (c) If to the Paying Agent: Morgan Stanley GmbH Rahmhofstra(beta)e 2 - 4 60313 Frankfurt am Main Federal Republic of Germany -8- Telefax: 69 2166 1399 Telex: 412 648 Attention: New Issues Department ss. 13 Severability. Should any provision of this Agreement be or become void in whole or in part, the other provisions of this Agreement shall remain in force. The void provision shall be deemed substituted by a valid provision which accomplishes as far as legally possible the economic purposes of the void provision. ss. 14 Stamp Taxes. The Issuer, failing whom the Guarantor, shall pay all stamp or other documentary taxes or duties, if any, to which this Agreement may be subject in Canada, the United States of America or the Federal Republic of Germany. ss. 15 Governing Law; Place of Performance and Jurisdiction (1) This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the Federal Republic of Germany. (2) Place of performance for the obligations of all parties hereto shall be Frankfurt am Main. ss. 16 Place of Jurisdiction Any action or other legal proceedings arising out of or in connection with this Agreement ("Proceedings") shall be brought in the District Court (Landgericht) in Frankfurt am Main. The Issuer and the Guarantor hereby appoint Wei(beta) & Hasche, Rechtsanwalte, Brienner Stra(beta)e 11/V, D-80333 Munich, as their respective agent for service of process with respect to any proceedings brought before any German court. ss. 17 Conditionality Except for the obligations of the Issuer and the Guarantor under ss. 14, the rights and obligations of the parties hereunder shall be conditional on the occurrence of the Closing under the Subscription Agreement. ss. 18 Counterparts This Agreement is executed in three counterparts in the English language. One executed counterpart is issued to each party hereto. Each executed counterpart shall be an original. -9- BBDO CANADA INC. By: Quattro ------------- OMNICOM GROUP INC. By: Hewitt ------------ MORGAN STANLEY GMBH By: Wirth Brugger EX-10 4 EX-10.14 EXHIBIT 10.14 AMENDMENTS TO 1987 STOCK PLAN Pursuant to resolutions adopted by the Board of Directors of Omnicom Group Inc. ("Omnicom") on March 28, 1994, the Omnicom 1987 Stock Plan (the "Plan") is hereby amended, effective June 1, 1994 and subject to the approval of the shareholders of Omnicom, as set forth below. A. Subsections (f), (g) and (h) of Section 7 are hereby deleted and the following substituted therefor: "(f) Retirement/Involuntary Termination of Employment of Holder of Option. In the event of Termination of Employment of an Employee to whom an Option has been granted by reason of his or her Retirement (other than for Total Disability), or Involuntary Termination of Employment: (i) if the date of such termination occurs before the expiration of the Waiting Period of an Option, such Option(s) shall automatically be cancelled and be of no further force or effect; (ii) if the date of such termination occurs after the expiration of the Waiting Period of an Option, such Option(s) may be exercised in full only during the thirty-six month period immediately following the date of such termination, but in no event may such Option(s) be exercised after the expiration of the term specified in the Option. (g) Total Disability of Holder of Option. In the event of Termination of Employment of an Employee to whom an Option has been granted by reason of his or her Total Disability, such Option(s) may be exercised in full only during the thirty-six month period immediately following the date of such termination, but in no event may such Option(s) be exercised after the expiration of the term specified in the Option. (h) Death of Holder of Option. In the event of Termination of Employment of an Employee to whom an Option has been granted by reason of his or her death, such Option(s) may be exercised in full only during the thirty-six month period immediately following the date of death, but in no event may such Option(s) be exercised after the expiration of the term specified in the Option, provided, however, that such Option(s) may only be exercised by those to whom such person's rights under the Option(s) have passed by will or through the laws of descent and distribution. In the event of the death of a former employee within the thirty-six month period following his or her termination of employment by reason of Retirement, Involuntary Termination of Employment or Total Disability, Option(s) exercisable under subsections (f) and (g) of this Section 7 may only be exercised by those to whom such person's rights under the Option(s) have passed by will or through the laws of descent and distribution. (i) The Committee shall have the authority to extend the post-termination of employment exercise periods of outstanding options to conform with the provisions of subsections (f), (g) and (h) of this Section 7." B. Subsections (i) through (l) of Section 7 are hereby redesignated as subsections (j) through (m). C. A new subsection (n) is hereby added to Section 7 and reads as follows: "(n) The maximum number of shares with respect to which options may be granted by the Committee to any employee in any one calendar year shall be 100,000 shares." EX-21 5 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Omnicom Group Inc................................ New York -- -- Omnicom International Inc........................ Delaware Registrant 100% Omnicom Management Inc........................... Delaware Registrant 100% Omnicom Finance Inc.............................. Delaware BBDO Worldwide Inc. 33% DDB Needham Worldwide Inc. 33% Omnicom Management Inc. 34% Altschiller & Company Inc........................ New York Registrant 100% Goodby, Silverstein & Partners Holdings Inc...... California Registrant 100% Goodby, Silverstein & Partners Inc............... California Goodby, Silverstein & Partners Holdings Inc. 100% Aegis Group plc.................................. United Kingdom Registrant 9% BBDO Worldwide Inc............................... New York Registrant 100% BBDO Atlanta, Inc................................ Georgia BBDO Worldwide Inc. 100% BBDO Chicago, Inc................................ Delaware BBDO Worldwide Inc. 100% BBDO Detroit, Inc................................ Delaware BBDO Worldwide Inc. 100% BBDO International Inc........................... Delaware Omnicom International Inc. 100% Baker Lovick, L.L.C.............................. Delaware BBDO Canada Inc. 99% Omnicom Finance Limited 1% RATTO/BBDO S.A................................... Argentina BBDO Worldwide Inc. 20% Clemenger BBDO Ltd............................... Australia BBDO Worldwide Inc. 47% Clemenger Perth Pty. Ltd......................... Australia Clemenger BBDO Ltd. 47% Clemenger Pty. Ltd............................... Australia Clemenger BBDO Ltd. 47% Diversified Marketing Services Pty. Ltd.......... Australia Clemenger BBDO Ltd. 47% Holt Group Pty. Ltd. (Melbourne)................. Australia Diversified Marketing Services Pty. Ltd. 47% Clemenger Adelaide Pty. Ltd...................... Australia Clemenger BBDO Ltd. 47% Holt Group Pty. Ltd. (Sydney).................... Australia Diversified Marketing Services Pty. Ltd. 47% Clemenger Direct Pty. Ltd. (Melbourne)........... Australia Diversified Marketing Services Pty. Ltd. 47% Clemenger Sydney Pty. Ltd........................ Australia Clemenger BBDO Ltd. 47% Port Productions Pty. Ltd. (Melbourne)........... Australia Diversified Marketing Services Pty. Ltd. 35% Clemenger Brisbane Pty. Ltd...................... Australia Clemenger BBDO Ltd. 47% Clemenger Direct Pty. Ltd. (Sydney).............. Australia Diversified Marketing Services Pty. Ltd. 47% Clemenger Tasmania Pty. Ltd...................... Australia Clemenger BBDO Ltd. 47% Clemenger Melbourne Pty. Ltd..................... Australia Clemenger BBDO Ltd. 47% Clemnet Pty. Ltd. (Australia).................... Australia Diversified Marketing Services Pty. Ltd. 47% TEAM/BBDO Werbeagentur Ges. m.b.H................ Austria BBDO Worldwide Inc. 100% TEAM/BBDO Werbeagentur Ges. m.b.H & Co. Kg....... Austria TEAM/BBDO Werbeagentur Ges.m.b.H 87% Sponsoring & Event Marketing S.A................. Belgium BBDO Belgium S.A. 65% Omnimedia S.A.................................... Belgium BBDO Belgium S.A. 44% BBDO/Business Communications S.A................. Belgium BBDO Belgium S.A. 70% Morael & Partners S.A............................ Belgium BBDO Belgium S.A. 61% VVL/BBDO S.A..................................... Belgium BBDO Belgium S.A. 70% Moors Bloomsbury................................. Belgium BBDO Belgium S.A. 61% BBDO Belgium S.A................................. Belgium BBDO Worldwide Inc. 88% N'Lil S.A........................................ Belgium BBDO Belgium S.A. 45% Optimum Media Team S.A........................... Belgium BBDO Belgium S.A. 44% DDB Needham Worldwide S.A. 46% The Media Partnership............................ Belgium BBDO Belgium S.A. 22% Topolino S.A..................................... Belgium BBDO Belgium S.A. 45% RPV Comunicacoes Ltda............................ Brazil ALMAP/BBDO Comunicacoes Ltda. 60% ALMAP/BBDO Comunicacoes Ltda..................... Brazil BBDO Publicidade, Ltda. 60% BBDO Publicidade, Ltda........................... Brazil BBDO Worldwide Inc. 100% McKim Communications Limited..................... Canada BBDO Canada Inc. 100%
S-2
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ The Gaylord Group Ltd............................ Canada BBDO Canada Inc. 70% PNMD, Inc........................................ Canada BBDO Canada Inc. 49% BBDO Canada Inc.................................. Canada BBDO Worldwide Inc. 100% BBDO Chile, S.A.................................. Chile BBDO Worldwide Inc. 45% BBDO/CNUAC Advertising Co. Ltd................... China BBDO Asia Pacific Ltd. 51% Alberto H. Garnier, S.A.......................... Costa Rica BBDO Worldwide Inc. 20% BBDO D.O.O Zagreb................................ Croatia BBDO Worldwide Inc. 60% Impact/BBDO International Ltd.................... Cyprus BBDO Worldwide Inc. 44% Mark/BBDO, joint stock company................... Czech Republic BBDO Worldwide Inc. 36% Media Direction.................................. Czech Republic BBDO Worldwide Inc. 20% BBDO Denmark A/S................................. Denmark BBDO Holding A/S 71% BBDO Business Communications A/S................. Denmark BBDO Holding A/S 32% J & J Business Communications A/S................ Denmark BBDO Business Communications A/S 32% BBDO Holding A/S................................. Denmark BBDO Worldwide Inc. 81% The Media Partnership A/S........................ Denmark BBDO Denmark A/S 16% Impact/BBDO...................................... Egypt Impact/BBDO International Ltd. 40% Apex/BBDO........................................ El Salvador Garnier/BBDO 10% Bookkeeper Investment OY......................... Finland BBDO Worldwide Germany GmbH 100% Avant/BBDO OY.................................... Finland Bookkeeper Investment OY 90% AKT/BBDO OY...................................... Finland Bookkeeper Investment OY 91% Bookkeeper Financing OY.......................... Finland Bookkeeper Investment OY 100% La Compagnie S.A................................. France BBDO GmbH 100% Nomad S.A........................................ France La Compagnie S.A. 60% The Media Partnership ........................... France La Compagnie S.A. 17% Proximite S.A.................................... France La Compagnie S.A. 64% Directment S.A................................... France La Compagnie S.A. 45% West End S.A..................................... France La Compagnie S.A. 100% Realisation S.A.................................. France La Compagnie S.A. 50% Optimum Media S.A................................ France La Compagnie S.A. 50% DDB Needham Worldwide Communications S.A. 50% Deslegan S.A..................................... France La Compagnie S.A. 40% Reflexions S.A................................... France La Compagnie S.A. 55% CLM/BBDO S.A..................................... France La Compagnie S.A. 100% Agence Parisienne................................ France La Compagnie S.A. 100% BBDO GmbH & Partner Kg........................... Germany BBDO GmbH 81% HM1 Heuser, Mayer, Partner GmbH.................. Germany HM1 Gesellschaft fur Direktmarketing - 32% Werbeagenter GmbH Hildmann & Schneider GmbH....................... Germany BBDO GmbH & Partner Kg 77% Stein Holding GmbH............................... Germany BBDO GmbH & Partner Kg 81% M.I.D GmbH....................................... Germany BBDO GmbH & Partner Kg 40% Boebel, Adam/GmbH................................ Germany BBDO GmbH & Partner Kg 36% SELL BY TEL Telefon und Direktmarketing GmbH..... Germany BBDO GmbH & Partner Kg 28% Sponsor Partners GmbH............................ Germany BBDO GmbH & Partner Kg 40% Kohtes & Klewes GmbH............................. Germany BBDO GmbH & Partner Kg 35% Claus Koch Corp. Communications GmbH............. Germany BBDO GmbH & Partner Kg 30% Hiel/BBDO GmbH................................... Germany BBDO GmbH & Partner Kg 32% BBDO Hamburg GmbH................................ Germany BBDO GmbH & Partner Kg 81% The Media Partnership GmbH....................... Germany BBDO GmbH & Partner Kg 20% TEAM DIRECT Ges fur Direct Marketing GmbH........ Germany BBDO GmbH & Partner Kg 60% Art & Production Advertising Services GmbH....... Germany BBDO GmbH & Partner Kg 26% BBDO Business Communications GmbH................ Germany BBDO GmbH & Partner Kg 64% Media Direction GmbH............................. Germany BBDO GmbH & Partner Kg 35% BBDO Dusseldorf GmbH............................. Germany BBDO GmbH & Partner Kg 79% BBDO Dusseldorf GmbH Werbeagentur................ Germany BBDO GmbH & Partner Kg 81% BBDO/TELECOM GmbH................................ Germany BBDO GmbH & Partner Kg 64%
S-3
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Economia Holding GmbH (Hamburg).................. Germany BBDO GmbH & Partner Kg 40% BBDO GmbH ....................................... Germany BBDO Worldwide Germany GmbH 100% BBDO Worldwide Germany GmbH...................... Germany BBDO Worldwide Inc. 100% Brodersen, Stampe, Partner GmbH.................. Germany Economia Holding GmbH (Hamburg) 40% Manfred Baumann GmbH............................. Germany Economia Holding GmbH (Hamburg) 40% Fotostudio as der Alster GmbH.................... Germany Economia Holding GmbH (Hamburg) 32% Economia KG...................................... Germany Economia Holding GmbH (Hamburg) 40% PURE Informations Public Relations GmbH.......... Germany Kohtes & Klewes GmbH 21% K & K Kohtes, Klewes & Partner Umweltkommunikation GmbH....................... Germany Kohtes & Klewes GmbH 20% Stein Promotion Management Group GmbH............ Germany Stein Holding GmbH 64% Promotion Dynamics GmbH.......................... Germany Stein Holding GmbH 81% Stein Promotions GmbH............................ Germany Stein Holding GmbH 81% DCS GmbH......................................... Germany HM1 Gesellschaft fur Direktmarketing - 32% Werbeagenter GmbH HM1 Gesellschaft fur Direktmarketing - Werbeagenter GmbH.............................. Germany BBDO GmbH & Partner Kg 32% BBDO Advertising S.A............................. Greece BBDO GmbH 80% Infomercial Direct S.A........................... Greece BBDO Advertising S.A. 80% Team/Athens S.A.................................. Greece BBDO Advertising S.A. 30% Sponsoring Business Ltd.......................... Greece BBDO Advertising S.A. 80% The Media Corp S.A.............................. Greece BBDO Advertising S.A. 80% The Media Partnership S.A. ...................... Greece BBDO Advertising S.A. 20% Cinemax S.A...................................... Greece BBDO Advertising S.A. 59% Global S.A....................................... Greece BBDO Advertising S.A. 80% Service 800 S.A.................................. Greece BBDO Advertising S.A. 32% BBDO Business Communications S.A................. Greece BBDO Advertising S.A. 60% IKON S.A......................................... Greece BBDO Advertising S.A. 39% Point Zero S.A................................... Greece BBDO Advertising S.A. 25% B/P/R Ltd........................................ Greece BBDO Advertising S.A. 80% Grafis S.A....................................... Greece BBDO Advertising S.A. 50% Lamda Alpha S.A.................................. Greece BBDO Advertising S.A. 21% BBDO/Guatemala S.A............................... Guatemala Garnier/BBDO 30% Zeus/BBDO........................................ Honduras Garnier/BBDO 10% BBDO Hong Kong Ltd............................... Hong Kong BBDO Asia Pacific Ltd. 100% BBDO Asia Pacific Ltd............................ Hong Kong BBDO Worldwide Inc. 100% ADCOM BBDO Direct Limited........................ Hong Kong BBDO Hong Kong Ltd. 100% Topreklam/BBDO Int'l Advtg. Agency Ltd........... Hungary BBDO Worldwide Inc. 35% RK Swamy/BBDO Advertising Ltd.................... India BBDO Asia Pacific Ltd. 20% Gitam/BBDO....................................... Israel BBDO Worldwide Inc. 20% BBDO Italy SpA................................... Italy BBDO Worldwide Inc. 100% The Media Partnership SpA........................ Italy BBDO Italy SpA 25% Impact/BBDO...................................... Lebanon Impact/BBDO International Ltd. 44% BBDO (Malaysia) Sdn Bhd.......................... Malaysia BBDO Asia Pacific Ltd. 70% BBDO Mexico, S.A. de C.V......................... Mexico BBDO Worldwide Inc. 95% Perik Landewe & Partners B.V..................... Netherlands BBDO BC B.V. 26% Keja/Donia B.V................................... Netherlands BBDO Nederlands B.V. 50% FHV/BBDO B.V..................................... Netherlands BBDO Nederlands B.V. 50% Adviesburau Bennis B.V........................... Netherlands BBDO Nederlands B.V. 25% BBK B.V.......................................... Netherlands BBDO Nederlands B.V. 24% Signum B.V....................................... Netherlands BBDO Nederlands B.V. 50% Bartels/Verdonk Impuls B.V....................... Netherlands BBDO Nederlands B.V. 50% BBDO BC B.V...................................... Netherlands BBDO Nederlands B.V. 50% Heliberg Beheer B.V.............................. Netherlands BBDO Nederlands B.V. 30% BBDO Nederlands B.V.............................. Netherlands BBDO Worldwide Inc. 50%
S-4
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Liberty Films B.V................................ Netherlands FHV/BBDO B.V. 50% Media Direction Netherlands B.V.................. Netherlands FHV/BBDO B.V. 31% The Media Partnership B.V........................ Netherlands FHV/BBDO B.V. 10% Business PR B.V.................................. Netherlands BBDO Nederlands B.V. 50% IPW De Personeelsstrategen B.V................... Netherlands Heliberg Beheer B.V. 30% Adviesbureau Bennis Pauw en Partners BVBA........ Netherlands Adviesburau Bennis B.V. 25% Grant Tandy B.V.................................. Netherlands BBDO Canada Inc. 100% OFI Finance B.V.................................. Netherlands Registrant 66% BBDO Canada Inc. 34% Clemenger/BBDO Ltd. (N.Z.)....................... New Zealand Clemenger BBDO Ltd. 47% Colenso Communications Ltd. (Auckland)........... New Zealand Clemenger/BBDO Ltd. (N.Z.) 47% Colenso Communications Ltd. (Wellington)......... New Zealand Clemenger/BBDO Ltd. (N.Z.) 47% HKM Advertising Ltd. (Auckland).................. New Zealand Clemenger/BBDO Ltd. (N.Z.) 47% HKM Advertising Ltd. (Wellington)................ New Zealand Clemenger/BBDO Ltd. (N.Z.) 47% BBDO/Nicaragua S.A............................... Nicaragua Garnier/BBDO 25% Jenssen & Borkenhagen A/S........................ Norway BBDO GmbH 42% Schroder Production A/S.......................... Norway Jenssen & Borkenhagen A/S 42% Garnier/BBDO .................................... Panama BBDO Worldwide Inc. 50% Campagnani/BBDO S.A.............................. Panama Garnier/BBDO 10% BBDO Peru S.A.................................... Peru BBDO Worldwide Inc. 51% PAC/BBDO Worldwide Inc........................... Philippines BBDO Asia Pacific Ltd. 30% BBDO Warsaw...................................... Poland BBDO Worldwide Inc. 100% The Media Partnership Lda........................ Portugal BBDO Portugal Agencia de Publicidade, Lda. 21% Media Direction.................................. Portugal BBDO Portugal Agencia de Publicidade, Lda. 84% BBDO Portugal Agencia de Publicidade, Lda........ Portugal BBDO Worldwide Inc. 84% Consultores de Relaciones Corporativas, Inc...... Puerto Rico BBDO Puerto Rico Inc. 85% Headline Public Relations & Promotions, Inc...... Puerto Rico BBDO Puerto Rico Inc. 85% BBDO Puerto Rico Inc............................. Puerto Rico BBDO Worldwide Inc. 85% Graffiti/BBDO.................................... Romania BBDO Worldwide Inc. 20% BBDO Marketing................................... Russia BBDO Worldwide Inc. 100% Impact/BBDO...................................... Saudi Arabia Impact/BBDO International Ltd. 44% BBDO Singapore Pte Ltd........................... Singapore BBDO Asia Pacific Ltd. 100% Mark/BBDO Ltd.................................... Slovak Republic Mark/BBDO, joint stock company 17% The Media Partnership S.A........................ Spain BBDO Espana S.A. 23% Tiempo/BBDO S.A.................................. Spain BBDO Espana S.A. 72% Contrapunto S.A.................................. Spain BBDO Espana S.A. 67% Tiempo/BBDO Madrid S.A........................... Spain BBDO Espana S.A. 70% BBDO Espana S.A.................................. Spain BBDO Worldwide Inc. 90% Media Direction Madrid, S.A...................... Spain Tiempo/BBDO Madrid S.A. 70% Extension S.A. ................................. Spain Tiempo/BBDO S.A. 72% DEC S.A. .................................. Spain Tiempo/BBDO S.A. 61% Media Direction.................................. Spain Tiempo/BBDO S.A. 72% Ehrenstrahle International A.B................... Sweden BBDO Worldwide Germany GmbH 84% HLR/BBDO Reklambyra A.B.......................... Sweden BBDO Worldwide Germany GmbH 81% Ehrenstrahle & Co. i Stockholm A.B............... Sweden Ehrenstrahle International A.B. 84% Turnpik Filmproduction A.B....................... Sweden HLR/BBDO Reklambyra A.B. 81% HLR/Broadcast Filmproduction A.B................. Sweden HLR/BBDO Reklambyra A.B. 81% Box Direct Marketing A.B......................... Sweden HLR/BBDO Reklambyra A.B. 27% Gester & Co. A.B................................. Sweden HLR/BBDO Reklambyra A.B. 23% BBDO Taiwan Advertising Company Ltd.............. Taiwan BBDO Asia Pacific Ltd. 55% Damask/BBDO Limited.............................. Thailand BBDO Asia Pacific Ltd. 50% MEDIA +.......................................... Turkey Alice Marketing Communication Services 27% FOCUS 4.......................................... Turkey Alice Marketing Communication Services 27% Alice Marketing Communication Services........... Turkey BBDO Worldwide Inc. 30% Impact/BBDO...................................... United Arab Emirates Impact/BBDO International Ltd. 44%
S-5
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Abbott Mead Vickers.BBDO Ltd..................... United Kingdom BBDO Worldwide Inc. 25% Ratto/BBDO Y Asociados........................... Uruguay David Ratto/BBDO S.A. 20% BBDO/Venezuela................................... Venezuela BBDO Worldwide Inc. 50% DDB Needham Worldwide Inc........................ New York Registrant 100% Tracy-Locke Inc.................................. Texas Registrant 100% DDB Needham Chicago, Inc......................... Delaware DDB Needham Worldwide Inc. 100% DDB Needham Worldwide Partners, Inc.............. New York DDB Needham Worldwide Inc. 100% Elgin Syferd/DDB Needham Inc..................... Washington DDB Needham Worldwide Inc. 100% DDB Needham International Inc.................... Delaware Omnicom International Inc. 100% Tracy-Locke Public Relations, Inc................ Texas Tracy-Locke Inc. 100% The Focus Agency Inc............................. Delaware DDB Needham Chicago Inc. 100% Puskar Gibbon Chapin Inc......................... Texas Tracy-Locke Inc. 100% Griffin Bacal Inc................................ New York DDB Needham Worldwide Inc. 100% Griffin Bacal International Inc.................. New York Griffin Bacal Inc. 100% DDB Needham Worldwide Pty. Ltd. (Australia) ..... Australia DDB Needham Worldwide Partners, Inc. 100% DDB Needham Brisbane Pty. Ltd.................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% Rapp & Collins Sydney Pty Ltd.................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% K & Z Marketing Group Pty Limited................ Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% DDB Needham Adelaide Pty. Ltd.................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% DDB Needham Sydney Pty. Ltd...................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% DDB Needham Melbourne Pty. Ltd................... Australia DDB Needham Worldwide Pty. Ltd. (Australia) 100% Salesforce Victoria Pty Ltd...................... Australia K & Z Marketing Group Pty Ltd. 100% DDB Needham Heye & Partner Werbeagentur GmbH..... Austria DDB Needham Heye & Partner GmbH 53% DDB Needham Heye & Partner GmbH.................. Austria DDB Needham Worldwide Partners, Inc. 55% Heye & Partner GmbH 34% The Media Partnership............................ Austria DDB Needham Heye & Partner Werbeagentur GmbH 13% Heye & Partner Werbeagentur...................... Austria Heye & Partner GmbH 45% DDB Needham Worldwide S.A. ...................... Belgium DDB Needham International Inc. 20% DDB Needham Worldwide Inc. 26% DDB Needham Worldwide Partners, Inc. 20% Registrant 26% DDB Needham Holding S.A.......................... Belgium DDB Needham Worldwide Inc. 1% DDB Needham Worldwide Partners, Inc. 99% T.M.P. S.A....................................... Belgium DDB Needham Worldwide S.A. 23% Marketing Power Rapp & Collins S.A............... Belgium DDB Needham Worldwide S.A. 60% Production 32 S.A................................ Belgium DDB Needham Worldwide S.A. 92% Product Creation S.A............................. Belgium DDB Needham Worldwide S.A. 55% DDB Needham Worldwide Brazil Ltda................ Brazil DDB Needham Worldwide Inc. 50% Olympic DDB Needham Bulgaria..................... Bulgaria Olympic DDB Needham S.A. 51% Omnicom Canada Inc............................... Canada Registrant 100% Griffin Bacal Volny.............................. Canada Griffin Bacal Inc. 60% Beijing DDB Needham Advertising Co. Ltd.......... China DDB Needham Worldwide Ltd. 51% DDB Needham WW Prague............................ Czech Republic DDB Needham Worldwide Partners, Inc. 64% The Media Partnership A/S........................ Denmark DDB Needham Denmark A/S 4% Rapp & Collins DDBN A/S.......................... Denmark DDB Needham Denmark A/S 36% DDB Needham Denmark A/S.......................... Denmark DDB Needham Scandinavia A/S 70% DDB Needham Scandinavia A/S...................... Denmark DDB Needham Worldwide Partners, Inc. 100% Brand Sellers DDB Needham OY..................... Finland DDB Needham Scandinavia A/S 30% DDB Lille S.A.................................... France DDB Needham Trade S.A. 51% DDB The Way S.A.................................. France DDB Needham Trade S.A. 80% JCR S.A.......................................... France DDB Needham Trade S.A. 51% Intertitres S.A................................. France DDB Needham Worldwide Communication S.A. 50% SDMP S.A. 14% Nacre S.A........................................ France DDB Needham Worldwide Communication S.A. 51% DDB En Reseau S.A................................ France DDB Needham Worldwide Communication S.A. 51%
S-6
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Optimum DDB...................................... France DDB Needham Worldwide Communication S.A. 100% Productions 32 S.N.C............................. France DDB Needham Worldwide Communication S.A. 66% SDMP S.A. 20% Orchestra S.A.................................... France DDB Needham Worldwide Communication S.A. 60% DDB Needham Worldwide Europe S.A. .............. France DDB Needham Worldwide Communication S.A. 100% MODA S.A......................................... France DDB Needham Worldwide Communication S.A. 100% SDMP S.A......................................... France DDB Needham Worldwide Communication S.A. 57% Directing/Rapp & Collins......................... France DDB Needham Worldwide Communication S.A. 60% DDB Needham Trade S.A............................ France DDB Needham Worldwide Communication S.A. 100% Marketic Conseil S.A............................. France DDB Needham Worldwide Communication S.A. 51% Pigment S.A...................................... France DDB Needham Worldwide Communication S.A. 88% Providence S.A................................... France MODA S.A. 100% SFV S.A.......................................... France Productions 32 S.A. 86% DDB Needham Worldwide Communication S.A.......... France Registrant 100% DDB Needham Worldwide S.A. ...................... France Registrant 45% DDB Needham Worldwide Communication S.A. 55% AZ Editions S.A.................................. France SDMP S.A. 38% Louis XIV........................................ France DDB Needham Worldwide Communication S.A. 51% SDMS............................................. France DDB Needham Worldwide Communication S.A. 11% SDMP S.A. 19% S'Printer........................................ France DDB Needham Worldwide Communication S.A. 12% SDMS 4% SCPEH 50% SCPEH............................................ France DDB Needham Worldwide Communication S.A. 51% SDMS 15% Boxa Nova........................................ France S'Printer 66% DDB CIE.......................................... France DDB Needham Worldwide Communication S.A. 99% Jaschke Optimum Media Dusseldorf................. Germany Communication Management GmbH Dusseldorf 50% Production 32 Dusseldorf......................... Germany Communication Management GmbH Dusseldorf 89% Jahns, Rapp & Collins Dusseldorf................. Germany Communication Management GmbH Dusseldorf 49% Heye & Partner GmbH 30% Screen GmbH...................................... Germany Communication Management GmbH Dusseldorf 99% The Media Partnership GmbH....................... Germany Communication Management GmbH Dusseldorf 25% Wensauer DDB Needham Beteiligungsgesellschaft GmbH Germany Communication Management GmbH Dusseldorf 82% Wensauer DDB Needham GmbH Dusseldorf............. Germany Communication Management GmbH Dusseldorf 99% Fritsch Heine Rapp & Collins GmbH................ Germany Communication Management GmbH Dusseldorf 85% Heye & Partner GmbH.............................. Germany DDB Needham Worldwide Partners, Inc. 45% Data Direct Rapp & Collins GmbH.................. Germany Fritsch Heine Rapp & Collins GmbH 85% Print, Munchen GmbH.............................. Germany Heye & Partner GmbH 45% Communication Management GmbH Dusseldorf......... Germany Registrant 99% Camera Uno GmbH (Ludwigsburg).................... Germany Service Company GmbH (Ludwigsburg) 89% Wensauer DDBN Werbeagentur GmbH (Frankfurt)...... Germany Wensauer DDB Needham Beteiligungsgesellschaft GmbH 82% SV Studio Lichts ATZ GmbH........................ Germany Wensauer DDB Needham GmbH Dusseldorf 99% Service Company GmbH (Ludwigsburg)............... Germany Wensauer DDB Needham GmbH Dusseldorf 99% Griffin Bacal GmbH............................... Germany Griffin Bacal BV 100% Olympic DDB Needham S.A.......................... Greece DDB Needham Holding S.A. 51% Tempo Hellas S.A................................. Greece Olympic DDB Needham S.A. 51% Inno Rapp & Collins S.A.......................... Greece Olympic DDB Needham S.A. 26% The Media Partnership S.A........................ Greece Olympic DDB Needham S.A. 13% Integreat S.A.................................... Greece Olympic DDB Needham S.A. 46% Brilliant Shine Development Ltd.................. Hong Kong Bentley DDB Needham Public Relations, Ltd. 70% Bentley DDB Needham Public Relations, Ltd........ Hong Kong DDB Needham Asia Pacific Ltd. 70% Delta Group Ltd.................................. Hong Kong DDB Needham Asia Pacific Ltd. 100% Doyle Dane Bernbach Hong Kong Ltd................ Hong Kong DDB Needham Asia Pacific Ltd. 100% Window Creative Ltd.............................. Hong Kong DDB Needham Asia Pacific Ltd. 85%
S-7
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ DDB Needham Worldwide Ltd........................ Hong Kong DDB Needham Asia Pacific Ltd. 100% DDB Needham Asia Pacific Ltd..................... Hong Kong DDB Needham Worldwide Partners, Inc. 100% DDB Needham (China) Investment Ltd............... Hong Kong DDB Needham Asia Pacific Ltd. 100% DDB Needham (China) Holding Ltd.................. Hong Kong DDB Needham Asia Pacific Ltd. 100% DDB Needham Advertising Co. (Budapest)........... Hungary DDB Needham Heye & Partner Werbeagentur GmbH 21% DDB Needham Worldwide Partners, Inc. 40% Verba DDB Needham S.R.L.......................... Italy Registrant 85% Auge S.R.L....................................... Italy Verba DDB Needham S.R.L. 43% BBDO Italy SrL 50% Verba PSA S.R.L.................................. Italy Verba DDB Needham S.R.L. 55% Grafika S.R.L.................................... Italy Verba DDB Needham S.R.L. 85% Nadler S.R.L..................................... Italy Verba DDB Needham S.R.L. 85% TMP Italy S.R.L.................................. Italy Verba DDB Needham S.R.L. 21% Rapp & Collins S.R.L............................. Italy Verba DDB Needham S.R.L. 68% DDB Needham Japan Inc............................ Japan DDB Needham Worldwide Inc. 100% DDB Needham DIK Korea............................ Korea DDB Needham Worldwide Partners, Inc. 25% Naga DDB Needham Dik SDN BHD..................... Malaysia DDB Needham Asia Pacific Ltd. 30% DDB Needham Worldwide S.A. de C.V................ Mexico Registrant 100% Capitol Advice B.V............................... Netherlands DDB B.V. 100% Rapp and Collins B.V............................. Netherlands DDB B.V. 100% Bas van Wijk Project House B.V................... Netherlands DDB B.V. 100% DDB Needham Holding B.V.......................... Netherlands DDB Needham Worldwide Partners, Inc. 100% DDB B.V.......................................... Netherlands Registrant 100% Griffin Bacal BV................................. Netherlands Griffin Bacal International Inc. 100% DDB Needham New Zealand Ltd...................... New Zealand DDB Needham Worldwide Ltd. 70% DDB Needham Worldwide Ltd........................ New Zealand DDB Needham Worldwide Pty. Ltd. (Australia) 100% DDB Needham Holding Norway A/S................... Norway DDB Needham Holding B.V. 4% DDB Needham Worldwide Partners, Inc. 96% New Deal DDB Needham A/S......................... Norway DDB Needham Holding Norway A/S 51% Pro Deal A/S..................................... Norway New Deal DDB Needham A/S 51% AMA DDB Needham Worldwide Inc.................... Philippines DDB Needham Asia Pacific Ltd. 51% DDB Needham Worldwide Warszawa................... Poland DDB Needham Worldwide Partners, Inc. 67% The Media Partnership............................ Portugal DB Needham Worldwide & Guerreiro, Publicidade S.A. 17% DDB Needham Worldwide & Guerreiro, Publicidade S.A. Portugal Registrant 70% DDB Needham Worldwide GAF Pte. Ltd............... Singapore Doyle Dane Bernbach Hong Kong Ltd. 100% DDB Needham Worldwide Bratislava................. Slovak Republic DDB Needham Worldwide Partners, Inc. 100% Tandem/DDB Needham Worldwide, S.A................ Spain DDB Needham Worldwide Inc. 7% Registrant 79% Tandem/DDB Campmany Guasch, S.A.................. Spain Registrant 2% Tandem/DDB Needham Worldwide S.A. 84% Optimum Media S.A................................ Spain Tandem/DDB Campmany Guasch, S.A. 86% Instrumens S.A................................... Spain Tandem/DDB Needham Worldwide S.A. 73% Rapp & Collins S.A............................... Spain Tandem/DDB Needham Worldwide S.A. 77% A Toda Copia S.A................................. Spain Tandem/DDB Needham Worldwide S.A. 86% The Media Partnership S.A........................ Spain Tandem/DDB Needham Worldwide S.A. 21% Paradiset DDB Needham A.B........................ Sweden Carlsson & Broman DDB Needham Worldwide A.B. 51% Carlsson & Broman DDB Needham Worldwide A.B...... Sweden DDB Needham Worldwide Partners, Inc. 100% DDB Needham Werbeagentur A.G..................... Switzerland DDB Needham Holding A.G. 100% Seiler Zur DDB Needham A.G....................... Switzerland DDB Needham Holding A.G. 30% DDB Needham Holding A.G.......................... Switzerland Registrant 100% DDB Needham Worldwide Taiwan Ltd................. Taiwan DDB Needham Asia Pacific Ltd. 90% Far East Advertising Co. Ltd..................... Thailand DDB Needham Asia Pacific Ltd. 10% DDB Needham Worldwide Limited.................... Thailand DDB Needham Worldwide Partners, Inc. 51% Far East Advertising Co. Ltd. 4% Spaulding & Hawi Advertising Company, Ltd........ Thailand DDB Needham Worldwide Inc. 100%
S-8
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Griffin Bacal Ltd................................ United Kingdom Griffin Bacal Inc. 100% Baxter, Gurian & Mazzei, Inc..................... California Health & Medical Communications, Inc. 100% Rainoldi, Kerzner & Radcliffe, Inc............... California Kallir, Philips, Ross Inc. 100% Alcone Sims O'Brien, Inc......................... California Registrant 100% Doremus & Company................................ Delaware BBDO Worldwide Inc. 100% Doremus Printing Corp............................ Delaware Doremus & Company 100% Porter Novelli Inc............................... Delaware Doremus & Company 100% Lyons/Lavey/Nickel/Swift, Inc.................... Delaware Lavey/Wolff/Swift, Inc. 100% Rapp Collins Worldwide Inc. (DE)................. Delaware Rapp Collins Worldwide Inc. (TX) 100% Rapp Collins Agency Group Inc.................... Delaware Registrant 100% Optima Direct Inc................................ Delaware Registrant 100% Merkley Newman Harty, Inc........................ Delaware Registrant 100% Thomas A. Schutz Co., Inc........................ Delaware Registrant 100% Gavin Anderson & Company Worldwide Inc........... Delaware Registrant 100% Bernard Hodes Advertising Inc.................... Delaware Registrant 100% Frank J. Corbett, Inc............................ Illinois Health & Medical Communications, Inc. 100% Rapp Collins Worldwide Inc. (IL)................. Illinois Rapp Collins Worldwide Inc. (TX) 100% Brodeur & Partners Inc........................... Massachusetts Registrant 100% RC Communications, Inc........................... New York BBDO Worldwide Inc. 98% Health & Medical Communications, Inc............. New York BBDO Worldwide Inc. 100% Gavin Anderson & Company Inc..................... New York Gavin Anderson & Company Worldwide Inc. 100% Lavey/Wolff/Swift, Inc........................... New York Health & Medical Communications, Inc. 100% Interbrand Schechter Inc......................... New York Registrant 100% Health Science Communications Inc................ New York Registrant 100% Kallir, Philips, Ross, Inc....................... New York Registrant 100% Shain Colavito Penesabene Direct, Inc............ New York Registrant 100% Harrison & Star, Inc............................. New York Registrant 100% Harrison Star Wiener & Beitler Public Relations, Inc New York Registrant 100% Rapp Collins Worldwide Inc. (TX)................. Texas Registrant 100% TP Flower Unit Trust S.A. (Sydney)............... Australia Gavin Anderson & Co. (Australia) Ltd. 100% Communications International Group S.A........... Belgium Diversified Agency Services Limited 100% Market Access Europe S.A......................... Belgium European Political Consultancy Group Limited 100% KPR S.A.......................................... Belgium Kallir, Philips, Ross, Inc. 100% Promotess S.A.................................... Belgium Promotess Holdings S.A. 100% Promotess Holdings S.A........................... Belgium Registrant 100% Gavin Anderson & Co. (Australia) Ltd............. Cayman Islands Gavin Anderson & Company Worldwide Inc. 100% Market Access France S.A......................... France European Political Consultancy Group Limited 100% Gavin Anderson & Company (France) S.A............ France Gavin Anderson & Company Worldwide Inc. 100% Product Plus (France) S.A........................ France Product Plus (London) Ltd. 83% Gavin Anderson & Company Worldwide GmbH.......... Germany BBDO Worldwide Germany GmbH 100% COGNIS Agentur fur Kommunikation GmbH............ Germany Diversified Agency Services Limited 51% Gavin Anderson & Company (H.K.) Limited.......... Hong Kong Gavin Anderson & Company Worldwide Inc. 100% Product Plus (Far East) Ltd...................... Hong Kong Product Plus (London) Ltd. 83% Counter Products Marketing (Ireland) Ltd......... Ireland CPM International Limited 100% Doremus & Company S.r.L.......................... Italy Doremus & Company 70% Kabushiki Kaisha Interbrand Japan................ Japan Interbrand Group plc 100% Interbrand Korea Inc............................. Korea Interbrand Group plc 100% Rapp Collins Marcoa Mexico S.A. de C.V........... Mexico Rapp Collins Worldwide Inc. (TX) 100% Interbrand International Holdings (I.I.H.) BV.... Netherlands Interbrand Group plc. 100% Product Plus Iberica SA.......................... Spain Product Plus (London) Ltd. 83% Billco Limited................................... United Kingdom BMP DDB Needham Worldwide Limited 97% Outdoor Connection Limited....................... United Kingdom BMP DDB Needham Worldwide Limited 32% Countrywide Communications North Limited......... United Kingdom Countrywide Communications Group Limited 76% BMP Countrywide Limited.......................... United Kingdom Countrywide Communications Group Limited 72% Countrywide Communications (London) Limited...... United Kingdom Countrywide Communications Group Limited 76%
S-9
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Countrywide Communications Limited............... United Kingdom Countrywide Communications Group Limited 76% VandenBurg Marketing Limited..................... United Kingdom Countrywide Communications Group Limited 76% Countrywide Communications (Scotland) Limited.... United Kingdom Countrywide Communications Group Limited 57% Government Policy Consultants Limited............ United Kingdom Countrywide Communications Group Limited 43% Vandisplay Limited............................... United Kingdom CPM International Limited 100% David Douglass Associates Limited................ United Kingdom CPM International Limited 100% CPM Field Marketing Limited...................... United Kingdom Davidson Pearce Group Limited 100% Product Plus (London) Ltd........................ United Kingdom Davidson Pearce Group Limited 83% Countrywide Communications Group Limited......... United Kingdom Diversified Agency Services Limited 76% Marketing Data Services Limited.................. United Kingdom Diversified Agency Services Limited 100% First City Public Relations Limited.............. United Kingdom Diversified Agency Services Limited 70% Omnicom Finance Limited.......................... United Kingdom Diversified Agency Services Limited 100% DAS Financial Services Limited................... United Kingdom Diversified Agency Services Limited 75% BBDO Canada Inc. 25% Bernard Hodes Advertising Limited................ United Kingdom Diversified Agency Services Limited 87% Medi Cine International plc...................... United Kingdom Diversified Agency Services Limited 100% WWAV Rapp Collins Group Limited.................. United Kingdom Diversified Agency Services Limited 100% Gavin Anderson (UK) Limited...................... United Kingdom Diversified Agency Services Limited 90% Vox Prism Cognis Limited......................... United Kingdom Diversified Agency Services Limited 100% European Political Consultancy Group Limited..... United Kingdom Diversified Agency Services Limited 100% Doremus & Company Limited........................ United Kingdom Diversified Agency Services Limited 100% First City/BBDO Limited.......................... United Kingdom Diversified Agency Services Limited 60% Omnicom UK Limited............................... United Kingdom Diversified Agency Services Limited 100% Connect Public Affairs Limited................... United Kingdom European Political Consultancy Group Limited 100% Market Access International Limited.............. United Kingdom European Political Consultancy Group Limited 100% Market Access Limited............................ United Kingdom European Political Consultancy Group Limited 100% HHL Contract Publishing Limited.................. United Kingdom Headway, Home and Law Publishing Group Ltd. 100% Interbrand Consultants Limited................... United Kingdom Interbrand Group plc. 100% Markforce Associates Limited..................... United Kingdom Interbrand Group plc. 100% Access Opinions Limited.......................... United Kingdom Market Access Limited 100% Interbrand Group plc............................. United Kingdom Omnicom UK Limited 100% Granby Marketing Services Ltd.................... United Kingdom Omnicom UK Limited 100% CPM International Limited........................ United Kingdom Omnicom UK Limited 100% Davidson Pearce Group Limited.................... United Kingdom Omnicom UK Limited 100% Specialist Publications (UK) Limited............. United Kingdom Omnicom UK Limited 100% The Anvil Consultancy Limited.................... United Kingdom Omnicom UK Limited 100% Premier Magazines Limited........................ United Kingdom Omnicom UK Limited 75% Macmillan Davies Advertising Ltd................. United Kingdom Omnicom UK Limited 100% Hoare Wilkins Limited............................ United Kingdom Omnicom UK Limited 100% Colour Solutions Limited......................... United Kingdom Omnicom UK Limited 100% BMP DDB Needham Worldwide Limited................ United Kingdom Omnicom UK Limited 97% Solutions in Media Limited....................... United Kingdom Omnicom UK Limited 100% Macmillan Davies Consultants Ltd................. United Kingdom Omnicom UK Limited 100% Paling Ellis Cognis Limited...................... United Kingdom Omnicom UK Limited 100% Headway, Home and Law Publishing Group Ltd....... United Kingdom Omnicom UK Limited 100% Diversified Agency Services Limited.............. United Kingdom Registrant 100% The Computing Group Limited...................... United Kingdom WWAV Rapp Collins Group Limited 100% WWAV Rapp Collins Limited........................ United Kingdom WWAV Rapp Collins Group Limited 100% WWAV Rapp Collins North Limited.................. United Kingdom WWAV Rapp Collins Group Limited 100% HLB Limited...................................... United Kingdom WWAV Rapp Collins Group Limited 100% Hooton Schofield Limited......................... United Kingdom WWAV Rapp Collins Group Limited 100% TBWA International Inc. ......................... Delaware TBWA International B.V. 100% TBWA Wolfe Freeman Advertising Inc. ............. Missouri TBWA Advertising, Inc. 80% TBWA Advertising, Inc. .......................... New York TBWA International Inc. 100% TBWA/GBD Holdings, Inc........................... New York TBWA Advertising, Inc. 100%
S-10
Percentage of Voting Jurisdiction Securities of Owning Owned by Company Incorporation Entity Registrant --------- ------------- -------- ------------ Beisler & Associates, Inc........................ New York TBWA Advertising, Inc. 100% GBB Advertising Co............................... New York TBWA/GBD Holdings, Inc. 51% TBWA S.A. (Brussels)............................. Belgium TBWA International B.V. 100% TBWA Reklamebureau A/S........................... Denmark TBWA International B.V. 51% TBWA S.A......................................... France TBWA International B.V. 100% TBWA (Deutschland) Holding GmbH (Frankfurt)...... Germany TBWA International B.V. 100% Eurospace Media GmbH............................. Germany TBWA (Deutschland) Holding GmbH (Frankfurt) 100% TBWA Werbeagentur GmbH........................... Germany TBWA (Deutschland) Holding GmbH (Frankfurt) 100% TBWA Dusseldorf GmbH............................. Germany TBWA Werbeagentur GmbH 100% Graf Bertel Buczek GmbH.......................... Germany GBB Advertising Co. 51% Producta/TBWA.................................... Greece Registrant 51% TBWA Italia SpA (Milan).......................... Italy TBWA International B.V. 100% Group Services S.r.L............................. Italy TBWA Italia SpA (Milan) 99% Ma.Ma.Fin S.r.L.................................. Italy TBWA Italia SpA (Milan) 100% Nadler & Larimer S.r.L (Milan)................... Italy Ma.Ma.Fin S.r.L. 60% TBWA Italia SpA (Milan) 40% TBWA International B.V........................... Netherlands Registrant 100% Multicom/TBWA Advertising ....................... Netherlands TBWA Groep BV 100% TBWA Campaign Company ........................... Netherlands TBWA Groep BV 100% Direct Advertising Company B.V................... Netherlands TBWA Groep BV 100% TISSA Holding B.V................................ Netherlands TBWA International B.V. 100% TBWA Groep B.V................................... Netherlands TISSA Holding BV 100% Hunt Lascaris TBWA Holdings (Pty) Ltd............ South Africa TBWA International B.V. 20% Registrant 40% Hunt Lascaris TBWA FMC (Pty) Ltd................. South Africa Hunt Lascaris TBWA Holdings (Pty) Ltd. 60% Hunt Lascaris TBWA Cape (Pty) Ltd................ South Africa Hunt Lascaris TBWA Holdings (Pty) Ltd. 51% TBWA Espana S.A.................................. Spain TBWA International B.V. 80% TBWA International A.G........................... Switzerland TBWA International B.V. 100% TBWA Holmes Knight Ritchie Ltd................... United Kingdom Floral Street Holdings Ltd. 100% FSC Group Ltd.................................... United Kingdom TBWA Holmes Knight Ritchie Ltd. 100% Floral Street Holdings Ltd....................... United Kingdom TBWA International B.V. 100%
S-11 EX-23 6 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 20, 1995 included in this Form 10-K into the previously filed Registration Statement File Nos. 33-51493, 2-98222, 33-29375 and 33-37380 on Form S-8 of Omnicom Group Inc. and into the previously filed Registration Statement File Nos. 33-29375, 33-37380, 33-52385, 33-54110, 33-62976, 33-63200, 33-62978, 33-61852, 33-50409, 33-50267, 33-50271, 33-50269, 33-50257, 33-45881, 33-54851 and 33-55235 on Form S-3 of Omnicom Group Inc. ARTHUR ANDERSEN LLP New York, New York March 28, 1995 S-12 EX-24 7 POWERS OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ BERNARD BROCHAND ------------------------------ Bernard Brochand POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ ROBERT J. CALLANDER ------------------------------ Robert J. Callander POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ LEONARD S. COLEMAN, JR. ------------------------------ Leonard S. Coleman, Jr. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ JOHN R. PURCELL ------------------------------ John R. Purcell POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ GARY L. ROUBOS ------------------------------ Gary L. Roubos POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ QUENTIN I. SMITH, JR. ------------------------------ Quentin I. Smith, Jr. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ ROBIN SMITH ------------------------------ Robin Smith POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of Omnicom Group Inc., a New York corporation ("Omnicom"), constitutes and appoints Bruce Crawford and Raymond E. McGovern, and each of them, his true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K to be filed by Omnicom for the fiscal year ending December 31, 1994, including any or all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, including specifically this Power of Attorney, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 28, 1995 /s/ EGON P.S. ZEHNDER ------------------------------ Egon P.S. Zehnder EX-27 8 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF OMNICOM GROUP INC. AND SUBSIDIARIES FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1994 DEC-31-1994 228,251 28,383 1,159,160 19,278 0 1,601,935 393,644 221,491 2,852,204 1,986,642 187,338 19,322 0 0 521,380 2,852,204 0 1,756,205 0 1,009,069 542,538 7,864 34,770 181,756 74,337 108,134 0 0 28,009 80,125 3.15 3.07