-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B6EIMx/RsIJTdkjj+O7XXfcsWBcbt4W5n5OOISlIrEWADG7t4Xt/yrQ+sy7UYKia lO4UanOm3WfDmimhAYEHpQ== 0000891092-02-000982.txt : 20020814 0000891092-02-000982.hdr.sgml : 20020814 20020814174410 ACCESSION NUMBER: 0000891092-02-000982 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNICOM GROUP INC CENTRAL INDEX KEY: 0000029989 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 131514814 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10551 FILM NUMBER: 02737267 BUSINESS ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124153700 MAIL ADDRESS: STREET 1: 437 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INC DATE OF NAME CHANGE: 19781226 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH INTERNATIONAL INC DATE OF NAME CHANGE: 19850604 FORMER COMPANY: FORMER CONFORMED NAME: DOYLE DANE BERNBACH GROUP INC DATE OF NAME CHANGE: 19861117 10-Q 1 e13715_10q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q ---------- (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: June 30, 2002 --------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ____________ 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 (IRS Employer incorporation or organization) Identification Number) 437 Madison Avenue, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 415-3600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 187,984,268 (as of July 31, 2002) INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheets - June 30, 2002 (unaudited) and December 31, 2001 1 Consolidated Condensed Statements of Income (unaudited) - Three Months and Six Months Ended June 30, 2002 and 2001 2 Consolidated Condensed Statements of Cash Flows (unaudited) - Six Months Ended June 30, 2002 and 2001 3 Notes to Unaudited Consolidated Condensed Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 PART II. OTHER INFORMATION Item 1. Legal Proceedings 23 Item 4. Submission of Matters to a Vote of Security Holders 24 Item 6. Exhibits and Reports on Form 8-K 24 SIGNATURES 26 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) June 30, 2002 December 31, (Unaudited) 2001 ------------- ------------ Assets Current assets: Cash and cash equivalents ................. $ 409,971 $ 472,151 Short-term investments at market, which approximates cost ................. 44,421 44,848 Accounts receivable, less allowance for doubtful accounts of $78,311 and $79,183 ............................. 4,055,363 3,720,790 Billable production orders in process, at cost ........................ 499,641 382,750 Prepaid expenses and other current assets .......................... 680,150 613,285 ----------- ----------- Total Current Assets ............ 5,689,546 5,233,824 ----------- ----------- Furniture, equipment and leasehold improvements at cost, less accumulated depreciation and amortization of $673,474 and $618,661 ................................ 557,901 547,801 Investments in affiliates ................. 179,148 186,156 Goodwill, net of accumulated amortization of $514,369 and $495,715 ................................ 4,290,769 3,859,162 Intangibles, net of accumulated amortization of $46,431 and $38,769 ................................. 89,733 75,350 Deferred tax benefits ..................... 90,748 100,418 Other assets .............................. 677,708 614,703 ----------- ----------- Total Assets .................... $11,575,553 $10,617,414 =========== =========== Liabilities and Shareholders' Equity Current liabilities: Accounts payable .......................... $ 4,361,927 $ 4,303,152 Advance billings .......................... 549,011 640,750 Current portion of long-term debt ......... 62,173 40,444 Bank loans ................................ 103,593 169,056 Accrued taxes and other liabilities ....... 1,251,873 1,490,385 ----------- ----------- Total Current Liabilities ....... 6,328,577 6,643,787 ----------- ----------- Long-term debt ................................. 806,063 490,105 Convertible notes .............................. 1,750,000 850,000 Deferred compensation and other liabilities .... 301,917 296,980 Minority interests ............................. 182,260 158,123 Shareholders' equity: Common stock .............................. 29,800 29,800 Additional paid-in capital ................ 1,437,955 1,400,138 Retained earnings ......................... 1,861,489 1,619,874 Unamortized restricted stock .............. (166,591) (125,745) Accumulated other comprehensive loss ...... (218,285) (295,358) Treasury stock ............................ (737,632) (450,290) ----------- ----------- Total Shareholders' Equity ...... 2,206,736 2,178,419 ----------- ----------- Total Liabilities and Shareholders' Equity .......... $11,575,553 $10,617,414 =========== =========== The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 1 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2002 2001 2002 2001 ------------ ------------ ------------- ----------- REVENUE ........................... $1,916,569 $1,746,788 $3,648,995 $3,347,921 OPERATING EXPENSES: Salary and service costs ..... 1,204,608 1,058,996 2,369,331 2,102,144 Office and general expenses .. 381,471 396,686 720,315 763,387 ---------- ---------- ---------- ---------- 1,586,079 1,455,682 3,089,646 2,865,531 ---------- ---------- ---------- ---------- OPERATING PROFIT .................. 330,490 291,106 559,349 482,390 NET INTEREST EXPENSE: Interest expense ............. 10,658 22,548 24,510 46,455 Interest income .............. (4,716) (3,109) (7,245) (6,707) ---------- ---------- ---------- ---------- 5,942 19,439 17,265 39,748 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES ........ 324,548 271,667 542,084 442,642 INCOME TAXES ...................... 122,014 107,613 201,872 175,336 ---------- ---------- ---------- ---------- INCOME AFTER INCOME TAXES ......... 202,534 164,054 340,212 267,306 EQUITY IN AFFILIATES .............. 3,454 2,880 5,976 3,290 MINORITY INTERESTS ................ (18,673) (15,568) (30,307) (23,950) ---------- ---------- ---------- ---------- NET INCOME ................ $ 187,315 $ 151,366(a) $ 315,881 $ 246,646(a) ========== ========== ========== ========== NET INCOME PER COMMON SHARE: Basic ..................... $ 1.01 $ 0.83(a) $ 1.70 $ 1.35(a) Diluted ................... $ 1.00 $ 0.81(a) $ 1.67 $ 1.32(a) DIVIDENDS DECLARED PER COMMON SHARE $ 0.200 $ 0.200 $ 0.400 $ 0.375
- ---------- (a) Three Months Ended and Six Months Ended June 30, 2001, adjusted to exclude goodwill amortization: Adjusted Net Income .............................. $171,451 $286,782 Adjusted Net Income Per Common Share - basic ..... $ 0.94 $ 1.57 Adjusted Net Income Per Common Share - diluted ... $ 0.91 $ 1.54 The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 2 OMNICOM GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) Six Months Ended June 30, ------------------------- 2002 2001 ----------- ----------- Cash flows from operating activities: Net income .................................. $ 315,881 $ 246,646 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of tangible assets ............. 59,866 55,965 Amortization of goodwill .................... -- 45,780 Amortization of intangible assets ........... 7,297 1,450 Minority interests .......................... 30,307 23,950 Earnings of affiliates less than dividends received ........................ 3,212 15,777 Tax benefit on employee stock plans ......... 12,243 8,297 Provisions for losses on accounts receivable ................................ 2,892 8,712 Amortization of restricted stock ............ 31,924 22,646 (Increase)/decrease in accounts receivable ................................ (161,371) 108,524 Increase in billable production orders in process ......................... (101,347) (46,319) Increase in prepaid expenses and other current assets ...................... (37,615) (54,605) Increase in other assets, net ............... (22,203) (81,637) Decrease in accounts payable ................ (101,221) (485,248) Decrease in accrued taxes, advanced billings and other liabilities ............ (432,662) (392,761) ---------- ---------- Net cash used for operating activities .... (392,797) (522,823) ---------- ---------- Cash flows from investing activities: Capital expenditures ........................ (62,011) (85,862) Payments for purchases of equity interests in subsidiaries and affiliates, net of cash acquired ......... (278,938) (299,400) Proceeds from sales of short-term investments and other, net ................ 164 45,531 ---------- ---------- Net cash used for investing activities .... (340,785) (339,731) ---------- ---------- Cash flows from financing activities: Net decrease in short-term borrowings ....... (73,708) (3,775) Net proceeds from issuance on convertible debentures and long-term debt obligations ................ 1,503,689 926,933 Repayments of principal of long-term debt obligations .......................... (309,073) (21,625) Dividends paid .............................. (73,964) (62,403) Purchase of treasury shares ................. (368,819) (60,149) Other ....................................... 14,611 13,115 ---------- ---------- Net cash provided by financing activities ............................. 692,736 792,096 ---------- ---------- Effect of exchange rate changes on cash and cash equivalents ........................... (21,334) (21,114) ---------- ---------- Net decrease in cash and cash equivalents .................................... (62,180) (91,572) Cash and cash equivalents at beginning of period ............................ 472,151 516,817 ---------- ---------- Cash and cash equivalents at end of period .................................. $ 409,971 $ 425,245 ========== ========== Supplemental Disclosures: Income taxes paid ........................... $ 243,546 $ 162,612 ========== ========== Interest paid ............................... $ 24,379 $ 41,849 ========== ========== The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 3 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in Thousands, except for per share amounts) 1. We have prepared the consolidated condensed interim financial statements included herein without audit pursuant to Securities and Exchange Commission rules. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles, or "GAAP", have been condensed or omitted pursuant to these rules. All dollar amounts in these footnotes are in thousands (unless otherwise specifically indicated by the word "millions"). 2. The accompanying financial statements reflect all adjustments, consisting of normally recurring accruals, which in the opinion of management are necessary for a fair presentation, in all material respects, of the information contained therein. Certain reclassifications have been made to the June 30, 2001 and December 31, 2001 reported amounts to conform them to the June 30, 2002 presentation. These reclassifications include changing the income statement line item from "Salary and related costs" to a new category entitled "Salary and service costs", and reallocating certain items previously shown in "Office and general expenses" to this new category. We have regrouped certain direct service costs such as freelance labor, travel, entertainment, reproduction, client service costs and other expenses from "Office and general expenses" into "Salary and service costs" in order to better segregate the expense items between those that are more closely related to directly serving clients versus those expenses, such as facilities, overhead, depreciation and other administrative expenses, which in nature are not directly related to servicing clients. These statements should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2001, which we refer to later in this report as our "2001 10-K". 3. Results of operations for interim periods are not necessarily indicative of annual results. 4. Basic earnings per share is based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share is based on the above, plus, if dilutive, common share equivalents which include outstanding options and restricted shares. No adjustments to diluted earnings per share were made for the zero-coupon convertible notes because the conversion criteria have not been met. For purposes of computing diluted earnings per share, 2,414,000 common share equivalents were assumed to be outstanding for the three months ended June 30, 2002 and 2,606,000 common share equivalents were assumed to have been outstanding for the comparable period last year. For the purposes of computing diluted earnings per share, 2,828,000 common share equivalents were assumed to be outstanding for the six months ended June 30, 2002 and 2,643,000 common share equivalents were assumed to have been outstanding for the comparable period last year. In December 2001, our $230.0 million aggregate principal amount of 2 1/4% convertible subordinated debentures were called for redemption and subsequently converted by holders into 4,612,000 shares of common stock. The additional shares are included in shares outstanding at June 30, 2002 and were assumed to have been converted for the June 30, 2001 computation. 4 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Dollars in Thousands, except for per share amounts) The assumed increase in net income related to the after-tax compensation expense related to dividends on restricted shares used in the computation was $187.5 for the three months ended June 30, 2002 and the assumed increase in net income related to the after-tax interest cost of the convertible debentures and the after-tax compensation expense related to dividends on restricted shares used in the computation was $2,255.4 for the three months ended June 30, 2001. The assumed increase in net income related to the after-tax compensation expense related to dividends on restricted shares used in the computation was $375.1 for the six months ended June 30, 2002 and the increase in net income related to the after-tax interest of the convertible debentures and the after-tax compensation expense related to dividends on restricted shares used in the computation was $4,487.8 for the six months ended June 30, 2001. The number of shares used in our EPS computations were: Three Months Six Months Ended June 30, Ended June 30, -------------------------- -------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Basic EPS 185,705,000 182,824,000 186,227,000 182,332,000 Diluted EPS 188,119,000 190,042,000 189,056,000 189,587,000 5. Total comprehensive income and its components were:
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 2002 2001 2002 2001 ------------- ------------ ----------- ---------- Net income for the period $187,315 $151,366 $315,881 $246,646 Unrealized gain on long-term investments and reclassification to cost basis investments (a) -- 26,308 -- 16,838 Reclassification to realized loss on sale of certain marketable securities, net of income taxes of $1,400 -- -- -- 2,100 Foreign currency translation adjustment (b) 106,297 (11,957) 77,073 (82,535) -------- -------- -------- -------- Comprehensive income for the period $293,612 $165,717 $392,954 $183,049 ======== ======== ======== ========
- ---------- (a) Net of income taxes of $17,539 for the three-month period ended June 30, 2001 and $11,225 for the six-month period ended June 30, 2001. (b) Net of income tax benefit of $64,051 and net of income tax expense of $7,971 for the three-month periods ended June 30, 2002 and 2001, respectively, and net of income tax benefit of $45,655 and net of income tax expense of $55,023 for the six-month periods ended June 30, 2002, and 2001, respectively. 5 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Dollars in Thousands, except for per share amounts) 6. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), in June 2001 and Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"), in August 2001. Effective January 1, 2002, the Company adopted SFAS 142, "Goodwill and Other Intangible Assets", and no longer amortizes goodwill and other intangibles with indefinite lives. These assets are subject to periodic testing for impairments at least annually. Substantially all of our assets subject to the impairment test consisted of goodwill. We completed the impairment test required by SFAS 142 in the second quarter of 2002 by comparing the fair value of our reporting units to their carrying values. We also reassessed the useful lives of other intangibles that are amortized. As of January 1, 2002, we concluded that the fair values of the reporting units exceeded the carrying values of the reporting units, and therefore no impairment charge was recognized in the results of operations and financial position upon adoption and no changes were made to the useful lives of our other intangibles. The following summary table presents the impact of the elmimination of goodwill amortization as required by the adoption of SFAS 142 on operating income, profit before tax ("PBT"), equity in affiliates, minority interest and earnings per share ("EPS") had the statement been in effect at the beginning of 2001.
Three Months Ended June 30, Six Months Ended June 30, 2002 2001 2002 2001 -------- ------------------------- -------- -------------------------- as adjusted as reported as adjusted as reported Operating Income $330,490 $314,215 $291,106 $559,349 $528,171 $482,390 PBT 324,548 294,776 271,667 542,084 488,423 442,642 Equity in Affiliates 3,454 3,864 2,880 5,976 5,759 3,290 Minority Interest (18,673) (15,898) (15,568) (30,307) (24,572) (23,950) Diluted EPS $ 1.00 $ 0.91 $ 0.81 $ 1.67 $ 1.54 $ 1.32
As of June 30, 2002, the components of our intangible assets were as follows:
June 30, 2002 December 31, 2001 ------------------------------------ ------------------------------------ Gross Net Gross Net Carry Accumulated Book Carry Accumulated Book Value Amortization Value Value Amortization Value ----- ------------ -------- ------- ------------ -------- Intangible assets subject to SFAS 142 impairment tests: Goodwill $4,805,138 $514,369 $4,290,769 $4,354,877 $ 495,715 $3,859,162 Other intangible assets subject to amortization: Purchased and internally developed software 121,357 42,529 78,828 103,497 35,289 68,208 Client lists 14,807 3,902 10,905 10,622 3,480 7,142 --------- -------- ---------- ---------- --------- ---------- Total $ 136,164 $ 46,431 $ 89,733 $ 114,119 $ 38,769 $ 75,350 ========= ======== ========== ========== ========= ==========
6 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Dollars in Thousands, except for per share amounts) The other intangible assets continue to be amortized on a straight-line basis over, on average, an eight-year period. Had we stopped recording amortization of goodwill as of January 1, 2001, net income for the three months ended June 30, 2001 would have increased from $151.3 million to $171.5 million as shown in the following table. As Adjusted As Reported Three Months Ended June 30, 2002 2001 (a) 2001 ----------- ----------- ----------- Revenue ........................... $ 1,916,569 $ 1,746,788 $ 1,746,788 Operating expenses: Salary and service costs ...... 1,204,608 1,058,996 1,058,996 Office and general expenses ... 381,471 373,577 396,686 ----------- ----------- ----------- 1,586,079 1,432,573 1,455,682 ----------- ----------- ----------- Operating profit .................. 330,490 314,215 291,106 Net interest expense: Interest expense .............. 10,658 22,548 22,548 Interest income ............... (4,716) (3,109) (3,109) ----------- ----------- ----------- 5,942 19,439 19,439 ----------- ----------- ----------- Income before income taxes ........ 324,548 294,776 271,667 Income taxes ...................... 122,014 111,291 107,613 ----------- ----------- ----------- Income after income taxes ......... 202,534 183,485 164,054 Equity in affiliates .............. 3,454 3,864 2,880 Minority interests ................ (18,673) (15,898) (15,568) ----------- ----------- ----------- Net income .................... $ 187,315 $ 171,451 $ 151,366 =========== =========== =========== Net Income Per Common Share: Basic ......................... $ 1.01 $ 0.94 $ 0.83 Diluted ....................... $ 1.00 $ 0.91 $ 0.81 Dividends Declared Per Common Share $ 0.200 $ 0.200 $ 0.200 - ---------- (a) Excludes amortization of goodwill and related tax impact. 7 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Dollars in Thousands, except for per share amounts) Had we stopped recording amortization of goodwill as of January 1, 2001, net income for the six months ended June 30, 2001 would have increased from $246.6 million to $286.8 million as shown in the following table. As Adjusted As Reported Six Months Ended June 30, 2002 2001 (a) 2001 ----------- ----------- ----------- Revenue ........................... $ 3,648,995 $ 3,347,921 $ 3,347,921 Operating expenses: Salary and service costs ...... 2,369,331 2,102,144 2,102,144 Office and general expenses ... 720,315 717,606 763,387 ----------- ----------- ----------- 3,089,646 2,819,750 2,865,531 ----------- ----------- ----------- Operating profit .................. 559,349 528,171 482,390 Net interest expense: Interest expense .............. 24,510 46,455 46,455 Interest income ............... (7,245) (6,707) (6,707) ----------- ----------- ----------- 17,265 39,748 39,748 ----------- ----------- ----------- Income before income taxes ........ 542,084 488,423 442,642 Income taxes ...................... 201,872 182,828 175,336 ----------- ----------- ----------- Income after income taxes ......... 340,212 305,595 267,306 Equity in affiliates .............. 5,976 5,759 3,290 Minority interests ................ (30,307) (24,572) (23,950) ----------- ----------- ----------- Net income .................... $ 315,881 $ 286,782 $ 246,646 =========== =========== =========== Net Income Per Common Share: Basic ......................... $ 1.70 $ 1.57 $ 1.35 Diluted ....................... $ 1.67 $ 1.54 $ 1.32 Dividends Declared Per Common Share $ 0.400 $ 0.375 $ 0.375 - ---------- (a) Excludes amortization of goodwill and related tax impact. SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144 superseded Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. We 8 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Dollars in Thousands, except for per share amounts) adopted SFAS 144 effective January 1, 2002. The adoption had no material impact on our consolidated results of operations and financial position. In July 2000, the Emerging Issues Task Force of the FASB ("EITF") released Issue 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. This Issue summarized the EITF's views on when revenue should be recorded at the gross amount billed because it has earned revenue from the sale of goods or services, or the net amount retained because it has earned a fee or commission. Additionally, in January 2002, the EITF released Issue 01-14, Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred. This Issue summarized the EITF's views on when out-of-pocket expenses should be characterized as revenue. The Company's revenue recognition policies are in compliance with EITF 99-19 and EITF 01-14. In substantially all of our businesses we act as an agent and record revenue for reimbursements when the fee or commission is earned. 7. Our wholly and partially owned businesses operate within the marketing and corporate communications services operating segment. These businesses provide a variety of communications services to clients on a global, pan-regional and national basis. By geographic location, the businesses have similar cost structures and are subject to the same general economic and competitive risk. Our revenue and long-lived assets by geographic area as of June 30, 2002 and 2001, is summarized in the following table. United United Euro Other States Kingdom Denominated International Total ------ ------- ----------- ------------- ----- Revenue 3 Months Ended June 30, 2002 $1,117,548 $ 195,272 $ 360,269 $ 243,480 $1,916,569 2001 925,343 202,082 339,652 279,711 1,746,788 Revenue 6 Months Ended June 30, 2002 $2,139,678 $ 378,174 $ 680,167 $ 450,976 $3,648,995 2001 1,821,942 397,729 660,045 468,205 3,347,921 Long-lived Assets At June 30, 2002 $ 317,293 $ 93,388 $ 72,595 $ 74,625 $ 557,901 2001 278,027 96,317 55,331 93,001 522,676 8. On April 26, 2002, we extended our 364-day revolving credit facility with a consortium of banks for which Citibank N.A. acts as administrative agent and Salomon Smith Barney Inc. acts as lead arranger. The consortium consists of 23 banks. Other significant lending institutions include The Bank of Nova Scotia, JPMorgan Chase Bank, Fleet National Bank, HSBC Bank USA and San Paolo IMI S.p.A. The facility was increased from $1.0 billion to $1.6 billion under substantially the same terms as had previously been in effect, 9 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Dollars in Thousands, except for per share amounts) including a provision which allows us to convert all amounts outstanding at expiration on April 25, 2003, into a one-year term loan. The facility, which can be drawn down at any time, also supports the issuance of up to $1.5 billion of commercial paper and subject to obtaining additional commitments may be increased up to $1.8 billion. At June 30, 2002, we had issued and outstanding $621.0 million of commercial paper which is classified as long-term debt. We also have a $500 million 5-year revolving credit facility, which expires on June 30, 2003, with a similar consortium of 13 banks for which ABN AMRO Bank acts as agent. Other significant lending institutions include Bank of America, HSBC, JPMorgan Chase and Wachovia. No amounts were outstanding under this facility at June 30, 2002. We also had short-term bank loans of $103.6 million at June 30, 2002, primarily comprised of unsecured overdrafts of international subsidiaries which are classified as bank loans. We had a total of $1,750.0 million aggregate principal amount of zero-coupon zero-accretion 30-year notes outstanding as further described in Note 9. At June 30, 2002, the unused portion of our committed credit facilities was $1,479.0 million. 9. In March 2002, we issued $900.0 million aggregate principal amount of zero-coupon zero-accretion convertible notes due 2032. The notes are senior unsecured securities that are convertible into 8.2 million common shares, implying a conversion price of $110.01 per common share, subject to normal anti-dilution adjustments. These notes are convertible at the specified ratio only upon the occurrence of certain events, including if our common shares trade above certain levels, if we effect extraordinary transactions or if our long-term debt ratings are downgraded at least three notches from their current level to Baa3 or lower by Moody's Investors Services, Inc. or BBB or lower by Standard & Poor's Ratings Services. These events would not, however, result in an adjustment of the number of shares issuable upon conversion. Holders of these notes have the right to put the notes back to us for, at our election, cash, stock or a combination of both in August of each year beginning in August 2003 and we have the right to redeem the notes for cash beginning in 2007. There are no events that accelerate the noteholders' put rights. Beginning in August 2007, if the market price of our common shares exceeds certain thresholds, we may be required to pay contingent cash interest on the notes equal to the amount of dividends that would be paid on the common shares into which the notes are contingently convertible. The net proceeds of the issuance of these notes were $905.0 million. We used a portion of these proceeds to repurchase 3.0 million of our common shares. We applied the balance of the net proceeds to reduce our short-term borrowings pending use for working capital and other general corporate purposes. These notes are substantially similar to the $850 aggregate principal amount of zero-coupon zero-accretion notes due 2031 that we issued in 2001. The noteholder put dates for those notes is in February 2003 and each February thereafter. 10 OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Dollars in Thousands, except for per share amounts) 10. Our operating companies completed acquisitions and made investments in other agencies in the first six months of this year. The aggregate revenue of the acquired businesses included in our consolidated revenue was $142.8 million for the second quarter and $233.6 million for the first six months of the year. These acquisitions and investments are consistent with our strategy of pursuing business transactions that are expected to expand relationships with existing clients, expand the geographic reach of our networks or increase service offerings to meet client requirements. During the first six months of this year, the aggregate consideration for acquisitions including assumed liabilities was $312.1 million. As is typical in our business, many of the acquisitions were structured as "earn-outs," or transactions in which the ultimate purchase price payable is determined in part by reference to the future financial performance of the acquired business. Included in the above amount, we paid $147.4 million and issued $14.6 million of loan notes in the first six months of the year for transactions closed in prior periods. 11. On June 13, 2002, a lawsuit was filed against us and certain of our senior executives in the federal court in the Southern District of New York on behalf of a purported class of purchasers of our common shares during the period April 25, 2000 to June 11, 2002. The complaint alleges, among other things, that our press releases and SEC filings during the alleged class period contained materially false and misleading statements or omitted to state material information. The complaint seeks an unspecified amount of money damages plus attorneys' fees and other costs. Ten other complaints were subsequently filed in the same court, each making similar allegations and referencing the same class period. In addition to the proceedings described above, a shareholder derivative action was filed on June 28, 2002 by a plaintiff stockholder, purported on our behalf alleging breaches of fiduciary duty, disclosure failures, abuse of control and gross mismanagement in connection with the formation of Seneca Investments LLC, including as a result of open-market sales of our common shares by our chairman and two former employee directors. The complaint seeks the imposition of a constructive trust on profits received in the stock sales, an unspecified amount of money damages and attorneys' fees and other costs. We are also subject to numerous lawsuits and other claims in the ordinary course of business. Management presently expects that the matters referred to above will not individually or in the aggregate have a material adverse effect on our financial position or results of operations. However, the outcome of any of these matters is inherently uncertain and may be affected by future events. Accordingly, there can be no assurance as to the ultimate effect of these matters. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations As discussed and presented in footnote 2 to our second quarter financial statements, beginning in 2002 and as required by SFAS 142, we are no longer amortizing goodwill and other intangible assets that have indefinite lives due to a change in generally accepted accounting principles. To make the discussion of periods comparable, 2001 income statement information in the discussion that follows has been adjusted to eliminate goodwill amortization. In addition, certain reclassifications have been made to the June 30, 2001 and December 31, 2001 reported amounts to conform them to the June 30, 2002 presentation, including changing the income statement line item from "Salary and related costs" to a new category entitled "Salary and service costs", and reallocating certain items previously shown in "Office and general expenses" to this new category as described in Note 2 of the notes to our second quarter financial statements. Second Quarter 2002 Compared to Second Quarter 2001 Revenue: Our consolidated worldwide revenue in the second quarter of 2002 increased 9.7% to $1,916.6 million from $1,746.8 million in the second quarter of 2001. The effect of acquisitions, net of disposals, increased worldwide revenue by $142.8 million, or 8.2%. Internal/organic growth increased worldwide revenue by $25.7 million, or 1.5%, and foreign exchange impacts increased worldwide revenue by $1.3 million, or 0.1%. The components of total revenue growth are summarized below ($'s in millions):
Total Domestic International --------------- --------------- ------------- $ % $ % $ % -------- --- -------- --- ------ --- Second Quarter 2001............... $1,746.8 -- $925.3 -- $821.4 -- Components of Revenue Changes: Foreign exchange impact........... 1.3 0.1% -- -- 1.3 0.2% Acquisitions...................... 142.8 8.2% 122.8 13.3% 20.1 2.5% Organic........................... 25.7 1.5% 69.4 7.5% (43.7) (5.3)% -------- --- -------- ---- ------ ---- Second Quarter 2002............... $1,916.6 9.7% $1,117.5 20.8% $799.1 (2.8)% ======== === ======== ==== ====== ====
The components and percentages are calculated as follows: o The foreign exchange impact component shown in the table is calculated by first converting the current period's local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $1,915.3 million for the Total column in the table). The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency (in this case $1,916.6 million less $1,915.3 million for the Total column in the table). o The acquisition component shown in the table is calculated by aggregating the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period. o The organic component shown in the table is calculated by subtracting both the foreign exchange and acquisition revenue components from total revenue growth. o The percentage change shown in the table of each component is calculated by dividing the individual component amount by the prior period revenue base of that component (in this case $1,746.8 million for the Total column in the table). 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Several fundamental trends continue to affect our business, including our clients increasingly expanding the focus of their brand strategies from national markets to the global market. Additionally, in an effort to gain greater efficiency and effectiveness from their marketing dollars, clients are increasingly requiring greater coordination of their traditional advertising and marketing activities and concentrating these activities with a smaller number of service providers. These factors affect the geographic and service mix of our business and the impact for the second quarter of 2002 is summarized below. The components of revenue and revenue growth (declines) for the second quarter of 2002 compared to the second quarter of 2001 in our primary geographic markets are summarized below ($'s in millions): $ Revenue % Growth --------- -------- United States.................... $ 1,117.5 20.8% United Kingdom................... 195.3 (3.4)% Euro Markets..................... 360.3 6.1% Other............................ 243.5 (13.0)% --------- ----- Total............................ $ 1,916.6 9.7% ========= ===== As indicated, foreign exchange impacts increased our international revenue by $1.3 million during the quarter ended June 30, 2002. The most significant impacts resulted from the strengthening of the Euro and the British Pound against the US dollar, as our operations in these markets represented over 70.0% of our international revenue, partially offset by the strengthening of the US dollar against the Japanese Yen and Brazilian Real. We monitor revenue across a broad range of disciplines and group them into the following four categories: traditional media advertising, customer relationship management ("CRM"), public relations and specialty communications. Traditional media advertising revenue represented 42.9%, or $821.8 million, of our worldwide revenue during the second quarter of 2002. The remainder of our revenue, 57.1%, or $1,094.8 million, was related to our other marketing and corporate communications services. The breakdown of this revenue was CRM: 30.7%, or $589.0 million; public relations: 12.8%, or $245.9 million; and specialty communication: 13.6%, or $259.9 million. Revenue for these services in the second quarter of 2002 when compared to the second quarter of 2001 increased by $76.6 million, or 15.0% for CRM, decreased by $29.5 million, or 10.7%, for public relations and increased by $54.8 million, or 26.7%, for specialty communications. Operating Expenses: Our second quarter 2002 worldwide operating expenses increased $153.5 million, or 10.7%, to $1,586.1 million from $1,432.6 million in the second quarter of 2001, consistent with the percentage increase in revenues over the same period. Salary and service costs, which are comprised of direct service costs and salary related costs, increased by $145.6 million, or 13.8%, and represent 75.9% of total operating expenses in the second quarter of 2002. These expenses increased as a percentage of revenue to 62.9% in the second quarter of 2002 from 60.6% in the second quarter of 2001. Salaries and incentive 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) compensation costs decreased as a percentage of revenue in the second quarter primarily as a result of continuing efforts to align staffing with current work levels on a location by location basis. This was off-set by increased direct service costs resulting from greater utilization of freelance labor. In addition, as a result of the increase in our revenues as well as changes in the mix of our revenues in the quarter on a period-over-period basis, other direct costs increased as a percentage of revenue in 2002 compared to the second quarter of 2001. Office and general expenses increased by $7.9 million, or 2.1%, in the second quarter of 2002. Office and general expenses primarily consist of occupancy costs, general office service costs, technology costs, depreciation and amortization and bad debt expense. These costs represented about 24.1% of our total operating costs in the second quarter of 2002, versus 26.1% in the second quarter of 2001. This decrease is primarily the result of our efforts to better align costs with business levels on a location by location basis. For the foregoing reasons, our operating margin decreased to 17.2% in the second quarter of 2002, from 18.0% in the same period in 2001. Net Interest Expense: Our net interest expense decreased in the second quarter of 2002 to $5.9 million, compared to $19.4 million in the same period in 2001. Our gross interest expense decreased by $11.9 million to $10.7 million. Of this decrease, $3.2 million was attributable to the conversion of our $230 million aggregate principal amount 2 1/4% convertible notes in December of 2001. The balance of the reduction was attributable to generally lower short-term interest rates as compared to the prior year, the issuance in February 2001 of the $850 million zero-coupon convertible notes as to which substantially all of the related debt issuance costs were amortized in the prior year and the issuance in March 2002 of the $900.0 million zero-coupon convertible notes. This was partially offset by increased daily average outstanding debt levels resulting primarily from our repurchase of common stock. Interest income increased slightly primarily as a result of higher daily average cash balances. Income Taxes: Our consolidated effective income tax rate was 37.6% in the second quarter of 2002, as compared to 37.8% in the second quarter of 2001. This decrease was attributable to the continued implementation of various tax planning initiatives designed to reduce the tax inefficiency of our holding company structure. Equity in Affiliates and Minority Interests: In the second quarter of 2002, our equity in affiliates was essentially flat compared to the same period of 2001. In the second quarter of 2002, minority interest expense increased to $18.7 million from $15.9 million in the same period in 2001, primarily due to higher earnings by companies where minority interests exist and the acquisition of additional entities in which there is a third party minority interest. Earnings Per Share (EPS): For the foregoing reasons, our net income in the second quarter of 2002 increased 9.2% to $187.3 million from $171.5 million in the second quarter of 2001. Our diluted earnings per share increased 9.9% to $1.00 in the second quarter of 2002, compared to $0.91 in the prior year period. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Six Months 2002 Compared to Six Months 2001 Revenue: Our consolidated worldwide revenue in the first six months of 2002 increased by $301.1 million, or 9.0% to $3,649.0 million from $3,347.9 million in the first six months of 2001. The effect of acquisitions, net of disposals, increased worldwide revenue by $233.6 million, or 7.0%. Internal/organic growth increased worldwide revenue by $83.7 million, or 2.5%; and foreign exchange impacts decreased worldwide revenue by $16.2 million, or 0.5%. The components of total revenue growth are summarized below ($'s in millions):
Total Domestic International --------------- --------------- ------------- $ % $ % $ % -------- --- -------- --- ------ --- Six Months Ended June 30, 2001..... $3,347.9 -- $1,822.0 -- $1,526.0 -- Components of Revenue Changes: Foreign exchange impact............ (16.2) (0.5)% -- -- (16.2) (1.1)% Acquisitions....................... 233.6 7.0% 189.5 10.4% 44.1 2.9% Organic............................ 83.7 2.5% 128.2 7.0% (44.5) (2.9)% -------- --- -------- ---- -------- ---- Six Months Ended June 30, 2002..... $3,649.0 9.0% $2,139.7 17.4% $1,509.4 (1.1)% ======== === ======== ==== ======== ====
The components and percentages are calculated as follow: o The foreign exchange impact shown in the table component is calculated by first converting the current period's local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $3,665.2 million for the Total column in the table). The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency (in this case $3,649.0 million less $3,665.2 million for the Total column in the table). o The acquisition component shown in the table is calculated by aggregating the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period. o The organic component shown in the table is calculated by subtracting both the foreign exchange and acquisition revenue components from total revenue growth. o The percentage change shown in the table of each component is calculated by dividing the individual component amount by the prior period revenue base (in this case $3,347.9 million for the Total column in the table). 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The components of revenue and revenue growth (declines) for the six months 2002 compared to the six months 2001 in our primary geographic markets are summarized below ($'s in millions): $ Revenue % Growth --------- -------- United States.................... $2,139.7 17.4% United Kingdom................... 378.2 (4.9)% Euro Markets..................... 680.2 3.0% Other............................ 450.9 (3.7)% -------- ------ Total............................ $3,649.0 9.0% ======== ====== As indicated, foreign exchange impacts further reduced our international revenue by $16.2 million during the six months ended June 30, 2002, reducing our international growth by 1.1%. The most significant impacts resulted from the strengthening in the first half of the US dollar against the Japanese Yen and Brazilian Real, partially offset by the strengthening in the second quarter of 2002 compared to the second quarter of 2001, of the Euro and the British Pound against the US dollar as our operations in these markets represented over 70.0% of our international revenue. Traditional media advertising revenue represented 43.8%, or $1,599.6 million, of our worldwide revenue during the first six months of 2002. The remainder of our revenue, 56.2%, or $2,049.4 million, was related to our other marketing and corporate communications services. The breakdown of this revenue was CRM: 30.5%, or $1,111.6 million; public relations: 13.0%, or $473.3 million; and specialty communications: 12.7%, or $464.5 million. Revenue for these services in the first six months of 2002 when compared to the first six months of 2001 increased by $143.1 million, or 14.8%, for CRM, decreased by $52.9 million, or 10.1%, for public relations and increased by $78.0 million, or 20.2%, for specialty communications. Operating Expenses: Our first half 2002 worldwide operating expenses increased $269.8 million, or 9.6%, to $3,089.6 million from $2,819.8 million in the first six months of 2001, essentially the same percentage increase as in revenues over the same period. Salary and service costs, which are comprised of direct service costs and salary related costs, increased by $267.2 million, or 12.7%, and represent 76.7% of total operating expenses in the first six months of 2002. These expenses increased as a percentage of revenue to 64.9% in the first six months of 2002 from 62.8% in the first six months of 2001. Salaries and incentive compensation costs decreased as a percentage of revenue in the first six months of 2002 primarily as a result of continuing efforts to align staffing with current work levels on a location by location basis. This was off-set by increased direct service costs resulting from greater utilization of freelance labor. In addition, as a result of the increase in our revenues as well as changes in the mix of our revenues in the first six months on a period-over-period basis, other direct costs increased as a percentage of revenue in the first half of 2002 compared to the first half of 2001. Office and general expenses increased by $2.7 million, or 0.4%, in the first six months of 2002. Office and general expenses, similar to the second quarter alone, represented about 23.3% 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) of our total operating costs in the first six months of 2002 versus 25.4% for the first six months of 2001. This decrease is primarily the result of our efforts to better align costs with business levels on a location by location basis. For the foregoing reasons, our operating margin decreased to 15.3% in the first six months of 2002, from 15.8% in the same period in 2001. Net Interest Expense: Our net interest expense decreased in the first six months of 2002 to $17.3 million, as compared to $39.7 million in the same period in 2001. Our gross interest expense decreased by $22.0 million to $24.5 million. Of this decrease, $6.4 million was attributable to the conversion of our 2 1/4% convertible notes in December of 2001; the balance of the reduction was attributable to generally lower short-term interest rates as compared to the prior year, the issuance in February 2001 of $850 million zero-coupon convertible notes as to which substantially all of the related debt issuance costs were amortized in the prior year and the issuance in March 2002 of the $900.0 million zero-coupon convertible notes. This was partially offset by increased daily average outstanding debt levels resulting primarily from our repurchase of common stock. Interest income increased slightly primarily as a result of higher daily average cash balances. Income Taxes: Our consolidated effective income tax rate was 37.2% in the first six months of 2002, as compared to 37.4% in the first six months of 2001. This decrease was attributable to the continued implementation of various tax planning initiatives designed to reduce the tax inefficiency of our holding company structure. Equity in Affiliates and Minority Interests: In the first six months of 2002, our equity in affiliates was essentially flat compared to the same period of 2001. In the first six months of 2002, minority interest expense increased to $30.3 million from $24.6 million in the same period in 2001, primarily due to higher earnings by companies where minority interests exist and the acquisition of additional entities in which there is a third party minority interest. Earnings Per Share (EPS): For the foregoing reasons, our net income in the first six months of 2002 increased 10.1% to $315.8 million from $286.8 million in the first six months of 2001. Our diluted earnings per share increased 8.4% to $1.67 in the first six months of 2002, compared to $1.54 in the prior year period. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Critical Accounting Policies and New Accounting Pronouncements We have prepared the following summary of critical accounting policies to assist in better understanding our financial statements and the related management's discussion and analysis of those results. Readers are encouraged to consider this information together with our discussion of critical accounting policies in the MD&A in our 2001 10-K, as well as our consolidated financial statements and the related notes included in our 2001 10-K, for a more complete understanding of all of our accounting policies. Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during a reporting period. Actual results can differ from those estimates or assumptions, and the differences could be material. A fair value approach is used when evaluating cost based investments, which consist of ownership interests in non-public companies, to determine if an other than temporary impairment has occurred and in testing goodwill for impairment under SFAS 142. The primary approach utilized to determine fair values is a discounted cash flow methodology. When available and as appropriate, we also use comparative market multiples to supplement the discounted cash flow analysis. Numerous estimates and assumptions necessarily have to be made when completing a discounted cash flow valuation, including estimates and assumptions regarding interest rates, appropriate discount rates, capital structure, revenue growth, operating margins, tax rates, working capital requirements and capital expenditures. Estimates and assumptions also need to be made when determining the appropriate comparative market multiples to be used. Actual results of operations, cash flows and other factors used in a discounted cash flow valuation will likely differ from the estimates utilized and the comparative market multiples used are subject to change based on future public market conditions; and these differences and changes could be material. Effective January 1, 2002, we adopted SFAS 142, "Goodwill and Other Intangible Assets", and no longer amortize goodwill and other intangibles with indefinite lives. These assets are subject to periodic testing for impairments at least annually. Substantially all of our assets subject to the impairment test consisted of goodwill. We completed the impairment test required by SFAS 142 in the second quarter of 2002, by comparing the fair value of our reporting units to their carrying values and reassessed the useful lives of other intangibles. As of January 1, 2002 we concluded that the fair values of the reporting units exceeded the carrying values of the reporting units. Therefore, no impairment charge was recognized in the results of operation and financial position upon adoption and no changes were made to the useful lives of our other intangibles. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Contingent Acquisition Obligations As is typical in our business, many of our acquisitions are structured as "earn-outs". We estimate that the amount of contingent future earn-out payments, assuming that the acquired businesses performed over the relevant earn-out periods at their current profit levels, that we will be required to make for prior acquisitions is $418.2 million as of June 30, 2002. The ultimate amounts payable are dependent upon future results, and in accordance with GAAP, we have not recorded a liability for these items on our balance sheet. Actual results can differ from these estimates and the actual amounts that we pay will be different from these estimates. These differences could be material. We estimate these obligations are as follows: ($ in millions) Q3 & Q4 There- 2002 2003 2004 2005 after Total ---- ---- ---- ---- ----- ----- $122.1 $130.8 $100.2 $45.9 $19.2 $418.2 In addition, owners of interests in certain of our subsidiaries or affiliates have the right in certain circumstances to require us to purchase additional ownership stakes which we estimate assuming that the subsidiaries and affiliates peformed over the relevant periods at their current profit levels, could require us in future periods to pay an additional aggregate of $165.4 million, $84.5 million of which relates to currently exercisable rights. The ultimate amount payable in the future relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses and the timing of when these rights are exercised. The actual amounts that we pay will be different from these estimates. These differences could be material. We estimate the obligations that exist for these agreements are as follows: ($ in millions) ------------------------------------- Currently Not Currently Exercisable Exercisable Total ----------- ----------- ----- Subsidiary agencies $ 73.2 $ 78.8 $152.0 Affiliated agencies 11.3 2.1 13.4 ------ ------ ------ Total $ 84.5 $ 80.9 $165.4 ====== ====== ====== 19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity and Capital Resources Liquidity: At June 30, 2002, our cash and cash equivalents and short-term investments totaled $454.4 million and we had $1,479.0 million available to us under committed credit facilities. We also had $415.0 million available under uncommitted credit facilities. Consistent with our historical trends in the first half of the year, we had negative cash flow from operations of $392.8 million, primarily as a result of payments of accrued incentive compensation, tax payments and payments to the media on behalf of clients, as well as seasonal year-end reductions of our current liabilities and, increases in accounts receivable and billable production orders at June 30, 2002 compared to December 31, 2001. Cash used for acquisition-related expenditures was $278.9 million. In addition, we issued $900.0 million aggregate principal amount of convertible debt in March 2002 and we repurchased $368.8 million of common stock. This resulted in an overall decrease in cash and cash equivalents of $62.2 million for the six month period. Capital Resources: We maintain two revolving credit facilities with two consortia of banks. On April 26, 2002, we extended our 364-day revolving credit facility with a consortium of banks for which Citibank N.A. acts as administrative agent and Salomon Smith Barney Inc. acts as lead arranger. The consortium consists of 23 banks. Other significant lending institutions include The Bank of Nova Scotia, JPMorgan Chase Bank, Fleet National Bank, HSBC Bank USA and San Paolo IMI S.p.A. The facility was increased from $1.0 billion to $1.6 billion under substantially the same terms as had previously been in effect, including a provision which allows us to convert all amounts outstanding at expiration on April 25, 2003, into a one-year term loan. The facility, which can be drawn down at any time, also supports the issuance of up to $1.5 billion of commercial paper, and subject to obtaining additional commitments may be increased up to $1.8 billion. At June 30, 2002, we had issued and outstanding $621.0 million of commercial paper which is classified as long-term debt. We also have a $500 million 5-year revolving credit facility, which expires on June 30, 2003, with a similar consortium of 13 banks for which ABN AMRO Bank acts as agent. Other significant lending institutions include Bank of America, HSBC, JPMorgan Chase and Wachovia. No amounts were outstanding under this facility at June 30, 2002. We had a total of $1,750.0 million aggregate principal amount of zero-coupon zero-accretion 30-year notes outstanding, as well as, short-term bank loans of $103.6 million at June 30, 2002. In March 2002, we issued $900 million aggregate principal amount of zero-coupon, zero-accretion convertible notes due 2032. The notes are senior unsecured securities that are convertible into 8.2 million common shares, implying a conversion price of $110.01 per common share, subject to normal anti-dilution adjustments. These notes are convertible at the specified ratio only upon the occurrence of certain events, including if our common shares trade above certain levels, if we effect extraordinary transactions or if our long-term debt ratings are downgraded at least three notches from their current level to Baa3 or lower by Moody's 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Investors Services, Inc., or BBB or lower by Standard & Poor's Ratings Services. These events would not, however, result in an adjustment of the number of shares issuable upon conversion. Holders of the notes due 2032 have the right to put the notes back to us for, at our election, cash, stock or a combination of both in August of each year beginning in August 2003 and we have the right to redeem the notes for cash beginning in 2007. There are no events that accelerate the noteholders' put rights. Beginning in August 2007, if the market price of our common shares exceeds certain thresholds, we may be required to pay contingent cash interest on the notes equal to the amount of dividends that would be paid on the common shares into which the notes are contingently convertible. Below is a summary of our debt position (in millions) as of June 30, 2002. Debt: Bank loans (due less than 1 year) ............................. $ 103 $500 Million Revolver - due June 30, 2003 ..................... -- Commercial paper issued ....................................... 621 (supported by a $1.6 Billion 364 Day Facility) 5.20 % Euro Notes - due June 24, 2005 ......................... 151 Convertible Notes - due February 7, 2031 ...................... 850 Convertible Notes - due July 31, 2032 ......................... 900 Loan Notes and Sundry - various through 2012 .................. 97 ------ Total Debt ........................................................ $2,722 ====== The holders of our convertible notes have the right to cause us to repurchase up to the entire $850.0 million aggregate face of the notes in February 2003 and the remaining $900.0 million aggregate face amount of the notes in August of 2003. We believe that our operating cash flow combined with our available lines of credit and our access to the capital markets are sufficient to support our foreseeable cash requirements, including working capital, capital expenditures, future acquisitions, earn-outs and other contingent payments, dividends, debt maturities and possible debt repurchase obligations. 21 ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Our results of operations are subject to the risk of currency exchange rate fluctuations related to our international operations. Our net income is subject to risk from the translation of the revenue and expenses of our foreign operations, which are generally denominated in the local currency. The effects of currency exchange rate fluctuation on our second quarter and first half results of operations are discussed on pages 13 and 16 of this report. We do not hedge these exposures against the US dollar in the normal course of our business. We do, however, conduct global treasury operations to improve liquidity and manage third party interest expense centrally. As an integral part of these operations, we enter into short-term forward foreign exchange contracts to hedge intercompany cash movements between subsidiaries operating in different currency markets. While our agencies operate in more than 100 countries and invoice clients in more than 70 different currencies, our major international markets are the E.U., the United Kingdom, Japan, Brazil and Canada. Our 2001 10-K provides a more detailed discussion of the market risks affecting our operations. As of June 30, 2002, no material change had occurred in our market risks, as compared to the disclosure in our 2001 10-K. Forward-Looking Statements "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" set forth in this report contain disclosures which are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that do no relate solely to historical or current facts, and in some instances are identifiable by the use of words such as "may," "will," "expect," "project," "estimate," "anticipate," "envisage," "plan" or "continue." These forward-looking statements are based upon our current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and anticipated actions and our future financial condition and results. The uncertainties and risks include, but are not limited to, changes in general economic conditions, competitive factors, client communication requirements, the hiring and retention of human resources and other factors. In addition, our international operations are subject to the risk of currency fluctuations, exchange controls and similar risks discussed above. As a consequence, current plans, anticipated actions and future financial condition and results may differ from those expressed in any forward-looking statements made by us or on our behalf. 22 PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On June 13, 2002, a lawsuit was filed against us and certain of our senior executives in the federal court in the Southern District of New York on behalf of a purported class of purchasers of our common shares during the period April 25, 2000 to June 11, 2002. The executives named as defendants are our chairman, chief executive officer, chief financial officer and controller. The complaint alleges, among other things, that our press releases and SEC reports during the alleged class period contained materially false and misleading statements or omitted to state material information relating to (1) our calculation of the organic component of period-to-period revenue growth, (2) the formation of Seneca Investments LLC in May 2001, and (3) the characterization of acquisition payments and the existence and amount of our future obligations in respect of acquisitions. The complaint seeks an unspecified amount of money damages plus attorneys' fees and other costs. Ten other complaints were subsequently filed in the same court, each making similar allegations and referencing the same class period. All of the cases are at a preliminary stage. Management believes that the allegations in the complaints in these lawsuits are without merit and we presently intend to vigorously defend the cases. In addition to the proceedings described above, a shareholder derivative action was filed on June 28, 2002 in New York state court in New York City by a plaintiff shareholder, proportedly on our behalf, against current and certain former directors alleging breaches of fiduciary duty, disclosure failures, abuse of control and gross mismanagement in connection with the formation of Seneca, including as a result of open-market sales of our common shares by our chairman and two former employee directors during the period August 2001 to May 2002. The complaint seeks the imposition of a constructive trust on profits received in the stock sales, an unspecified amount of money damages and attorneys' fees and other costs. The cases follow the publication of several press reports about us in June 2002. We have received requests from the Staff of the Securities and Exchange Commission for information on topics referred to in those reports. We have fully cooperated and intend to continue to cooperate in any SEC inquiry into these matters. We also are subject to numerous lawsuits and other claims in the ordinary course of business. Management presently expects that the matters referred to in this Item 1 will not individually or in the aggregate have a material adverse effect on our financial position or results of operations. However, the outcome of any of these matters is inherently uncertain and may be affected by future events. Accordingly, there can be no assurance as to the ultimate effect of these matters. 23 Item 4. Submission of Matters to a Vote of Security Holders We held our annual shareholders' meeting on May 21, 2002. At the meeting, votes cast regarding the election of four Directors to serve in the class of Directors whose term expires in 2005 were as follows: Votes For Votes Withheld --------- -------------- Robert Charles Clark 152,181,951 1,545,866 Leonard S. Coleman, Jr. 152,564,719 1,163,098 Peter Foy 152,624,878 1,102,939 Gary L. Roubos 152,796,417 931,400 Votes cast regarding the approval of the Omnicom Group Inc. Equity Incentive Plan were as follows: Votes For Votes Against Votes Withheld --------- ------------- -------------- 142,118,350 9,941,157 1,668,310 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Number Description ------ ----------- 10.7a Thomas Harrison (Chief Executive Officer of Diversified Agency Services) Executive Salary Continuation Plan Agreement 10.7b Peter Mead (Vice Chairman) Executive Salary Continuation Plan Agreement 10.7c Keith L. Reinhard (Chairman and Chief Executive Officer of DDB Worldwide) Executive Salary Continuation Plan Agreement 10.7d Allen Rosenshine (Chairman and Chief Executive Officer of BBDO Worldwide) Executive Salary Continuation Plan Severance Compensation Agreement 10.7e John Wren (Chief Executive Officer of Omnicom) Executive Salary Continuation Plan Agreement 10.7f Michael Greenlees (former Chairman and CEO of TBWA Worldwide) Employment Agreement, Executive Salary Continuation Plan Agreement and Note 24 (b) Reports on Form 8-K On June 5, 2002, we filed a Current Report on Form 8-K disclosing under Item 5 changes in the composition of our Board of Directors. On June 13, 2002, we filed a Current Report on Form 8-K disclosing under Item 4 changes in our certifying accountants. On June 21, 2002, we filed a Current Report on Form 8-K disclosing under Item 4 changes in the certifying accountants for our employee retirement savings plan. On July 8, 2002, we filed a Current Report on Form 8-K to furnish under Item 9 (Regulation FD disclosure) the text of materials used in investor presentations. On August 6, 2002, we filed a Current Report on Form 8-K to furnish under Item 9 (Regulation FD disclosure) the text of materials used in investor presentations. 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Omnicom has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. August 14, 2002 /s/ Randall J. Weisenburger --------------------------------------- Randall J. Weisenburger Executive Vice President and Chief Financial Officer (Principal Financial Officer) August 14, 2002 /s/ Philip J. Angelastro --------------------------------------- Philip J. Angelastro Senior Vice President, Finance and Controller (Chief Accounting Officer) 26 EX-10.7A 3 e13715ex10_7a.txt THOMAS HARRISON EXECUTIVE SALARY EXHIBIT 10.7a OMNICOM GROUP INC. EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT Agreement made the 30th day of January, 1997 by and between Omnicom Group Inc., a New York corporation, its place of business at 437 Madison Avenue, New York, New York 10022, and Thomas Harrison ("Participant"), an employee of Harrison & Star Inc., a subsidiary of Omnicom Group Inc. I. Purpose of the Plan. The purpose of the 1988 Executive Salary Continuation Plan (the "Plan") is to further the growth of Omnicom Group Inc. by offering a benefit to encourage experienced executives to enter the employ of Omnicom Group Inc. or one of its Subsidiary companies, and to encourage key executives to remain in the employ of Omnicom or a Subsidiary company. II. Definitions. The following terms shall have the meaning set forth below: 1. "Company" means Omnicom Group Inc. 2. "Subsidiary" means any company in which the Company holds, directly or indirectly, fifty percent (50%) or more of its outstanding voting stock. 3. "Affiliate" means any company in which the Company holds, directly or indirectly, not less than twenty percent (20%) but not more than forty nine percent (49%) of its outstanding voting stock. 4. "Employer" means the Company or a Subsidiary. 5. "Employer Group" means the Company and all Subsidiaries. 2 6. "Committee" means the Compensation Committee of the Board of Directors of the Company, or if there should be no Compensation Committee means a committee of not less than three members of the Board of Directors of the Company none of whom shall, while serving as a member of the committee, be eligible to participate in the Plan. 7. "Participant" means an employee of the Employer recommended by the Chief Executive Officer of the Company and approved by the Committee as a participant in the Plan. 8. "Beneficiary" means any person, persons, entity or entities designated in writing by the Participant to the Company to receive payment, if any, to be made hereunder following the death of the Participant, and in the absence of such designation, means (i) the Participant's surviving spouse, while living, and (ii) if there be no surviving spouse or upon the death of the surviving spouse, then to the estate of the Participant. 9. "Participation" means the highest percentage of the annual net profits of the Company specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 10(a) "Net profits of the Company" means the consolidated net profits of the Company for a calendar year determined in accordance with its then current accounting procedures and practices before deducting any United States income tax applicable to its taxable income for such year. In determining net profits of the Company, the following shall apply: (i) dividends from Subsidiaries and Affiliates shall be excluded from income; (ii) the Company's interest in the net profit or loss of Subsidiaries and Affiliates before deducting any United States or foreign national income tax shall be included in income; (iii) any liability to make payments or payments made under this document or under like documents with others shall not be deducted as an expense; 3 (iv) the premiums for and the proceeds of life insurance policies payable to the Company and/or a Subsidiary shall not be deducted as an expense or included in income, as the case may be; (v) the aggregate amount, if any, by which employee compensation (salary, bonus, service awards, stock awards and the like, but excluding contributions to pension and/or deferred profit sharing plans) paid or accrued in respect of a calendar year by the Company and its Subsidiaries exceeds fifty-two (52%) percent of such year's consolidated gross income of the Company (income from all sources except for dividends from Subsidiaries and Affiliates, and before adjustments, if any, resulting from efficiency incentive compensation arrangements with clients) shall not be deducted as an expense; and (vi) in respect of each calendar year commencing with calendar year 1989, the aggregate amount, if any, by which interest and other charges for the borrowing of funds paid or accrued in respect of a calendar year by the Company and its Subsidiaries ("Debt Service") exceeds the Allowable Debt Service for the subject year shall not be deducted as an expense; for purposes hereof "Allowable Debt Service" means (A) for calendar year 1988 the actual Debt Service for such year, (B) for calendar year 1989, the Allowable Debt Service for calendar year 1988 increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for 1989 over the actual Debt Service for 1988, whichever results in the lower amount, and (C) for each calendar year subsequent to calendar year 1989, the Allowable Debt Service for the immediately preceding calendar year increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for the subject calendar year over the actual Debt Service for the immediately preceding calendar year, whichever results in the lower amount. (b) The Company, upon its own initiative may, or shall upon receipt of written demand from the Participant or the Beneficiary, as the case may, designate a firm of public accountants, which may or may not be the firm of accountants regularly employed by the Company to verify the Company's determination of net profits of the Company, and to determine any question arising in the course of 4 such verification not herein specifically provided for. The determination by such firm of public accountants shall be binding and conclusive. In computing net profits of the Company, the public accountants shall conform to the accounting procedures and practices of the Company as modified by the provisions of subparagraph (a) of this Section 10. A condition of the right to demand verification as aforesaid is that the person requesting verification shall reimburse the Company to the extent of one-half of the cost of the services of such public accountants, and, at the request of the Company and before the accountants shall have commenced the verification work, shall pay to the Company one-half of the cost of the services of the said accountants as estimated by them. 11(a) "Year of Service" means each consecutive period of 365 days the Participant is in the continuous employ of a member or members of the Employer Group. For purposes of this Section, "continuous employ of members of the Employer Group" means consecutive employment by members of the Employer Group without interruption by reason of self-employment or employment by a third party employer, except as provided in Section 11 (b)(ii) below. (b) A Participant shall be in the employ of the Employer regardless of absences by reason of: (i) sick leave, vacation leave, maternity leave or other special leave approved by the Employer which does not exceed 6 months, provided the Participant returns to work for the Employer not later than the expiration date of the authorized leave of absence; and (ii) time spent in the service of others at the request of, or with the approval of, the Employer, provided the Participant returns to work for the Employer within 15 days following cessation of work for such other party. 12. "Salary" means the base salary paid by the Employer, excluding all other forms of compensation, such as bonuses, special awards, severance pay, contributions under benefit plans, and the compensatory elements of stock awards. The payroll records of the Employer shall be conclusive and binding on the Participant, the Beneficiary and the Employer as to the salary of the Participant. "One year's salary" shall mean the highest annual rate of salary at which the Participant was paid by the Employer at any time within 5 five (5) years of the termination of the Participant's employment giving rise to the Company's obligation to make payments under Article IV hereof. 13. "Salary Limitation" means the highest percentage of one years salary, which may not exceed 50%, specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 14. "Disability" means the inability of the Participant, by reason of physical condition, mental illness or accident, to perform substantially all of the duties of the position at which he was employed by the Employer when such disability commenced. 15. "Cause" means the Participant's misconduct involving willful malfeasance, such as breach of trust, fraud or dishonesty. All determinations as to "Disability" or "Cause" shall be made by the Board of Directors of the Employer, after a hearing at which the Participant may be present, and the determination by the Board of Directors shall be final and conclusive. III. Employment Is Unrestricted. Nothing herein contained shall be deemed to give the Participant the right to remain in the employ of the Employer or to interfere with the right of the Employer to terminate the Participant's employment at any time, nor to give the Employer the right to require the Participant to remain in its employ or to interfere with the Participant's right to terminate employment at any time. IV. Compensation. 1. In the event (a) the Participant dies while in the employ of the Employer, (b) the Employer determines, in the manner provided in Article II, Section 14 hereof, that the Participant is disabled and the employment of the Participant is terminated by the Employer by reason of Disability, (c) the Participant, after 5 Years of Service, terminates his or her employment with the Employer for a reason other than to enter the employ of another member of the 6 Employer Group or (d) the employment of the Participant is terminated by the Employer for a reason other than Cause, then upon the happening of any such event the Company, subject to all the terms and conditions hereof, shall become obligated to pay to the Participant, or to the Beneficiary if the obligation arises under (a) above, each year, for the number of consecutive calendar years determined in accordance with the schedule on page 8 hereof, an amount equal to the lesser of (i) the Salary Limitation applied to one year's salary, or (ii) the Participation applied to the net profits of the Company for the calendar year immediately preceding the calendar year of payment, subject to adjustment as provided in Sections 2, 3 and 4 of this Article. 2. If the employment of the Participant is terminated by reason of an event occurring under (c) of Section 1 of this Article and at the effective date of such termination the Participant has not accumulated 20 Years of Service, the annual payment the Participant would have been entitled to receive under said Section 1 ("Proposed Payment") shall be reduced to an amount resulting from multiplying the Proposed Payment by a fraction the numerator of which is the Participant's Years of Service at the effective date of such termination and the denominator of which is 20. The Committee may, in its absolute discretion, waive this provision or reduce the number of the denominator in said traction if it decides such action would be in the best interest of the Company and equitable to the Participant or the Beneficiary. 3.(a) In the event of the Participant's death after the occurrence of an event described in (b), (c) or (d) of Section 1 of this Article and before the Participant has received payment(s) in respect of the total number of calendar years as to which the Company is obligated to make payment hereunder ("Payment Period"), the Company shall thereafter be obligated to make an annual payment to the Beneficiary during the Payment Period or the remainder thereof, as the case may be, equal to seventy five (75%) percent of the amount which the Company would have been obligated to pay to the Participant had the Participant lived to receive all payments. 7 (b) In the event of the Participant's death while in the employ of the Employer, the Company shall be obligated to make an annual payment to the Beneficiary in the same manner and to the same extent as provided in (a) of this Section 3. (c) The Company may, at any time and from time to time, seek to fund, in whole or in part, its obligation under this Section 3 by applying for insurance on the life of the Participant. The Participant shall, if requested in writing by the Company, undergo a physical examination for such purpose by medical examiners designated by the Company, and if the Participant should fail or refuse to undergo such physical examination the Company shall have the right to terminate its obligation under this Section 3 by giving written notice of such termination to the Participant. 4. If during any period of twenty-four consecutive months assets of the Company are sold or otherwise disposed of having a value or aggregate value of thirty (30%) percent or more of the total assets of the Company as at the commencement date of said period ("Disposal Transaction"), then beginning with the calendar year in which the Disposal Transaction occurs the amount of the annual payments the Company may be obligated to make under the provisions of Section 1 of this Article shall be the Salary Limitation applied to one year's salary. If the asset sold or disposed of is stock of a Subsidiary, the value of the total assets, not net assets, of the Subsidiary shall be used for purposes of this Section 4. 5. The first calendar year of payment, if any, shall be the second calendar year following the calendar year in which the event that gave rise to the Company's obligation to pay occurred. If, however, such event is the death of the participant while in the employ of the Employer, the first calendar year of payment shall be the first calendar year following the calendar year in which the Participant's death occurred. Payment shall be made by the Company in each calendar year of payment during the first ninety (90) days of the subject calendar year. 8
NUMBER OF YEARS OF PAYMENT Years of Service 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age at 30 1 1 1 2 2 Termination 31 1 1 1 2 2 2 32 1 1 1 2 2 3 33 1 1 2 2 2 3 3 34 1 2 2 2 3 3 3 4 35 1 1 2 2 3 3 3 4 4 4 36 1 1 2 2 3 3 3 4 4 4 5 37 1 1 2 3 3 4 4 4 5 5 5 6 38 1 2 3 3 4 4 4 5 5 5 6 6 6 39 1 2 3 3 4 4 4 5 5 5 6 6 6 7 40 1 1 2 3 3 4 4 5 5 5 6 6 6 7 7 7 41 1 1 2 3 4 4 4 5 5 5 6 6 6 7 7 7 8 42 1 2 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 43 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 44 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 45 1 1 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 46 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 47 1 2 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 48 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 49 1 2 3 4 5 5 6 6 7 7 7 8 8 8 9 9 9 10 50 1 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 51 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 52 1 2 3 4 5 6 6 7 7 8 8 8 9 9 9 10 53 1 2 3 4 5 6 7 7 8 8 8 9 9 9 10 54 1 2 3 4 5 6 7 8 8 8 9 9 9 10 55 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 56 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 57 0 1 2 3 4 5 6 7 8 8 9 9 9 10 58 0 1 2 3 4 5 6 7 8 8 9 9 9 10 59 0 1 2 3 4 5 6 7 8 8 9 9 10 60 0 1 2 3 4 5 6 7 8 8 9 9 10 and up
9 6. The amount payable hereunder by the Company in respect of the Payment Period shall be reduced by the value of payments to be made following cessation of Participant's employment to the Participant, Beneficiary or other designee of the Participant pursuant to any other agreement or arrangement between the Participant and one or more members of the Employer Group ("Post-Employment Payments"). For purposes hereof, Post-Employment Payments shall not include payments under (i) a pension, profit-sharing or savings plan which qualifies for favorable tax treatment under the United States Internal Revenue Code, (ii) a benefit plan for the payor's employees generally ("Employee Benefit Plan") (iii) a plan for the payor's executive officers approved by the Company that augments a benefit provided for in an Employee Benefit Plan, and (iv) an agreement financed, in whole or in part, by the Participant to the extent the payments are attributable to the financing provided by the Participant. V. Company's Payment Obligation Conditional on Participant's Refraining from Competitive and Harmful Activities After Severance of Employment. It is a condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder: (a) that the Participant shall not directly or indirectly, engage in, nor become employed by or otherwise associated with any persons or entities engaged in, business of the same nature as or competitive with the business engaged in, at the time of Participant's severance of employment, by the Participant's Employer ("Protected Business") in (i) the United States and (ii) any other country in which at the time of Participant's severance of employment the Employer holds, directly or indirectly, more than fifty percent (50%) of the voting stock or its equivalent of an entity engaged in the same or a related business as that of the Employer; and the Participant shall not make any financial investment, direct or indirect, in any sole proprietorship or entity engaged in the same business as that of the Employer at the time of Participant's severance of employment 10 ("Protected investment"), provided nothing herein shall prohibit the purchase of less than a controlling interest in publicly traded securities of any such entity for bona fide investment only; (b) that the Participant shall not willfully engage in any activity which is harmful to the interest of the Company. The determination of (i) whether a business is of the same nature as, competitive with, or related to that of the Employer, (ii) whether any activity of a Participant is harmful to the interest of the Company and (iii) whether the Participant has willfully engaged in such harmful activity, shall be made by the Board of Directors of the Company after a hearing at which the Participant shall be entitled to be present, and the determination by the Board of Directors shall be final and conclusive; and (c) Nothing herein prohibits or restricts the Participant from engaging in Protected Business in the related areas described in Subsection (a) above, making a Protected Investment, or willfully engaging in activity harmful to the interest of the Company (collectively "Activities") and in the event the Participant chooses to engage in any of such Activities the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such Activity occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. If requested in writing by the Company, the Participant shall, within 30 days after receipt of such request, advise the Company in writing whether the Participant has or has not engaged in such Activities for a specified calendar year, and the Company shall have no obligation to make a payment in respect of such calendar year until the Company has received such written advice from the Participant. VI. Company's Payment Obligation Conditional On Participant's Availability for Advisory and Consultative Services after Severance of Employment. (a) It is a further condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that 11 shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder, that the Participant, if not physically or mentally disabled, shall, as an independent contractor and upon not less than thirty (30) days prior written notice from the Company, make his or her services available to the Company for such periods of time as may be specified in the notice, as an advisor and consultant with respect to activities of the department or unit of the Employer's business to which the Participant was last assigned, provided, however, that the Participant shall not be obligated to make his or her services available (i) for more than sixty (60) days in the aggregate and for more than twenty (20) consecutive days in any one calendar year, and (ii) during the period December 15 through January 15. The Company shall reimburse the Participant for reasonable traveling, transportation and living expenses necessarily incurred by the Participant while away from his or her regular place of residence in the performance of such advisory and consultative services for the Company. (b) In the event the Participant chooses not to render advisory and consultative services when requested by the Company as provided in Subsection (a) above, the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such event occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. VII. Prepayments. Following the occurrence of an event described in Section 1 of Article IV hereof, the Company may, at any time and from time to time, make a prepayment, in whole or in part, of its obligation hereunder in respect of any one or more calendar years and any such prepayment shall be irrevocable and non-refundable. 12 VIII. Participant's and Beneficiary's Rights Hereunder Are Personal, Nonassignable and Nontransferable. 1. The right of the Participant or Beneficiary to receive payments hereunder is personal, non-assignable and non-transferable by operation of law or otherwise. The word "otherwise" in the preceding sentence shall include, without limitation, any execution, levy, garnishment, attachment or seizure by any other legal process. 2. If at the time the Company is to make a payment to the Participant or a Beneficiary hereunder the Participant or Beneficiary is not entitled to receive such payment by reason of non-compliance with the provisions of Section 1 of this Article, the obligation of the Company to make such payment shall forthwith terminate. IX. Designation and Identity of Beneficiary. 1. The Participant may designate a Beneficiary by signing, dating and filing with the Secretary of the Company a written instrument setting forth the name(s) and address(es) of the Beneficiary, and if the Beneficiary be more than one person or entity, describing the allocation of the payment benefit among them. The Participant may change his or her designation of a Beneficiary and thereby revoke a prior designation of a Beneficiary at any time and from time to time by filing a new such written instrument with the Secretary. The Beneficiary named in the last unrevoked designation of Beneficiary so filed by the Participant prior to his or her death shall be the Beneficiary for purposes of this Agreement. In the absence of a designation of Beneficiary by the Participant, or in the event the last written designation of Beneficiary on file with the Secretary has been revoked by the Participant, the Beneficiary shall be as described in Section 8 of Article II of this Agreement. 2. It is a condition of the Company's obligation to make payments to the Beneficiary hereunder that (a) in making payments the Company may, in its sole and absolute discretion, rely upon signed, written declarations, verifying the identity of a Beneficiary filed with the Secretary of the Company by a person or entity claiming to be such Beneficiary; (b) any payment made by the Company in good faith to any claimant, whether or not such declarations shall have been filed with the Company, shall pro tanto, 13 discharge any obligation the Company might otherwise have to make payment to any and all other actual or possible claimants; (c) any person or entity claiming to be entitled to receive payments hereunder following the death of the Participant shall have recourse only against the person or entity to whom the Company shall have made payment in good faith; and (d) in the event the Company, on advice of counsel, delays payment of any sums becoming due to a Beneficiary by reason of a dispute as to the legitimacy of the claim of such Beneficiary, no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. X. Payment to Minors. Any payment to be made by the Company to a person under the age of twenty-one (21) years may be made to such person or to a guardian of the property of such person or to a parent of such person as the Company may, in its sole and absolute discretion, determine. As to any payment becoming due or payable to a person under the age of twenty-one (21) years, the Company may defer such payment until the Company has received notice of the appointment and qualification of a guardian of the property of such person, and no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. XI. Miscellaneous Provisions. 1. An act or determination by the Board of Directors of the Company or the Employer may be made by a committee of directors, number not less than three, appointed by the Board for such purpose. 2. Notices shall be sent by registered or certified mail, return receipt requested, to the Participant at the Participant's last address on file with his or her Employer or to such other address as may hereafter be designated by the Participant to the Company, and to the Beneficiary at the address listed in the latest written designation of beneficiary filed with the Company by the Participant or to such other address as may hereafter be designated by the Beneficiary to the Company subsequent to the death of the Participant. 14 3. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of any right hereunder, nor shall it deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. 4. This Agreement sets forth the entire understanding of the parties in respect of the subject matter hereof, superseding, and evidencing and confirming the termination of, any and all prior agreements, arrangements or understandings between the parties relating to such subject matter, and neither party has relied on any representations of the other party except as expressly set forth herein. This Agreement may be amended only by a written instrument signed by both parties. 5. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and is subject to all applicable federal, state and municipal laws and regulations now or hereafter in force. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ Thomas Harrison ---------------------------- Thomas Harrison Omnicom Group Inc. By /s/ John Wren ------------------------- President and Chief Executive Officer Name of Participant: Thomas Harrison Date of Birth: August 19. 1947 --------------- Date First Commenced Service: December 22. 1992 ----------------- Name of Employer: Harrison & Star Inc. ------------------- EX-10.7B 4 e13715ex10_7b.txt PETER MEAD EXECUTIVE SALARY EXHIBIT 10.7b OMNICOM GROUP INC. EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT Agreement made the 10th day of May, 2000 by and between Omnicom Group Inc., a New York corporation, its place of business at 437 Madison Avenue, New York, New York 10022, and Peter Mead ("Participant"), an employee of a subsidiary of Omnicom Group Inc. I. Purpose of the Plan. The purpose of the 1988 Executive Salary Continuation Plan (the "Plan") is to further the growth of Omnicom Group Inc. by offering a benefit to encourage experienced executives to enter the employ of Omnicom Group Inc. or one of its Subsidiary companies, and to encourage key executives to remain in the employ of Omnicom or a Subsidiary company. II. Definitions. The following terms shall have the meaning set forth below: 1. "Company" means Omnicom Group Inc. 2. "Subsidiary" means any company in which the Company holds, directly or indirectly, fifty percent (50%) or more of its outstanding voting stock. 3. "Affiliate" means any company in which the Company holds, directly or indirectly, not less than twenty percent (20%) but not more than forty nine percent (49%) of its outstanding voting stock. 4. "Employer" means the Company or a Subsidiary. 5. "Employer Group" means the Company and all Subsidiaries. 2 6. "Committee" means the Compensation Committee of the Board of Directors of the Company, or if there should be no Compensation Committee means a committee of not less than three members of the Board of Directors of the Company none of whom shall, while serving as a member of the committee, be eligible to participate in the Plan. 7. "Participant" means an employee of the Employer recommended by the Chief Executive Officer of the Company and approved by the Committee as a participant in the Plan. 8. "Beneficiary" means any person, persons, entity or entities designated in writing by the Participant to the Company to receive payment, if any, to be made hereunder following the death of the Participant, and in the absence of such designation, means (i) the Participant's surviving spouse, while living, and (ii) if there be no surviving spouse or upon the death of the surviving spouse, then to the estate of the Participant. 9. "Participation" means the highest percentage of the annual net profits of the Company specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 10(a) "Net profits of the Company" means the consolidated net profits of the Company for a calendar year determined in accordance with its then current accounting procedures and practices before deducting any United States income tax applicable to its taxable income for such year. In determining net profits of the Company, the following shall apply: (i) dividends from Subsidiaries and Affiliates shall be excluded from income; (ii) the Company's interest in the net profit or loss of Subsidiaries and Affiliates before deducting any United States or foreign national income tax shall be included in income; 3 (iii) any liability to make payments or payments made under this document or under like documents with others shall not be deducted as an expense; (iv) the premiums for and the proceeds of life insurance policies payable to the Company and/or a Subsidiary shall not be deducted as an expense or included in income, as the case may be; (v) the aggregate amount, if any, by which employee compensation (salary, bonus, service awards, stock awards and the like, but excluding contributions to pension and/or deferred profit sharing plans) paid or accrued in respect of a calendar year by the Company and its Subsidiaries exceeds fifty-two (52%) percent of such year's consolidated gross income of the Company (income from all sources except for dividends from Subsidiaries and Affiliates, and before adjustments, if any, resulting from efficiency incentive compensation arrangements with clients) shall not be deducted as an expense; and (vi) in respect of each calendar year commencing with calendar year 1989, the aggregate amount, if any, by which interest and other charges for the borrowing of funds paid or accrued in respect of a calendar year by the Company and its Subsidiaries ("Debt Service") exceeds the Allowable Debt Service for the subject year shall not be deducted as an expense; for purposes hereof "Allowable Debt Service" means (A) for calendar year 1988 the actual Debt Service for such year, (B) for calendar year 1989, the Allowable Debt Service for calendar year 1988 increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for 1989 over the actual Debt Service for 1988, whichever results in the lower amount, and (C) for each calendar year subsequent to calendar year 1989, the Allowable Debt Service for the immediately preceding calendar year increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for the subject calendar year over the actual Debt Service for the immediately preceding calendar year, whichever results in the lower amount. 4 (b) The Company, upon its own initiative may, or shall upon receipt of written demand from the Participant or the Beneficiary, as the case may, designate a firm of public accountants, which may or may not be the firm of accountants regularly employed by the Company to verify the Company's determination of net profits of the Company, and to determine any question arising in the course of such verification not herein specifically provided for. The determination by such firm of public accountants shall be binding and conclusive. In computing net profits of the Company, the public accountants shall conform to the accounting procedures and practices of the Company as modified by the provisions of subparagraph (a) of this Section 10. A condition of the right to demand verification as aforesaid is that the person requesting verification shall reimburse the Company to the extent of one-half of the cost of the services of such public accountants, and, at the request of the Company and before the accountants shall have commenced the verification work, shall pay to the Company one-half of the cost of the services of the said accountants as estimated by them. 11 .(a) "Year of Service" means each consecutive period of 365 days the Participant is in the continuous employ of a member or members of the Employer Group. For purposes of this Section, "continuous employ of members of the Employer Group" means consecutive employment by members of the Employer Group without interruption by reason of self-employment or employment by a third party employer, except as provided in Section 11 (b)(ii) below. (b) A Participant shall be in the employ of the Employer regardless of absences by reason of: (i) sick leave, vacation leave, maternity leave or other special leave approved by the Employer which does not exceed 6 months, provided the Participant returns to work for the Employer not later than the expiration date of the authorized leave of absence; and (ii) time spent in the service of others at the request of, or with the approval of, the Employer, provided the Participant returns to work for the Employer within 15 days following cessation of work for such other party. 5 12. "Salary" means the base salary paid by the Employer, excluding all other forms of compensation, such as bonuses, special awards, severance pay, contributions under benefit plans, and the compensatory elements of stock awards. The payroll records of the Employer shall be conclusive and binding on the Participant, the Beneficiary and the Employer as to the salary of the Participant. "One year's salary" shall mean the highest annual rate of salary at which the Participant was paid by the Employer at any time within five (5) years of the termination of the Participant's employment giving rise to the Company's obligation to make payments under Article IV hereof. 13. "Salary Limitation" means the highest percentage of one year's salary, which may not exceed 50%, specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 14. "Disability" means the inability of the Participant, by reason of physical condition, mental illness or accident, to perform substantially all of the duties of the position at which he was employed by the Employer when such disability commenced. 15. "Cause" means the Participant's misconduct involving willful malfeasance, such as breach of trust, fraud or dishonesty. All determinations as to "Disability" or "Cause" shall be made by the Board of Directors of the Employer, after a hearing at which the Participant may be present, and the determination by the Board of Directors shall be final and conclusive. III. Employment Is Unrestricted. Nothing herein contained shall be deemed to give the Participant the right to remain in the employ of the Employer or to interfere with the right of the Employer to terminate the Participant's employment at any time, nor to give the Employer the right to require the Participant to remain in its employ or to interfere with the Participant's right to terminate employment at any time. IV. Compensation. 6 1. In the event (a) the Participant dies while in the employ of the Employer, (b) the Employer determines, in the manner provided in Article II, Section 14 hereof, that the Participant is disabled and the employment of the Participant is terminated by the Employer by reason of Disability, (c) the Participant, after 5 Years of Service, terminates his or her employment with the Employer for a reason other than to enter the employ of another member of the Employer Group or (d) the employment of the Participant is terminated by the Employer for a reason other than Cause, then upon the happening of any such event the Company, subject to all the terms and conditions hereof, shall become obligated to pay to the Participant, or to the Beneficiary if the obligation arises under (a) above, each year, for the number of consecutive calendar years determined in accordance with the schedule on page 8 hereof, an amount equal to the lesser of (i) the Salary Limitation applied to one year's salary, or (ii) the Participation applied to the net profits of the Company for the calendar year immediately preceding the calendar year of payment, subject to adjustment as provided in Sections 2, 3 and 4 of this Article. 2. If the employment of the Participant is terminated by reason of an event occurring under (c) of Section 1 of this Article and at the effective date of such termination the Participant has not accumulated 20 Years of Service, the annual payment the Participant would have been entitled to receive under said Section 1 ("Proposed Payment") shall be reduced to an amount resulting from multiplying the Proposed Payment by a fraction the numerator of which is the Participant's Years of Service at the effective date of such termination and the denominator of which is 20. The Committee may, in its absolute discretion, waive this provision or reduce the number of the denominator in said fraction if it decides such action would be in the best interest of the Company and equitable to the Participant or the Beneficiary. 3(a) In the event of the Participant's death after the occurrence of an event described in (b), (c) or (d) of Section 1 of this Article and before the Participant has received payment(s) in respect of the total number of calendar years as to which the Company is obligated to make payment hereunder ("Payment Period"), the Company shall thereafter be obligated to make an annual payment to 7 the Beneficiary during the Payment Period or the remainder thereof, as the case may be, equal to seventy five (75%) percent of the amount which the Company would have been obligated to pay to the Participant had the Participant lived to receive all payments. (b) In the event of the Participant's death while in the employ of the Employer, the Company shall be obligated to make an annual payment to the Beneficiary in the same manner and to the same extent as provided in (a) of this Section 3. (c) The Company may, at any time and from time to time, seek to fund, in whole or in part, its obligation under this Section 3 by applying for insurance on the life of the Participant. The Participant shall, if requested in writing by the Company, undergo a physical examination for such purpose by medical examiners designated by the Company, and if the Participant should fail or refuse to undergo such physical examination the Company shall have the right to terminate its obligation under this Section 3 by giving written notice of such termination to the Participant. 4. If during any period of twenty-four consecutive months assets of the Company are sold or otherwise disposed of having a value or aggregate value of thirty (30%) percent or more of the total assets of the Company as at the commencement date of said period ("Disposal Transaction"), then beginning with the calendar year in which the Disposal Transaction occurs the amount of the annual payments the Company may be obligated to make under the provisions of Section 1 of this Article shall be the Salary Limitation applied to one year's salary. If the asset sold or disposed of is stock of a Subsidiary, the value of the total assets, not net assets, of the Subsidiary shall be used for purposes of this Section 4. 5. The first calendar year of payment, if any, shall be the second calendar year following the calendar year in which the event that gave rise to the Company's obligation to pay occurred. If, however, such event is the death of the participant while in the employ of the Employer, the first calendar year of payment shall be the first calendar year following the calendar year in which the Participant's death occurred. Payment shall be made by the Company in each calendar year of payment during the first ninety (90) days of the subject calendar year. 8
NUMBER OF YEARS OF PAYMENT Years of Service 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age at 30 1 1 1 2 2 Termination 31 1 1 1 2 2 2 32 1 1 1 2 2 3 33 1 1 2 2 2 3 3 34 1 2 2 2 3 3 3 4 35 1 1 2 2 3 3 3 4 4 4 36 1 1 2 2 3 3 3 4 4 4 5 37 1 1 2 3 3 4 4 4 5 5 5 6 38 1 2 3 3 4 4 4 5 5 5 6 6 6 39 1 2 3 3 4 4 4 5 5 5 6 6 6 7 40 1 1 2 3 3 4 4 5 5 5 6 6 6 7 7 7 41 1 1 2 3 4 4 4 5 5 5 6 6 6 7 7 7 8 42 1 2 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 43 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 44 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 45 1 1 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 46 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 47 1 2 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 48 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 49 1 2 3 4 5 5 6 6 7 7 7 8 8 8 9 9 9 10 50 1 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 51 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 52 1 2 3 4 5 6 6 7 7 8 8 8 9 9 9 10 53 1 2 3 4 5 6 7 7 8 8 8 9 9 9 10 54 1 2 3 4 5 6 7 8 8 8 9 9 9 10 55 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 56 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 57 0 1 2 3 4 5 6 7 8 8 9 9 9 10 58 0 1 2 3 4 5 6 7 8 8 9 9 9 10 59 0 1 2 3 4 5 6 7 8 8 9 9 10 60 0 1 2 3 4 5 6 7 8 8 9 9 10 and up
9 6. The amount payable hereunder by the Company in respect of the Payment Period shall be reduced by the value of payments to be made following cessation of Participant's employment to the Participant, Beneficiary or other designee of the Participant pursuant to any other agreement or arrangement between the Participant and one or more members of the Employer Group ("Post-Employment Payments"). For purposes hereof, Post-Employment Payments shall not include payments under (i) a pension, profit-sharing or savings plan which qualifies for favorable tax treatment under the United States Internal Revenue Code, (ii) a benefit plan for the payors employees generally ("Employee Benefit Plan") (iii) a plan for the payor's executive officers approved by the Company that augments a benefit provided for in an Employee Benefit Plan, and (iv) an agreement financed, in whole or in part, by the Participant to the extent the payments are attributable to the financing provided by the Participant. V. Company's Payment Obligation Conditional on Participant's Refraining from Competitive and Harmful Activities After Severance of Employment. It is a condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder: (a) that the Participant shall not, directly or indirectly, engage in, nor become employed by or otherwise associated with any persons or entities engaged in, business of the same nature as or competitive with the business engaged in, at the time of Participants severance of employment, by the Participant's Employer ("Protected Business") in (i) the United States and (ii) any other country in which at the time of Participant's severance of employment the Employer holds, directly or indirectly, more than fifty percent (50%) of the voting stock or its equivalent of an entity engaged in the same or a related 10 business as that of the Employer; and the Participant shall not make any financial investment, direct or indirect, in any sole proprietorship or entity engaged in the same business as that of the Employer at the time of Participant's severance of employment ("Protected investment"), provided nothing herein shall prohibit the purchase of less than a controlling interest in publicly traded securities of any such entity for bona fide investment only; (b) that the Participant shall not willfully engage in any activity which is harmful to the interest of the Company. The determination of (i) whether a business is of the same nature as, competitive with, or related to that of the Employer, (ii) whether any activity of a Participant is harmful to the interest of the Company, and (iii) whether the Participant has willfully engaged in such harmful activity, shall be made by the Board of Directors of the Company after a hearing at which the Participant shall be entitled to be present, and the determination by the Board of Directors shall be final and conclusive; and (c) Nothing herein prohibits or restricts the Participant from engaging in Protected Business in the related areas described in Subsection (a) above, making a Protected Investment, or willfully engaging in activity harmful to the interest of the Company (collectively "Activities"), and in the event the Participant chooses to engage in any of such Activities the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such Activity occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. If requested in writing by the Company, the Participant shall, within 30 days after receipt of such request, advise the Company in writing whether the Participant has or has not engaged in such Activities for a specified calendar year, and the Company shall have no obligation to make a payment in respect of such calendar year until the Company has received such written advice from the Participant. 11 VI. Company's Payment Obligation Conditional On Participant's Availability for Advisory and Consultative Services after Severance of Employment. (a) It is a further condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder, that the Participant, if not physically or mentally disabled, shall, as an independent contractor and upon not less than thirty (30) days prior written notice from the Company, make his or her services available to the Company for such periods of time as may be specified in the notice, as an advisor and consultant with respect to activities of the department or unit of the Employer's business to which the Participant was last assigned, provided, however, that the Participant shall not be obligated to make his or her services available (i) for more than sixty (60) days in the aggregate and for more than twenty (20) consecutive days in any one calendar year, and (ii) during the period December 15 through January 15. The Company shall reimburse the Participant for reasonable traveling, transportation and living expenses necessarily incurred by the Participant while away from his or her regular place of residence in the performance of such advisory and consultative services for the Company. (b) In the event the Participant chooses not to render advisory and consultative services when requested by the Company as provided in Subsection (a) above, the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such event occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. 12 VII. Prepayments. Following the occurrence of an event described in Section 1 of Article IV hereof, the Company may, at any time and from time to time, make a prepayment, in whole or in part, of its obligation hereunder in respect of any one or more calendar years and any such prepayment shall be irrevocable and non-refundable. VIII. Participant's and Beneficiary's Rights Hereunder Are Personal, Nonassignable and Nontransferable. 1. The right of the Participant or Beneficiary to receive payments hereunder is personal, non-assignable and non-transferable by operation of law or otherwise. The word "otherwise" in the preceding sentence shall include, without limitation, any execution, levy, garnishment, attachment or seizure by any other legal process. 2. If at the time the Company is to make a payment to the Participant or a Beneficiary hereunder the Participant or Beneficiary is not entitled to receive such payment by reason of non-compliance with the provisions of Section 1 of this Article, the obligation of the Company to make such payment shall forthwith terminate. IX. Designation and Identity of Beneficiary. 1. The Participant may designate a Beneficiary by signing, dating and filing with the Secretary of the Company a written instrument setting forth the name(s) and address(es) of the Beneficiary, and if the Beneficiary be more than one person or entity, describing the allocation of the payment benefit among them. The Participant may change his or her designation of a Beneficiary and thereby revoke a prior designation of a Beneficiary at any time and from time to time by filing a new such written instrument with the Secretary. The Beneficiary named in the last unrevoked designation of Beneficiary so filed by the Participant prior to his or her death shall be the Beneficiary for purposes of this Agreement. In the absence of 13 a designation of Beneficiary by the Participant, or in the event the last written designation of Beneficiary on file with the Secretary has been revoked by the Participant, the Beneficiary shall be as described in Section 8 of Article II of this Agreement. 2. It is a condition of the Company's obligation to make payments to the Beneficiary hereunder that (a) in making payments the Company may, in its sole and absolute discretion, rely upon signed, written declarations, verifying the identity of a Beneficiary filed with the Secretary of the Company by a person or entity claiming to be such Beneficiary; (b) any payment made by the Company in good faith to any claimant, whether or not such declarations shall have been filed with the Company, shall pro tanto, discharge any obligation the Company might otherwise have to make payment to any and all other actual or possible claimants; (c) any person or entity claiming to be entitled to receive payments hereunder following the death of the Participant shall have recourse only against the person or entity to whom the Company shall have made payment in good faith; and (d) in the event the Company, on advice of counsel, delays payment of any sums becoming due to a Beneficiary by reason of a dispute as to the legitimacy of the claim of such Beneficiary, no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. X. Payment to Minors. Any payment to be made by the Company to a person under the age of twenty-one (21) years may be made to such person or to a guardian of the property of such person or to a parent of such person as the Company may, in its sole and absolute discretion, determine. As to any payment becoming due or payable to a person under the age of twenty-one (21) years, the Company may defer such payment until the Company has received notice of the appointment and qualification of a guardian of the property of such person, and no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. 14 XI. Miscellaneous Provisions. 1. An act or determination by the Board of Directors of the Company or the Employer may be made by a committee of directors, number not less than three, appointed by the Board for such purpose. 2. Notices shall be sent by registered or certified mail, return receipt requested, to the Participant at the Participant's last address on file with his or her Employer or to such other address as may hereafter be designated by the Participant to the Company, and to the Beneficiary at the address listed in the latest written designation of beneficiary filed with the Company by the Participant or to such other address as may hereafter be designated by the Beneficiary to the Company subsequent to the death of the Participant. 3. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of any right hereunder, nor shall it deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. 4. This Agreement sets forth the entire understanding of the parties in respect of the subject matter hereof, superseding, and evidencing and confirming the termination of, any and all prior agreements, arrangements or understandings between the parties relating to such subject matter, and neither party has relied on any representations of the other party except as expressly set forth herein. This Agreement may be amended only by a written instrument signed by both parties. 5. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and is subject to all applicable federal, state and municipal laws and regulations now or hereafter in force. 15 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ Peter Mead ------------------------------ Peter Mead Omnicom Group Inc. By /s/ John Wren ---------------------------- President and Chief Executive Officer Name of Participant: Peter Mead ---------- Date of Birth: 22/3/40 ------- Date First Commenced Service: 10/2/91 ------- Name of Employer: Abbott Mead Vickers BBDO ------------------------ EX-10.7C 5 e13715ex10_7c.txt KEITH L. REINHARD EXECUTIVE SALARY EXHIBIT 10.7c OMNICOM GROUP INC. 1988 EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT Agreement made the 22nd day of December 1988 by and between Omnicom Group Inc., a New York corporation, its place of business at 437 Madison Avenue, New York, New York 10022, and Keith L. Reinhard ("Participant"), an employee of DDB Needham Worldwide Inc., a subsidiary of Omnicom Group Inc. I. Purpose of the Plan. The purpose of the 1988 Executive Salary Continuation Plan (the "Plan") is to further the growth of Omnicom Group Inc. by offering a benefit to encourage experienced executives to enter the employ of Omnicom Group Inc. or one of its Subsidiary companies, and to encourage key executives to remain in the employ of Omnicom or a Subsidiary company. II. Definitions. The following terms shall have the meaning set forth below: 1. "Company" means Omnicom Group Inc. 2. "Subsidiary" means any company in which the Company holds, directly or indirectly, fifty percent (50%) or more of its outstanding voting stock. 3. "Affiliate" means any company in which the Company holds, directly or indirectly, not less than twenty percent (20%) hut not more than forty nine percent (49%) of its outstanding voting stock. 4. "Employer" means the Company or a Subsidiary. 5. "Employer Group" means the Company and all Subsidiaries. 6. "Committee" means the Compensation Committee of the Board of Directors of the Company, or if there should be no Compensation Committee means a committee of not less than three members of the Board of Directors of the Company none of whom shall, while serving as a member of the committee, be eligible to participate in the Plan. 7. "Participant" means an employee of the Employer recommended by the Chief Executive Officer of the Company and approved by the Committee as a participant in the Plan. -2- 8. "Beneficiary" means any person, persons, entity or entities designated in writing by the Participant to the Company to receive payment, if any, to be made hereunder following the death of the Participant, and in the absence of such designation, means (i) the Participant's surviving spouse, while living, and (ii) if there be no surviving spouse or upon the death of the surviving spouse, then to the estate of the Participant. 9. "Participation" means the highest percentage of the annual net profits of the Company specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 1O.(a) "Net profits of the Company" means the consolidated net profits of the Company for a calendar year determined in accordance with its then current accounting procedures and practices before deducting any United States income tax applicable to its taxable income for such year. In determining net profits of the Company, the following shall apply: (i) dividends from Subsidiaries and Affiliates shall be excluded from income; (ii) the Company's interest in the net profit or loss of Subsidiaries and Affiliates before deducting any United States or foreign national income tax shall be included in income; (iii) any liability to make payments or payments made under this document or under like documents with others shall not be deducted as an expense; (iv) the premiums for and the proceeds of life insurance policies payable to the Company and/or a Subsidiary shall not be deducted as an expense or included in income, as the case may be; (v) the aggregate amount, if any, by which employee compensation (salary, bonus, service awards, stock awards and the like, but excluding contributions to pension and/or deferred profit sharing plans) paid or accrued in respect of a calendar year by the Company and its Subsidiaries exceeds fifty-two (52%) percent of such years consolidated gross income of the Company (income from all sources except for dividends from Subsidiaries and Affiliates, and before adjustments, if any, resulting from efficiency incentive compensation arrangements with clients) shall not be deducted as an expense; and -3- (vi) in respect of each calendar year commencing with calendar year 1989, the aggregate amount, if any, by which interest and other charges for the borrowing of funds paid or accrued in respect of a calendar year by the Company and its Subsidiaries ("Debt Service") exceeds the Allowable Debt Service for the subject year shall not be deducted as an expense; for purposes hereof "Allowable Debt Service" means (A) for calendar year 1988 the actual Debt Service for such year, (B) for calendar year 1989, the Allowable Debt Service for calendar year 1988 increased by 20% or increased by the percentage increase, in any, in the actual Debt Service for 1989 over the actual Debt Service for 1988, whichever results in the lower amount, and (C) for each calendar year subsequent to calendar year 1989, the Allowable Debt Service for the immediately preceding calendar year increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for the subject calendar year over the actual debt Service for the immediately preceding calendar year, whichever results in the lower amount. (b) The Company, upon its own initiative may, or shall upon receipt of written demand from the Participant or the Beneficiary, as the case may be, designate a firm of public accountants, which may or may not be the firm of accountants regularly employed by the Company to verify the Company's determination of net profits of the Company, and to determine any question arising in the course of such verification not herein specifically provided for. The determination by such firm of public accountants shall be binding and conclusive. In computing net profits of the Company, the public accountants shall conform to the accounting procedures and practices of the Company as modified by the provisions of subparagraph (a) of this Section 10. A condition of the right to demand verification as aforesaid is that the person requesting verification shall reimburse the Company to the extent of one-half of the cost of the services of such public accountants, and, at the request of the Company and before the accountants shall have commenced the verification work, shall pay to the Company one-half of the cost of the services of the said accountants as estimated by them. 11.(a) "Year of Service" means each consecutive period of 365 days the Participant is in the continuous employ of a member or members of the Employer Group. If the Participant was in the employ of a member of the Employer Group on September 1, 1986 and is in the continuous employ of members of the Employer Group during the entire 5 year period commencing September 1, 1986 or ceases to be in the continuous employ of members of the Employer Group during such 5 year period by reason of the Participant's death, Disability or discharge by the Employer without Cause, the period of time immediately prior to September 1, 1986 during which the Participant was in the continuous employ of members of the Employer Group shall be taken into -4- account in determining a Year of Service hereunder. For purposes of this Section, "continuous employ of members of the Employer Group" means consecutive employment by members of the Employer Group without interruption by reason of self-employment or employment by a third party employer, except as provided in Section II (b)(ii) below. (b) A Participant shall be in the employ of the Employer regardless of absences by reason of: (i) sick leave, vacation leave, maternity leave or other special leave approved by the Employer which does not exceed 6 months, provided the Participant returns to work for the Employer not later than the expiration date of the authorized leave of absence; and (ii) time spent in the service of others at the request of, or with the approval of, the Employer, provided the Participant returns to work for the Employer within 15 days following cessation of work for such other party. 12. "Salary" means the base salary paid by the Employer, excluding all other forms of compensation, such as bonuses, special awards, severance pay, contributions under benefit plans, and the compensatory elements of stock awards. The payroll records of the Employer shall be conclusive and binding on the Participant, the Beneficiary and the employer as to the salary of the Participant. "One year's salary" shall mean the highest annual rate of salary at which the Participant was paid by the Employer at any time within five (5) years of the termination of the Participant's employment giving rise to the Company's obligation to make payments under Article IV hereof. 13. "Salary Limitation" means the highest percentage of one year's salary, which may not exceed 50%, specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 14. "Disability" means the inability of the Participant, by reason of physical condition, mental illness or accident, to perform substantially all of the duties of the position at which he was employed by the Employer when such disability commenced. 15. "Cause" means the Participant's misconduct involving willful malfeasance, such as breach of trust, fraud or dishonesty. All determinations as to "Disability" or "Cause" shall be made by the Board of Directors of the Employer, after a hearing at which the Participant may be present, and the determination by the Board of Directors shall be final and conclusive. -5- III. Employment Is Unrestricted. Nothing herein contained shall be deemed to give the Participant the right to remain in the employ of the Employer or to interfere with the right of the Employer to terminate the Participant's employment at any time, nor to give the Employer the right to require the Participant to remain in its employ or to interfere with the Participant's right to terminate employment at any time. IV. Compensation. 1. In the event (a) the Participant dies while in the employ of the Employer. (b) the Employer determines, in the manner provided in Article 1, Section 14 hereof, that the Participant is disabled and the employment of the Participant is terminated by the Employer by reason of Disability, (c) the Participant, after 5 Years of Service, terminates his or her employment with the Employer for a reason other than to enter the employ of another member of the Employer Group or (d) the employment of the Participant is terminated by the Employer for a reason other than Cause, then upon the happening of any such event the Company, subject to all the terms and conditions hereof, shall become obligated to pay to the Participant, or to the Beneficiary if the obligation arises under (a) above, each year, for the number of consecutive calendar years determined in accordance with the schedule on page 7 hereof, an amount equal to the lesser of (i) the Salary Limitation applied to one year's salary, or (ii) the Participation applied to the net profits of the Company for the calendar year immediately preceding the calendar year of payment, subject to adjustment as provided in Sections 2, 3 and 4 of this Article. 2. If the employment of the Participant is terminated by reason of an event occurring under (c) of Section 1 of this Article and at the effective date of such termination the Participant has not accumulated 20 Years of Service, the annual payment the Participant would have been entitled to receive under said Section 1 ("Proposed Payment") shall be reduced to an amount resulting from multiplying the Proposed Payment by a fraction the numerator of which is the Participant's Years of Service at the effective date of such termination and the denominator of which is 20. The Committee may, in its absolute discretion, waive this provision or reduce the number of the denominator in said fraction if it decides such action would be in the best interest of the Company and equitable to the Participant or the Beneficiary. -6- 3.(a) In the event of the Participant's death after the occurrence of an event described in (b), (c) or (d) of Section 1 of this Article and before the Participant has received payment(s) in respect of the total number of calendar years as to which the Company is obligated to make payment hereunder ("Payment Period"), the Company shall thereafter be obligated to make an annual payment to the Beneficiary during the Payment Period or the remainder thereof, as the case may be, equal to seventy five (75%) percent of the amount which the Company would have been obligated to pay to the Participant had the Participant lived to receive all payments. (b) In the event of the Participant's death while in the employ of the Employer, the Company shall be obligated to make an annual payment to the Beneficiary in the same manner and to the same extent as provided in (a) of this Section 2. 4. If during any period of twenty-four consecutive months assets of the Company are sold or otherwise disposed of having a value or aggregate value of thirty (30%) percent or more of the total assets of the Company as at the commencement date of said period ("Disposal Transaction"), then beginning with the calendar year in which the Disposal Transaction occurs the amount of the annual payments the Company may be obligated to make under the provisions of Section 1 of this Article shall be the Salary Limitation applied to one year's salary. If the asset sold or disposed of is stock of a Subsidiary, the value of the total assets, not net assets, of the Subsidiary shall be used for purposes of this Section 4. 5. The first calendar year of payment, if any, shall be the second calendar year following the calendar year in which the event that gave rise to the Company's obligation to pay occurred. If, however, such event is the death of the Participant while in the employ of the Employer, the first calendar year of payment shall be the first calendar year following the calendar year in which the Participant's death occurred. Payment shall be made by the Company in each calendar year of payment during the first ninety (90) days of the subject calendar year. 6. The amount payable hereunder by the Company in respect of the Payment Period shall be reduced by the value of pension, deferred compensation, retirement and like payments ("Retirement Payments") to be made following cessation of Participant's employment to the Participant, Beneficiary or other designee of the Participant pursuant to an agreement or arrangement between the Participant and one or more members of the Employer Group. For purposes hereof, Retirement Payments shall not include payments under a pension, profit-sharing or savings plan which qualifies for favorable tax treatment under the United States Internal Revenue Code, payments under an agreement financed solely by the Participant, and payments under an agreement which becomes operative by reason of a change in control of the Company (golden parachute agreement), but shall include payments described in paragraph 4 of the Employment Agreement between DDB Needham Worldwide Inc. and the Participant made on September 1, 1984, a copy of the text of which is attached hereto as Exhibit A. -7-
NUMBER OF YEARS OF PAYMENT Years of Service 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age at 30 1 1 1 2 2 Termination 31 1 1 1 2 2 2 32 1 1 1 2 2 3 33 1 1 2 2 2 3 3 34 1 2 2 2 3 3 3 4 35 1 1 2 2 3 3 3 4 4 4 36 1 1 2 2 3 3 3 4 4 4 5 37 1 1 2 3 3 4 4 4 5 5 5 6 38 1 2 3 3 4 4 4 5 5 5 6 6 6 39 1 2 3 3 4 4 4 5 5 5 6 6 6 7 40 1 1 2 3 3 4 4 5 5 5 6 6 6 7 7 7 41 1 1 2 3 4 4 4 5 5 5 6 6 6 7 7 7 8 42 1 2 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 43 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 44 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 45 1 1 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 46 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 47 1 2 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 48 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 49 1 2 3 4 5 5 6 6 7 7 7 8 8 8 9 9 9 10 50 1 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 51 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 52 1 2 3 4 5 6 6 7 7 8 8 8 9 9 9 10 53 1 2 3 4 5 6 7 7 8 8 8 9 9 9 10 54 1 2 3 4 5 6 7 8 8 8 9 9 9 10 55 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 56 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 57 0 1 2 3 4 5 6 7 8 8 9 9 9 10 58 0 1 2 3 4 5 6 7 8 8 9 9 9 10 59 0 1 2 3 4 5 6 7 8 8 9 9 10 60 0 1 2 3 4 5 6 7 8 8 9 9 10 and up
-8- V. Company's Payment Obligation Conditional on Participant's Refraining from Competitive and Harmful Activities After Severance of Employment. It is a condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder: (a) that the Participant shall not, directly or indirectly, engage in, nor become employed by or otherwise associated with any persons or entities engaged in, business of the same nature as or competitive with the business engaged in, at the time of Participant's severance of employment, by the Participant's Employer ("Protected Business") in (i) the United States and (ii) any other country in which at the time of Participant's severance of employment the Employer holds, directly or indirectly, more than fifty percent (50%) of the voting stock or its equivalent of an entity engaged in the same or a related business as that of the Employer; and the Participant shall not make any financial investment, direct or indirect, in any sole proprietorship or entity engaged in the same business as that of the Employer at the time of Participant's severance of employment ("Protected Investment"), provided nothing herein shall prohibit the purchase of less than a controlling interest in publicly traded securities of any such entity for bona fide investment only; (b) that the Participant shall not willfully engage in any activity which is harmful to the interest of the Company. The determination of (i) whether a business is of the same nature as, competitive with, or related to that of the Employer, (ii) whether any activity of a Participant is harmful to the interest of the Company, and (iii) whether the Participant has wilfully engaged in such harmful activity, shall be made by the Board of Directors of the Company after a hearing at which the Participant shall be entitled to be present, and the determination by the Board of Directors shall be final and conclusive; and (c) Nothing herein prohibits or restricts the Participant from engaging in Protected Easiness in the related areas described in Subsection (a) above, making a Protected Investment, or wilfully engaging in activity harmful to the interest of the Company (collectively "Activities"), and in the event the Participant chooses to engage in any of such Activities the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such Activity occurred and to the Participant or the Beneficiary in -9- respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. If requested in writing by the Company, the Participant shall, within 30 days after receipt of such request, advise the Company in writing whether the Participant has or has not engaged in such Activities for a specified calendar year, and the Company shall have no obligation to make a payment in respect of such calendar year until the Company has received such written advice from the Participant. VI. Company's Payment Obligation Conditional On Participant's Availability for Advisory and Consultative Services after Severance of Employment. (a) It is a further condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder, that the Participant, if not physically or mentally disabled, shall, as an independent contractor and upon not less than thirty (30) days prior written notice from the Company, make his or her services available to the Company for such periods of time as may be specified in the notice, as an advisor and consultant with respect to activities of the department or unit of the Employer's business to which the Participant was last assigned, provided, however, that the Participant shall not be obligated to make his or her services available (i) for more than sixty (60) days in the aggregate and for more than twenty (20) consecutive days in any one calendar year, and (ii) during the period December 15 through January 15. The Company shall reimburse the Participant for reasonable traveling, transportation and living expenses necessarily incurred by the Participant while away from his or her regular place of residence in the performance of such advisory and consultative services for the Company. (b) In the event the Participant chooses not to render advisory and consultative services when requested by the Company as provided in Subsection (a) above, the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such event occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. -10- VII. Prepayments. Following the occurrence of an event described in Section I of Article IV hereof, the Company may, at any time and from time to time, make a prepayment, in whole or in part, of its obligation hereunder in respect of any one or more calendar years and any such prepayment shall be irrevocable and non-refundable. VIII. Participant's and Beneficiary's Rights Hereunder Are Personal, Nonassignable and Nontransferable. 1. The right of the Participant or Beneficiary to receive payments hereunder is personal, non-assignable and non-transferable by operation of law or otherwise. The word "otherwise" in the preceding sentence shall include, without limitation, any execution, levy, garnishment, attachment or seizure by any other legal process. 2. If at the time the Company is to make a payment to the Participant or a Beneficiary hereunder the Participant or Beneficiary is not entitled to receive such payment by reason of non-compliance with the provisions of Section 1 of this Article, the obligation of the Company to make such payment shall forthwith terminate. IX. Designation and Identity of Beneficiary. 1. The Participant may designate a Beneficiary by signing, dating and filing with the Secretary of the Company a written instrument setting forth the name(s) and address(es) of the Beneficiary, and if the Beneficiary be more than one person or entity, describing the allocation of the payment benefit among them. The Participant may change his or her designation of a Beneficiary and thereby revoke a prior designation of a Beneficiary at any time and from time to time by filing a new such written instrument with the Secretary. The Beneficiary named in the last unrevoked designation of Beneficiary so filed by the Participant prior to his or her death shall be the Beneficiary for purposes of this Agreement. In the absence of a designation of Beneficiary by the Participant, or in the event the last written designation of Beneficiary on file with the Secretary has been revoked by the Participant, the Beneficiary shall be as described in Section 8 of Article. I of this Agreement. 2. It is a condition of the Company's obligation to make payments to the Beneficiary hereunder that (a) in making payments the Company may, in its sole and absolute discretion, rely upon signed, written declarations, verifying the identity of a Beneficiary filed with the Secretary of the Company by a person or entity claiming to be such Beneficiary; (b) any payment made by the Company in good faith to any claimant, whether or not such -11- declarations shall have been filed with the Company, shall pro tanto, discharge any obligation the Company might otherwise have to make payments to any and all other actual or possible claimants; (c) any person or entity claiming to be entitled to receive payments hereunder following the death of the Participant shall have recourse only against the person or entity to whom the Company shall have made payment in good faith; and (d) in the event the Company, on advice of counsel, delays payment of any sums becoming due to a Beneficiary by reason of a dispute as to the legitimacy of the claim of such Beneficiary, no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. X. Payment to Minors. Any payment to be made by the Company to a person under the age of twenty-one (21) years may be made to such person or to a guardian of the property of such person or to a parent of such person as the Company may, in its sole and absolute discretion, determine. As to any payment becoming due or payable to a person under the age of twenty-one (21) years, the Company may defer such payment until the Company has received notice of the appointment and qualification of a guardian of the property of such person, and no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. XI. Miscellaneous Provisions. 1. An act or determination by the Board of Directors of the Company or the Employer may be made by a committee of directors, numbering not less than three, appointed by the Board for such purpose. 2. Notices shall be sent by registered or certified mail, return receipt requested, to the Participant at the Participant's last address on file with his or her Employer or to such other address as may hereafter be designated by the Participant to the Company, and to the Beneficiary at the address listed in the latest written designation of beneficiary filed with the Company by the Participant or to such other address as may hereafter be designated by the Beneficiary to the Company subsequent to the death of the Participant. 3. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of any right hereunder, nor shall it deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. -12- 4. This Agreement sets forth the entire understanding of the parties in respect of the subject matter hereof, superseding, and evidencing and confirming the termination of, any and all prior agreements, arrangements or understandings between the parties relating to such subject matter, and neither party has relied on any representations of the other party except as expressly set forth herein. This Agreement may be amended only by a written instrument signed by both parties. 5. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and is subject to all applicable federal, state and municipal laws and regulations now or hereafter in force. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ Keith L. Reinhard -------------------------- Participant Omnicom Group Inc. By /s/ Allen Rosenshine ----------------------------- President and Chief Executive Officer Name of Participant: Keith L. Reinhard ----------------- Date of Birth: January 20, 1935 ----------------- Date First Commenced Service: September 1, 1986 ------------------- Name of Employer: DDB Needham Worldwide Inc. ------------------------- EXHIBIT A 4. Retirement Benefit. (a) Retirement Income. (i) When EXECUTIVE ceases to be in the employ of the Company, whether at or subsequent to the expiration of the employment period, other than by reason of termination of his employment by the Company for cause, the Company shall pay EXECUTIVE retirement income at an annual rate equal to the greater of (1) sixty-six thousand six hundred sixty-seven dollars ($66,667) or (ii) thirty-three and one-third percent (33 1/3%) of the weighted average annual salary (excluding bonuses and other benefits) paid by the Company to EXECUTIVE during the last sixty (60) months of his employment by the Company. For purposes of this paragraph 4, the rate of annual salary paid by the Company to EXECUTIVE during the employment period shall be deemed to be not less than Six Hundred Thousand Dollars ($600,000). The retirement income, as thus calculated, shall be subject to cost-of-living adjustments as set forth below. The retirement income provided for hereby shall be payable monthly, beginning in the month following the month during which EXECUTIVE ceases to be in the employ of the Company or during which payments, if any, being made to the EXECUTIVE under paragraph 2(c) hereof terminate, whichever is the last to occur, and continuing for ten (10) years. (ii) As of each anniversary of the date retirement income payments begin under paragraph 4(a)(i) ("Adjustment Date"), the amount of the retirement income payments to be made pursuant to paragraph 4(a)(i) -5- shall be increased or decreased, as the case may be be, by an amount equal to the amount of retirement income determined pursuant to paragraph 4(a)(i) (without regard to the adjustments provided in this paragraph 4(a)(ii) multiplied by the Cost-Of-Living Change, as defined below, provided that the incremental increase or decrease in such payments as of the then current Adjustment Date shall not exceed ten percent (10%) of the retirement income that would be payable (without regard to the proviso set forth below) if the Current Cost-Of-Living Index remained unchanged from the immediately preceding year; provided, however, that if any portion of an increase or decrease that would otherwise apply on any Adjustment Date cannot be made effective because of the foregoing ten percent (10%) limitation, such portion of the increase or decrease shall be applied on immediately succeeding Adjustment Dates (after calculation of the amount otherwise due as of such Adjustment Date and to the extent such application will not result in an aggregate increase or decrease that exceeds the applicable ten percent (10%) limit) until such amount is exhausted (or the period during which payments are to be made ends). For the purpose of this paragraph 4(a)(ii): (A) the "Current Cost-Of-Living Index" as of any Adjustment Date shall be the monthly National Consumer Price Index figure for the month next preceding the Adjustment Date issued by the Bureau of Labor Statistics of the United States Department of Labor; (B) the "Base Cost-Of-Living Index" shall mean the monthly National Consumer Price Index figure issued for the month next preceding the month as of which retirement income payments begin as provided in the last sentence of paragraph 4(a)(i) above; -6- (C) the "Cost-Of-Living Change" as of any Adjustment Date shall be a fraction whose numerator is an amount equal to the Current Cost-Of Living Index minus the Base Cost-Of-Living Index and whose denominator Is the Base Cost-Of-Living Index. Should the method of determining the Monthly Consumer Price Index be revised by the Bureau of Labor Statistics, such revisions as the Board of Directors of the Company shall determine to be appropriate and equitable shall be made in the calculation of the Current Cost-of-Living Index hereunder. (b) Breach by Executive. (i) EXECUTIVE may engage in the advertising agency business, as an owner or employee of another advertising agency, at a time when the Company is obligated to pay retirement income to the EXECUTIVE pursuant to paragraph 4(a)(i) so long as such activity is not inconsistent with the covenants of the EXECUTIVE set forth in paragraph 4(b)(ii) below. In the event that the EXECUTIVE engages in the advertising agency business as permitted in this paragraph 4(b)(ii), the obligation of the Company to pay retirement income, and the obligation of the EXECUTIVE to render services to the Company under paragraph 4(c), will be suspended until the EXECUTIVE ceases to be so engaged in the advertising agency business or dies, at which time such obligations of the Company and of the EXECUTIVE (if he is living) will be reinstated. The ten (10) year period referred to in paragraph 4(a)(i) shall be extended by the period of any such suspension. If the EXECUTIVE shall again so engage in the advertising agency business, the obligations of the parties shall again be suspended and subsequently reinstated in the same manner. -7- (ii) During the period EXECUTIVE is entitled to receive retirement income as provided in paragraph 4(a)(i)("Entitlement Period"), and during the period, if any, that the obligations of the Company to pay retirement income is suspended as provided in paragraph 4(b)(i) ("Suspension Period"), the EXECUTIVE covenants and agrees that: (A) during the Entitlement Period and the Suspension Period the EXECUTIVE will not, directly or indirectly, persuade or attempt to persuade any client of the Company or any subsidiary to discontinue in whole or in part any service rendered by the Company or any subsidiary to such client; (B) during the first year of the Entitlement Period or the Suspension Period, whichever first occurs, the EXECUTIVE will not render services, in behalf of any other advertising agency, to any client of the Company or any subsidiary or to any former client of the Company or any subsidiary, unless such former client shall have ceased to be a client of the Company or such subsidiary at least one (1) year before the EXECUTIVE became associated with such other advertising agency; and (C) during the first year of the Entitlement Period or the Suspension Period, whichever first occurs, the EXECUTIVE will not furnish any services to or for any company or advertising agency with respect to any product or services which are identical or competitive with any product serviced or services furnished by the Company or any subsidiary at the time or within one (1) year prior to the commencement of the applicable period. -8- Products will be deemed competitive if they can be used for the same or similar purposes. Without limiting any other remedy which the Company nay have in law or in equity, in the event of the breach of this covenant by the EXECUTIVE, the Company may discontinue the inking of any and all payments provided for in paragraph 4(a)(i). (c) Consulting Agreement. (i) The EXECUTIVE agrees that at all times during which he is entitled to receive retirement income pursuant to paragraph 4(a)(i) he will take himself available in an advisory and consulting capacity to render general advice and consultation. (ii) With respect to the advisory and consulting services referred to in paragraph 4(c)(i) above, (A) it is anticipated that the EXECUTIVE normally will not devote to the performance of such services more than five (5) business days in any month during which he is obligated to render such advisory or consulting services; (B) the Company will consider the reasonable convenience of the EXECUTIVE in the timing of its requests to perform such services and will give the EXECUTIVE as much advance notice of such requests as may be practicable; (C) this agreement on the part of the EXECUTIVE is not intended to subordinate the EXECUTIVE's other activities, whether personal, business or otherwise, to those of the Company, it being understood that the EXECUTIVE shall be free to arrange his own time and pursuits and to perform such services in manners and at times and places of his own choosing; and (D) the EXECUTIVE will not be obligated to render such advisory or consulting services with respect to matters in which the interests of any business, other than the advertising agency business, in which the EXECUTIVE is engaging as an owner or employee, are incompatible with those of the Company. -9- (iii) After the date upon which the EXECUTIVE attains age sixty-five (65), or in the event he becomes disabled at any time in the opinion of competent medical authority, he will not be obligated to perform the consulting and advisory services provided for in paragraph 4(c)(i). In any such event, the EXECUTIVE shall continue to be entitled to receive the retirement income provided for by paragraph 4(a)(1). In the event EXECUTIVE breaches the provisions of this paragraph 4(c), the Company may discontinue the making of any payments provided for in paragraph 4(a)(i) in respect of the period of the breach. (d) Death of EXECUTIVE. (i) In the event the EXECUTIVE shall die while in the employ of the Company, the retirement income payments will be made in accordance with paragraph 4(a)(i) as though the ten (10) year period contemplated therein had commenced on the first day of the month following the date of his death. (ii) In the event the EXECUTIVE shall die during the Entitlement Period or the Suspension Period, the retirement income payments provided for by paragraph 4(a)(i) will continue for the reminder of the ten (10) year period contemplated therein. (iii) Any payment due under paragraphs 4(d)(i) and 4(d)(ii) will be made to or for the benefit of such person or persons as the EXECUTIVE shall have designated in the last unrevoked written notice filed by him prior to his death with the Secretary of the Company, or, if the EXECUTIVE shall have failed to file such written notice or shall have revoked all such written notices filed by him during his lifetime, to his widow, or, if he shall not be survived by a widow, to the executors or administrators of his estate. -10- (iv) The Company may in its sole discretion accelerate the payment of any one or more of the monthly installments payable under this paragraph 4(d), but neither the designee of the EXECUTIVE nor the widow or estate of the EXECUTIVE will have any right to demand that any installment be accelerated. EX-10.7D 6 e13715ex10_7d.txt ALLEN ROSENSHINE EXECUTIVE SALARY EXHIBIT 10.7d BBDO WORLDWIDE INC. 1989 SEVERANCE COMPENSATION AGREEMENT Agreement made the 9th day of January 1989 by and between BBDO Worldwide Inc. (herein the "Company"), a New York corporation with its place of business at 1285 Avenue of the Americas, New York, New York 10019, and Allen Rosenshine (herein the "Participant"). I. Definitions. The following terms shall have the meaning set forth below: 1. "Subsidiary" means any company in which the Company holds, directly or indirectly, fifty percent (50%) or more of its outstanding voting stock. 2. "Affiliate" means any company in which the Company holds, directly or indirectly, not less than twenty percent (20%) but not more than forty-nine percent (49%) of its outstanding voting stock. 3. "Parent" means the company which directly holds all of the outstanding voting stock of the Company. 4. "Subsidiary of the Parent" means any company in which the Parent holds, directly or indirectly, fifty percent (50%) or more of its outstanding voting stock. 5. "Affiliate of the Parent" means any company in which the Parent holds, directly or indirectly, not less than twenty percent (20%) but not more than forty-nine percent (49%) of its outstanding voting stock. 6. "Employer" means the Company, a Subsidiary, the Parent, or a Subsidiary of the Parent. 7. "Employer Group" means the Company, all Subsidiaries, the Parent, and all Subsidiaries of the Parent. 8. "Beneficiary" means any person, persons, entity or entities designated in writing by the Participant to the Company to receive payment, if any, to be made hereunder following the death of the Participant, and in the absence of such designation, means (i) the Participant's surviving spouse, while living, and (ii) if there be no surviving spouse or upon the death of the surviving spouse, then to the estate of the Participant. 9. "Participation" means the highest percentage of the annual net profits of the Company and the Parent specified by the Company and communicated to the Participant in writing by the Chairman of the Board, President, Chief Financial Officer or the Secretary of the Company. -2- 10(a) "Net profits of the Company" means the consolidated net profits of the Company for a calendar year determined in accordance with its then current accounting procedures and practices before deducting any United States income tax applicable to its taxable income for such year. In determining net profits of the Company, the following shall apply: (i) dividends from Subsidiaries and Affiliates shall be excluded from income; (ii) the Company's interest in the net profit or loss of Subsidiaries and Affiliates before deducting any United States or foreign national income tax shall be included in income; (iii) any liability to make payments or payments made under this document or under like documents with others shall not be deducted as an expense; (iv) the premiums for and the proceeds of life insurance policies payable to the Company and/or a Subsidiary shall not be deducted as an expense or included in income, as the case may be; (v) the aggregate amount, if any, by which employee compensation (salary, bonus, service awards, stock awards and the like, but excluding employer contributions to pension deferred profit sharing plans and/or savings plans) paid or accrued in respect of a calendar year by the Company and its Subsidiaries exceeds fifty-two (52%) percent of such year's consolidated gross income of the Company (income from all sources except for dividends from Subsidiaries and Affiliates, and before adjustments, if any, resulting from efficiency incentive compensation arrangements with clients) shall not be deducted as an expense; and (vi) in respect of each calendar year commencing with calendar year 1989, the aggregate amount, if any, by which interest and other charges for the borrowing of funds paid or accrued in respect of a calendar year by the Company and its Subsidiaries ("Debt Service") exceeds the Allowable Debt Service for the subject year shall not be deducted as an expense; for purposes hereof "Allowable Debt Service" means (A) for calendar year 1988 the actual Debt Service for such year, (B) for calendar year 1989, the Allowable Debt Service for calendar year 1988 increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for 1989 over the actual Debt Service for 1988, whichever results in the lower amount, and (C) for each calendar year subsequent to calendar year 1989, the Allowable Debt Service for the immediately preceding calendar year increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for the subject calendar year over the actual Debt Service for the immediately preceding calendar year, whichever results in the lower amount. -3- (b) "Net profits of the Parent" means the consolidated net profits of the Parent for a calendar year determined in accordance with its then current accounting procedures and practices before deducting any United States income tax applicable to its taxable income for such year. In determining net profits of the Parent, the following shall apply: (i) dividends from Subsidiaries and Affiliates of the Parent shall be excluded from income; (ii) the Parent's interest in the net profit or loss of Subsidiaries and Affiliates of the Parent before deducting any United States or foreign national income tax shall be included in income; (iii) any liability of the Company to make payments or payments made by the Company under this document, or any liability of the Company or the Parent to make payments or payments made by the Company or the Parent under like or substantially similar documents with others shall not be deducted as an expense; (iv) the premiums for and the proceeds of life insurance policies payable to the Parent and/or a Subsidiary of the Parent shall not be deducted as an expense or included in income, as the case may be; (v) the aggregate amount, if any, by which employee compensation (salary, bonus, service awards, stock awards and the like, but excluding employer contributions to pension and/or deferred profit sharing plans) paid or accrued in respect of a calendar year by the Parent and the Subsidiaries of the Parent exceeds fifty-two (52%) percent of such year's consolidated gross income of the Parent (income from all sources except for dividends from Subsidiaries and Affiliates of the Parent, and before adjustments, if any, resulting from efficiency incentive compensation arrangements with clients) shall not be deducted as an expense; and (vi) in respect of each calendar year commencing with calendar year 1989, the aggregate amount, if any, by which interest and other charges for the borrowing of funds paid or accrued in respect of a calendar year by the Parent and Subsidiaries of the Parent ("Parent Debt Service") exceeds the Allowable Debt Service for the subject year shall not be deducted as an expense; for purposes hereof "Allowable Debt Service" means (A) for calendar year 1988 the actual Parent Debt Service for such year, (B) for calendar year 1989, the Allowable Debt Service for calendar year 1988 increased by 20% or increased by the percentage increase, in any, in the actual Parent Debt Service for 1989 over the actual Parent Debt Service for 1988, whichever results in the lower amount, and (C) for each calendar year subsequent to calendar year 1989, the Allowable Debt Service -4- for the immediately preceding calendar year increased by 20% or increased by the percentage increase, if any, in the actual Parent Debt Service for the subject calendar year over the actual Parent Debt Service for the immediately preceding calendar year, whichever results in the lower amount. (c) The Company, upon its own initiative may, or shall upon receipt of written demand from the Participant or the Beneficiary, as the case may be, designate a firm of public accountants, which may or may not be the firm of accountants regularly employed by the Company to verify the Company's determination of net profits of the Company, and to determine any question arising in the course of such verification not herein specifically provided for. The determination by such firm of public accountants shall be binding and conclusive. In computing net profits of the Company and the Parent, the public accountants shall conform to the accounting procedures and practices of the entity as modified by the provisions of subparagraph (a) and (b) of this Section 10. A condition of the right to demand verification as aforesaid is that the person requesting verification shall reimburse the Company to the extent of one-half of the cost of the services of such public accountants, and, at the request of the Company and before the accountants shall have commenced the verification work, shall pay to the Company one-half of the cost of the services of the said accountants as estimated by them. 11(a) "Year of Service" means each consecutive period of 365 days the Participant is in the continuous employ of a member or members of the Employer Group. (b) A Participant shall be in the employ of the Employer regardless of absences by reason of: (i) sick leave, vacation leave, maternity leave or other special leave approved by the Employer which does not exceed 6 months, provided the Participant returns to work for the Employer not later than the expiration date of the authorized leave of absence; and (ii) time spent in the service of others at the request of, or with the approval of, the Employer, provided the Participant returns to work for the Employer within 15 days following cessation of work for such other party. 12. "Salary" means the base salary paid by the Employer, excluding all other forms of compensation, such as bonuses, special awards, severance pay, contributions under benefit plans, and the compensatory elements of stock awards. The payroll records of the Employer shall be conclusive and binding on the Participant, the Beneficiary and the Employer as to the salary of the Participant. "One Year's Salary" means the highest annual rate of salary at which the Participant was paid by the Employer at any time within five (5) years of the termination of the Participant's employment giving rise to the Company's obligation to make payments under Article III hereof. -5- 13. "Salary Limitation" means the highest percentage of One Year's Salary, specified by the Company and communicated to the Participant in writing by the Chairman of the Board, President, Chief Financial Officer or the Secretary of the Company. 14. "Disability" means the inability of the Participant, by reason of physical condition, mental illness or accident, to perform substantially all of the duties of the position at which he was employed by the Employer when such disability commenced. 15. "Cause" means the Participant's misconduct involving willful malfeasance, such as breach of trust, fraud or dishonesty. All determinations as to "Disability" or "Cause" shall be made by the Board of Directors of the Employer, after a hearing at which the Participant may be present, and the determination by the Board of Directors shall be final and conclusive. II. Employment Is Unrestricted. Nothing herein contained shall be deemed to give the Participant the right to remain in the employ of the Employer or to interfere with the right of the Employer to terminate the Participant's employment at any time, nor to give the Employer the right to require the Participant to remain in its employ or to interfere with the Participant's right to terminate employment at any time. III. Compensation. 1. In the event (a) the Participant dies while in the employ of the Employer, (b) the Employer determines, in the manner provided in Article 1, Section 14 hereof, that the Participant is disabled and the employment of the Participant is terminated by the Employer by reason of Disability, (c) the Participant terminates his or her employment with the Employer for a reason other than to enter the employ of another member of the Employer Group or (d) the employment of the Participant is terminated by the Employer for a reason other than Cause, then upon the happening of any such event the Company, subject to all the terms and conditions hereof, shall become obligated to pay to the Participant, or to the Beneficiary if the obligation arises under (a) above, each year, for the number of consecutive calendar years determined in accordance with the schedule on page 7 hereof, an amount equal to the lesser of (i) the Salary Limitation applied to One Year's Salary, or (ii) the greater of the Participation applied to the net profits of the Company or the net profits of the Parent for the calendar year immediately preceding the calendar year of payment, the resulting amount being subject to adjustment as provided in Sections 2 and 3 of this Article. -6- 2.(a) In the event of the Participant's death after the occurrence of an event described in (b), (c) or (d) of Section 1 of this Article and before the Participant has received payment(s) in respect of the total number of calendar years as to which the Company is obligated to make payment hereunder ("Payment Period"), the Company shall thereafter be obligated to make an annual payment to the Beneficiary during the Payment Period or the remainder thereof, as the case may be, equal to seventy five (75%) percent of the amount which the Company would have been obligated to pay to the Participant had the Participant lived to receive all payments. (b) In the event of the Participant's death while in the employ of the Employer, the Company shall be obligated to make an annual payment to the Beneficiary in the same manner and to the same extent as provided in (a) of this Section 2. 3. If during any period of twenty-four consecutive months assets of the Parent are sold or otherwise disposed of having a value or aggregate value of thirty (30%) percent or more of the total assets of the Parent as at the commencement date of said period ("Disposal Transaction"), then beginning with the calendar year in which the Disposal Transaction occurs the amount of the annual payments the Company may be obligated to make under the provisions of Section 1 of this Article shall be the Salary Limitation applied to One Year's Salary. If the asset sold or disposed of is stock of a Subsidiary of the Parent, the value of the total assets, not net assets, of such Subsidiary shall be used for purposes of this Section 3. 4. The first calendar year of payment, if any, shall be the second calendar year following the calendar year in which the event that gave rise to the Company's obligation to pay occurred. If, however, such event is the death of the participant while in the employ of the Employer, the first calendar year of payment shall be the first calendar year following the calendar year in which the Participant's death occurred. Payment shall be made by the Company in each calendar year of payment during the first ninety (90) days of the subject calendar year. 5. If requested by a Participant, the Board of Directors of the Company may, in its sole discretion, extend a Payment Period of ten (10) calendar years to fifteen (15) and/or twenty (20) calendar years and correspondingly decrease the obligations of the Company to pay the Participant or the Beneficiary, as the case may be, in each of the calendar years of the applicable extended Payment Period, such decrease to be actually determined on the basis of life expectancy and interest rates. -7-
NUMBER OF YEARS OF PAYMENT Years of Service 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age at 30 1 1 1 2 2 Termination 31 1 1 1 2 2 2 32 1 1 1 2 2 3 33 1 1 2 2 2 3 3 34 1 2 2 2 3 3 3 4 35 1 1 2 2 3 3 3 4 4 4 36 1 1 2 2 3 3 3 4 4 4 5 37 1 1 2 3 3 4 4 4 5 5 5 6 38 1 2 3 3 4 4 4 5 5 5 6 6 6 39 1 2 3 3 4 4 4 5 5 5 6 6 6 7 40 1 1 2 3 3 4 4 5 5 5 6 6 6 7 7 7 41 1 1 2 3 4 4 4 5 5 5 6 6 6 7 7 7 8 42 1 2 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 43 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 44 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 45 1 1 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 46 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 47 1 2 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 48 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 49 1 2 3 4 5 5 6 6 7 7 7 8 8 8 9 9 9 10 50 1 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 51 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 52 1 2 3 4 5 6 6 7 7 8 8 8 9 9 9 10 53 1 2 3 4 5 6 7 7 8 8 8 9 9 9 10 54 1 2 3 4 5 6 7 8 8 8 9 9 9 10 55 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 56 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 57 0 1 2 3 4 5 6 7 8 8 9 9 9 10 58 0 1 2 3 4 5 6 7 8 8 9 9 9 10 59 0 1 2 3 4 5 6 7 8 8 9 9 10 60 0 1 2 3 4 5 6 7 8 8 9 9 10 and up
-8- IV. Company's Payment Obligation Conditional on Participant's Refraining from Competitive and Harmful Activities After Severance of Employment. It is a condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article III hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder: (a) that the Participant shall not directly or indirectly, engage in, nor become employed by or otherwise associated with any persons or entities engaged in, business of the same nature as or competitive with the business engaged in, at the time of Participant's severance of employment, by the Participant's Employer ("Protected Business") in (i) the United States and (ii) any other country in which at the time of Participant's severance of employment the Employer holds, directly or indirectly, more than fifty percent (50%) of the voting stock or its equivalent of an entity engaged in the same or a related business as that of the Employer; and the Participant shall not make any financial investment, direct or indirect, in any sole proprietorship or entity engaged in the same business as that of the Employer at the time of Participant's severance of employment ("Protected Investment"), provided nothing herein shall prohibit the purchase of less than a controlling interest in publicly traded securities of any such entity for bona fide investment only; (b) that the Participant shall not wilfully engage in any activity which is harmful to the interest of the Company. The determination of (i) whether a business is of the same nature as, competitive with, or related to that of the Employer, (ii) whether any activity of a Participant is harmful to the interest of the Company and (iii) whether the Participant has wilfully engaged in such harmful activity, shall be made by the Board of Directors of the Company after a hearing at which the Participant shall be entitled to be present, and the determination by the Board of Directors shall be final and conclusive; and (c) Nothing herein prohibits or restricts the Participant from engaging in Protected Business in the areas described in Subsection (a) above, making a Protected Investment, or wilfully engaging in activity harmful to the interest of the Company (collectively "Activities"), and in the event the Participant chooses to engage in any of such Activities the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such Activity occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant -9- shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. If requested in writing by the Company, the Participant shall, within 30 days after receipt of such request, advise the Company in writing whether the Participant has or has not engaged in such Activities for a specified calendar year, and the Company shall have no obligation to make a payment in respect of such calendar year until the Company has received such written advice from the Participant. V. Company's Payment Obligation Conditional On Participant's Availability for Advisory and Consultative Services after Severance of Employment. (a) It is a further condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article III hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder, that the Participant, if not physically or mentally disabled, shall, as an independent contractor and upon not less than thirty (30) days prior written notice from the Company, make his or her services available to the Company for such periods of time as may be specified in the notice, as an advisor and consultant with respect to activities of the department or unit of the Employer's business to which the Participant was last assigned, provided, however, that the Participant shall not be obligated to make his or her services available (i) for more than sixty (60) days in the aggregate and for more than twenty (20) consecutive days in any one calendar year, and (ii) during the period December 15 through January 15. The Company shall reimburse the Participant for reasonable traveling, transportation and living expenses necessarily incurred by the Participant while away from his or her regular place of residence in the performance of such advisory and consultative services for the Company. (b) In the event the Participant chooses not to render advisory and consultative services when requested by the Company as provided in Subsection (a) above, the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such event occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. -10- VI. Prepayments. Following the occurrence of an event described in Section 1 of Article III hereof, the Company may, at any time and from time to time, make a prepayment, in whole or in part, of its obligation hereunder in respect of any one or more calendar years and any such prepayment shall be irrevocable and non-refundable. VII. Participant's and Beneficiary's Rights Hereunder Are Personal, Nonassignable and Nontransferable. 1. The right of the Participant or Beneficiary to receive payments hereunder is personal, non-assignable and non-transferable by operation of law or otherwise. The word "otherwise" in the preceding sentence shall include, without limitation, any execution, levy, garnishment, attachment or seizure by any other legal process. 2. If at the time the Company is to make a payment to the Participant or a Beneficiary hereunder the Participant or Beneficiary is not entitled to receive such payment by reason of non-compliance with the provisions of Section 1 of this Article, the obligation of the Company to make such payment shall forthwith terminate. VIII. Designation and Identity of Beneficiary. 1. The Participant may designate a Beneficiary by signing, dating and filing with the Secretary of the Company a written instrument setting forth the name(s) and address(es) of the Beneficiary, and if the Beneficiary be more than one person or entity, describing the allocation of the payment benefit among them. The Participant may change his or her designation of a Beneficiary and thereby revoke a prior designation of a Beneficiary at any time and from time to time by filing a new such written instrument with the Secretary. The Beneficiary named in the last unrevoked designation of Beneficiary so filed by the Participant prior to his or her death shall be the Beneficiary for purposes of this Agreement. In the absence of a designation of Beneficiary by the Participant, or in the event the last written designation of Beneficiary on file with the Secretary has been revoked by the Participant, the Beneficiary shall be as described in Section 8 of Article I of this Agreement. 2. It is a condition of the Company's obligation to make payments to the Beneficiary hereunder that (a) in making payments the Company may, in its sole and absolute discretion, rely upon signed, written declarations, verifying the identity of a Beneficiary filed with the Secretary of the Company by a person or -11- entity claiming to be such Beneficiary; (b) any payment made by the Company in good faith to any claimant, whether or not such declarations shall have been filed with the Company, shall pro tanto, discharge any obligation the Company might otherwise have to make payment to any and all other actual or possible claimants; (c) any person or entity claiming to be entitled to receive payments hereunder following the death of the Participant shall have recourse only against the person or entity to whom the Company shall have made payment in good faith; and (d) in the event the Company, on advice of counsel, delays payment of any sums becoming due to a Beneficiary by reason of a dispute as to the legitimacy of the claim of such Beneficiary, no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. IX. Payment to Minors. Any payment to be made by the Company to a person under the age of twenty-one (21) years may be made to such person or to a guardian of the property of such person or to a parent of such person as the Company may, in its sole and absolute discretion, determine. As to any payment becoming due or payable to a person under the age of twenty-one (21) years, the Company may defer such payment until the Company has received notice of the appointment and qualification of a guardian of the property of such person, and no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. X. Miscellaneous Provisions. 1. An act or determination by the Board of Directors of the Company or the Employer may be made by a committee of directors, numbering not less than three, appointed by the respective Board for such purpose. 2. Notices shall be sent by registered or certified mail, return receipt requested, to the Participant at the Participant's last address on file with his or her Employer or to such other address as may hereafter be designated by the Participant to the Company, and to the Beneficiary at the address listed in the latest written designation of beneficiary filed with the Company by the Participant or to such other address as may hereafter be designated by the Beneficiary to the Company subsequent to the death of the Participant. 3. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of any right hereunder, nor shall it deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. -12- 4. This Agreement sets forth the entire understanding of the parties in respect of the subject matter hereof, superseding, and evidencing and confirming the termination of, any and all prior agreements, arrangements or understandings between the parties relating to such subject matter, and neither party has relied on any representations of the other party except as expressly set forth herein. This Agreement may be amended only by a written instrument signed by both parties. 5. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and is subject to all applicable federal, state and municipal laws and regulations now or hereafter in force. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ Allen Rosenshine ---------------------------- Participant BBDO Worldwide Inc. By /s/ Norman W. Campbell ------------------------- Chairman of the Board and Chief Executive Officer Name of Participant: Allen Rosenshine ---------------- Date of Birth: March 14, 1939 -------------- Date First Commenced Service: May 17, 1965 ------------ Name of Employer: Omnicom Group, Inc. ------------------- EX-10.7E 7 e13715ex10_7e.txt JOHN WREN EXECUTIVE SALARY EXHIBIT 10.7e OMNICOM GROUP INC. EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT Agreement made the 26th day of November, 1990 by and between Omnicom Group Inc., a New York corporation, its place of business at 437 Madison Avenue, New York, New York 10022, and John Wren ("Participant"), an employee of Omnicom Group Inc. I. Purpose of the Plan. The purpose of the 1988 Executive Salary Continuation Plan (the "Plan") is to further the growth of Omnicom Group Inc. by offering a benefit to encourage experienced executives to enter the employ of Omnicom Group Inc. or one of its Subsidiary companies, and to encourage key executives to remain in the employ of Omnicom or a Subsidiary company. II. Definitions. The following terms shall have the meaning set forth below: 1. "Company" means Omnicom Group Inc. 2. "Subsidiary" means any company in which the Company holds, directly or indirectly, fifty percent (50%) or more of its outstanding voting stock. 3. "Affiliate" means any company in which the Company holds, directly or indirectly, not less than twenty percent (20%) but not more than forty nine percent (49%) of its outstanding voting stock. 4. "Employer" means the Company or a Subsidiary. 5. "Employer Group" means the Company and all Subsidiaries. 6. "Committee" means the Compensation Committee of the Board of Directors of the Company, or if there should be no Compensation Committee means a committee of not less than three members of the Board of Directors of the Company none of whom shall, while serving as a member of the committee, be eligible to participate in the Plan. 7. "Participant" means an employee of the Employer recommended by the Chief Executive Officer of the Company and approved by the Committee as a participant in the Plan. -2- 8. "Beneficiary" means any person, persons, entity or entities designated in writing by the Participant to the Company to receive payment, if any, to be made hereunder following the death of the Participant, and in the absence of such designation, means (i) the Participant's surviving spouse, while living, and (ii) if there be no surviving spouse or upon the death of the surviving spouse, then to the estate of the Participant. 9. "Participation" means the highest percentage of the annual net profits of the Company specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 1O.(a) "Net profits of the Company" means the consolidated net profits of the Company for a calendar year determined in accordance with its then current accounting procedures and practices before deducting any United States income tax applicable to its taxable income for such year. In determining net profits of the Company, the following shall apply: (i) dividends from Subsidiaries and Affiliates shall be excluded from income; (ii) the Company's interest in the net profit or loss of Subsidiaries and Affiliates before deducting any United States or foreign national income tax shall be included in income; (iii) any liability to make payments or payments made under this document or under like documents with others shall not be deducted as an expense; (iv) the premiums for and the proceeds of life insurance policies payable to the Company and/or a Subsidiary shall not be deducted as an expense or included in income, as the case may be; (v) the aggregate amount, if any, by which employee compensation (salary, bonus, service awards, stock awards and the like, but excluding contributions to pension and/or deferred profit sharing plans) paid or accrued in respect of a calendar year by the Company and its Subsidiaries exceeds fifty-two (52%) percent of such year's consolidated gross income of the Company (income from all sources except for dividends from Subsidiaries and Affiliates, and before adjustments, if any, resulting from efficiency incentive compensation arrangements with clients) shall not be deducted as an expense; and -3- (vi) in respect of each calendar year commencing with calendar year 1989, the aggregate amount, if any, by which interest and other charges for the borrowing of funds paid or accrued in respect of a calender year by the Company and its Subsidiaries ("Debt Service") exceeds the Allowable Debt Service for the subject year shall not be deducted as an expense; for purposes hereof "Allowable Debt Service" means (A) for calendar year 1988 the actual Debt Service for such year, (B) for calendar year 1989, the Allowable Debt Service for calendar year 1988 increased by 20% or increased by the percentage increase, in any, in the actual Debt Service for 1989 over the actual Debt Service for 1988, whichever results in the lower amount, and (C) for each calendar year subsequent to calendar year 1989, the Allowable Debt Service for the immediately preceding calendar year increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for the subject calendar year over the actual Debt Service for the immediately preceding calendar year, whichever results in the lower amount. (b) The Company, upon its own initiative may, or shall upon receipt of written demand from the Participant or the Beneficiary, as the case may be, designate a firm of public accountants, which may or may not be the firm of accountants regularly employed by the Company to verify the Company's determination of net profits of the Company, and to determine any question arising in the course off such verification not herein specifically provided for. The determination by such firm of public accountants shall be binding and conclusive. In computing net profits of the Company, the public accountants shall conform to the accounting procedures and practices of the Company as modified by the provisions of subparagraph (a) of this Section 10. A condition of the right to demand verification as aforesaid is that the person requesting verification shall reimburse the Company to the extent of one-half of the cost of the services of such public accountants, and, at the request of the Company and before the accountants shall have commenced the verification work, shall pay to the Company one-half of the cost of the services of the said accountants as estimated by them. 11.(a) "Year of Service" means each consecutive period of 365 days the Participant is in the continuous employ of a member or members of the Employer Group. If the Participant was in the employ of a member of the Employer Group on September 1, 1986 and is in the continuous employ of members of the Employer Group during the entire 5 year period commencing September 1, 1986 or ceases to be in the continuous employ of members of the Employer Group during such 5 year period by reason of the Participant's death, Disability or discharge by the Employer without Cause, the period of time immediately prior to September 1, 1986 during which the Participant was in the continuous employ of members of the Employer Group shall be taken into -4- account in determining a Year of Service hereunder. For purposes of this Section, "continuous employ of members of the Employer Group" means consecutive employment by members of the Employer Group without interruption by reason of self-employment or employment by a third party employer, except as provided in Section 11 (b)(ii) below. (b) A Participant shall be in the employ of the Employer regardless of absences by reason of: (i) sick leave, vacation leave, maternity leave or other special leave approved by the Employer which does not exceed 6 months, provided the Participant returns to work for the Employer not later than the expiration date of the authorized leave of absence; and (ii) time spent in the service of others at the request of, or with the approval of, the Employer, provided the Participant returns to work for the Employer within 15 days following cessation of work for such other party. 12. "Salary" means the base salary paid by the Employer, excluding all other forms of compensation, such as bonuses, special awards, severance pay, contributions under benefit plans, and the compensatory elements of stock awards. The payroll records of the Employer shall be conclusive and binding on the Participant, the Beneficiary and the Employer as to the salary of the Participant. "One year's salary" shall mean the highest annual rate of salary at which the Participant was paid by the Employer at any time within five (5) years of the termination of the Participant's employment giving rise to the Company's obligation to make payments under Article IV hereof. 13. "Salary Limitation" means the highest percentage of one year's salary, which may not exceed 50%, specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 14. "Disability" means the inability of the Participant, by reason of physical condition, mental illness or accident, to perform substantially all of the duties of the position at which he was employed by the Employer when such disability commenced. 15. "Cause" means the Participant's misconduct involving wilful malfeasance, such as breach of trust, fraud or dishonesty. All determinations as to "Disability" or "Cause" shall be made by the Board of Directors of the Employer, after a hearing at which the Participant may be present, and the determination by the Board of Directors shall be final and conclusive. -5- III. Employment Is Unrestricted. Nothing herein contained shall be deemed to give the Participant the right to remain in the employ of the Employer or to interfere with the right of the Employer to terminate the Participant's employment at any time, nor to give the Employer the right to require the Participant to remain in its employ or to interfere with the Participant's right to terminate employment at any time. IV. Compensation. 1. In the event (a) the Participant dies while in the employ of the Employer, (b) the Employer determines, in the manner provided in Article II, Section 14 hereof, that the Participant is disabled and the employment of the Participant is terminated by the Employer by reason of Disability, (c) the Participant, after 5 Years of Service, terminates his or her employment with the Employer for a reason other than to enter the employ of another member of the Employer Group or (d) the employment of the Participant is terminated by the Employer for a reason other than Cause, then upon the happening of any such event the Company, subject to all the terms and conditions hereof, shall become obligated to pay to the Participant, or to the Beneficiary if the obligation arises under (a) above, each year, for the number of consecutive calendar years determined in accordance with the schedule on page 7 hereof, an amount equal to the lesser of (i) the Salary Limitation applied to one year's salary, or (ii) the Participation applied to the net profits of the Company for the calendar year immediately preceding the calendar year of payment, subject to adjustment as provided in Sections 2, 3 and 4 of this Article. 2. If the employment of the Participant is terminated by reason of an event occurring under (c) of Section 1 of this Article and at the effective date of such termination the Participant has not accumulated 20 Years of Service, the annual payment the Participant would have been entitled to receive under said Section 1 ("Proposed Payment") shall be reduced to an amount resulting from multiplying the Proposed Payment by a fraction the numerator of which is the Participant's Years of Service at the effective date of such termination and the denominator of which is 20. The Committee may, in its absolute discretion, waive this provision or reduce the number of the denominator in said fraction if it decides such action would be in the best interest of the Company and equitable to the Participant or the Beneficiary. -6- 3.(a) In the event of the Participant's death after the occurrence of an event described in (b), (c) or (d) of Section I of this Article and before the Participant has received payment(s) in respect of the total number of calendar years as to which the Company is obligated to make payment hereunder ("Payment Period"), the Company shall thereafter be obligated to make an annual payment to the Beneficiary during the Payment Period or the remainder thereof, as the case may be, equal to seventy five (75%) percent of the amount which the Company would have been obligated to pay to the Participant had the Participant lived to receive all payments. (b) In the event of the Participant's death while in the employ of the Employer, the Company shall be obligated to make an annual payment to the Beneficiary in the same manner and to the same extent as provided in (a) of this Section 3. (c) The Company may, at any time and from time to time, seek to fund, in whole or in part, its obligation under this Section 3 by applying for insurance on the life of the Participant. The Participant shall, if requested in writing by the Company, undergo a physical examination for such purpose by medical examiners designated by the Company, and if the Participant should fail or refuse to undergo such physical examination the Company shall have the right to terminate its obligation under this Section 3 by giving written notice of such termination to the Participant. 4. If during any period of twenty-four consecutive months assets of the Company are sold or otherwise disposed of having a value or aggregate value of thirty (30%) percent or more of the total assets of the Company as at the commencement date of said period ("Disposal Transaction"), then beginning with the calendar year in which the Disposal Transaction occurs the amount of the annual payments the Company may be obligated to make under the provisions of Section 1 of this Article shall be the Salary Limitation applied to one year's salary. If the asset sold or disposed of is stock of a Subsidiary, the value of the total assets, not net assets, of the Subsidiary shall be used for purposes of this Section 4. 5. The first calendar year of payment, if any, shall be the second calendar year following the calendar year in which the event that gave rise to the Company's obligation to pay occurred. If, however, such event is the death of the Participant while in the employ of the Employer, the first calendar year of payment shall be the first calendar year following the calendar year in which the Participant's death occurred. Payment shall be made by the Company in each calendar year of payment during the first ninety (90) days of the subject calendar year. -7-
NUMBER OF YEARS OF PAYMENT Years of Service 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age at 30 1 1 1 2 2 Termination 31 1 1 1 2 2 2 32 1 1 1 2 2 3 33 1 1 2 2 2 3 3 34 1 2 2 2 3 3 3 4 35 1 1 2 2 3 3 3 4 4 4 36 1 1 2 2 3 3 3 4 4 4 5 37 1 1 2 3 3 4 4 4 5 5 5 6 38 1 2 3 3 4 4 4 5 5 5 6 6 6 39 1 2 3 3 4 4 4 5 5 5 6 6 6 7 40 1 1 2 3 3 4 4 5 5 5 6 6 6 7 7 7 41 1 1 2 3 4 4 4 5 5 5 6 6 6 7 7 7 8 42 1 2 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 43 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 44 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 45 1 1 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 46 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 47 1 2 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 48 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 49 1 2 3 4 5 5 6 6 7 7 7 8 8 8 9 9 9 10 50 1 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 51 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 52 1 2 3 4 5 6 6 7 7 8 8 8 9 9 9 10 53 1 2 3 4 5 6 7 7 8 8 8 9 9 9 10 54 1 2 3 4 5 6 7 8 8 8 9 9 9 10 55 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 56 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 57 0 1 2 3 4 5 6 7 8 8 9 9 9 10 58 0 1 2 3 4 5 6 7 8 8 9 9 9 10 59 0 1 2 3 4 5 6 7 8 8 9 9 10 60 0 1 2 3 4 5 6 7 8 8 9 9 10 and up
-8- 6. The amount payable hereunder by the Company in respect of the Payment Period shall be reduced by the value of pension, deferred compensation, retirement and like payments ("Retirement Payments") to be made following cessation of Participant's employment to the Participant, Beneficiary or other designee of the Participant pursuant to an agreement or arrangement between the Participant and one or more members of the Employer Group. For purposes hereof, Retirement Payments shall not include payments under a pension, profit-sharing or savings plan which qualifies for favorable tax treatment under the United States Internal Revenue Code, payments under an agreement financed solely by the Participant, and payments under an agreement which becomes operative by reason of a change in control of the Company (golden parachute agreement). V. Company's Payment Obligation Conditional on Participant's Refraining from Competitive and Harmful Activities After Severance of Employment. It is a condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder: (a) that the Participant shall not, directly or indirectly, engage in, nor become employed by or otherwise associated with any persons or entities engaged in, business of the same nature as or competitive with the business engaged in, at the time of Participant's severance of employment, by the Participant's Employer ("Protected Business") in (i) the United States and (ii) any other country in which at the time of Participant's severance of employment the Employer holds, directly or indirectly, more than fifty percent (50%) of the voting stock or its equivalent of an entity engaged in the same or a related business as that of the Employer; and the Participant shall not make any financial investment, direct or indirect, in any sole proprietorship or entity engaged in the same business as that of the Employer at the time of Participant's severance of employment ("Protected Investment"), provided nothing herein shall prohibit the purchase of less than a controlling interest in publicly traded securities of any such entity for bona fide investment only; (b) that the Participant shall not wilfully engage in any activity which is harmful to the interest of the Company. -9- The determination of (i) whether a business is of the same nature as, competitive with, or related to that of the Employer, (ii) whether any activity of a Participant is harmful to the interest of the Company, and (iii) whether the Participant has wilfully engaged in such harmful activity, shall be made by the Board of Directors of the Company after a hearing at which the Participant shall be entitled to be present, and the determination by the Board of Directors shall be final and conclusive; and (c) Nothing herein prohibits or restricts the Participant from engaging in Protected Business in the related areas described in Subsection (a) above, making a Protected Investment, or wilfully engaging inactivity harmful to the interest of the Company (collectively "Activities"), and in the event the Participant chooses to engage in any of such Activities the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such Activity occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. If requested in writing by the Company, the Participant shall, within 30 days after receipt of such request, advise the Company in writing whether the Participant has or has not engaged in such Activities for a specified calendar year, and the Company shall have no obligation to make a payment in respect of such calendar year until the Company has received such written advice from the Participant. VI. Company's Payment Obligation Conditional On Participant's Availability for Advisory and Consultative Services after Severance of Employment. (a) It is a further condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder, that the Participant, if not physically or mentally disabled, shall, as an independent contractor and upon not less than thirty (30) days prior written notice from the Company, make his or her services available to the Company for such periods of time as may be specified in the notice, as an advisor and consultant with respect to activities of the department or unit of the Employer's business to which the Participant was last assigned, provided, however, that the Participant shall not be obligated to make his or her services available (i) for -10- more than sixty (60) days in the aggregate and for more than twenty (20) consecutive days in any one calendar year, and (ii) during the period December 15 through January 15. The Company shall reimburse the Participant for reasonable traveling, transportation and living expenses necessarily incurred by the Participant while away from his or her regular place of residence in the performance of such advisory and consultative services for the Company. (b) In the event the Participant chooses not to render advisory and consultative services when requested by the Company as provided in Subsection (a) above, the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such event occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. VII. Prepayments. Following the occurrence of an event described in Section I of Article IV hereof, the Company may, at any time and from time to time, make a prepayment, in whole or in part, of its obligation hereunder in respect of any one or more calendar years and any such prepayment shall be irrevocable and non-refundable. VIII. Participant's and Beneficiary's Rights Hereunder Are Personal, Nonassignable and Nontransferable. 1. The right of the Participant or Beneficiary to receive payments hereunder is personal, non-assignable and non-transferable by operation of law or otherwise. The word "otherwise" in the preceding sentence shall include, without limitation, any execution, levy, garnishment, attachment or seizure by any other legal process. 2. If at the time the Company is to make a payment to the Participant or a Beneficiary hereunder the Participant or Beneficiary is not entitled to receive such payment by reason of non-compliance with the provisions of Section 1 of this Article, the obligation of the Company to make such payment shall forthwith terminate. -11- IX. Designation and Identity of Beneficiary. 1. The Participant may designate a Beneficiary by signing, dating and filing with the Secretary of the Company a written instrument setting forth the name(s) and address(es) of the Beneficiary, and if the Beneficiary be more than one person or entity, describing the allocation of the payment benefit among them. The Participant may change his or her designation of a Beneficiary and thereby revoke a prior designation of a Beneficiary at any time and from time to time by filing a new such written instrument with the Secretary. The Beneficiary named in the last unrevoked designation of Beneficiary so filed by the Participant prior to his or her death shall be the Beneficiary for purposes of this Agreement. In the absence of a designation of Beneficiary by the Participant, or in the event the last written designation of Beneficiary on file with the Secretary has been revoked by the Participant, the Beneficiary shall be as described in Section 8 of Article II of this Agreement. 2. It is a condition of the Company's obligation to make payments to the Beneficiary hereunder that (a) in making payments the Company may, in its sole and absolute discretion, rely upon signed, written declarations, verifying the identity of a Beneficiary filed with the Secretary of the Company by a person or entity claiming to be such Beneficiary; (b) any payment made by the Company in good faith to any claimant, whether or not such declarations shall have been filed with the Company, shall pro tanto, discharge any obligation the Company might otherwise have to make payments to any and all other actual or possible claimants; (c) any person or entity claiming to be entitled to receive payments hereunder following the death of the Participant shall have recourse only against the person or entity to whom the Company shall have made payment in good faith; and (d) in the event the Company, on advice of counsel, delays payment of any sums becoming due to a Beneficiary by reason of a dispute as to the legitimacy of the claim of such Beneficiary, no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. X. Payment to Minors. Any payment to be made by the Company to a person under the age of twenty-one (21) years may be made to such person or to a guardian of the property of such person or to a parent of such person as the Company may, in its sole and absolute discretion, determine. As to any payment becoming due or payable to a person under the age of twenty-one (21) years, the Company may defer such payment until the Company has received notice of the appointment and qualification of a guardian of the property of such person, and no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. -12- XI. Miscellaneous Provisions. 1. An act or determination by the Board of Directors of the Company or the Employer may be made by a committee of directors, numbering not less than three, appointed by the Board for such purpose. 2. Notices shall be sent by registered or certified mail, return receipt requested, to the Participant at the Participant's last address on file with his or her Employer or to such other address as may hereafter be designated by the Participant to the Company, and to the Beneficiary at the address listed in the latest written designation of beneficiary filed with the Company by the Participant or to such other address as may hereafter be designated by the Beneficiary to the Company subsequent to the death of the Participant. 3. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of any right hereunder, nor shall it deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. 4. This Agreement sets forth the entire understanding of the parties in respect of the subject matter hereof, superseding, and evidencing and confirming the termination of, any and all prior agreements, arrangements or understandings between the parties relating to such subject matter, and neither party has relied on any representations of the other party except as expressly set forth herein. This Agreement may be amended only by a written instrument signed by both parties. 5. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and is subject to all applicable federal, state and municipal laws and regulations now or hereafter in force. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ John Wren -------------------------- Participant Omnicom Group Inc. By /s/ Bruce Crawford ----------------------------- President and Chief Executive Officer Name of Participant: John Wren --------- Date of Birth: July 22, 1952 -------------- Date First Commenced Service: September 1, 1986 ------------------ Name of Employer: Omnicom Group Inc. ----------------- EX-10.7F 8 e13715ex10_7f.txt MICHAEL GREENLEES EMPLOYMENT AGREEMENT EXHIBIT 10.7f EMPLOYMENT AGREEMENT AGREEMENT made as of the 1st day of April, 1998, by and between OMNICOM GROUP INC., a New York corporation, (the "Company"), and MICHAEL EDWARD GREENLEES (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive was employed by GGT Group plc., whose name has been changed to The GGT Group Limited ("GGT"), an indirectly held subsidiary of the Company, pursuant to a Service Agreement dated May 1, 1991, as thereafter amended (the "Service Agreement"); and WHEREAS, the Company desires to employ the Executive, terminate the Service Agreement and enter an agreement embodying the terms of such employment (this "Agreement"), and the Executive desires to terminate the Service Agreement and enter into this Agreement and to accept such employment, subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Employment The Company agrees to employ the Executive during the Term specified in paragraph 2, and the Executive agrees to accept such employment, upon the terms and conditions hereinafter set forth. 2. Term Subject to paragraphs 6 and 7 below and the other terms and conditions of this Agreement, the Executive's employment by the Company pursuant to the terms of this Agreement, shall be for a term commencing as of March 31, 1998 and expiring on March 31, 2003 (the "Initial Term"); provided, however, the term of the Executive's employment by the Company shall continue for an indefinite period thereafter unless and until either (x) the Company shall give to the Executive one year's advance written notice of expiration of the term, or (y) the Executive shall give to the Company six months' advance written notice of expiration of the term (both such notices being referred to as a "Notice of Termination"). (The Initial Term and the period, if any, thereafter, during which the Executive's employment shall continue are collectively referred to as the "Term"). Any Notice of Termination given under this paragraph 2, shall specify the date of expiration (which may not be earlier than the close of business on March 31, 2003) and may be given at any time on or after March 31, 2002 in the case of the Company, or on or after September 30, 2002 in the case of the Executive. The Company shall have the right at any time during such one year or six month notice period, as the case may be, to relieve the Executive of his offices, duties and responsibilities and to place him on a paid leave-of-absence status, provided that during such notice period the Executive shall remain a full-time employee of the Company and shall continue to receive his salary compensation and other benefits as provided in this Agreement. The effective date of the termination of the Executive's employment with the Company, regardless of the reason therefor, is referred to in this Agreement as the "Date of Termination". 3. Duties and Responsibilities (a) (i) During the Term, the Executive shall hold the position of President and Chief Executive Officer of the TBWA Worldwide group of companies as constituted from time to time and including any successor (the "Group"). The Executive shall report directly to the Chief Executive Officer of the Company (the "Company CEO") at such times and in such detail as the Company CEO shall reasonably require. (ii) The Company CEO shall recommend to the Board of Directors of the Company (the "Board") that the Executive be duly elected to the Board no later than January 31, 2000. Thereafter, during the Term, the Company CEO shall recommend to the Board that the Executive be duly nominated for reelection at each subsequent Annual Meeting of Shareholders upon which his then term of directorship expires. The Executive agrees to serve on the Board if so elected; his compensation, if any, for serving as such shall be determined by the Board. (b) The Executive shall perform such executive and managerial duties and responsibilities customary to the office of President and Chief Executive Officer of the Group and as are reasonably necessary to the operations of the Group and such additional duties as may be assigned to him from time to time by or under authority of the Company CEO consistent with his position as designated in paragraph 3(a) above. In furtherance of the foregoing, the Executive shall have primary responsibility and authority (subject to the terms of this Agreement, the "Omnicom Grant of Authority" as from time to time in effect and the authority of the Company CEO) (i) for the general management, administration, day-to-day operations and long-term planning of the Group, which shall include authority to determine operating budgets and profit plans for the Group, (ii) for the determination of the reporting requirements and relationships, and the review and evaluation, of the key Group personnel who are employed by companies operating within the Group, and (iii) subject to the approved operating budget of the Group, for the determination of the compensation for the key Group personnel. (c) The Executive will use his reasonable best efforts to (i) perform his duties and responsibilities in a manner consistent with the policies set forth in the "Omnicom Grant of Authority" and the parameters of the Group's then current profit plan and capital expenditure budget, (ii) ensure that the Group as a whole and each member of the Group comply on a timely basis with all budgetary and reporting requirements reasonably requested by the Company, (iii) not incur obligations on behalf of any member of the Group other than in the ordinary course of business nor enter into any transaction on behalf of any member of the Group other than in the ordinary course of business, without obtaining appropriate approvals to the extent required by the Omnicom "Grant of Authority", and (iv) not knowingly take any action to prevent any member 2 of the Group from participating in the Company's cash management program or abiding by the Company's dividend, management fee and corporate policies as from time to time in effect. (d) During the Term, the Executive's employment by the Company shall be full-time and exclusive, and the Executive agrees that he will, in carrying out his duties hereunder, devote all of his business time and attention, his best efforts, and all of his skill and ability to promote the interests of the Company and the Group. Notwithstanding the foregoing, the Executive shall be permitted to engage in charitable and civic activities and manage his personal investments, provided that such investments are not in a company which the Executive knows or has reason to believe transacts business with any member of the Group, or which engages in business competitive with that conducted by any member of the Group (or, if such company does transact business with a member of the Group or does engage in a competitive business, it is a publicly held corporation of which the Executive owns less than 1/4 of 1% of its outstanding shares), and further provided that such activities (individually or collectively) do not materially interfere with the performance of his duties or responsibilities under this Agreement. (e) During the Term, the Executive's services hereunder shall be performed at the offices of the Group in New York, New York, subject to necessary travel requirements of his positions and duties hereunder. 4. Compensation (a) As compensation for his services hereunder and in consideration of his non-solicitation/non-servicing and non-disclosure covenants as set forth in paragraph 8 below, during the Term the Company shall pay, or cause a member of the Group to pay, the Executive in accordance with its normal payroll practices, direct salary compensation at the annual rate of at least $860,000. The annual direct salary compensation shall be reviewed by the Company CEO not less frequently than every 24 months. The first such review shall be completed by such date as shall be necessary to permit any salary increase to be effective as of January 1, 2000. (b) During the Term, the Executive shall be eligible to participate in the Company's 1998 Incentive Compensation Plan or any successor plan (the "Incentive Plan") and to receive awards of stock options, cash bonuses, restricted stock and other awards thereunder. During the Term, the awards under the Incentive Plan granted to the Executive by the Compensation Committee of the Board (the "Compensation Committee") shall be commensurate with the awards granted to the chief executive officers of the other worldwide advertising agency networks owned by the Company (together with the Executive, the "Agency CEO's"), taking into account the relative size and profitability of such advertising agency networks and such other factors as the Compensation Committee shall deem reasonable and appropriate. The bonus formula applicable to Executive's bonus in respect of 1999 is attached as Annex A. The Executive's bonus for calendar year 1998 was $900,000. 5. Expenses; Fringe Benefits (a) The Company agrees to pay or to reimburse, or cause a member of the Group to pay or to reimburse, the Executive for all reasonable, ordinary and necessary vouchered 3 business or entertainment expenses incurred during the Term in the performance of his services hereunder in accordance with the policy of the Company and the Group as from time to time in effect. The Executive, as a condition precedent to obtaining such payment or reimbursement, shall provide to the Company or such member of the Group designated to pay or reimburse the Executive, any and all statements, bills or receipts evidencing the travel or out-of-pocket expenses for which the Executive seeks payment or reimbursement, and any other information or materials, as the Company or such designated member of the Group may from time to time reasonably require. (b) During the Term, the Executive and, to the extent eligible, his dependents, shall be entitled to participate in and receive all benefits under any welfare benefit plans and programs made available generally to the Group's senior level executives based in the United States or (without duplication) to its employees based in the United States generally (including without limitation, medical, hospitalization, disability and life insurance programs, accidental death and dismemberment protection and business travel insurance), subject, however, to the generally applicable eligibility and other provisions of the various plans and programs in effect from time to time. In addition, during the Term, (x) the Company shall provide the Executive with $1,000,000 of life insurance coverage under the Company's Executive Life Insurance Program and (y) the Company shall pay or reimburse the Executive, or cause a member of the Group to pay or to reimburse the Executive, up to $2,000 annually for the premium costs payments in respect of the Life Assurance policy maintained for the Executive during his employment period with GGT, which policy currently provides for an insurance benefit of four times salary (death for any cause) and of five times salary (death by accident only). (c) During the Term, the Executive shall be entitled to participate in all retirement plans and programs (including without limitation any profit sharing/401(k) plan) made available generally to the Group's senior level executives based in the United States or (without duplication) to its employees based in the United States generally, subject, however, to the generally applicable eligibility and other provisions of the various plans and programs In effect from time to time. In addition, during the Term, the Executive shall be entitled to receive fringe benefits and perquisites in accordance with the plans, practices, programs and policies of the Group from time to time in effect which are made available generally to the Group's senior level executives based in the United States or (without duplication) to its employees based in the United States generally. Such benefits and perquisites as of the date hereof shall include the following: (i) for each whole and any partial calendar year included in the Term, financial planning and tax preparation assistance in an amount not to exceed $15,000 annually (pro-rated for any partial calendar year); (ii) health club dues; (iii) first class travel accommodations; and (iv) annual membership dues at Anglebrook Golf Club. 4 (d) During each calendar year of the Term, the Executive shall be entitled to four weeks paid vacation (on a non-cumulative basis), to be taken at such time(s) as shall not, in the reasonable judgment of the Company CEO, materially interfere with the Executives fulfillment of his duties hereunder, and shall be entitled to as many holidays, sick days and personal days as are in accordance with the Company's policy then in effect generally for its senior level executives. (e) The Executive acknowledges that he is a party to a Company Executive Salary Continuation Agreement ("ESCA") with a 50% salary limitation and a March 31, 1998 first commencement of service date. (f) During the Term, the Company shall provide, or cause a member of the Group to provide, the Executive with an automobile allowance of $2,350, per month to cover his costs of using, maintaining, insuring and garaging his car in connection with the business of the Group. The Company shall provide the Executive with the use of a chauffeur in connection with the business of the Group. (g) The Executive acknowledges that (i) in March 1998 under the Incentive Plan, the Company made an initial stock option grant covering 50,000 shares of the Company's common stock and 10,000 shares of restricted Company common stock; (ii) in March 1998, $2,000,000 was paid into the Executive's UK pension fund in full satisfaction of the Company's agreement to remedy the underfunding of the Executive's Pension Scheme; and (iii) February 1999 under the Incentive Plan the Executive was awarded a grant of 60,000 shares of the Company's common stock and 10,000 shares of restricted Company common stock in March 1999. (h) It is intended that the Executive will relocate his family to the New York area during calendar 2000. At the time of such relocation, the Company shall pay or cause a member of the Group to pay for the reasonable and ordinary costs incurred by the Executive related to such move. Until the time Executive establishes a new residence in the New York City metropolitan area, but not beyond December 31, 1999, the Company shall provide the Executive with an appropriate furnished apartment/hotel accommodation in New York City, reasonably acceptable to Executive. In connection with Executive's purchase of a residence in the New York City metropolitan area, the Company will, within 14 days of Executive's written request, advance to Executive (or at the Company's option, arrange for a third party loan) on or about the date on which title of such new residence is expected to close, a loan (the "Home Loan") of up to $3,000,000. $1,000,000 of the Home Loan shall be payable in six months, together with accrued interest thereon, at the interest rate set forth in clause (y) below. The remaining $2,000,000 of the Home Loan shall mature on the sooner of (x) one year after the Date of Termination and (y) March 31, 2003 (the "Maturation Date"), and shall bear simple interest at the average of the daily LIBOR (one-year rate) rates published in The Wall Street Journal during the period of the loan. Payments of principal and interest shall be made annually, on the last day of March in each year, in arrears, based upon a 20-year amortization schedule. The Executive shall execute a promissory note evidencing the Home Loan prepared by the Company and reasonably satisfactory to the Executive. The Home Loan shall be secured by a first mortgage on Executive's residence so purchased. The Company shall have the right 5 to offset any payments to be made under the ESCA against any outstanding amounts of principal and interest on the Home Loan, after notice to such effect.. (i) To the extent any plan, program, practice, policy, arrangement or agreement providing compensation or benefits to the Executive takes into account a participant's service with the Company or the Group, whether for the purposes of determining eligibility, vesting, level of benefits or otherwise, the Executive's service will include his whole and partial years of service with GGT prior to its merger with and into the Company; provided, however, for purposes of determining years of service under the ESCA, the Executive's commencement of service date shall be March 31, 1998. (j) The Company shall pay or reimburse the Executive, or cause a member of the Group to pay or to reimburse the Executive, for the reasonable legal fees and expenses incurred by the Executive in connection with the negotiation of this Agreement, not to exceed $35,000. 6. Termination (a) The Company, by direction of the Board or the Company CEO, shall be entitled to terminate the Term and to discharge the Executive for "cause" effective upon the giving of written notice. The term "cause" shall be limited to the following grounds: (i) the Executive's failure or refusal to materially perform his material duties and responsibilities as set forth in paragraph 3 hereof other than by reason of his disability (as defined in paragraph 7 below), or the failure of the Executive to devote his attention exclusively to the business and affairs of the Group in accordance with the terms hereof (other than by reason of his disability), in each case if such failure or refusal is not cured (if curable) within 20 days after written notice thereof to the Executive by the Company; (ii) the willful misappropriation of the funds or property of the Company or any member of the Group; (iii) use of alcohol or illegal drugs, materially interfering with the performance of the Executive's obligations under this Agreement, continuing after written warning; (iv) conviction in a court of law of, or entering a plea of guilty or no contest to, any felony or any crime involving moral turpitude, fraud or theft; (v) the material nonconformance with the standard business practices and policies of the Company or the Group, including without limitation, policies against racial or sexual discrimination or harassment made known to the Executive, which nonconformance is not cured (if curable) within 10 days after written notice to the Executive by the Company; 6 (vi) the willful commission in bad faith by the Executive of any act which materially injures or could reasonably be expected to materially injure the reputation, business or business relationships of the Company or any member of the Group; (vii) any material breach (not covered by any of the clauses (i) through (vi) above) of any material term, provision or condition of this Agreement, if such breach is not cured (if curable) within 20 days after written notice thereof to the Executive by the Company; (viii) a voluntary resignation by the Executive other than pursuant to a Notice of Termination given under paragraph 2 above or for "Good Reason" (as defined in paragraph 6(b) below); and (ix) the gross misconduct or gross negligence by the Executive in the performance of his duties continuing after written warning. Prior to the effectiveness of any notice to Executive terminating the Executive for cause hereunder, the Company will provide the Executive with a prompt, in-person hearing before the Board, at which hearing the Executive may be accompanied by counsel. Any notice required to be given by the Company pursuant clause (i), (iii), (v), (vii) or (ix) above shall specify the specific nature of the claimed breach and the manner in which the Company believes such breach should be cured (if curable). In the event that the Executive is purportedly terminated for cause and the arbitrator appointed pursuant to paragraph 19 below determines that cause as defined herein was not present, then such purported termination for cause shall be deemed a termination by the Company "without cause" pursuant to paragraph 6(d) below and the Executive's rights and remedies will be governed by paragraph 6(d) below in full satisfaction and in lieu of any and all other or further remedies the Executive may have. (b) The Executive shall be entitled to terminate this Agreement and the Term hereunder for "Good Reason" at any time during the Term by written notice to the Company given not more than 30 days after the occurrence of the event or if Good Reason occurs by virtue of a series of events, the last occurring event constituting such Good Reason. "Good Reason" shall be limited to (i) a material reduction of the Executive's duties or responsibilities or the assignment of duties which are materially inconsistent with his position as President and Chief Executive Officer of the Group; which action is not reversed within 20 days after written notice of the breach from the Executive to the Company; and (ii) the failure of the Board to elect the Executive as a Director of the Company on or prior to January 31, 2000; or (iii) a material breach (not covered by clause (i) or (ii) above) by the Company of a material term, provision or condition of this Agreement, which breach remains uncured for a period of 20 days after written notice of such breach from the Executive to the Company. Any notice required to be given by the Executive pursuant to this paragraph 6(b) shall specify the specific nature of the claimed breach and the manner in which the Executive believes such breach should be cured (if curable). (c) In the event of the termination of the employment of the Executive with the Company for any reason (including without limitation, a termination pursuant to a Notice of 7 Termination under paragraph 2 above) other than by virtue of a termination by the Company "without cause" or a termination by the Executive for "Good Reason", the Executive shall be entitled to the following payments and benefits, subject to any appropriate offsets, as permitted by applicable law, for debts or money due to the Company or an affiliate thereof (collectively, "Offsets"): (i) unpaid salary compensation and any unused accrued vacation only through, and any unpaid reimbursable expenses outstanding as of, the Date of Termination; and (ii) all benefits, if any, that had accrued to the Executive through the Date of Termination under the plans and programs described in paragraphs 4 and 5 above, or any other applicable compensation and benefit plans and programs in which he participated as an employee of the Company, the Group or GGT, in the manner and in accordance with the terms of such plans and programs; (iii) any earned but unpaid bonus for the year prior to the year in which the Date of Termination occurs; and (iv) in the event the Executive's employment terminated by reason of his death or disability, or pursuant to a Notice of Termination, without duplication of any bonus that may be payable under the Incentive Plan, a bonus for the year in which the Date of Termination occurs, based on the factors used by the Compensation Committee, that he would have earned had he remained an employee through the end of such year, prorated based on the ratio of (A) the number of months, and parts thereof, in the year in which the Date of Termination occurs, prior to the Date of Termination, to (B) 12 months. In the event of the termination of the Executive's employment other than by virtue of a termination by the Company "without cause" or a termination by the Executive for "Good Reason", except as provided in this paragraph 6(c) and as otherwise required by applicable law, the Company shall have no further liability to the Executive or the Executive's heirs, beneficiaries or estate for damages, compensation, benefits, severance or other amounts of whatever nature, directly or indirectly, arising out of or otherwise related to this Agreement and the Executive's employment or cessation of employment with the Company. (d) The Company shall have the right at any time during the Term to terminate the employment of the Executive "without cause" by giving written notice to the Executive setting forth a Date of Termination. In the event of a termination by the Company "without cause" or a termination by the Executive for "Good Reason", the Executive shall be entitled to the following payments and benefits, subject to any Offsets: (i) as severance compensation, his then applicable direct salary compensation when otherwise payable for the following period (the "Severance Period") (x) from the Date of Termination through March 31, 2003 if the Date of 8 Termination occurs on or prior to March 31, 2002 or (y) one year from the Date of Termination, if the Date of Termination occurs after March 31, 2002; (ii) any unpaid reimbursable expenses outstanding, and any unused accrued vacation, as of the Date of Termination; (iii) all benefits, if any, that had accrued to the Executive through the Date of Termination under the plans and programs described in paragraphs 4 and 5 above, or any other applicable compensation and benefit plans and programs in which he participated as an employee of the Company, the Group or GGT, in the manner and in accordance with the terms of such plans and programs; (iv) continued participation on the same basis (including without limitation, cost contributions) as the other senior executives of the Company in all medical, dental, hospitalization, disability and life insurance coverage (the "Continued Plans") in which he was participating on the Date of Termination (as such Continued Plans are from time to time in effect at the Company) until the earlier of (A) the end of the period that he receives severance compensation payments under clause (i) of this paragraph 6(d) or (B) the date, or dates, he is entitled to receive coverage and benefits under the same type of plan of a subsequent employer; provided, however, (1) if the Executive is precluded from continuing his participation in any Continued Plan, he shall be provided with the after-tax economic equivalent of the benefits provided under the Continued Plan in which he is unable to participate, for the period specified above, (2) the economic equivalent of a benefit foregone shall be deemed a reasonable cost in the State of New York that would be incurred by the Executive in obtaining such benefit himself on an individual basis, and (3) payment of such after-tax economic equivalent shall be made quarterly in advance; (v) any earned but unpaid bonus for the year prior to the year in which the Date of Termination occurs; (vi) without duplication of any bonus that may be payable under the Incentive Plan, a bonus for the year in which the Date of Termination occurs, based on the factors used by the Compensation Committee, that he would have earned had he remained an employee through the end of such year, prorated based on the ratio of (A) the number of months, and pans thereof, in the year in which the Date of Termination occurs, prior to the Date of Termination, to (B) 12 months; and (vii) for purposes of determining "Years of Service" under the ESCA, the Executive's employment with the Employer Group (as defined in the ESCA) shall be deemed to have terminated on March 31, 2003; provided, however, nothing is this clause (vii) is intended to limit the conditions of Section V of the ESCA to the extent the Executive violates any condition between the actual Date of Termination hereunder and March 31, 2003. 9 In connection with a termination "without cause" or for "Good Reason", except as provided in this paragraph 6(d) or as otherwise required by applicable law, (x) the Company shall have no further liability to the Executive or the Executive's heirs, beneficiaries or estate for damages, compensation, benefits, severance or other amounts of whatever nature, directly or indirectly, arising out of or otherwise related to this Agreement and the Executive's employment or cessation of employment with the Company, and (y) the Executive shall be under no obligation to mitigate his damages or to seek other employment and if the Executive obtains other employment, any compensation earned by the Executive therefrom shall not reduce the Company's severance obligations under this paragraph 6(d). The making of any severance payments and providing the other benefits as provided in this paragraph 6(d) is conditioned upon the Executive signing a general release (the "Release") of the Company and its subsidiaries and affiliates, and its and their respective successors and assigns, officers, directors, employees, agents, attorneys and representatives, of any claims (including, without limitation, claims of discrimination, but excluding any rights and benefits provided to him under this paragraph 6(d)) relating to the Executive's employment with the Company or the termination thereof. In the event the Executive breaches any provisions of the Release or the provisions of paragraph 8 of this Agreement, in addition to any other remedies at law or in equity available to it, the Company may cease making any further severance payments and providing the other benefits provided for herein, without affecting its rights under this Agreement or the Release. 7. Disability; Death In the event the Executive shall be unable to perform his duties hereunder by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever) in substantially the manner and to the extent required hereunder prior to the commencement of such disability (all such causes being herein referred to as "disability") and the Executive shall fail to perform such duties for periods aggregating 180 days, whether or not continuous, in any continuous period of 270 days, the Company shall have the right to terminate the Executive's employment hereunder as at the end of any calendar month during the continuance of such disability upon at least 30 days' prior written notice to him. In the event of the Executive's death, the Date of Termination shall be the date of such death. 8. Non-Solicitation/Non-Servicing Agreement and Protection of Confidential Information (a) The Executive acknowledges (i) the highly competitive nature of the business of the Group and the industry in which the Group competes; (ii) that as the President and Chief Executive Officer of the Group and his prior position as Chief Executive Officer of GGT, the Executive has obtained and will continue to obtain knowledge of the "know-how" and business practices of Group, in which matters members of the Group have a substantial proprietary interest; (iii) that his employment hereunder requires the performance of services which are special, unique, extraordinary and intellectual in character, and his position with the Group places him in a position of confidence and trust with the clients and employees of members of the Group; and (iv) that his rendering of services to the Group necessarily requires the disclosure to the Executive of confidential information (as defined in paragraph 8(b) below) of the members of the Group. In the course of the Executive's employment with the Company 10 and GGT, the Executive has and will continue to develop a personal relationship with clients of members of the Group and a knowledge of those clients' affairs and requirements, and that the relationship of members of the Group with their established clientele will therefore be placed in the Executive's hands in confidence and trust. The Executive consequently agrees that it is reasonable and necessary for the protection of the confidential information, goodwill and business of the Group that the Executive make the covenants contained herein and that the Company would not have entered into this Agreement unless the covenants set forth in this paragraph 8 were contained in this Agreement. Accordingly, the Executive agrees that during the period that he is employed by the Company and thereafter through the longer of: (x) the Severance Period and (y) two years after the Date of Termination he shall not, as an individual, consultant, partner, shareholder, or in association with any other person, business or enterprise, except on behalf of the Company, directly or indirectly, and regardless of the reason for his ceasing to be employed by the Company: (i) attempt in any manner to solicit or accept from any client business of the type performed by members of the Group or to persuade any client to cease to do business or to reduce the amount of business which any such client has customarily done or is reasonably expected to do with any member of the Group, whether or not the relationship between such member of the Group and such client was originally established in whole or in part through his efforts; or (ii) employ as an employee or retain as a consultant any person who is then or at any time during the preceding twelve months was an employee of or exclusive consultant to a member of the Group, or persuade or attempt to persuade any employee of or exclusive consultant to a member of the Group to leave the employ of such member or to become employed as an employee or retained as a consultant by anyone other than another member of the Group; or (iii) render to or for any client any services of the type rendered by members of the Group. As used in this paragraph 8, the term "client" shall mean (1) anyone who is a client of any member of the Group on the Date of Termination or, if the Executive's employment shall not have terminated, at the time of the alleged prohibited conduct (any such applicable date being called the "Determination Date"); (2) anyone who was a client of any member of the Group at any time during the one year period immediately preceding the Determination Date; (3) any prospective client to whom any member of the Group had made a new business presentation (or similar offering of services) at any time during the one year period immediately preceding the Determination Date; and (4) any prospective client to whom any member of the Group made a new business presentation (or similar offering of services) at any time within six months after the Date of Termination (but only if the initial discussions between such member of the Group and such prospective client relating to the rendering of services occurred prior to the Date of Termination, and only if the Executive participated in or directly supervised such discussions). For purposes of this clause it is agreed that a general mailing or an incidental contact shall not be deemed a "new business presentation or similar offering of services or a "discussion". In addition, if the client is part of a group of companies which conducts business through more than 11 one entity, division or operating unit, whether or not separately incorporated (a "Client Group"), the term "client" as used herein shall also include each entity, division and operating unit of the Client Group where the same management group of the Client Group has the decision making authority with respect to contracting for services of the type rendered by members of the Group. (b) In the course of the Executive's rendering services to the Group he has acquired and will continue to acquire and have access to confidential or proprietary information about the Group and members of the Group and/or their clients, including but not limited to, trade secrets, methods, models, passwords, access to computer files, financial information and records, computer software programs, agreements and/or contracts between members of the Group and their clients, client contacts, marketing and/or creative policies and ideas, advertising campaigns, media plans and budgets, practices, concepts, strategies, and methods of operations, financial or business projections of the Group as a whole and members of the Group individually, acquisition strategies and candidates, and information about or received from clients and other companies with which members of the Group do business. The foregoing shall be collectively referred to as "confidential information". The Executive is aware that the confidential information is not readily available to the public and accordingly, the Executive agrees that he will not at any time (whether during the Term or after termination of this Agreement), disclose to anyone any confidential information, or utilize such confidential information for his own benefit, or for the benefit of third parties except in furtherance of his duties hereunder. The Executive agrees that the foregoing restrictions shall apply whether or not any such information is marked "confidential". The term "confidential information" does not include information which (i) becomes generally available to the public or the trade other than by the Executive's breach of this provision, (ii) the Executive learns from a third party who is not under an obligation of confidence to the Company or any member of the Group, or (iii) the Executive learns from a subsequent employer. In the event that the Executive becomes, on the advice of his counsel, legally required to disclose any confidential information, he will provide the Company with prompt notice thereof so that the Company or a member of the Group designated by it may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this paragraph 8(b) to permit a particular disclosure. In the event that such protective order or other remedy is not obtained, or that the Company waives compliance with the provisions of this paragraph 8(b) to permit a particular disclosure, the Executive will furnish only that portion of the confidential information which he is legally required to disclose and, at the Company's expense, will, in the absence of a direct conflict of interest, cooperate with the efforts of the Company or the designated member of the Group to obtain a protective order or other reliable assurance that confidential treatment will be accorded the confidential information. The Executive further agrees that all memoranda, disks, files, notes, records or other documents, whether in electronic form or hard copy (collectively, the "material") compiled by him or made available to him during his employment with the Company and/or GGT (whether or not the material contains confidential information) shall be the property of the Company or the appropriate member of the Group, as the case may be, and shall be delivered to the Company, or such appropriate member of the Group, on the termination of the Executive's employment with the Company or at any other time upon request by the Company. Except in connection with the Executive's employment with the Company, the Executive agrees that he will not make or retain copies or excerpts of the material. 12 (c) If the Executive commits a breach or is about to commit a breach, of any of the provisions of paragraphs 8(a) or (b) above, the Company and other members of the Group shall have the right to have the provisions of this Agreement specifically enforced by the arbitrator appointed under paragraph 19 or by any court having equity jurisdiction without being required to post bond or other security and without having to prove the inadequacy of the available remedies at law, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and members of the Group and that money damages will not provide an adequate remedy to the Company and other members of the Group. In addition, the Company and other members of the Group may, subject to the provisions of paragraph 19 hereof, take all such other actions and remedies available to each of them under law or in equity and shall be entitled to such damages as they can show they have sustained by reason of such breach. (d) The parties acknowledge that (i) the type and periods of restriction imposed in the provisions of paragraphs 8(a) and (b) above are fair and reasonable and are reasonably required in order to protect and maintain the proprietary interests of the Company and the Group described above, other legitimate business interests of the Company and the Group and the goodwill associated with the business of the Company and the Group, (ii) that the business of the Group extends throughout the world and that the Executive will engage in such business pursuant to the terms of this Agreement throughout the world and (iii) that the time, scope and other provisions of this paragraph 8 have been specifically negotiated by sophisticated commercial parties. It is further understood and agreed that the clients of the members of the Group may be serviced from any location and accordingly it is reasonable that the covenants set forth herein are not limited by narrow geographic area but generally by the location of such clients and potential clients. The Executive specifically acknowledges that his being restricted from soliciting and servicing clients as contemplated by this Agreement will not prevent him from being employed or earning a livelihood in the type of business conducted by members of the Group. If any of the covenants contained in paragraphs 8(a) or (b), or any part thereof, is held to be unenforceable by reason of its extending for too great a period of time or over too great a geographic area or by reason of its being too extensive in any other respect, the parties agree (x) such covenant shall be interpreted to extend only over the maximum period of time for which it may be enforceable and/or over the maximum geographic areas as to which it may be enforceable and/or over the maximum extent in all other respects as to which it may be enforceable, all as determined by the court or arbitration panel making such determination and (y) in its reduced form, such covenant shall then be enforceable. 9. Intellectual Property During the Term, the Executive will disclose to members of the Group all ideas, inventions and business plans developed by him during such period which relate directly or indirectly to the business of the Group, including without limitation, any design, logo, slogan, advertising campaign or any process, operation, product or improvement which may be patentable or copyrightable. The Executive agrees that all patents, licenses, copyrights, tradenames, trademarks, service marks, planning, marketing and/or creative policies, advertising campaigns, media campaigns, and budgets, practices, concepts, strategies, and methods of operations, financial or business projections, designs, logos, slogans and business plans 13 developed or created by the Executive in the course of his employment hereunder, either individually or in collaboration with others, will be deemed works for hire and the sole and absolute property of the Company or the member of the Group for which the same was developed or created. The Executive agrees, that at the request and expense of the Company or a member of the Group, he will take all steps necessary to secure the rights thereto to the Company or such other member of the Group by patent, copyright or otherwise. 10. Enforceability The Executive acknowledges that certain of the provisions contained in this Agreement, including but not limited to those contained in paragraph 8 above, are intended to protect each member of the Group, and accordingly each such Group member shall be deemed a third party beneficiary with respect to such provisions and shall have the right to enforce such provisions as appropriate. The failure of any party at any time to require performance by another party of any provision hereunder shall in no way affect the right of that party thereafter to enforce the same, nor shall it affect any other party's right to enforce the same, or to enforce any of the other provisions in this Agreement; nor shall the waiver by any party of the breach of any provision hereof be taken or held to be a waiver of any subsequent breach of such provision or as a waiver of the provision itself. 11. Assignment This Agreement is a personal contract and the Executive's rights and obligations hereunder may not be sold, transferred, assigned, pledged or hypothecated by the Executive. The rights and obligations of the Company hereunder shall be binding upon and run in favor of the successors and assigns of the Company. 14 12. Modification This Agreement may not be orally canceled, changed, modified or amended, and no cancellation, change, modification or amendment shall be effective or binding, unless in writing and signed by the parties to this Agreement. 13. Severability; Survival In the event any provision or portion of this Agreement is determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall nevertheless be binding upon the parties with the same effect as though the invalid or unenforceable part had been severed and deleted. The respective rights and obligations of the parties hereunder shall survive the termination of the Executive's employment to the extent necessary to the intended preservation of such rights and obligations. 14. Life Insurance The Executive agrees that, during the Term, and, in the event insurance is used to fund any deferred compensation for the Executive, until such time as such deferred compensation is paid, the Company or a member of the Group designated by it shall have the right to obtain reasonable amounts of life insurance on the Executive's life, at the sole expense of the Company or such designee, as the case may be, and with the Company or such other member of the Group as the sole beneficiary thereof. The Executive shall (a) cooperate fully in obtaining such life insurance, (b) sign any necessary consents, applications and other related forms or documents and (c) at the expense of the Company or designated member of the Group, take any reasonably required medical examinations. 15. Notice Any notice, request, instruction or other document to be given hereunder by any party hereto to another party shall be in writing and shall be deemed effective (a) upon personal delivery, if delivered by hand, or (b) three days after the date of deposit in the mails, postage prepaid if mailed by certified or registered mail, or (c) on the next business day, if sent by facsimile transmission (if electronically confirmed) or prepaid overnight courier service, and in each case, addressed as follows: 15 If to the Executive: Michael Edward Greenlees TBWA Worldwide 488 Madison Avenue New York, NY 10022 with a copy to: Kramer Levin Naftalis & Frankel 919 Third Avenue New York, New York 10022-3852 Attention: Kenneth P. Kopelman, Esq. Fax: (212)715-8000 If to the Company: Omnicom Group Inc. 437 Madison Avenue New York, New York 10022 Attention: Secretary Fax: (212)415-3670 with a copy to: Davis & Gilbert LLP 1740 Broadway New York, New York 10019 Attention: Michael D. Ditzian, Esq. Fax: (212) 468-4888 Any party may change the address to which notices are to be sent by giving notice of such change of address to the other party in the manner herein provided for giving notice. 16. Applicable Law This Agreement shall be governed by and construed in accordance with the laws of the State of New York without application of conflict of law provisions applicable therein. 16 17. No Conflict The Executive represents and warrants that he is not subject to any agreement, instrument, order, judgment or decree of any kind, or any other restrictive agreement of any character, which would prevent him from entering into this Agreement or which would be breached by the Executive upon his performance of his duties pursuant to this Agreement. 18. Entire Agreement This Agreement represent the entire agreement between the Company and the Executive with respect to the subject matter hereof, and all prior agreements, plans and arrangements relating to the employment of the Executive by the Company or any affiliate thereof are nullified and superseded hereby, including without limitation the Service Agreement. The Executive acknowledges that GGT has satisfied all obligations to him under the Service Agreement. 19. Arbitration (a) If any dispute arises between the Executive and the Company that the parties cannot resolve themselves, including any dispute over the application, validity, construction, or interpretation of this Agreement, arbitration in accordance with the then-applicable rules of the American Arbitration Association with respect to employment disputes shall provide the exclusive remedy for resolving any such dispute, regardless of its nature; provided, however, that the Company and any other aggrieved member of the Group may enforce Executive's obligations under paragraph 8 hereof and the obligations of the Executive with respect to the notice provision under paragraph (2) above, by an action for injunctive relief in a court of competent jurisdiction at any time prior or subsequent to the commencement of an arbitration proceeding as herein provided. (b) Except with respect to injunctions provided for under paragraph (a) above, this paragraph 19 shall apply to all disputes arising under or in connection with this Agreement. This paragraph 19 shall apply to claims arising under state and federal statutes, local ordinances, and the common law. The arbitrator shall apply the same substantive law that a court with jurisdiction over the parties and their dispute would apply under the terms of this Agreement. The arbitrator's remedial authority shall equal the remedial power that a court with jurisdiction over the parties and their dispute would have. The arbitrator shall, upon an appropriate motion, dismiss any claim brought in arbitration if he or she determines that the claim could not properly have been pursued through court litigation. If the then-applicable rules of the American Arbitration Association conflict with the procedures of this paragraph 19(b), the latter shall apply. (c) If the parties cannot agree upon an arbitrator, the parties shall select a single arbitrator from a list of seven arbitrators provided by the New York City, New York office of the American Arbitration Association. All seven listed arbitrators shall be retired judges experienced in employment law and/or persons actively involved in hearing private cases. If the parties cannot agree on selecting an arbitrator from that list, then the parties shall alternately 17 strike names from the list, with the first party to strike being determined by lot. After each party has used three strikes, the remaining name on the list shall be the arbitrator, unless subject to objection by reason of conflict, bias or similar bona fide grounds. (d) Each party may be represented by counsel or by another representative of the party's choice, and each party shall pay the costs and fees of its counsel or other representative and its own filing or administrative fees. The arbitrator shall have the right to award the prevailing party in any dispute its or his reasonable attorneys' fees and cost, as the case may be, incurred in connection with such arbitration proceeding. (e) The arbitrator shall render an award and opinion in the form typical of those rendered in labor arbitrations, and that award shall be final and binding and non-appealable, except to the extent otherwise provided under applicable law. To the extent that any part of this paragraph 19 is found to be legally unenforceable for any reason, that part shall be modified or deleted in such a manner as to render this paragraph 19 (or the remainder of this paragraph) legally enforceable and as to ensure that except as provided in paragraph 19(a), all conflicts between the Company and the Executive shall be resolved by neutral, binding arbitration. The remainder of this paragraph 19 shall not be affected by any such modification or deletion but shall be construed as severable and independent. If a court finds that the arbitration procedures of this paragraph 19 are not absolutely binding, then the parties intend any arbitration decision to be fully admissible in evidence, given great weight by any finder of fact, and treated as determinative to the maximum extent permitted by law. (f) Unless the parties agree otherwise, any arbitration shall take place in the New York City, New York in such location as agreed to by the Company and the Executive. If the parties cannot agree upon a location for the arbitration, the arbitrator shall determine the location within New York City, New York. (g) The Executive has read and understands this paragraph 19 which discusses arbitration. The Executive understands that by signing this Agreement, the Executive agrees to submit any claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof, or his employment or the termination thereof, to binding arbitration, and that this arbitration provision constitutes a waiver of the Executive's right to a jury trial and relates to the resolution of all disputes relating to all aspects of the employer/employee relationship, including but not limited to the following: (i) Any and all claims for wrongful discharge of employment, breach of contract, both express and implied; breach of the covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation; (ii) Any and all claims for violation of any federal, state or municipal statute, including, without limitation, Title VII of the Civil Rights 18 Act of 1964, as amended, the Civil Rights Act of 1991, the Equal Pay Act, the Employee Retirement Income Security Act of 1974, as amended, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Fair Labor Standards Act and the New York Human Rights Law; and (iii) Any and all claims arising out of any other federal, state or local laws or regulations relating to employment or employment discrimination. 20. Indemnification. The Company shall provide Executive with the benefits of all indemnification provisions contained in the Certificate of Incorporation and By-laws of the Company, to the fullest extent permitted by applicable law at the time of the assertion of any liability against Executive. The Executive will be covered by any Directors' and Officers' Insurance Policy which the Company may from time to time have in effect, and shall provide Executive with such other indemnification and/or contribution benefits as the Company may at any time during the Term hereof provide to the other Agency CEO's generally. 21. Headings The headings contained in this Agreement are for reference purposes only, and shall not affect the meaning or interpretation of this Agreement. 22. Miscellaneous The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 19 IN WITNESS WHEREOF, the parties have executed this Agreement on ___________ ___, 1999 as of the day and year first above written. OMNICOM GROUP INC. /s/ Barry J. Wagner By: ------------------------------------ Name: Barry J. Wagner Title: General Counsel and Secretary /s/ Michael Edward Greenlees ------------------------------------ Michael Edward Greenlees 20 Annex A 1999 Performance Compensation Mike Greenlees Mr. Greenlees' Cash Bonus and Restricted Stock award value in respect of 1999 ("Performance Compensation") shall be based on TBWA International B.V. ("TBWA") Performance Criteria, with a weight of 80% of all criteria measured, and Omnicom Group Inc. ("0MC") Performance Criteria, with a weight of 20% of all criteria measured. Mr. Greenlees' Performance Compensation in respect to the 1999 TBWA Performance shall be based on the following criteria, by order of importance: A. If TBWA's 1999 pretax profit margin is less than its 1998 pretax profit margin, the Committee may make a downward adjustment to the amount of Performance Compensation Mr. Greenlees should otherwise be entitled to receive under the table below. The pretax profit margin shall be determined by dividing TBWA's pretax profit by its commissions and fees. B. TBWA 1999 Net Profit vs. 1998 Net Profit Performance Targets 80% Performance 1999 vs. 1998 Net Profit Compensation (Maximum) More than 120.0% 1,650,000 (125% of 80% of'98 Perf. Comp.) 115.1% - 120.0% 1,585,000 (120% of 80% of'98 Perf Comp.) 110.1% - 115.0% 1,450,000 (110% of 80% of '98 Perf. Comp.) 105.1% - 110.0% 1,320,000 (100% of 80% of'98 Perf Comp.) 100.1% - 105.0% 1,190,000 ( 90% of 80% of'98 Perf. Comp.) 95.0% - 100.0% 1,055,000 ( 80% of 80% of'98 Perf. Comp.) (Amounts rounded to the closest $5,000) C. If TBWA's 1999 revenue growth (including revenue growth from acquisitions) is less than 10%, the Compensation Committee of the Board may make a downward adjustment to the amount of Performance Compensation Mr. Greenlees should otherwise be entitled to received under the above table. Mr. Greenlees Performance Compensation in respect to the 1999 OMC Performance shall be based on the following criteria, by order of importance: A. Omnicom Group Inc. ("0MC") earnings per share fully diluted before special charges, extraordinary items and the effect of any changes in accounting principles ("EPS") for 1999 evaluated relative to OMC's EPS for 1999. 21 1999 EPS vs. 1998 EPS Performance Targets 20% Performance 1999 EPS vs. 1998 EPS Compensation (Maximum) More than 120.0% 415,000 (125% of 20% of'98 Perf Comp.) 115.1% - 120.0% 395,000 (120% of 20% of '98 Perf. Comp.) 110.1% - 115.0% 365,000 (110% of 20% of '98 Perf. Comp.) 105.1% - 110.0% 330,000 (100% of 20% of '98 Perf Comp.) 100.1% - 105.0% 295,000 (90% of 20% of '98 Perf Comp.) 95.0% - 100.0% 265,000 (80% of 20% of '98 Perf Comp.) (Amounts rounded to the closest $5,000) If OMC's 1999 EPS is less than 95% of its 1998 EPS, the Compensation Committee of the Board ("Committee") may make further downward adjustments to the Performance Compensation. B. If OMCs 1999 operating margin is less than its 1999 operating margin, the Compensation Committee of the Board ("Committee") may make a downward adjustment to the amount of Performance Compensation Mr. Greenlees should otherwise be entitled to received under the above table. The operating margin shall be determined by dividing the sum of OMC's income before tax plus its net interest expense by its commissions and fees. Income before tax shall exclude special charges, extraordinary items and the effect of any changes in accounting principles. C. If OMC's 1999 revenue growth is less than the average revenue growth of its three largest competitors (WPP, IPG, CIDA), the Compensation Committee of the Board may make a downward adjustment to the amount of Performance Compensation Mr. Greenlees should otherwise be entitled to receive under the above table. If full-year 1999 revenues are not available for all three competitors, the Committee will rely on revenues of the most recent coincident 12-month period. The Committee retains the overall discretion to reduce the Performance Compensation Mr. Greenlees may otherwise be entitled to receive hereunder. 22 NOTE October 23, 2000 Greenwich, Connecticut 61 Clapboard Ridge Road, Greenwich, Connecticut 06830 (Property Address) 1. Borrower's Promise to Pay In return for a loan that I have received, I promise to pay U.S. $2 MILLION (Two Million Dollars) (this amount is called "principal"), plus interest, to the order of the Lender. The Lender is Omnicom Finance Inc. I understand that the Lender may transfer the Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this note is called the "Note Holder." 2. Interest Interest will be charged on unpaid principal until the full amount of principal has been paid. I will pay interest at the average of the daily LIBOR (one-year rate) rates published in The Wall Street Journal during the period of the loan. 3. Payments I shall make payments of interest annually, on the last day of March in each year, in arrears. The outstanding principal shall be repayable no later than the last day of March 2003. Payments shall be made at: One East Weaver Street, Greenwich, Connecticut 06831. 4. Borrower's Right to Prepay I have the right to make payments of principal at any time before they are due. A payment of principal only is known as a "prepayment." When I make a prepayment, I will tell the Note Holder in writing that I am doing so. I may make a full prepayment or partial prepayments without paying any prepayment charge. The Note Holder will use all of my prepayments to reduce the amount of principal that I owe under this Note. If I make a partial prepayment, there will be no changes in the due date or in the amount of my annual payment unless the Note Holder agrees in writing to those changes. 5. Loan Charges If a low, which applies to this loan and which sets maximum loan charges, is finally interpreted so that the interest or other loan charges collected or to be collect in connection with this loan exceed the permitted limits, the (i) any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (ii) any such sums already collected from me which exceeded permitted limits will be refunded to me. The Note Holder may choose to make this refund by reducing the principal I owe under this Note or by making a direct payment to me. If a refund reduces principal, the reduction will be treated as a partial prepayment. 6. Borrower'S Failure to Pay as Required (A) Late Charge for Overdue Payments If the Note Holder has not received the full amount of any annual payment by the end of 10 calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 5% of my overdue payment of principal and interest. I will pay this late charge promptly but only once on each late payment. (B) Default If I do not pay the full amount of each payment on the date it is due, I will be in default. (C) Notice of Default If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of principal which has not been paid and the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is delivered or mailed to me. (D) No Waiver By Note Holder Even if, at a time when I am in default, the Note Holder does not require me to pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time. (E) Payment of Note Holder's Costs and Expenses If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys' fees. 7. Giving of Notices Unless applicable requires a different method, any notice that must be given to me under this Note will be given by delivering it or by mailing it by first class mail to me at the Property Address above or at a different address if I give the Note Holder a notice of my different address. Any notice that must be given to the Note Holder under this Note will be given by mailing it by first class mail to the Note Holder at the address stated in Section 3(A) above or at a different address if I am given a notice of that different address. 8. Obligations of Persons Under this Note If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who takes over these obligations is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us maybe required to pay all of the amounts owed under this Note. 9. Waivers I and any other person who has obligations under this Note waive the rights of presentment and notice of dishonor. "Presentment" means the right to require the Note Holder to demand payment of amounts due. "Notice of dishonor" means the right to require the Note Holder to give notice to other persons that amounts due have not been paid. 10. Uniform Secured Note This Note is a uniform instrument with limited variations in some jurisdictions. In addition to the protections given to the Note Holder under this Note, a Mortgage, Deed of Trust or Security Deed (the "Security Instrument") dated the same date as this Note, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in full of amounts I owe under this Note. Some of those conditions are paraphrased as follows: Transfer of the Property or a Beneficial Interest in Borrower. If all or any part of the Property or any interest in it is sold or transferred (of if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person) without Lender's prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if exercise is prohibited by federal law as of the date of this Security Instrument. If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is delivered or mailed within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower. Witness the Hand(s) and Seal(s) of the Undersigned /s/ Michael Edward Greenlees ---------------------------- (Seal) Michael Edward Greenlees Borrower /s/ Randi Helen Greenlees ---------------------------- (Seal) Randi Helen Greenlees Borrower OMNICOM GROUP INC. EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT Agreement made the 1st day of December, 1998 by and between Omnicom Group Inc., a New York corporation, its place of business at 437 Madison Avenue, New York, New York 10022, and Michael Greenlees ("Participant"), an employee of TBWA Worldwide a subsidiary of Omnicom Group Inc. I. Purpose of the Plan. The purpose of the 1988 Executive Salary Continuation Plan (the "Plan") is to further the growth of Omnicom Group Inc. by offering a benefit to encourage experienced executives to enter the employ of Omnicom Group Inc. or one of its Subsidiary companies, and to encourage key executives to remain in the employ of Omnicom or a Subsidiary company. II. Definitions. The following terms shall have the meaning set forth below: 1. "Company" means Omnicom Group Inc. 2. "Subsidiary" means any company in which the Company holds, directly or indirectly, fifty percent (50%) or more of its outstanding voting stock. 3. "Affiliate" means any company in which the Company holds, directly or indirectly, not less than twenty percent (20%) but not more than forty nine percent (49%) of its outstanding voting stock. 4. "Employer" means the Company or a Subsidiary. 5. "Employer Group" means the Company and all Subsidiaries. 2 6. "Committee" means the Compensation Committee of the Board of Directors of the Company, or if there should be no Compensation Committee means a committee of not less than three members of the Board of Directors of the Company none of whom shall, while serving as a member of the committee, be eligible to participate in the Plan. 7. "Participant" means an employee of the Employer recommended by the Chief Executive Officer of the Company and approved by the Committee as a participant in the Plan. 8. "Beneficiary" means any person, persons, entity or entities designated in writing by the Participant to the Company to receive payment, if any, to be made hereunder following the death of the Participant, and in the absence of such designation, means (i) the Participant's surviving spouse, while living, and (ii) if there be no surviving spouse or upon the death of the surviving spouse, then to the estate of the Participant. 9. "Participation" means the highest percentage of the annual net profits of the Company specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 10.(a) "Net profits of the Company" means the consolidated net profits of the Company for a calendar year determined in accordance with its then current accounting procedures and practices before deducting any United States income tax applicable to its taxable income for such year. In determining net profits of the Company, the following shall apply: (i) dividends from Subsidiaries and Affiliates shall be excluded from income; (ii) the Company's interest in the net profit or loss of Subsidiaries and Affiliates before deducting any United States or foreign national income tax shall be included in income; (iii) any liability to make payments or payments made under this document or under like documents with others shall not be deducted as an expense; 3 (iv) the premiums for and the proceeds of life insurance policies payable to the Company and/or a Subsidiary shall not be deducted as an expense or included in income, as the case may be; (v) the aggregate amount, if any, by which employee compensation (salary, bonus, service awards, stock awards and the like, but excluding contributions to pension and/or deferred profit sharing plans) paid or accrued in respect of a calendar year by the Company and its Subsidiaries exceeds fifty-two (52%) percent of such year's consolidated gross income of the Company (income from all sources except for dividends from Subsidiaries and Affiliates, and before adjustments, if any, resulting from efficiency incentive compensation arrangements with clients) shall not be deducted as an expense; and (vi) in respect of each calendar year commencing with calendar year 1989, the aggregate amount, if any, by which interest and other charges for the borrowing of funds paid or accrued in respect of a calendar year by the Company and its Subsidiaries ("Debt Service") exceeds the Allowable Debt Service for the subject year shall not be deducted as an expense; for purposes hereof "Allowable Debt Service" means (A) for calendar year 1988 the actual Debt Service for such year, (B) for calendar year 1989, the Allowable Debt Service for calendar year 1988 increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for 1989 over the actual Debt Service for 1988, whichever results in the lower amount, and (C) for each calendar year subsequent to calendar year 1989, the Allowable Debt Service for the immediately preceding calendar year increased by 20% or increased by the percentage increase, if any, in the actual Debt Service for the subject calendar year over the actual Debt Service for the immediately preceding calendar year, whichever results in the lower amount. (b) The Company, upon its own initiative may, or shall upon receipt of written demand from the Participant or the Beneficiary, as the case may, designate a firm of public accountants, which may or may not be the firm of accountants regularly employed by the Company to verify the Company's determination of net profits of the Company, and to determine any question arising in the course of such verification not herein specifically provided for. The determination by such firm of public accountants shall be 4 binding and conclusive. In computing net profits of the Company, the public accountants shall conform to the accounting procedures and practices of the Company as modified by the provisions of subparagraph (a) of this Section 10. A condition of the right to demand verification as aforesaid is that the person requesting verification shall reimburse the Company to the extent of one-half of the cost of the services of such public accountants, and, at the request of the Company and before the accountants shall have commenced the verification work, shall pay to the Company one-half of the cost of the services of the said accountants as estimated by them. 11.(a) "Year of Service" means each consecutive period of 365 days the Participant is in the continuous employ of a member or members of the Employer Group. For purposes of this Section, "continuous employ of members of the Employer Group" means consecutive employment by members of the Employer Group without interruption by reason of self-employment or employment by a third party employer, except as provided in Section 11 (b)(ii) below. (b) A Participant shall be in the employ of the Employer regardless of absences by reason of: (i) sick leave, vacation leave, maternity leave or other special leave approved by the Employer which does not exceed 6 months, provided the Participant returns to work for the Employer not later than the expiration date of the authorized leave of absence; and (ii) time spent in the service of others at the request of, or with the approval of, the Employer, provided the Participant returns to work for the Employer within 15 days following cessation of work for such other party. 12. "Salary" means the base salary paid by the Employer, excluding all other forms of compensation, such as bonuses, special awards, severance pay, contributions under benefit plans, and the compensatory elements of stock awards. The payroll records of the Employer shall be conclusive and binding on the Participant, the Beneficiary and the Employer as to the salary of the Participant. "One year's salary" shall mean the highest annual rate of salary at which the Participant was 5 paid by the Employer at any time within five (5) years of the termination of the Participant's employment giving rise to the Company's obligation to make payments under Article IV hereof. 13. "Salary Limitation" means the highest percentage of one year's salary, which may not exceed 50%, specified by the Company and communicated to the Participant in writing by the President, Chief Financial Officer or the Secretary of the Company. 14. "Disability" means the inability of the Participant, by reason of physical condition, mental illness or accident, to perform substantially all of the duties of the position at which he was employed by the Employer when such disability commenced. 15. "Cause" means the Participant's misconduct involving willful malfeasance, such as breach of trust, fraud or dishonesty. All determinations as to "Disability" or "Cause" shall be made by the Board of Directors of the Employer, after a hearing at which the Participant may be present, and the determination by the Board of Directors shall be final and conclusive. III. Employment Is Unrestricted. Nothing herein contained shall be deemed to give the Participant the right to remain in the employ of the Employer or to interfere with the right of the Employer to terminate the Participant's employment at any time, nor to give the Employer the right to require the Participant to remain in its employ or to interfere with the Participant's right to terminate employment at any time. IV. Compensation. 1. In the event (a) the Participant dies while in the employ of the Employer, (b) the Employer determines, in the manner provided in Article II, Section 14 hereof, that the Participant is disabled and the employment of the Participant is terminated by the Employer by reason of Disability, (c) the 6 Participant, after 5 Years of Service, terminates his or her employment with the Employer for a reason other than to enter the employ of another member of the Employer Group or (d) the employment of the Participant is terminated by the Employer for a reason other than Cause, then upon the happening of any such event the Company, subject to all the terms and conditions hereof, shall become obligated to pay to the Participant, or to the Beneficiary if the obligation arises under (a) above, each year, for the number of consecutive calendar years determined in accordance with the schedule on page 8 hereof, an amount equal to the lesser of (i) the Salary Limitation applied to one year's salary, or (ii) the Participation applied to the net profits of the Company for the calendar year immediately preceding the calendar year of payment, subject to adjustment as provided in Sections 2, 3 and 4 of this Article. 2. If the employment of the Participant is terminated by reason of an event occurring under (c) of Section 1 of this Article and at the effective date of such termination the Participant has not accumulated 20 Years of Service, the annual payment the Participant would have been entitled to receive under said Section 1 ("Proposed Payment") shall be reduced to an amount resulting from multiplying the Proposed Payment by a fraction the numerator of which is the Participant's Years of Service at the effective date of such termination and the denominator of which is 20. The Committee may, in its absolute discretion, waive this provision or reduce the number of the denominator in said fraction if it decides such action would be in the best interest of the Company and equitable to the Participant or the Beneficiary. 3(a) In the event of the Participant's death after the occurrence of an event described in (b), (c) or (d) of Section 1 of this Article and before the Participant has received payment(s) in respect of the total number of calendar years as to which the Company is obligated to make payment hereunder ("Payment Period"), the Company shall thereafter be obligated to make an annual payment to the Beneficiary during the Payment Period or the remainder thereof, as the case may be, equal to seventy five (75%) percent of the amount which the Company would have been obligated to pay to the Participant had the Participant lived to receive all payments. (b) In the event of the Participant's death while in the employ of the Employer, the Company shall be obligated to make an annual payment to the Beneficiary in the same manner and to the same extent as provided in (a) of this Section 3. 7 (c) The Company may, at any time and from time to time, seek to fund, in whole or in part, its obligation under this Section 3 by applying for insurance on the life of the Participant. The Participant shall, if requested in writing by the Company, undergo a physical examination for such purpose by medical examiners designated by the Company, and if the Participant should fail or refuse to undergo such physical examination the Company shall have the right to terminate its obligation under this Section 3 by giving written notice of such termination to the Participant. 4. If during any period of twenty-four consecutive months assets of the Company are sold or otherwise disposed of having a value or aggregate value of thirty (30%) percent or more of the total assets of the Company as at the commencement date of said period ("Disposal Transaction"), then beginning with the calendar year in which the Disposal Transaction occurs the amount of the annual payments the Company may be obligated to make under the provisions of Section 1 of this Article shall be the Salary Limitation applied to one year's salary. If the asset sold or disposed of is stock of a Subsidiary, the value of the total assets, not net assets, of the Subsidiary shall be used for purposes of this Section 4. 5. The first calendar year of payment, if any, shall be the second calendar year following the calendar year in which the event that gave rise to the Company's obligation to pay occurred. If, however, such event is the death of the participant while in the employ of the Employer, the first calendar year of payment shall be the first calendar year following the calendar year in which the Participant's death occurred. Payment shall be made by the Company in each calendar year of payment during the first ninety (90) days of the subject calendar year. 8
NUMBER OF YEARS OF PAYMENT Years of Service 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age at 30 1 1 1 2 2 Terminations 31 1 1 1 2 2 2 32 1 1 1 2 2 3 33 1 1 2 2 2 3 3 34 1 2 2 2 3 3 3 4 35 1 1 2 2 3 3 3 4 4 4 36 1 1 2 2 3 3 3 4 4 4 5 37 1 1 2 3 3 4 4 4 5 5 5 6 38 1 2 3 3 4 4 4 5 5 5 6 6 6 39 1 2 3 3 4 4 4 5 5 5 6 6 6 7 40 1 1 2 3 3 4 4 5 5 5 6 6 6 7 7 7 41 1 1 2 3 4 4 4 5 5 5 6 6 6 7 7 7 8 42 1 2 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 43 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 44 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 45 1 1 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 46 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 47 1 2 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 48 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10 49 1 2 3 4 5 5 6 6 7 7 7 8 8 8 9 9 9 10 50 1 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 51 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10 52 1 2 3 4 5 6 6 7 7 8 8 8 9 9 9 10 53 1 2 3 4 5 6 7 7 8 8 8 9 9 9 10 54 1 2 3 4 5 6 7 8 8 8 9 9 9 10 55 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 56 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10 57 0 1 2 3 4 5 6 7 8 8 9 9 9 10 58 0 1 2 3 4 5 6 7 8 8 9 9 9 10 59 0 1 2 3 4 5 6 7 8 8 9 9 10 60 0 1 2 3 4 5 6 7 8 8 9 9 10 and up
9 6. The amount payable hereunder by the Company in respect of the Payment Period shall be reduced by the value of payments to be made following cessation of Participant's employment to the Participant, Beneficiary or other designee of the Participant pursuant to any other agreement or arrangement between the Participant and one or more members of the Employer Group ("Post-Employment Payments"). For purposes hereof Post-Employment Payments shall not include payments under (i) a pension, profit-sharing or savings plan which qualifies for favorable tax treatment under the United States Internal Revenue Code, (ii) a benefit plan for the payor's employees generally ("Employee Benefit Plan") (iii) a plan for the payor's executive officers approved by the Company that augments a benefit provided for in an Employee Benefit Plan, and (iv) an agreement financed, in whole or in part, by the Participant to the extent the payments are attributable to the financing provided by the Participant. V. Company's Payment Obligation Conditional on Participant's Refraining from Competitive and Harmful Activities After Severance of Employment. It is a condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder: (a) that the Participant shall not, directly or indirectly, engage in, nor become employed by or otherwise associated with any persons or entities engaged in, business of the same nature as or competitive with the business engaged in, at the time of Participant's severance of employment, by the Participant's Employer ("Protected Business") in (i) the United States and (ii) any other country in which at the time of Participant's severance of employment the Employer holds, directly or indirectly, more than fifty percent (50%) of the voting stock or its equivalent of an entity engaged in the same or a related business as that of the Employer; and the Participant shall not make any financial investment, direct or indirect, in any sole proprietorship or entity engaged in the same business as that of the Employer at the time of Participant's severance of employment ("Protected 10 investment"), provided nothing herein shall prohibit the purchase of less than a controlling interest in publicly traded securities of any such entity for bona fide investment only; (b) that the Participant shall not willfully engage in any activity which is harmful to the interest of the Company. The determination of (i) whether a business is of the same nature as, competitive with, or related to that of the Employer, (ii) whether any activity of a Participant is harmful to the interest of the Company, and (iii) whether the Participant has willfully engaged in such harmful activity, shall be made by the Board of Directors of the Company after a hearing at which the Participant shall be entitled to be present, and the determination by the Board of Directors shall be final and conclusive; and (c) Nothing herein prohibits or restricts the Participant from engaging in Protected Business in the related areas described in Subsection (a) above, making a Protected Investment, or willfully engaging in activity harmful to the interest of the Company (collectively "Activities"), and in the event the Participant chooses to engage in any of such Activities the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such Activity occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. If requested in writing by the Company, the Participant shall, within 30 days after receipt of such request, advise the Company in writing whether the Participant has or has not engaged in such Activities for a specified calendar year, and the Company shall have no obligation to make a payment in respect of such calendar year until the Company has received such written advice from the Participant. VI. Company's Payment Obligation Conditional On Participant's Availability for Advisory and Consultative Services after Severance of Employment. (a) It is a further condition of the Company's obligation to make payments hereunder that from the date of the occurrence of an event 11 described in (b), (c) or (d) of Section 1 of Article IV hereof that shall have given rise to the obligation to pay and until the close of the last calendar year in respect of which the Participant may become entitled to receive payments hereunder, that the Participant, if not physically or mentally disabled, shall, as an independent contractor and upon not less than thirty (30) days prior written notice from the Company, make his or her services available to the Company for such periods of time as may be specified in the notice, as an advisor and consultant with respect to activities of the department or unit of the Employer's business to which the Participant was last assigned, provided, however, that the Participant shall not be obligated to make his or her services available (i) for more than sixty (60) days in the aggregate and for more than twenty (20) consecutive days in any one calendar year, and (ii) during the period December 15 through January 15. The Company shall reimburse the Participant for reasonable traveling, transportation and living expenses necessarily incurred by the Participant while away from his or her regular place of residence in the performance of such advisory and consultative services for the Company. (b) In the event the Participant chooses not to render advisory and consultative services when requested by the Company as provided in Subsection (a) above, the Company's obligation to make payments hereunder shall forthwith terminate as to payments which might otherwise have become payable to the Participant in respect of the calendar year in which such event occurred and to the Participant or the Beneficiary in respect of all calendar years thereafter, but the Participant shall not be obligated to refund to the Company any payments theretofore paid to Participant hereunder. VII. Prepayments. Following the occurrence of an event described in Section 1 of Article IV hereof the Company may, at any time and from time to time, make a prepayment, in whole or in part, of its obligation hereunder in respect of any one or more calendar years and any such prepayment shall be irrevocable and non-refundable. 12 VIII. Participant's and Beneficiary's Rights Hereunder Are Personal, Nonassignable and Nontransferable. 1. The right of the Participant or Beneficiary to receive payments hereunder is personal, non-assignable and non-transferable by operation of law or otherwise. The word "otherwise" in the preceding sentence shall include, without limitation, any execution, levy, garnishment, attachment or seizure by any other legal process. 2. If at the time the Company is to make a payment to the Participant or a Beneficiary hereunder the Participant or Beneficiary is not entitled to receive such payment by reason of non-compliance with the provisions of Section 1 of this Article, the obligation of the Company to make such payment shall forthwith terminate. IX. Designation and Identity of Beneficiary. 1. The Participant may designate a Beneficiary by signing, dating and filing with the Secretary of the Company a written instrument setting forth the name(s) and address(es) of the Beneficiary, and if the Beneficiary be more than one person or entity, describing the allocation of the payment benefit among them. The Participant may change his or her designation of a Beneficiary and thereby revoke a prior designation of a Beneficiary at any time and from time to time by filing a new such written instrument with the Secretary. The Beneficiary named in the last unrevoked designation of Beneficiary so filed by the Participant prior to his or her death shall be the Beneficiary for purposes of this Agreement. In the absence of a designation of Beneficiary by the Participant, or in the event the last written designation of Beneficiary on file with the Secretary has been revoked by the Participant, the Beneficiary shall be as described in Section 8 of Article II of this Agreement. 2. It is a condition of the Company's obligation to make payments to the Beneficiary hereunder that (a) in making payments the Company may, in its sole and absolute discretion, rely upon signed, written declarations, verifying the identity of a Beneficiary filed with the Secretary of the Company by a person or entity claiming to be such Beneficiary; (b) any payment made by the Company in good faith to any claimant, whether or not such declarations shall have been filed with the Company, shall pro 13 tanto, discharge any obligation the Company might otherwise have to make payment to any and all other actual or possible claimants; (c) any person or entity claiming to be entitled to receive payments hereunder following the death of the Participant shall have recourse only against the person or entity to whom the Company shall have made payment in good faith; and (d) in the event the Company, on advice of counsel, delays payment of any sums becoming due to a Beneficiary by reason of a dispute as to the legitimacy of the claim of such Beneficiary, no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. X. Payment to Minors. Any payment to be made by the Company to a person under the age of twenty-one (21) years may be made to such person or to a guardian of the property of such person or to a parent of such person as the Company may, in its sole and absolute discretion, determine. As to any payment becoming due or payable to a person under the age of twenty-one (21) years, the Company may defer such payment until the Company has received notice of the appointment and qualification of a guardian of the property of such person, and no interest, penalty or damage shall accrue, become payable by or be assessed against the Company by reason of such delay in payment. XI. Miscellaneous Provisions. 1. An act or determination by the Board of Directors of the Company or the Employer may be made by a committee of directors, number not less than three, appointed by the Board for such purpose. 2. Notices shall be sent by registered or certified mail, return receipt requested, to the Participant at the Participant's last address on file with his or her Employer or to such other address as may hereafter be designated by the Participant to the Company, and to the Beneficiary at the address listed in the latest written designation of beneficiary filed with the Company by the Participant or to such other address as may hereafter be designated by the Beneficiary to the Company subsequent to the death of the Participant. 3. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of 14 any right hereunder, nor shall it deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. 4. This Agreement sets forth the entire understanding of the parties in respect of the subject matter hereof, superseding, and evidencing and confirming the termination of, any and all prior agreements, arrangements or understandings between the parties relating to such subject matter, and neither party has relied on any representations of the other party except as expressly set forth herein. This Agreement may be amended only by a written instrument signed by both parties. 5. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and is subject to all applicable federal, state and municipal laws and regulations now or hereafter in force. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ Michael Greenlees -------------------------- Michael Greenlees Omnicom Group Inc. By /s/ John Wren ----------------------------- President and Chief Executive Officer Name of Participant: Michael Greenlees ----------------- Date of Birth: 16 February 1947 ---------------- Date First Commenced Service: 1 March 1998 ------------ Name of Employer: TBWA Worldwide -------------- -----END PRIVACY-ENHANCED MESSAGE-----