-----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, DBLnrnJ9bjQlbQTjN2HeEWldv7rxBBjEpQpkjOLRuo2O71ggAgpPZ8n6PAR3yZYo y4C4EXLSc/aYpCbBsmNeaA== /in/edgar/work/20000814/0000912057-00-037075/0000912057-00-037075.txt : 20000921 0000912057-00-037075.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037075 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRUE NORTH COMMUNICATIONS INC CENTRAL INDEX KEY: 0000037931 STANDARD INDUSTRIAL CLASSIFICATION: [7311 ] IRS NUMBER: 361088162 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05029 FILM NUMBER: 697356 BUSINESS ADDRESS: STREET 1: 101 E ERIE ST CITY: CHICAGO STATE: IL ZIP: 60611-2897 BUSINESS PHONE: 3124256500 MAIL ADDRESS: STREET 1: 101 E ERIE ST CITY: CHICAGO STATE: IL ZIP: 60611-2897 FORMER COMPANY: FORMER CONFORMED NAME: FOOTE CONE & BELDING COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FOOTE CONE & BELDING INC DATE OF NAME CHANGE: 19720824 10-Q 1 a10-q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000 Commission file no. 1-5029 -------------------- TRUE NORTH COMMUNICATIONS INC. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) DELAWARE 36-1088161 ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 101 EAST ERIE STREET, CHICAGO, ILLINOIS 60611 - --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number: (312) 425-6500 -------------- 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of Common Stock, 33-1/3 cents par value, outstanding as of August 4, 2000 was 49,828,428. TRUE NORTH COMMUNICATIONS INC. INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Unaudited Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2000 and 1999. 3 Unaudited Condensed Consolidated Balance Sheets as of June 30, 2000, and December 31, 1999. 4 Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999. 5 Unaudited Notes to Condensed Consolidated Financial Statements for the Six Months Ended June 30, 2000 and 1999. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 Item 3. Quantitative and Qualitative Disclosure about Market Risk. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings. 16 Item 4. Submission of Matters to a Vote of Security Holders. 16 Item 6. Exhibits and Reports on Form 8-K. 17
2 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Commissions and Fees $ 375,090 $ 355,652 $ 734,678 $ 659,098 ---------- ---------- ---------- ---------- Operating Expenses: Salaries and employee benefits 221,277 217,416 450,632 419,880 Office and general 97,664 98,260 211,252 188,235 ---------- ---------- ---------- ---------- Total operating expenses 318,941 315,676 661,884 608,115 ---------- ---------- ---------- ---------- Operating Income 56,149 39,976 72,794 50,983 ---------- ---------- ---------- ---------- Other Income (Expense): Interest income 1,130 1,843 2,801 3,465 Interest expense (4,130) (5,458) (7,987) (9,846) Gains on sales of marketable securities and other (203) 1,357 (482) 5,479 ---------- ---------- ---------- ---------- Total other income (expense) (3,203) (2,258) (5,668) (902) ---------- ---------- ---------- ---------- Income Before Taxes, Minority Interest and Equity Income 52,946 37,718 67,126 50,081 Provision for income taxes 22,432 16,412 28,529 21,785 ---------- ---------- ---------- ---------- Income Before Minority Interest and Equity Income 30,514 21,306 38,597 28,296 Minority interests (911) (752) 613 (779) Equity income (loss) of affiliates (2,513) 480 (1,960) 690 ---------- ---------- ---------- ---------- Net Income $ 27,090 $ 21,034 $ 37,250 $ 28,207 ========== ========== ========== ========== PER SHARE INFORMATION: Basic earnings per share $ 0.55 $ 0.45 $ 0.76 $ 0.60 ========== ========== ========== ========== Diluted earnings per share $ 0.54 $ 0.43 $ 0.74 $ 0.58 ========== ========== ========== ========== Average common shares outstanding 49,401 47,296 49,170 46,637 ========== ========== ========== ========== Average common shares outstanding, assuming dilution 50,621 48,871 50,535 48,235 ========== ========== ========== ========== Cash dividends per common share $ 0.15 $ 0.15 $ 0.30 $ 0.30 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 3 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS)
JUNE 30, DECEMBER 31, 2000 1999 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 64,241 $ 118,265 Short-term investments -- 16,858 Marketable securities 626 2,076 Accounts receivable, net 1,033,931 1,020,701 Expenditures billable to clients 71,048 69,512 Other current assets 20,667 19,529 ------------ ------------ Total current assets 1,190,513 1,246,941 ------------ ------------ NONCURRENT ASSETS: Property and equipment, net 143,316 156,799 Goodwill, net 467,092 487,787 Investment in affiliated companies 92,765 32,871 Other noncurrent assets 90,094 80,882 ------------ ------------ Total noncurrent assets 793,267 758,339 ------------ ------------ Total assets $ 1,983,780 $ 2,005,280 ============ ============ CURRENT LIABILITIES: Accounts payable $ 1,102,938 $ 1,034,980 Short-term bank borrowings 71,554 117,847 Income taxes payable 21,359 22,642 Current portion of long-term debt 7,616 9,036 Accrued expenses 178,343 210,283 ------------ ------------ Total current liabilities 1,381,810 1,394,788 ------------ ------------ NONCURRENT LIABILITIES: Long-term debt 34,868 36,632 Liability for deferred compensation 68,405 67,723 Other noncurrent liabilities 78,056 139,761 ------------ ------------ Total noncurrent liabilities 181,329 244,116 ------------ ------------ STOCKHOLDERS' EQUITY: Preferred stock -- -- Common stock 16,599 16,295 Paid-in capital 331,039 293,435 Retained earnings 103,061 80,615 Unrealized gain on marketable securities 345 1,179 Cumulative translation adjustment (25,263) (22,304) Less - treasury stock (1,144) (983) Less - deferred compensation (3,996) (1,861) ------------ ------------ Total stockholders' equity 420,641 366,376 ------------ ------------ Total liabilities and stockholders' equity $ 1,983,780 $ 2,005,280 ============ ============
See accompanying notes to consolidated financial statements. 4 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, -------------------------- 2000 1999 ------------ ------------ Cash flows provided (used) by operating activities: Net income $ 37,250 $ 28,207 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 30,532 26,935 Equity income (loss) of affiliates 1,960 (690) Other 5,189 6,776 Changes in assets and liabilities, net of acquisitions: Accounts receivable (60,540) (96,148) Other assets (17,319) (22,962) Accounts payable and accrued expenses 92,980 26,488 ------------ ------------ Net cash provided (used) by operating activities: 90,052 (31,394) ------------ ------------ Cash flows provided (used) by investing activities: Purchases of property and equipment (28,627) (24,024) Acquisitions and investments in businesses (51,237) (56,785) Deconsolidiation of subsidiary (29,143) -- Maturities of short-term investments 16,502 -- Proceeds from sale of marketable securities -- 139,735 ------------ ------------ Net cash provided (used) by investing activities (92,505) 58,926 ------------ ------------ Cash flows provided (used) by financing activities: Increase (decrease) in short-term bank borrowings (46,293) 33,640 Proceeds from issuance of common stock 20,821 5,851 Proceeds from issuance of long-term debt -- 25,852 Payments of long-term debt (2,141) (37,128) Proceeds from initial public offering of subsidiary -- 42,048 Cash dividends paid (14,804) (14,176) Payments for purchases of common stock (6,686) (6,989) ------------ ------------ Net cash provided (used) by financing activities (49,103) 49,098 ------------ ------------ Effects of exchange rates on cash (2,468) (3,504) ------------ ------------ Net increase (decrease) in cash and cash equivalents (54,024) 73,126 Cash and cash equivalents at beginning of year 118,265 88,685 ------------ ------------ Cash and cash equivalents at end of period $ 64,241 $ 161,811 ============ ============
See accompanying notes to consolidated financial statements. 5 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by True North without audit, and include all adjustments, consisting only of normal recurring accruals, which True North considers necessary for a fair presentation. The condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in True North's 1999 Annual Report on Form 10-K. The operating results for the first six months of the year are not necessarily indicative of the results for the year or other interim periods. 2. ACQUISITIONS In the first six months of 2000, the cost of advertising and communication agencies acquired by True North in transactions accounted for as purchases were $15.6 million. The excess of the purchase price over the fair value of net tangible assets acquired was $14.6 million and is being amortized over periods not exceeding 40 years. In addition, in February 2000, Modem Media, Inc. ("Modem") acquired 100% of the outstanding capital stock of Vivid Holdings, Inc. and its majority-owned subsidiary, Vivid Publishing, Inc. ("Vivid") for approximately $63.6 million. The consideration was comprised of approximately $10.2 million in cash, approximately $14.4 million in Modem common stock (446,010 shares), of which approximately $4.5 million will remain in escrow as security for the indemnification obligations of the sellers, and approximately $39.0 million in value related to employee stock options that were converted to Modem stock options. The acquisition has been accounted for under the purchase method of accounting. The preliminary allocation of the excess of purchase price over the fair value of net assets acquired of approximately $63.8 million is being amortized over a five-year period and is subject to final determination. As a result of this transaction, True North recorded a $6.1 million gain, net of $4.6 million of deferred income taxes, as a credit to stockholders' equity. 3. RESTRUCTURING CHARGES In September 1999, management of True North committed to a formal plan to restructure its operations and recorded a $76.4 million pre-tax charge in the third quarter of 1999. The charge covered primarily severance, lease termination and other exit costs in connection with the combination and integration of True North's two independent worldwide advertising agency networks. The restructuring initiatives also included the sale or closing of certain underperforming business units. 6 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) A summary of components of the restructuring charge is as follows (in millions):
Severance Lease and Termination Termination and Other Impairment Benefits Exit Costs Loss Total -------- ---------- ---- ----- Restructuring reserve, September 30, 1999 $ 41.4 $ 24.2 $ 10.8 $ 76.4 Write-down of impaired assets -- (0.9) (10.8) (11.7) Cash payments (9.7) (3.2) -- (12.9) ------- ------- ------- ------- Balance, December 31, 1999 31.7 20.1 -- 51.8 Write-down of impaired assets -- (1.2) -- (1.2) Cash payments (8.3) (2.3) -- (10.6) ------- ------- ------- ------- Balance, March 31, 2000 23.4 16.6 -- 40.0 Write-down of impaired assets -- (0.4) -- (0.4) Cash payments (5.8) (4.0) -- (9.8) ------- ------- ------- ------- Balance, June 30, 2000 $ 17.6 $ 12.2 $ -- $ 29.8 ======= ======= ======= =======
The involuntary severance and termination benefits portion of the 1999 charge reflected the elimination of approximately 640 positions worldwide, primarily in international locations. As of June 30, 2000, approximately 595 positions were eliminated and True North anticipates that the severance actions will be completed by September 30, 2000. The 1999 charge associated with lease terminations and other exit costs represented primarily the closure, abandonment and downsizing of office space globally, including approximately 30 international locations. As of June 30, 2000, approximately 19 facilities were abandoned or downsized. The remaining actions are expected to be completed by mid-to-late 2000, with the cash portion of the charge to be paid out over the remaining lease periods, which range from one to five years. 4. COMPREHENSIVE INCOME True North classifies its comprehensive income, which includes foreign currency translation adjustments and unrealized gains and losses on marketable securities available for sale, as a separate component of stockholders' equity. Total comprehensive income for the three and six months ended June 30, 2000 and 1999 was as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------- --------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Net Income $ 27.1 $ 21.0 $ 37.2 $ 28.2 Foreign currency translation (0.4) 0.7 (3.0) (11.6) Unrealized gains (losses) on marketable securities, net of deferred income taxes (0.5) 2.1 (0.8) (3.3) -------- -------- -------- -------- Total comprehensive income $ 26.2 $ 23.8 $ 33.4 $ 13.3 ======== ======== ======== ========
7 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 5. CONTINGENCIES On December 2, 1997, Mazda Motor of America, Inc. ("Mazda"), a former client of True North's subsidiary, Foote Cone & Belding Advertising, Inc. ("FCB"), initiated an arbitration against FCB before the American Arbitration Association in Los Angeles, California. Mazda seeks indemnity and reimbursement for liabilities it incurred or expects to incur in connection with automobile lease advertising that aired in 1996 and 1997. Mazda is currently seeking from FCB approximately $9.0 million in damages, exclusive of interest, costs and attorneys' fees, arising from (a) Mazda's settlement of false advertising claims asserted by the Federal Trade Commission ("FTC"), various state attorneys general, and a class of consumers and (b) Mazda's settlement on or about September 30, 1999, of claims asserted by the FTC and various state attorneys general, which alleged that Mazda violated the consent orders entered in previous FTC and state attorneys general actions. FCB intends to defend Mazda's claim vigorously. In addition, FCB has filed a counterclaim in the arbitration seeking approximately $5.5 million in unpaid commissions for planning and placing advertising during the final months of FCB's relationship with Mazda. The arbitration hearing is scheduled for the first quarter of year 2001. True North is a party to several other lawsuits incidental to its business. It is not possible at the present time to estimate the ultimate liability, if any, of True North with respect to such litigation, however, management believes that any ultimate liability will not be material in relation to True North's consolidated results of operations or financial position. 6. INVESTMENT IN MODEM MEDIA, INC. In March 2000, Modem announced that it had filed a registration statement with the Securities and Exchange Commission relating to a proposed public offering of 4.5 million shares of its common stock. As part of the proposed offering, True North was offering to sell 2.5 million shares. Subsequently, Modem postponed the offering due to adverse market conditions. On April 26, 2000, True North converted all of its shares of Modem Class B common stock into Class A common stock. As a result, True North's voting power was reduced from approximately 80% to approximately 46%. Accordingly, effective with the second quarter of 2000, Modem is no longer consolidated in True North's financial statements and is accounted for under the equity method. 8 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30, 2000 VERSUS 1999 GENERAL True North's net income for the three months ended June 30, 2000, was $27.1 million, or $0.54 per diluted share. This compares to $21.0 million, or $0.43 per diluted share, for the three months ended June 30, 1999. Effective for the second quarter of 2000, True North's voting power in Modem was reduced to approximately 46%. As a result, Modem's results are no longer consolidated in True North's financial statements and are now reported under the equity method of accounting. The second quarter of 1999 included a pre-tax gain of $1.4 million ($0.8 million after-tax or $0.02 per share) on the sale of True North's holdings in Publicis S.A. REVENUES Consolidated revenues increased $19.4 million, or 5.5%, to $375.1 million for the three months ended June 30, 2000, from $355.7 million in 1999. Revenues from the U.S. operations increased $25.3 million, or 9.7%, to $286.3 million in 2000, while international revenues decreased 6.2%, or $5.9 million, to $88.8 million. Excluding the impact of changes in foreign exchange rates, international revenues were essentially unchanged. Excluding the impact of deconsolidating Modem in the second quarter of 2000, consolidated revenues increased $35.5 million or 10.4%. Approximately 2.7% of this worldwide growth was due to acquisitions (net of divestitures) while the impact of changes in foreign exchange rates decreased consolidated revenues by 1.6%. The resultant organic revenue growth from net new business wins and growth in existing client net expenditures was 9.3%. OPERATING EXPENSES Total consolidated operating expenses increased $3.3 million to $319.0 million from $315.7 million in 1999. Acquisitions accounted for approximately $7.9 million of the increase. Modem's total operating expense were $14.8 million in the second three months of 1999. Excluding the effects of acquisitions, divestitures, changes in foreign exchange rates, and the Modem deconsolidation, total operating expenses increased 5.0% in the second quarter of 2000. Salaries and benefits increased $3.9 million, or 1.8%, to $221.3 million in 2000 from $217.4 million in the comparable quarter of 1999. Acquisitions represented approximately $5.4 million of the increase, while the impact of changes in foreign exchange rates decreased salaries and related benefit expenses by approximately $2.9 million. Excluding the effects of the items noted above, as 9 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) well as the effect of Modem's deconsolidation, salaries and related benefits increased by 5.0%, representing normal salary growth and higher incentive expense due to the increased level of profitability partially offset by savings from the restructuring efforts. Office and general expenses were $97.7 million for the three months ended June 30, 2000, compared to $98.3 million in 1999, a $0.6 million, or 0.6% decrease. Acquisitions accounted for $2.4 million of the difference, while the impact of lower foreign exchange rates decreased those expenses by $1.7 million. Excluding the impact of acquisitions divestitures, changes in foreign exchange rates, and Modem's impact from deconsolidating its results, office and general expenses increased by 5.0% in 2000 versus 1999. This reflects higher goodwill amortization due to acquisitions, higher depreciation charges from upgrading the facilities and computer systems and bad debt expense. RESTRUCTURING AND OTHER CHARGES In September 1999, management of True North committed to a formal plan to restructure its operations and recorded a $76.4 million pre-tax charge in the third quarter of 1999. The charge covered primarily severance, lease termination and other exit costs in connection with the combination and integration of True North's two independent worldwide advertising agency networks. The restructuring initiatives also included the sale or closing of certain underperforming business units. The involuntary severance and termination benefits portion of the 1999 charge reflected the elimination of approximately 640 positions worldwide, primarily in international locations. As of June 30, 2000, approximately 595 positions were eliminated and True North anticipates that the remaining severance actions will be completed by September 30, 2000. The 1999 charge associated with the lease terminations and other exit costs represented primarily the closure, abandonment and downsizing of office space globally, including approximately 30 international locations. As of June 30, 2000, approximately 19 facilities were abandoned or downsized. The remaining actions are expected to be completed by mid-to-late 2000, with the cash portion of the charge to be paid out over the remaining lease periods, which range from one to five years. The impairment loss on the sale or closing of certain businesses resulted from the decision to sell two business units, one in the U.S., and one in the United Kingdom, and to close four other business units and joint ventures, including the R/GA Digital Studios, which specialized in digital production for advertising and film companies. These sales or closures are expected to be completed by September 30, 2000. 10 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) True North anticipates net pre-tax expense savings of approximately $25.0 million on an annualized basis, with approximately two thirds or more of such savings occurring in 2000 and the full amount realized in 2001 and thereafter. OTHER INCOME (EXPENSES) Interest income decreased by $0.7 million in the three months ended June 30, 2000 compared to 1999 primarily due to the effect of deconsolidating Modem's results in the second quarter of 2000. Interest expenses decreased by $1.3 million in the second quarter of 2000 versus 1999 due primarily to lower average debt levels, slightly offset by higher short-term interest rates. True North recognized a pre-tax gain of $1.4 million in the second quarter of 1999 on the sales of its holdings in Publicis S.A. INCOME TAXES True North's effective tax rate was 42.4% in the second quarter of 2000 versus 43.5% in 1999. The effective rate is higher than the U.S. statutory rate of 35% primarily due to U.S. state and local income taxes and to the nondeductibity of certain expenses, including entertainment and amortization of goodwill. MINORITY INTERESTS Minority interest expense in the second quarter of 2000 was $0.9 million versus $0.7 million in 1999. This reflects the impact of net losses in the operations of Modem in 1999 and its subsequent deconsolidation in the second quarter of 2000. EQUITY INCOME (LOSS) Equity income (loss) was a loss of $2.5 million for the second quarter of 2000, compared to income of $0.5 million in the corresponding period of 1999. This decrease is due primarily to True North's share of the net loss at Modem, which was included as a consolidated entity in 1999. 11 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) SIX MONTHS ENDED JUNE 30, 2000 VERSUS 1999 GENERAL True North's net income for the six months ended June 30, 2000, was $37.2 million, or $0.74 per diluted share. This compares to $28.2 million, or $0.58 per diluted share, for the six months ended June 30, 1999. The first six months of 1999 included gains on the sale of securities of $5.4 million ($3.1 million after-tax or $0.06 per diluted share). Excluding these gains, net income for the first six months of 1999 was $25.1 million or $0.52 per diluted share. REVENUES Consolidated revenues increased $75.6 million, or 11.5%, to $734.7 million for the six months ended June 30, 2000, from $659.1 million in 1999. Revenues from the U.S. operations increased $80.0 million, or 16.4%, to $568.1 million in 2000, while international revenues decreased 2.6%, or $4.4 million, to $166.5 million. Excluding the impact of changes in foreign exchange rates, international revenues increased 3.1%. Excluding the impact of deconsolidating Modem in the second quarter of 2000, consolidated revenues increased $75.5 million or 12.0%. Approximately 4.0% of this worldwide growth was due to acquisitions (net of divestitures) while the impact of changes in foreign exchange rates decreased consolidated revenues by 1.3%. The resultant organic revenue growth from net new business wins and growth in existing client net expenditures was 9.3%. OPERATING EXPENSES Total consolidated operating expenses increased $53.8 million to $661.9 million from $608.1 million in 1999. Acquisitions accounted for approximately $22.8 million of the increase. Excluding the effects of acquisitions, divestitures, changes in foreign exchange rates, and the impact of deconsolidating Modem in the second quarter of 2000, total operating expenses increased 6.3%. Salaries and benefits increased $30.7 million, or 7.3%, to $450.6 million in 2000 from $419.9 million in the comparable period of 1999. Acquisitions represented approximately $15.6 million of the increase, while the impact of changes in foreign exchange rates decreased salaries and related benefit expenses by approximately $5.4 million. Excluding the effects of the items noted above, and Modem's deconsolidation, salaries and related benefits increased by 5.1%, representing normal salary growth progression and higher incentive expense due to the increased level of profitability partially offset by savings from the restructuring efforts. 12 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Office and general expenses were $211.3 million for the six months ended June 30, 2000, compared to $188.2 million in 1999, a $23.1 million, or 12.3% increase. Acquisitions accounted for $7.2 million of the increase, while lower foreign exchange rates decreased those expenses by $3.2 million. Excluding the impact of acquisitions, divestitures, changes in foreign exchange rates, and the Modem deconsolidation, office and general expenses increased by 9.1% in 2000 versus 1999. This reflects higher goodwill amortization due to acquisitions, higher depreciation charges from upgrading the facilities and computer systems and strengthening bad debt reserves. OTHER INCOME (EXPENSES) Interest income decreased by $0.7 million in the six months ended June 30, 2000, compared to 1999 primarily due to the impact of deconsolidating Modem. Interest expense decreased by $1.9 million in the first quarter of 2000 versus 1999 due primarily to lower average debt levels. True North recognized pre-tax gains of $5.4 million in the first six months of 1999 on the sales of its holdings in DoubleClick, Inc. and Publicis S.A. INCOME TAXES True North's effective tax rate was 42.5% in the first six months of 2000 versus 43.5% in 1999. The effective rate is higher than the U.S. statutory rate of 35% primarily due to U.S. state and local income taxes and to the nondeductibity of certain expenses, including entertainment and amortization of goodwill. MINORITY INTERESTS Minority interest income in the first six months of 2000 was $0.6 million versus an expense of $0.8 million in 1999. This reflects the impact of deconsolidating Modem in the second quarter of 2000. EQUITY INCOME (LOSS) Equity income (loss) was $(2.0) million for the first six months of 2000, compared to income of $0.7 million in the corresponding period of 1999. This decrease reflects the net losses sustained by Modem in the second quarter of 2000. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2000, True North's cash and cash equivalents totaled $64.2 million, which is a decrease of $54.1 million over the 1999 year-end balance of $118.3 million. This decrease is due primarily to the repayment of short-term borrowings and the impact of the deconsolidation of Modem. 13 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) OPERATING ACTIVITIES True North's funds from operating activities consist primarily of net income adjusted for noncash items, including depreciation and amortization, and changes in operating assets and liabilities. Cash provided by operating activities was $90.1 million in the first six months of 2000. Operating cash flows are impacted by the seasonal spending patterns of clients. True North's policy is to bill and collect monies from its clients prior to payments due to the media. INVESTING ACTIVITIES True North's net capital expenditures for property and equipment were $28.6 million for the six months ended June 30, 2000. These expenditures are primarily related to True North's worldwide investment in technology, coupled with leasehold improvements related to office moves. True North anticipates that capital expenditures in 2000 will approximate 1999's level and has no material commitments for future expenditures. In the first half of 2000, True North acquired several companies to enhance its network, primarily in Europe and the U.S. True North anticipates that it will continue to pursue acquisitions opportunities that will expand its capabilities and geographical presence. FINANCING ACTIVITIES At June 30, 2000, True North was in compliance with all covenants and conditions related to its Revolving Credit Agreement and other debt agreements. In March 2000, Modem announced that it had filed a registration statement with the Securities and Exchange Commission relating to a proposed public offering of 4.5 million shares of its common stock. As part of the proposed offering, True North was offering to sell 2.5 million shares. Subsequently, Modem postponed the offering due to adverse market conditions. True North has paid cash dividends at an annual rate of $0.60 per share over the past ten years. Determination of the payment of dividends is made by True North's Board of Directors on a quarterly basis. True North anticipates that its cash flow from operations will be adequate to continue payment of dividends at similar levels in 2000. 14 TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) In July 2000, True North's Board of Directors authorized an increase in its previously announced $30,000,000 stock repurchase program to allow True North to make systematic repurchases, in open market and privately negotiated transactions, of an additional $30,000,000 in True North Common Stock. The stock repurchased under this program would be held as treasury shares for use under the Company's stock-based benefit programs. Such purchases would be dependent upon a number of factors, including the price and availability of True North's shares, general market conditions and the number of shares required for True North's stock-based benefit programs. The stock repurchase program may be discontinued at any time. In the first six months of 2000, True North purchased 163,000 shares at a cost of $6.7 million. Since the program's inception, True North has purchased 885,618 shares at a cost of $26.8 million. In May 2000, True North extended its 364-day credit agreement for up to $75 million of borrowings as part of its $250 million Revolving Credit Agreement. True North believes that cash flow from operations, along with current cash balances, will be sufficient to satisfy working capital and other operating requirements in 2000. In the event additional funds are required, True North believes it will have sufficient resources, including borrowing capacity, to meet such requirements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK True North's consolidated financial statements are denominated in U.S. dollars. In 1999 and the first six months of 2000, True North derived approximately 26% and 23%, respectively, of its revenues from operations outside the United States. Currency fluctuations may give rise to translation gains and losses when financial statements of foreign operating units are translated into U.S. dollars. Significant strengthening of the U.S. dollar against major foreign currencies could have an adverse impact on True North's results of operations. In general, True North incurs most of its costs to support the related revenues in the same currency in which these revenues are billed, thereby reducing exposure to currency fluctuations. In the past, True North has not hedged foreign currency profits into U.S. dollars, because management has believed that, over time, the costs of a hedging program outweigh any benefit of greater predictability in the Company's U.S. dollar denominated profits. However, as True North continues to extend the depth and breadth of its foreign operations, management will from time to time reconsider the issue of whether a foreign currency-hedging program would be beneficial to its operations. 15 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Response to this item is incorporated by reference to Part 1, Note 5 to the Registrant's unaudited notes to financial statements in this Quarterly Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On May 17, 2000, Registrant held its Annual Meeting of Stockholders to consider and vote upon the following matters: 1. A proposal to elect 11 directors.
- ------------------------------------------------------------------------------------------------------------- FOR WITHHELD - ------------------------------------------------------------------------------------------------------------- David A. Bell 39,490,649 494,479 - ------------------------------------------------------------------------------------------------------------- Joseph A. Califano, Jr. 39,485,847 499,281 - ------------------------------------------------------------------------------------------------------------- Donald L. Elliman, Jr. 39,514,140 470,988 - ------------------------------------------------------------------------------------------------------------- H. John Greeniaus 39,452,238 532,890 - ------------------------------------------------------------------------------------------------------------- Leo-Arthur Kelmenson 39,458,305 526,823 - ------------------------------------------------------------------------------------------------------------- Wenda Harris Millard 39,126,733 858,395 - ------------------------------------------------------------------------------------------------------------- Michael E. Murphy 39,515,345 469,783 - ------------------------------------------------------------------------------------------------------------- J. Brendan Ryan 39,454,390 530,738 - ------------------------------------------------------------------------------------------------------------- Donald L. Seeley 39,504,372 480,756 - ------------------------------------------------------------------------------------------------------------- Marilyn R. Seymann 39,515,518 469,610 - ------------------------------------------------------------------------------------------------------------- Stephan T. Vehslage 39,453,100 532,028 - -------------------------------------------------------------------------------------------------------------
2. A proposal to ratify the appointment of Arthur Andersen LLP as Registrant's independent accountants.
- ------------------------------------------------------------------------------------------------------------- FOR AGAINST ABSTAIN - ------------------------------------------------------------------------------------------------------------- 39,459,557 356,579 168,992 - -------------------------------------------------------------------------------------------------------------
16 PART II. OTHER INFORMATION (CONTINUED) ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 10.1 Employment Agreement between Eugene Bartley and Registrant dated as of March 16, 2000. 10.2 Employment Agreement between Dennis McClain and Registrant dated April 1, 1992, amended as of August 29, 1997. 10.3 True North Communications Inc. Asset Protection Plan as amended and restated as of June 1, 2000. 10.4 True North Communications Inc. Senior Management Income Protection Plan dated as of June 1, 2000. 10.5 Employment Agreement between J. Brendan Ryan and Registrant dated as of January 1, 2000. (b) Reports on Form 8-K: (1) Form 8-K filed on April 26, 2000 reported certain events concerning the Registrant's conversion of shares of Modem Media. (2) Form 8-K filed on May 4, 2000 reported Registrant's first quarter earnings release. (3) Form 8-K filed on July 26, 2000 reported Registrant's second quarter earnings release. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRUE NORTH COMMUNICATIONS INC. (Registrant) Kevin J. Smith ------------------------------ (Signature) Kevin J. Smith Executive Vice President Chief Financial Officer Date: August 14, 2000 18 EX-10.1 2 ex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 2000 (the "Effective Date") between Bozell Group, Inc., a New York corporation (the "Company"), and Eugene Bartley (the "Executive"). WHEREAS, the Executive and the Company (under its prior name of Bozell Worldwide, Inc.) previously entered into an Employment Agreement dated as of April 1, 1995, and previously amended as of July 30, 1997 (the "Prior Agreement"); and WHEREAS, the parties desire to enter into this Agreement to replace the Prior Agreement and to provide for the employment of the Executive by the Company upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereby agree as follows: 1. EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby agrees to be employed by the Company upon the terms and subject to the conditions contained in this Agreement. The term of employment of the Executive by the Company pursuant to this Agreement (the "Employment Period") shall commence on the Effective Date and, unless earlier terminated as specifically hereinafter provided, shall end on December 31, 2002; provided that the term of this Agreement may be extended upon mutual written agreement of the parties. 2. POSITION AND DUTIES. As of the Effective Date, the Executive's title shall be Chairman and Chief Executive Officer of the Company and he shall report directly to the Chief Executive Officer of the Company's parent company, True North Communications Inc. ("True North"). The Executive shall have the authority, duties and responsibilities commensurate with his position and title and such other duties and responsibilities (not inconsistent with his position or his other concurrent assigned duties and responsibilities) as are assigned to him from time to time by the Chief Executive Officer of True North or the Board of Directors of the Company or True North (the "Board"). During the Employment Period, the Executive shall perform faithfully and loyally and to the best of the Executive's abilities his duties hereunder, shall devote his full business time, attention and efforts to the affairs of the Company and shall use his reasonable best efforts to promote the interests of the Company and True North. Notwithstanding the foregoing, the Executive may engage in charitable, civic or community activities, provided that they do not materially interfere with the performance of the Executive's duties hereunder. 3. COMPENSATION. (a) ANNUAL BASE SALARY. During the Employment Period, the Company shall pay to the Executive an annual base salary at the rate of at least $522,000 per annum in accordance with the Company's regular payroll practices. The annual base salary shall be reviewed periodically in accordance with guidelines applicable to the Company's senior executives generally. (b) INCENTIVE COMPENSATION. During the Employment Period, the Executive shall be entitled to participate in the True North Executive Compensation Program, as such Program applies to similarly situated senior executives and as such Program may be amended from time to time. (c) OTHER BENEFITS. During the Employment Period, the Executive shall be entitled to participate in the Company's employee benefit plans and programs and fringe benefits that are generally available to senior executives of the Company from time to time, including, but not to the extent resulting in duplicative benefits, the benefit plans and programs and fringe benefit arrangements generally made available to members of the Management Executive Committee of True North and the fringe benefits to which the Executive was entitled immediately prior to the Effective Date. (d) EXPENSE REIMBURSEMENT. During the Employment Period, the Company shall reimburse the Executive for all proper expenses incurred by him in the performance of his duties hereunder in accordance with the Company's policies and procedures for senior executives. The Executive shall submit invoices for all such expenses in accordance with the Company's policies and procedures for senior executives. 4. CONSULTING PERIOD. (a) CONSULTING TERM. Upon the December 31, 2002 expiration of the Employment Period, the Executive shall become a consultant to the Company for a period of two years ending on the close of business on December 31, 2004 (the "Consulting Period"), subject to the terms and conditions set forth in this Section 4. The Consulting Period is subject to termination by the Executive, upon at least 30 days' advance notice to the Company, at any time prior to December 31, 2004. (b) CONSULTING DUTIES. During the Consulting Period, the Executive shall make himself available upon reasonable notice to perform such services as are requested from time to time by the Chief Executive Officer of True North. The requested services shall be consistent with the Executive's years of experience and skills. The Executive shall make himself available to work at least 50 days (which shall not include weekends or holidays) during each calendar year, but he shall not be required to work more than two days in any week. (c) CONSULTING FEES. For each day during the Consulting Period that he is called upon to work more than an insignificant amount of time (i.e., at least one hour), the Executive shall be paid a per diem fee of $3,000; provided that the total annual consulting fees paid to the Executive for each calendar year during the Consulting Period shall be at least $60,000. - 2 - (d) EXPENSE REIMBURSEMENT. During the Consulting Period, the Company shall reimburse the Executive for all expenses incurred by him in the performance of his consulting duties in accordance with the Company's policies and procedures for senior executives. The Executive shall submit invoices for all such expenses in accordance with the Company's policies and procedures for senior executives. 5. TERMINATION OF EMPLOYMENT PERIOD. (a) QUALIFYING TERMINATION. For purposes of this Agreement, "Qualifying Termination" means the occurrence of any of the following events: (i) termination of the Executive's employment by the Company without Cause (as defined in subsection (b) below) during the Employment Period upon not less than 30 days' prior written notice to the Executive, (ii) termination of the Executive's employment by the Company on account of the Executive having become unable (as determined by the Company in good faith) to perform regularly his duties hereunder by reason of illness or mental or physical disability for a period of more than three consecutive months (termination for "Disability"), (iii) termination of the Executive's employment on account of the Executive's death, or (iv) termination of the Executive's employment by the Executive due to and within 60 days of the occurrence, without the Executive's consent, of any of the following events: (1) any change or changes in the Executive's duties and responsibilities that, taken as a whole, result in a material diminution of the Executive's duties and responsibilities, (2) a decrease in the Executive's base salary, or (3) any requirement of the Company that the location where the Executive is based be materially changed. (b) DEFINITION OF CAUSE. The Company or True North may terminate the Executive's employment immediately for "Cause" if, in the reasonable determination of the Board or the True North Chief Executive Officer, as set forth in a written notice to the Executive not less than 15 days prior to the date of such proposed termination setting forth in reasonable detail the reasons for such termination, (i) the Executive engages in conduct that violates significant written policies of the Company or True North which were provided to the Executive within a reasonable period of time prior to his violation thereof; (ii) the Executive materially fails to perform the essential functions of his job (except for a failure resulting from a bona fide illness or mental or physical disability, or from the Executive's unavailability by reason of approved leave) or fails to carry out the reasonable directions of the Board or the True North Chief Executive Officer with respect to material duties that are within the scope of his duties as set forth in this Agreement; (iii) the Executive engages in embezzlement or misappropriation of corporate funds or other acts of fraud, dishonesty or self-dealing, or commits a felony or any material violation of any material statutory or common law duty of loyalty to the Company or True North; or (iv) the Executive breaches a material provision of this Agreement (including, but not limited to, the non-compete, non-solicitation, confidentiality, or non-disparagement provisions in Sections 8 and 9). - 3 - 6. CONSEQUENCES OF TERMINATION OF EMPLOYMENT PERIOD. (a) BENEFITS UPON TERMINATION. If the Employment Period terminates for any reason, the Executive (or the Executive's executor, administrator or other legal representative, as the case may be) shall be entitled to receive the following benefits: (i) within 30 days after the amount in question is reasonably determinable (1) base salary payable through the date of termination of employment, (2) unpaid annual incentive compensation for the calendar year immediately preceding the date of such termination (unless such termination is for Cause, as defined in Section 5(b) above), and (3) reimbursement of expenses incurred through the date of such termination in accordance with the Company's policies and procedures; (ii) participation (by the Executive or the Executive's qualified dependents, as the case may be) in all other applicable benefit plans or programs in accordance with the provisions thereof applicable to terminated employees (or their qualified dependents, as the case may be); and (iii) payment for any accrued but unused vacation for the calendar year in which such termination of employment occurs. (b) ADDITIONAL BENEFITS UPON QUALIFYING TERMINATION. If the Employment Period terminates for a reason set forth in Section 5(a), the Executive (or the Executive's executor, administrator or other legal representative, as the case may be) shall be entitled to receive the following additional benefits: (i) within 30 days after the amount in question is reasonably determinable, annual incentive compensation for the calendar year in which such termination shall have occurred, prorated through the date of such termination based on actual results of operations for such full calendar year; and (ii) if the Qualifying Termination is for any reason other than death or Disability: (1) all stock options and restricted stock granted to the Executive by the Company on or after the Effective Date then held by the Executive shall on the date of such termination be 100% vested; (2) subject to the last two sentences of this Section 6(b), for a period equal to the greater of the then remaining scheduled term of the Employment Period or 18 months (the "Severance Period"), commencing on the day immediately following the date of termination of the employment of the Executive, the Executive shall be entitled to receive (A) base salary, at the annual rate in effect as of the date of such termination (or, in the event the Executive has terminated his employment due to the happening of the event set forth in Section 5(a)(iv)(2) above, at the annual rate in effect - 4 - immediately prior to the salary reduction for which the Executive terminated his employment), payable in accordance with the Company's normal payroll policies and (B) annual incentive compensation at the rate of 50% of annual base salary at the annual rate in effect as of the date of such termination (or, in the event the Executive has terminated his employment due to the happening of the event set forth in Section 5(a)(iv)(2) above, at the annual rate in effect immediately prior to the salary reduction for which the Executive terminated his employment),; and (3) subject to the last two sentences of this Section 6(b), during the Severance Period, the Executive shall be entitled to participate in life insurance, medical and dental benefits on terms no less favorable to the Executive than those in effect on the termination date, subject to restrictions imposed by applicable statute and regulation and to modifications of general application to active executives of the Company; and (iii) each stock option granted to the Executive by the Company on or after the Effective Date then held by the Executive shall be exercisable (to the extent it is vested at the date of termination or to the extent it becomes vested in accordance with subparagraph (ii)(1) above) by the Executive or the Executive's executor, administrator or other legal representative, as the case may be, for up to three years after the date of termination, but in no case beyond a date 10 years following the date of grant of such option. As a condition to the receipt of the severance benefits described in subparagraphs (ii)(2) and (ii)(3) above, the Company reserves the right in accordance with the standard Company severance policy to require the Executive to sign a standard separation agreement (the "Separation Agreement"), containing a general release of claims. The Separation Agreement shall be in the form attached hereto as Exhibit A, with only such changes thereto as may be required by statute or regulation to make such Separation Agreement fully valid and enforceable in accordance with its terms. 7. FEDERAL AND STATE WITHHOLDING. The Company shall deduct from the amounts payable to the Executive pursuant to this Agreement the amount of all required federal and state withholding taxes in accordance with the Executive's Form W-4 on file with the Company and all applicable social security and Medicare taxes. 8. NON-COMPETITION; NON-SOLICITATION; CONFIDENTIALITY. (a) COVENANT NOT TO COMPETE. The Executive acknowledges that in the course of employment with the Company pursuant to this Agreement, the Executive will become familiar with the Confidential Information (as defined below) of the Company and its subsidiaries, affiliates and clients, and that the Executive's services will be of special, unique and extraordinary value to the Company. Except with the prior written consent of the Board: - 5 - (i) during the period from the Effective Date until the last to end of the Employment Period, the Consulting Period and any Severance Period, the Executive shall not engage in any activities, whether as employer, proprietor, principal, partner, stockholder (other than the holder of 1% or less of the stock of a corporation the securities of which are traded on a securities exchange or in the over-the-counter market), director, officer, employee or otherwise, in competition with (A) the businesses conducted at the date hereof by the Company or (B) any business in which the Company is substantially engaged within the one year period preceding the termination of Executive's employment with the Company (including any proposed new business venture in which the Executive was involved while an employee of the Company); and (ii) during the period from the Effective Date until the last to end of (1) the Employment Period, (2) the full scheduled three-year term of the Employment Period if the Executive resigns (other than upon a Qualifying Termination) or is terminated by the Company for Cause during the Employment Period, (3) the Consulting Period, (4) the full scheduled two-year term of the Consulting Period if the Executive elects to terminate the Consulting Period prior to the end of the two-year term, and (5) any Severance Period, the Executive shall not, directly or indirectly, either on the Executive's behalf or on behalf of any other person, firm or corporation: (A) solicit, call on, service or otherwise do business with, or interfere in any way with the Company's relationship with any account that is a client of the Company at the time of the Executive's termination, or that was a client of the Company at any time within 12 months prior to the date of such termination; provided that the foregoing shall apply only to accounts with whom the Executive had responsibilities for or learned Confidential Information relating to within the one-year period preceding the Executive's termination of employment with the Company; (B) perform any services relating to advertising, marketing, research, public relations or related services for any account described in (A) above; or (C) recruit or solicit, or attempt to recruit or solicit, the employment or consulting services of or hire or employ or retain the employment or consulting services of any person who is at such time or who was at any time within 12 months immediately prior to such time, an employee of the Company. (b) CONFIDENTIAL INFORMATION AND TRADE SECRETS. The Executive agrees that the Company has a protectable interest in Company bidding information, trade secrets, client information, computer programs, financial information and other confidential information (collectively, the "Confidential Information"). The Executive shall not, at any time during the Employment Period (except for the benefit of the Company within the scope of the Executive's duties) or thereafter, make use of or divulge any Confidential Information, except to the extent that such Confidential Information becomes available to the general public (other than as a result of disclosure by the Executive) or as the Company may so authorize in writing; and when the - 6 - Executive shall cease to be employed by the Company, the Executive shall surrender to the Company all Confidential Information which exists in written, tangible or electronic form and records and other documents obtained by him or entrusted to the Executive during the course of the Executive's employment hereunder (together with all copies thereof) which pertain specifically to any of the businesses covered by the covenants in Section 8(a)(i) or which were paid for by the Company; provided, however, that upon written approval of the Company (which approval shall not be unreasonably withheld) the Executive may retain copies of such documents as necessary for the Executive's personal records for federal income tax purposes. The Executive also agrees that the Executive will not at any time (whether before or after the termination of the Executive's employment with the Company) disclose to anyone the terms of this Agreement, except to the Executive's counsel, tax advisors, accountants and members of the Executive's immediate family, in connection with any arbitration, action or other proceeding to enforce the terms of this Agreement, or as may otherwise be required by law. (c) SCOPE OF COVENANTS; REMEDIES. The following provisions shall apply to the covenants of the Executive contained in this Section: (i) the covenants set forth in Sections 8(a)(i) and 8(a)(ii) shall apply within all territories in which the Company is actively engaged in the conduct of business during the Employment Period, including, without limitation, the territories in which customers are then being solicited; (ii) the Executive expressly agrees and acknowledges that the covenants contained in Sections 8(a) and 8(b) are reasonable in all respects (including subject matter, time period and geography) and necessary because of the substantial and irreparable harm that would be caused to the Company by the Executive engaging in any of the prohibited activities contained in such Sections. The Executive expressly agrees and acknowledges that the covenants contained in this Agreement will not preclude the Executive from earning a livelihood, nor unreasonably limit the Executive's ability to earn a living, since the Executive has the ability and experience to engage in employment that will not breach or violate the covenants contained in this Agreement. Each party intends and agrees that if in any action before any court or agency legally empowered to enforce the covenants contained in Sections 8(a) and 8(b) any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (iii) the covenants contained in Sections 8(a) and 8(b) shall survive the conclusion of the Executive's employment by the Company. 9. NON-DISPARAGEMENT; COOPERATION. (a) Except in connection with any arbitration, action or other proceeding to enforce the terms of this Agreement, the Executive shall not, at any time during his employment with the Company or thereafter, make any public or private statement to the news media, to any Company competitor or client, or to any other individual or entity, if such statement would disparage any of the Company, its businesses or any director or officer of any of the Company or such businesses or would have a deleterious effect - 7 - upon the interests of any of such businesses or the stockholders or other owners of any of them; provided, however, that the Executive shall not be in breach of this restriction if such statements consist solely of (i) private statements made to any officers, directors or employees of the Company by the Executive in the course of carrying out his duties pursuant to this Agreement or, to the extent applicable, his duties as a director or officer, or (ii) private statements made to persons other than clients or competitors of the Company (or its representatives) or members of the press or the financial community that do not have a material adverse effect upon the Company; and provided further that nothing contained in this Section 9(a) or in any other provision of this Agreement shall preclude the Executive from making any statement in good faith that is required by law, regulation or order of any court or regulatory commission, department or agency. (b) Except in connection with any arbitration, action or other proceeding to enforce the terms of this Agreement, the Company shall not, at any time during the Executive's employment with the Company or thereafter, authorize any person to make, nor shall the Company condone the making of, any statement, publicly or privately, which would disparage the Executive; provided, however, that the Company shall not be in breach of this restriction if such statements consist solely of (i) private statements made to any officers, directors or employees of the Company or (ii) private statements made to persons other than clients or competitors of any of the Company (or its representatives) or members of the press or the financial community that do not have a material adverse effect upon the Executive; and provided further that nothing contained in this Section 9(b) or in any other provision of this Agreement shall preclude any officer, director, employee, agent or other representative of the Company from making any statement in good faith which is required by any law, regulation or order of any court or regulatory commission, department or agency. 10. ENFORCEMENT. The parties hereto agree that the Company would be damaged irreparably in the event that any provision of Section 8 or 9 of this Agreement were not performed in accordance with its terms or were otherwise breached and that money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Company and its successors or permitted assigns shall be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). Each of the parties agrees that he or it will submit himself or itself to the personal jurisdiction of federal and state courts located within the State, City and County of New York in any action by the other party to enforce an arbitration award against him or it or to obtain interim injunctive or other relief pending an arbitration decision. 11. SURVIVAL. Sections 4, 6, 8, 9 and 10 of this Agreement shall survive and continue in full force and effect in accordance with their respective terms, notwithstanding any termination or expiration of the Employment Period. 12. ARBITRATION. Any dispute or controversy between the Company and the Executive, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be settled by arbitration administered by JAMS/Endispute, Inc. ("JAMS") in accordance with its Commercial Rules then in effect and judgment on the award rendered by the - 8 - arbitrator may be entered in any court having jurisdiction thereof. Any arbitration shall be held before a single arbitrator with prior judicial experience who shall be selected by mutual agreement of the Company and the Executive, unless the parties are unable to agree to an arbitrator, in which case the arbitrator shall be selected under the procedures of JAMS. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, the Company may, at its option without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy for the purpose of seeking injunctive or other equitable relief to enforce Sections 8 and 9 of this Agreement. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company and the Executive. The Company and the Executive acknowledge that this Agreement evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Agreement, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. 13. NOTICE. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when personally delivered or five days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed (a) if to the Executive, to the most recent address then shown on the employment records of the Company, with a copy to Gould & Wilkie LLP, One Chase Manhattan Plaza, New York, NY, 10005, attn: Michael J. Kopcsak, Esq. (fax: (212) 363-2138), and if to the Company, to True North Communications Inc., 101 East Erie Street, Chicago, Illinois 60611-2897, Attention: General Counsel, or (b) to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is determined to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement or the validity, legality or enforceability of such provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 15. ENTIRE AGREEMENT. This Agreement, together with the Exhibit hereto, constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related in any manner to the subject matter hereof. 16. SUCCESSORS AND ASSIGNS. This Agreement shall be enforceable by the Executive and the Executive's heirs, executors, administrators and legal representatives, and by the Company and its successors and permitted assigns. Any successor or permitted assign of the - 9 - Company shall assume by instrument delivered to the Executive the liabilities of the Company hereunder. This Agreement shall not be assigned by the Company other than to a successor pursuant to a merger, consolidation or transfer of all or substantially all of the capital stock or assets of the Company. 17. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to principles of conflict of laws. 18. AMENDMENT AND WAIVER. The provisions of this Agreement may be amended or waived only by the written agreement of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement. 19. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BOZELL GROUP, INC. By: /s/ Gary D. Chester ---------------------------------- Its: Vice President ---------------------------------- EXECUTIVE /s/ Eugene Bartley --------------------------------------- Eugene Bartley - 10 - Approved By: TRUE NORTH COMMUNICATIONS INC. By: /s/ Marilyn R. Seymann ---------------------------------- Marilyn R. Seymann, Chairman of the Compensation Committee of the Board of Directors By: /s/ David A. Bell ---------------------------------- David A. Bell, Chairman and Chief Executive Officer - 11 - EXHIBIT A CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE FOR EUGENE BARTLEY This shall confirm the arrangements relating to the termination of your employment with Bozell Group, Inc. (the "Company"), a True North Communications Inc. company. The effective date of your termination of employment from the Company is ________________________ [INSERT LAST DAY OF EMPLOYMENT] (the "Termination Date"). The terms of our agreement are as follows: 1. TERMINATION BENEFITS. Upon your termination, you will be entitled to those benefits generally applicable to terminated employees, including 401(k)/retirement benefits, continuation of health coverage under COBRA, and a payment for any accrued but unused vacation. In addition, in exchange for your entering into this Agreement and Release, the Company will pay to you the following benefits (the "Termination Benefits"): a. The Company will provide you with the severance that the Company is required to make to you pursuant to Sections 5 and 6 of a certain Employment Agreement between you and the Company, dated as of January 1, 2000 (the "Employment Agreement"), less the required federal, state and local withholdings. This amount will be paid to you in semi-monthly installments in accordance with the payroll procedures for salaried personnel, beginning as soon as practicable after the Termination Date, but no sooner than the eighth day following the date you sign this Agreement and Release. b. You shall also receive all such additional benefits which the Company is required to provide to you pursuant to Section 6 of the Employment Agreement, less any required federal, state and local withholdings. These benefits will commence no sooner than the eighth day following the date you sign this Agreement and Release. 2. CONSIDERATION. You hereby acknowledge that the benefits described in Paragraph 1(a) and (b) exceed any duty to you on the part of the Company (by virtue of Company policies and relevant laws) and that the Company's agreement to provide such benefits to you is sufficient consideration for the release terms set forth below. 3. COMPLETE RELEASE. By signing this Agreement and Release, you release and waive all legal claims in law or in equity of any kind whatsoever that you have or may have against the Company, including its parent and subsidiary corporations, and their officers, directors, employees, affiliates, members, agents, attorneys, benefit plans and plan administrators, successors and/or assigns (collectively, the "Releasees"). This release and waiver covers all rights, claims, actions and suits of all kinds and descriptions that you now have or have ever had, whether known or unknown or based on facts now known or unknown, fixed or contingent, against the Releasees, occurring from the beginning of the world up to and including the date that you execute this Agreement and Release. This release and waiver includes but is not limited to: a. any claims for wrongful termination, defamation, invasion of privacy, intentional infliction of emotional distress, or any other common law claims; b. any claims for the breach of any written, implied or oral contract between you and the Company, including but not limited to any contract of employment; c. any claims of discrimination, harassment or retaliation based on such things as age, national origin, ancestry, race, religion, sex, sexual orientation, or physical or mental disability or medical condition; and d. any claims for payments of any nature, including but not limited to wages, overtime pay, vacation pay, severance pay, commissions, bonuses and benefits or the monetary equivalent of benefits; but not including the rights, benefits and obligations contained in the following clauses 1 through 5 of this Paragraph 3(d), which shall survive the execution of this Agreement and Release: (1) the right to file an administrative charge, (2) any claims for unemployment or workers' compensation benefits, (3) any claims for the consideration being provided to you pursuant to Paragraph 1(a) and (b) of this Agreement and Release, (4) any and all vested rights and benefits you may have as of the Termination Date pursuant to the Company's qualified and non-qualified retirement plans, and (5) any and all rights to indemnification to which you may be entitled pursuant to law or pursuant to the by-laws and the certificate of incorporation of any of the Releasees and their successors (including, but not limited to, insurance benefits) by reason of your being named as a defendant in any lawsuit or other proceeding in connection with your having served as an officer or director of any entity: (x) which is either itself a Releasee, or (y) although not itself a Releasee, your service as an officer or director was at the request of, or for the benefit and with the knowledge of any Releasee. Your release and waiver includes all claims that you have or that may arise under the common law and all federal, state and local statutes, ordinances, rules, regulations and orders, including but not limited to any claim or cause of action based on the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Family and Medical Leave Act, the Americans with Disabilities Act, the Civil Rights Acts of 1866, 1871 and 1991, the Rehabilitation Act of 1973, the National Labor Relations Act, the Employee Retirement Income Security Act of 1974 (except as set forth in (d) above), the Vietnam Era Veterans' Readjustment Assistance Act of 1974, Executive Order 11246, and any state laws governing employee rights, as each of them has been or may be amended. You further waive any right to any form of recovery or compensation from any legal action brought by you or on your behalf in connection with your employment or termination of employment with the Company. You also waive, release and discharge the Releasees from any reinstatement rights which you have or could have, and you acknowledge that you have not suffered any on-the-job injury for which you have not already filed a claim. This Agreement and Release shall be binding upon and inure to the benefit of you and the 2 Releasees and any other individual or entity who may claim any interest in the matter through you. You also acknowledge that you have not assigned any of your rights to make the aforementioned claims or demands. By signing this Agreement and Release, you are forever giving up your rights to make the aforementioned claims or demands. 4. NON-ADMISSION. This Agreement and Release shall not in any way be construed as an admission by the Company of any liability or any wrongful or discriminatory act. 5. NON-DISPARAGEMENT. Both parties hereby acknowledge and reaffirm their continuing obligations pursuant to Section 9 of the Employment Agreement. 6. NO LAWSUITS. You acknowledge and represent that you have not filed nor will you file any lawsuits based on claims or demands that you have released herein; provided, however, that nothing in this Paragraph 6 shall be construed as preventing you from commencing any suit or other proceeding seeking to enforce the terms of this Agreement and Release. 7. CONFIDENTIALITY/NON-COMPETITION/COMPANY PROPERTY. You acknowledge that you have had access to confidential, proprietary business information of the Company as a result of employment, and you hereby agree not to use such information personally or for the benefit of others. You also agree not to disclose to anyone any confidential information at any time in the future so long as it remains confidential. By way of illustration (but not limitation), you agree not to make use of any bidding information (or computer programs thereof) of the Company, nor divulge any trade secrets or confidential financial information of the Company. Further, you agree to keep the terms and the existence of this Agreement and Release confidential and not to discuss it with anyone other than your immediate family, legal representative, tax advisor or as may be required by law. You represent that you have returned or will return on or immediately after the Termination Date all of the Company property in your possession including, but not limited to, all computer-related equipment, keys, credit cards, telephone calling cards, parking cards, building identification cards and files/diskettes relating to the Company and its clients. You also hereby acknowledge and reaffirm your continuing obligations to the Company pursuant to Sections 8 and 10 of the Employment Agreement and pursuant to any other confidentiality, non-compete and/or non-solicitation agreements signed by you during your employment with the Company but after the Effective Date (as that term is defined in the Employment Agreement). 8. ENTIRE AGREEMENT; NO OTHER PROMISES. Except as to any continuing obligations under the Employment Agreement and any other agreements specifically referenced herein, you hereby acknowledge and represent that this Agreement and Release contains the entire agreement between you and the Company, and it supersedes and takes priority over any other written or oral understanding or contract that may have existed in the past between you and the Company or any of its current or former affiliates. You further acknowledge and represent that neither the Company nor any of its agents, representatives or employees have made any promise, representation or warranty whatsoever, express, implied or statutory, not contained herein, concerning the subject matter hereof, to induce you to execute this Agreement and Release, and 3 you acknowledge that you have not executed this Agreement and Release in reliance on any such promise, representation or warranty. You understand and further acknowledge and agree that following the Termination Date the Company will no longer need your services and that the Company will not have any obligations to you following that date, except as provided in this Agreement and Release. 9. KNOWING AND VOLUNTARY RELEASE. You agree that you are signing this Agreement and Release voluntarily and of your own free will and not because of any threats or duress. You are hereby given a period of 21 days to review and consider this Agreement and Release before signing and returning it. You acknowledge you received a copy of this Agreement on _____________, 20___ [INSERT THE DATE THE AGREEMENT IS GIVEN TO THE INDIVIDUAL]. In order to receive the Termination Benefits described in Paragraph 1(a) and (b) above, you must sign, date and return this Agreement and Release to the Company (c/o ___________) [insert name of HR representative] not later than _____________, 2000 [insert date that is 21 days following date the Agreement is given to the individual]. Please note that if you do not return the signed and dated Agreement and Release to the Company (c/o ______________) [insert name of HR representative] by midnight on that date, the offer to pay you the Termination Benefits described in Paragraph 1(a) and (b) above will be automatically withdrawn. 10. ENCOURAGEMENT TO CONSULT WITH ATTORNEY. You are encouraged to consult with an attorney or other representative of your own choice at your own expense prior to signing this Agreement and Release. By signing this Agreement and Release, you are signifying that you have read this Agreement and Release thoroughly, that you have had the opportunity to consult with an attorney prior to signing, and that your agreement to the terms of the Agreement and Release is knowing, willing and voluntary. 11. RIGHT TO REVOKE. You may revoke this Agreement and Release within seven days after you have signed it. Revocation must be made by delivering a written notice of revocation to the Company representative listed in Paragraph 9 above no later than the close of business on the seventh day after you have signed this Agreement and Release. If you revoke this Agreement and Release, this Agreement will not be effective and enforceable, and you will not receive from the Company the benefits set forth in Paragraph 1(a) and (b) above. 12. BREACH. You acknowledge and agree that in the event that you materially breach any of the provisions of Paragraphs 5-7 above, (a) the Company shall be entitled to apply for and receive an injunction to restrain any breaches of the provisions of Paragraphs 5-7 above, and (b) in the event of your material breach of the provisions of Paragraphs 5-7 hereof, you shall be obligated upon written demand to repay to the Company all but $500.00 of the Termination Benefits paid to you pursuant to Paragraph 1(a) hereof, and the foregoing shall not constitute a forfeiture or a penalty and shall not affect the validity of this Agreement and Release. 4 13. RESOLUTION OF ALL MATTERS. This Agreement and Release resolves all matters between the parties, including but not limited to all matters relating to your employment and the termination of your employment with the Company. 14. ENFORCEMENT. This Agreement and Release shall be construed and enforced in accordance with, and governed by, the substantive laws of the State of New York, excluding its conflicts of laws rules. If any term or condition of this Agreement and Release shall be held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, this Agreement and Release shall be construed without such term or condition. Any dispute under this Agreement and Release shall be adjudicated by a federal or state court of competent jurisdiction located within the City, County and State of New York. HAVING READ AND UNDERSTOOD THE RELEASE, CONSULTED COUNSEL OR VOLUNTARILY ELECTED NOT TO CONSULT COUNSEL, AND HAVING HAD SUFFICIENT TIME TO CONSIDER WHETHER TO ENTER INTO THIS AGREEMENT AND RELEASE, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AND RELEASE AS OF THE DAY AND YEAR FIRST WRITTEN BELOW. -------------------------------------------- Eugene Bartley Dated: -------------------------------------- BOZELL GROUP, INC. By: ----------------------------------------- [NAME AND TITLE] Dated: -------------------------------------- 5 EX-10.2 3 ex-10_2.txt EXHIBIT 10.2 EXHIBIT 10.2 [Conformed copy, including 4/1/92 Agreement, and 8/29/97 Amendment] EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT made as of this 1st day of April, 1992, by and between TEMERLIN MCCLAIN, INC., a Texas corporation (the "Company"), and DENNIS MCCLAIN (the "Executive"). 1. TERM OF AGREEMENT; POSITION. (a) The Company hereby employs the Executive as President of the Company for a term (the "Term") to begin on April 1, 1992, and which will end, subject to the provisions of paragraph 19 hereof, on March 31, 2001, and the Executive hereby accepts such employment. The Executive shall serve as President of the Company throughout the Term. (b) The Executive shall devote his full time, attention and energies during regular business hours to the business and affairs and to promote the interests and welfare of the Company and its subsidiaries. The Company acknowledges that the Executive is involved in community activities, and may engage in the activities described in Paragraph 1(d) below, subject to the terms and conditions of said Paragraph 1(d), and the Company has no objection to such involvement continuing or occurring provided it does not materially interfere with the performance of the Executive's duties hereunder. The Company will give written notice to the Executive in the event the Company believes the Executive's community activities or such other activities described in paragraph 1(d) below are materially interfering with his duties hereunder, and the Executive shall have a reasonable time within which to diminish or delete such activities. The Executive shall perform, to the best of his abilities, as President of the Company, such executive duties with managerial responsibility as may, from time to time, be specified by the Board of Directors consistent with his status as President of the Company. The parties acknowledge that the Executive being President of the Company as hereinabove provided in subparagraph (a) of this Paragraph 1 is a material term of this Agreement. The Company shall cause the Executive to be elected to its Board of Directors during the Term. The Executive's services shall be performed at the Company's offices in the Dallas Metroplex area, subject to the reasonable travel requirements of his position and duties hereunder. The parties acknowledge that the Executive's performance of services in the Dallas Metroplex area as referred to in the preceding sentence is a material term of this Agreement. (c) The Executive shall not during the Term be interested directly or indirectly, in any manner, as a partner, officer, director, stockholder, advisor, employee or in any other capacity, in any other business similar to any of the businesses of the Company or any of its subsidiaries or affiliates; provided, however, that this clause shall not prevent or limit the right of the Executive to own up to five percent (5%) of the issued and outstanding securities of any publicly-owned company whose securities are traded on any securities exchange or in the over-the-counter market; provided further however that this clause shall not apply to Executive from and after the effectiveness of the Company's termination of Executive's employment without Cause (as hereinafter defined) or Executive's termination of employment for Good Reason (as hereinafter defined). In addition, the Company and Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("BJK&E"), the parent corporation of the Company, agree that Section 9 of that certain Stockholders' Agreement dated as of February 18, 1988, among BJK&E and certain of its stockholders shall have no applicability to the Executive. (d) Subject to the provisions of subparagraphs (b) and (c) above, from and after April 1, 1992, the Executive may, in addition to the community activities described in subparagraph b. above, engage in venture capital transactions and other investments in businesses, other than the advertising, public relations, radio, television or print media businesses, provided that the Executive performs no services for remuneration in connection with any such investments. 2. COMPENSATION. 2.1 BASE COMPENSATION. (a) The Company shall compensate the Executive (as adjusted in accordance herewith, his "Base Compensation") for the services to be rendered by the Executive hereunder, including all services to be rendered as a director and executive officer of the Company and a director of BJK&E and as a member of any committee of the Board of Directors of the Company or BJK&E, at the rate of $675,000 per annum. The Executive's annual Base Compensation shall be payable not less frequently than monthly in accordance with the regular executive salary procedures from time to time adopted by the Company. The Company shall deduct from all compensation paid to the Executive hereunder such sums, including but without limitation, Social Security, income tax withholding, and unemployment insurance, as the Company is by law obligated to deduct. (b) On April 1, 1993 and on each April 1 thereafter during the Term (the "Adjustment Date"), the Base Compensation shall be adjusted upward based upon the Consumer Price Index for all Urban Consumer/United States City Average, as published by the Bureau of Labor Statistics of the United States Department of Labor (the "CPI"). Such compensation for the twelve (12) months beginning on each Adjustment Date shall be equal to the Greater of (i) $675,000, or (ii) $675,000, multiplied by a fraction, the numerator of which shall be the CPI published most recently prior to the Adjustment Date and the denominator of which shall be the CPI published most recently prior to April 1, 1992. In no event, however, shall the Base Compensation for any such twelve (12) month period exceed 106% of the Base Compensation payable in the previous twelve (12) month period. 2 2.2 FRINGE BENEFITS. The Company agrees that the Executive's fringe benefits, taken as a whole, will not be less than he received as an employee of BJK&E and/or its affiliates as of April 1, 1992. 2.3 AIR TRAVEL. (a) It is understood that it will be necessary for business purposes for the Executive's spouse to accompany the Executive on various business trips from time to time, and whenever the Executive, in the exercise of his reasonable judgment, determines that the presence of the Executive's spouse on any business trip will serve the Company's best interests, the Company will pay for all reasonable travel expenses incurred by the Executive's spouse on such business trip. (b) It is acknowledged that Company policy requires all employees, including senior executives, to travel in Economy Class on domestic flights and in Business Class on International flights. However, from time to time the Executive may fly First Class on either a domestic or an international flight whenever the Executive, in the exercise of his reasonable judgment, determines that it is in the best interests of the Company for him to do so, as, for example, and without limitation, when traveling with a client or with talent appearing in a commercial produced by the Company. (c) It is understood and agreed that the Chief Financial Officer of BJK&E may from time to time review determinations made by the Executive with regard to travel arrangements as provided in this Paragraph 2.3. If in the reasonable determination of such officer any of such travel arrangements were not in the best interests of the Company, the Executive agrees to conform to such determination with regard to future travel arrangements, without any adjustment of the costs of travel arrangements previously incurred. 2.4 PARTICIPATION IN CERTAIN BENEFIT PLANS. The Executive shall be entitled to life insurance (in addition to the life insurance hereinbelow provided in Paragraphs 2.5 and 3), medical insurance, Profit Sharing Plan participation, Wealth Accumulation Plan participation and other fringe benefits in accordance with BJK&E's standard policy affecting senior BJK&E executives. 2.5 SPLIT-DOLLAR LIFE INSURANCE POLICY. The Company will provide the Executive with a split-dollar life insurance policy providing for death benefit in the event of the Executive's death of Two Million Dollars ($2,000,000.00), the annual premium for which will be paid by the 3 Company, subject to a total annual premium cost to the Company of not more than Thirty-Eight Thousand Five Hundred Dollars ($38,500.00). The Executive shall advise the Company in writing of the name(s) of the beneficiary or beneficiaries of such policy. In the event that the Executive's employment with the Company terminates for any reason other than his death (any such termination being hereinafter the "Termination") within the Term, the following percentage of the cash surrender value shall be paid to the Executive upon such Termination:
Year Percentage ---- ---------- Year ending March 31, 1993 50 Year ending March 31, 1994 60 Year ending March 31, 1995 70 Year ending March 31, 1996 80 Year ending March 31, 1997 90 April 1, 1997 and thereafter 100
The Company shall have the right during the period of the Executive's employment with the Company to borrow against the cash surrender value of such policy. If in the event of Termination, the amount of the cash surrender value to which the Executive is entitled pursuant to the previous paragraph exceeds the amount available to the Executive by reason of loans against the cash surrender value made to the Company, the Company agrees to pay the amount of such excess to the Executive, promptly after Termination. 2.6 BONUS PLAN. (a) During the Executive's employment with the Company, the Executive shall be entitled to participate in the BJK&E Bonus Plan (the "Bonus Plan") duly adopted by BJK&E, a copy of which Plan is annexed hereto as Exhibit 1. An example of the operation of the Bonus Plan as it applies to the Company is annexed hereto as Exhibit 2. (b) The Executive and, if Liener Temerlin is employed by the Company, Liener Temerlin shall constitute a committee which shall be responsible for determining which employees of the Company are eligible to participate in the Bonus Plan and the distribution each fiscal year of the Bonus Pool payable under the Bonus Plan among the Company's eligible employees. (c) BJK&E agrees, and acknowledges such agreement by its execution of the Guaranty appearing at the end of this Agreement, that it will not authorize or permit either the termination or amendment of the Bonus Plan at any time within the Term without the specific written approval of the Executive, unless, in the case of any amendment of the Bonus Plan, such amendment does not adversely affect or diminish the Executive's rights and privileges under the Bonus Plan. 4 2.7 STOCK OPTION PLAN. BJK&E agrees, and acknowledges such agreement by its execution of the Guaranty appearing at the end of this Agreement, to give and grant to the Executive an option to purchase 100,000 shares of the Class B Common Stock of BJK&E pursuant to the terms and conditions of the Bozell, Jacobs, Kenyon & Eckhardt, Inc. Stock Option Plan (the "Stock Option Plan"), which plan was effective as of March 30, 1992, a copy of which Stock Option Plan is attached hereto as Exhibit 3. The grant of such option shall be evidenced by the execution by BJK&E and the Executive, simultaneously with the execution of this Agreement, of a Stock Option Agreement, the form of which is annexed hereto as Exhibit 4 (the "Stock Option Agreement"). 2.8 EXPENSES. The Executive shall be reimbursed for the reasonable and actual out-of-pocket expenses incurred by him in the performance of his duties and responsibilities hereunder, provided the Executive shall first furnish to the Company proper vouchers and expense accounts in accordance with the Company policy. 3. LIFE INSURANCE. BJK&E or the Company may, in the sole discretion of either of them, and at any time during the Term, apply for and procure as owner and for its own benefit insurance on the life of the Executive, in such amounts and in such form or forms as the Company may choose. The Executive shall have no interest whatsoever in any such policy or policies, but he shall, at the request of the Company, submit to such medical examinations, supply such information, and execute such documents as may be reasonably required by the insurance company or companies to whom the Company has applied for such insurance. Upon the termination of Executive's employment by the Company, if BJK&E or the Company owns any life insurance policy on the Executive's life, the Executive shall have the option to acquire such life insurance from such owner at a price equal to its cash surrender value, if any, at the date of the termination of the Executive's employment, and if BJK&E or the Company owns any term life insurance on the Executive's life, the Executive shall have the option to acquire such life insurance from such owner at a price equal to the prepaid premium at the date of the termination of the Executive's employment. However, the Executive shall have no right to acquire any insurance covering his life maintained in connection with the Wealth Accumulation Plan. 4. DISABILITY. (a) If, on account of any physical or mental disability, the Executive shall fail or be unable to perform under this Agreement for a continuous period of one hundred twenty (120) days or an aggregate period of one hundred eighty (180) days during any consecutive twelve (12) month period, then the Company may, at its option, terminate this Agreement upon thirty (30) days written notice. In such event, the 5 Executive shall be entitled to receive, in addition to any and all disability and other benefits that he may otherwise be entitled to receive: (i) his Base Compensation and other benefits under Paragraph 2.1, 2.2 and 2.4, for a period ending six months following the date on which the Company terminates this Agreement pursuant to the first sentence of this Paragraph 4 (the date of such termination being called herein the "Termination Date"), (ii) any and all accrued but unpaid bonuses payable to the Executive under the Bonus Plan, (iii) if the Termination Date occurs prior to April 1, 1993, a bonus payable from the Company's Bonus Pool, if any, which is established under the Bonus Plan, for BJK&E's 1993 fiscal year, in an amount determined in the sole discretion of Liener Temerlin (or, if Liener Temerlin dies before making such determination, in an amount determined in the reasonable discretion of the Company's Board of Directors), and (iv) if the Termination Date occurs on or after April 1, 1993, a bonus payable from the Company's Bonus Pool, if any, in an amount equal to one-half of the amount of the bonus amount under the Bonus Plan that was payable to the Executive during the fiscal year of BJK&E immediately preceding the fiscal year in which the Termination Date occurs, subject to the Company having earned a Bonus for such year pursuant to the provision of the Bonus Plan. The option on the part of the Company to terminate provided in this Paragraph 4 is separate, distinct and additional to any right on the part of the Company to terminate this Agreement pursuant to Paragraph 9 hereof. (b) If there should be a dispute between the parties hereto as to the Executive's physical or mental disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician or psychiatrist agreed upon for the purpose by the parties or their representatives, or if the parties cannot agree within thirty (30) days after a request for designation of such party, then each party shall designate a physician or psychiatrist and the two of them shall designate a third such-medical professional and the opinion of a majority of the three (3) of them shall settle the question. The certification of such physician or psychiatrist or the majority of the three (3) of them, as the case may be, as to the question in dispute shall be final and binding upon the parties hereto. 5. DEATH. This Agreement will terminate in the event that the Executive should die during the Term. In such event, the Executive's personal representative and/or family, as 6 the case may be, shall be entitled to receive, in addition to any and all death and other benefits that such representative and/or family may otherwise be entitled to receive: (i) the Executive's Base Compensation and other benefits under Paragraphs 2.1, 2.2 and 2.4 for a period ending six months following the date of his death, and (ii) any and all accrued but unpaid bonuses payable to the Executive under the Bonus Plan. (iii) if the date of his death is prior to April 1, 1993, a bonus payable from the Company's Bonus Pool, if any, for BJK&E's 1993 fiscal year representing a bonus payment under the Bonus Plan for the portion of said fiscal year prior to the Executive's date of death, in an amount determined in the sole discretion of Liener Temerlin (or, if Liener Temerlin dies before making such determination, in an amount determined in the reasonable discretion of the Company's Board of Directors), and (iv) if the date of his death is on or after April 1, 1993, a bonus payable from the Company's Bonus Pool, if any, in an amount equal to one-half of the amount of the bonus under the Bonus Plan that was payable to the Executive during the fiscal year of BJK&E immediately preceding the fiscal year during which he dies, subject to the Company having earned a Bonus for such year pursuant to the provisions of the Bonus Plan. 6. VACATION. The Executive shall be entitled to four (4) weeks' vacation in any twelve (12) month period or to such greater time that is determined by the Company's Board of Directors to be the Company's vacation policy with respect to its executive officers. 7. SERVICING ACCOUNTS; SOLICITATION OF THE COMPANY EMPLOYEES; DISCLOSURE OF CONFIDENTIAL INFORMATION. Subject to the provisions of Paragraphs 9(d) and 19 hereof, the Executive agrees that during the Term and for a period of one year thereafter, whether or not the Executive is then employed by the Company, and if he is no longer employed by the Company, regardless of the reasons why he is not then so employed, he will not, directly or indirectly, (i) either on the Executive's own behalf or on behalf of any other person, firm or corporation, without the prior written consent of the Board of Directors of BJK&E, solicit or perform any services for or on behalf of any entity or person which is a client of BJK&E or any of its subsidiaries at any time within one year prior to the termination of the Executive's employment with the Company; or (ii) solicit or otherwise initiate any inducement of any persons who are employees of the Company or its subsidiaries to terminate their employment with the Company or such subsidiary. 7 The Executive also agrees that he will not at any time (whether before or after the termination of his employment with the Company) disclose to anyone any confidential information or trade secrets of the Company or of any client of the Company, or utilize such confidential information or trade secrets for his own benefit or the benefit of third parties. All records, memoranda, notes and other documents compiled by him or made available to him during his employment concerning the business of the Company or the business of any of its clients shall be and remain the property of the Company, and shall be delivered to the Company upon the termination of the Executive's employment or at any time prior thereto upon request. Notwithstanding the foregoing, upon the occurrence of an act of Default (as hereinafter defined) and the failure of the Company to cure such act of Default within the applicable 30 day cure period as provided in Paragraph 9(d) hereof, the Executive shall be entitled to disclose or utilize (for any purpose or reason) any and all of such confidential information and trade secrets (including, without limitation, Procedural Information), except that in no event may the Executive disclose or utilize (i) confidential information or trade secrets about the Company that do not constitute Procedural Information or (ii) without the written consent of any client of the Company, any confidential information or trade secrets of such client. As used herein, "Procedural Information" means procedures, techniques, policies and programs developed by the Executive at any time, and/or used by the Company or any of its affiliates at any time, to operate the Company's business and/or manage its employees. 8. REMEDY FOR BREACH. The Executive hereby represents and acknowledges that the services to be performed by him under this Agreement are of a special, unique, unusual, extraordinary and intellectual character, the loss of which cannot be reasonably or adequately compensated for in damages. Accordingly, the Executive agrees that, in the event (i) of any breach by him of the second or third sentences of paragraph 1(b) or of paragraphs 1(c), 1(d), 7, 10 or the last sentence of paragraph 19.1 of this Agreement to be performed or observed by him, or (ii) the Executive shall, without the written consent of the Company, leave its employment (except if the Executive leaves the employ of the Company for Good Reason or is terminated by the Company without Cause) and thereafter perform services within the Term for any person, firm, or corporation engaged in competition with the Company, then in the case of either (i) or (ii) the Company shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages for any breach of this Agreement, or to enforce the specific performance of any negative covenant made by the Executive hereunder, or to enjoin the Executive from performing services for any such other person, firm, or corporation, or from breaching any of the provisions of this Agreement referred to in clause (i) of this Paragraph 8. 8 9. TERMINATION FOR CAUSE OR GOOD REASON. (a) TERMINATION BY THE COMPANY FOR "CAUSE". The Company shall have the right at any time, by written notice to the Executive, to terminate this Agreement forthwith and to discharge the Executive for Cause (herein so called) if the following shall occur during the employment term: the Executive's continued, willful failure or refusal to perform specific written directives of the Board of Directors of BJK&E or of the Company or of the Chief Executive Officer of BJK&E which directives involve material aspects of the Executive's duties and responsibilities and which are consistent with the scope and nature of the Executive's duties and responsibilities as set forth in Paragraph 1 hereof. The Company agrees, for the benefit of BJK&E, not to terminate this Agreement and discharge the Executive pursuant to this Paragraph 9(a) without the prior consent of the Board of Directors of BJK&E or the Chief Executive Officer of BJK&E. (b) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive shall have the right at any time, within ninety (90) days following the later of the date on which the occurrence of such event becomes known to the Executive or the expiration of any "cure" period as provided below, by giving not less than ten days prior written notice to the Company, to terminate his employment for "Good Reason" which, for purposes of this Agreement, is hereby defined as the occurrence, without the Executive's consent, of one or more of the following events: (i) the failure of BJK&E to make any payments to the Company, or the failure of the Company to make any payments to the employees of the Company, when due under the Bonus Plan within thirty (30) days of BJK&E's receipt of written notice from the Executive of such failure; (ii) if the Executive is not appointed to or is otherwise removed from the office of President of the Company for any reason other than in connection with the termination of his employment with the Company, and, if the Executive is not so appointed, or is so removed, without the prior consent of the Board of Directors of BJK&E or the Chief Executive Officer of BJK&E, the foregoing is not cured within ten (10) days after written notice thereof to the Company; (iii) if the Executive's Base Compensation and/or fringe benefits payable under Paragraph 2 hereof are reduced or, in the case of fringe benefits, are materially reduced, for any reason other than in connection with the termination of his employment with the Company and the foregoing is not cured within thirty (30) days after written notice thereof to the Company; (iv) if the principle office of the Company is moved to a location that is outside the Dallas Metroplex area; or 9 (v) the commission by the Company or BJK&E of a material breach of its obligations under this Agreement, the Bonus Plan as it pertains to the Company or the Stock Option Agreement (other than any breaches referred to in clauses (i) - (iv) of this Paragraph 9(b)) which breach shall continue for thirty (30) days after written notice thereof to the Company. The Company agrees for the benefit of BJK&E that it will not take any action, or omit to take any action it should take, which results in the Executive having the right to terminate his employment for Good Reason without the prior consent of the Board of Directors of BJK&E or the Chief Executive Officer of BJK&E. (c) BENEFITS UPON TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event that the Company terminates the Executive's employment with the Company without Cause or the Executive terminates his employment with the Company for Good Reason, the Executive shall be under absolutely no duty whatsoever to mitigate damages and shall be entitled to receive throughout the remainder of the Term: (i) the Base Compensation payable to him under section 2.1 hereof; (ii) the benefits to which the Executive is entitled under Sections 2.2 and 2.5 hereof; (iii) annually, a dollar amount equal to the sum of the amounts actually contributed annually to qualified plans that would have been allocated to the Executive's account thereunder if the Executive had continued to be employed by the Company for the remainder of the Term; and (iv) if such termination occurs prior to the allocation of bonuses for the Company's employees under the Bonus Plan for the fiscal year ending March 31, 1993, the bonuses that would otherwise be payable to the Executive under the Bonus Plan for the balance of the Term, with the Executive's bonus for that fiscal year to be an amount equal to Twenty-five percent (25%) (the "Percentage") of the Company's Bonus Pool, if any, for that fiscal year and the Executive's bonus each remaining fiscal year of the Term to be an amount equal to the greater of (A) the dollar amount equal to the product of the Percentage multiplied by the Company's Bonus Pool for the fiscal year ending March 31, 1993, and (B) the dollar amount equal to the product of the Percentage multiplied by the Company's Bonus Pool for such remaining fiscal year; amounts under this clause (iii) shall be payable to the Executive at the same time as the Company Bonus Pool to which it relates is paid to employees of the Company, but no later than December 31 of the year in which it is to be paid under the Bonus Plan; and the Company hereby agrees that any 10 amount payable to the Executive under this clause (iv) shall reduce the amounts due and owing to the Company and its Bonus Plan participants under the Bonus Plan. (v) if such termination occurs after the allocation of bonuses for the Company's employees under the Bonus Plan for the fiscal year ending March 31, 1993, the bonuses that would otherwise be payable to the Executive under the Bonus Plan for the balance of the Term (including earned but unpaid bonuses), with the Executive's bonus each remaining fiscal year of the Term to be an amount equal to the greater of (A) the last annual bonus to which the Executive was entitled under the Bonus Plan prior to his termination of employment with the Company, and (B) a dollar amount equal to the Company's Bonus Pool for that fiscal year multiplied by the average percentage of the Executive's share of the Company's Bonus Pool for BJK&E's last three fiscal years (or shorter period) prior to Executive's termination of employment (but in no event shall such percentage exceed the Percentage); amounts under this clause (v) shall be payable to the Executive at the same time as the Company Bonus Pool to which it relates is paid to employees of the Company, but no later than December 31 of the year in which it is to be paid under the Bonus Plan; and the Company hereby agrees that any amount payable to the Executive under this clause (v) shall reduce the amounts due and owing to the Company and its Bonus Plan participants under the Bonus Plan. Subject to the provisions of Paragraphs 9(d) and 19 hereof, the agreements and representations of the Executive contained in Paragraphs 7 and 8 hereof shall remain in effect in accordance with their terms for the remainder of the Term, and if termination pursuant to this Paragraph 9(c) occurs after March 31, 1997, then for a period of one year subsequent to the date of such termination. BJK&E and the Company hereby agree that, in the event (i) BJK&E terminates or amends the Bonus Plan in violation of the terms hereof or thereof, (ii) the Company is liquidated or dissolved or merged or consolidated with or into another corporation which does not continue the Bonus Plan and the activities of which immediately after such merger or consolidation do not consist substantially of the activities of the Company immediately prior to such merger or consolidation, (iii) the Company's assets are sold and the buyer does not continue the Bonus Plan and the buyer's assets immediately after such sale do not consist substantially of the assets of the Company immediately prior to such sale, or (iv) BJK&E, the Company or any successor thereto otherwise materially curtails the Company's or such successor's operations, then in lieu of a bonus formula in clauses (iv) and (v) above the Executive shall be entitled to receive the greater of (A) the bonus he received in the prior year, and (B) $500,000, which bonus amount shall be payable by June 30 following the end of each fiscal year during the Term. 11 (d) FAILURE OF THE COMPANY TO MAKE PAYMENTS AFTER TERMINATION BY THE COMPANY WITHOUT CAUSE OR TERMINATION BY THE EXECUTIVE FOR GOOD REASON. If after termination of the Executive's employment by the Company without Cause or the Executive's termination of his employment with the Company for Good Reason, the Company commits an act of Default, as hereinafter defined, the Executive may advise the Company in writing of the occurrence of such Default and, if such act of Default is not cured within thirty (30) days after receipt by the Company of such notice from the Executive, then the Executive shall not thereafter be bound by the agreements and representations contained in Paragraphs 7 and 8 hereof. Therefore, and without limiting the generality of the foregoing, Executive shall thereafter be fully entitled to (i) solicit or perform services for or on behalf of any person or entity which is a client of BJK&E or any of its subsidiaries at any time within one year prior to the termination of the Executive's employment with the Company and (ii) solicit or otherwise initiate any inducement of any persons who are employees of the Company or its subsidiaries to terminate their employment with the Company or any such subsidiary. (e) DEFAULT DEFINED. An act of Default, as referred to in subparagraph (d) of this Paragraph 9, shall occur in the event that the Company or BJK&E: (i) shall fail to make any payment when due hereunder; or (ii) shall otherwise commit a material breach of its obligations under this Agreement, the Bonus Plan or the Stock Option Agreement. 10. USE OF THE EXECUTIVE'S NAME. It is acknowledged that the Executive's surname (the "Surname") is utilized in the Company's name, and the Executive acknowledges the importance to the Company of its ability to continue to use the corporate name into the future without the confusion to the general public and to its clientele which might be occasioned by the use of the Surname by the Executive as the name of another business entity. Accordingly, the Executive gives and grants to the Company the right to use the Surname in the name of the Company in perpetuity; provided, however, that (a) the Surname shall only be used when preceded by the name "Temerlin" and the name "Temerlin McClain" shall not be used in conjunction with any other name, word or expression other than "Temerlin McClain, Inc."; (b) the Surname shall only be used for advertising or public relations purposes and shall not be licensed or sold (other than in connection with the sale of the business but only if the purchaser agrees in writing to the restrictions on the right to use the Surname contained in this Paragraph 10); (c) the Surname shall not be used by other BJK&E subsidiaries (other than subsidiaries of the Company), divisions or other affiliates as long as either the 12 Executive or Liener Temerlin is employed by, or is otherwise contractually engaged to provide any services to, BJK&E or the Company; (d) as long as the Company operates under the Surname, neither it nor its subsidiaries shall accept accounts involving, or on behalf of, the following: (i) gambling (including, without limitation, lotteries, horse racing and casinos); (ii) tobacco; (iii) alcohol other than beer or wine; (iv) any country, institution, organization, association, other entity or group or individual (but not an individual employee of any such account) that conducts or promotes anti-Semitic practices or policies; and (v) politics. (e) all rights to the Surname shall revert to the Executive or his estate in the event that the Company or a permitted assignee ceases using the Surname. The parties acknowledge that any determination as to whether or not any entity, country, institution, organization, association, group or individual conducts or promotes anti-Semitism may be difficult to determine on an objective basis. It is therefore acknowledged that if a dispute arises as to whether or not the Company has in fact accepted an account of the type described in clause (iv) above, the parties agree to resolve such dispute by arbitration under the auspices of the Anti-Defamation League of the B'nai B'rith (the "ADL"). Such arbitration shall be governed by the then current rules of the American Arbitration Association. In this regard, the parties agree that (i) such arbitration shall commence as promptly as possible after the 20th day following service of notice of a dispute by one party on the other, (ii) the proceeding shall be determined by one arbitrator (who shall be selected or approved by the ADL), (iii) the arbitrator shall have authority to determine only the issue of whether or not the entity, country, institution, organization, association, group or individual in question conducts or promotes anti-Semitic activities, and shall have no authority to order a modification or amendment of this agreement, and (iv) the decision of the arbitrator shall be final and binding upon the parties thereto. All reasonable legal and other fees and expenses, including, without limitation, any arbitration expenses incurred by the prevailing party, shall be paid to the prevailing party by the other party to the extent permitted by law. If the Executive is deceased and Liener Temerlin is living, the Liener Temerlin shall have the right to waive compliance with clause (d) above, but if both the Executive and Liener Temerlin are deceased, neither's representatives, heirs or estate shall have the right to waive compliance with such clause (d). 13 In addition, the Executive covenants and agrees that he will not at any time use or authorize or permit the use of the Surname in connection with any business entity in which the name "Temerlin" appears, and further, that for a period of nine (9) years from the date hereof, he will not use or authorize or permit the use of the Surname in the name of any business entity in which the Executive has any interest of any kind or to any degree. The Executive shall have the right to terminate the license granted by this section in the event that (i) the Company terminates this Agreement without Cause, (ii) the Executive terminates this Agreement for Good Reason, (iii) after 120 days prior written notice by the Executive to the Company and the failure to cure the same, any breach by the Company of this Paragraph 10, it being agreed that, for purposes of this Agreement, the Company shall be deemed to have cured any breach arising under this Section 10 by virtue of the Company having accepted an account contrary to clause (d) of this Section 10 if the Company resigns such account within such 120 day period. Without limiting the generality of the foregoing, the Company shall, upon such termination of the license granted by this section, change its name. Notwithstanding the foregoing, the Executive shall have the right to terminate his obligations under the immediately preceding paragraph in the event that said license is terminated pursuant to the immediately preceding sentence and, pursuant to Paragraph 11(d), the Executive is no longer bound by the agreements and representations contained in Paragraphs 9 and 10 hereof and elects to compete with the Company as provided in said paragraphs. 11. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including, without limitation, any corporation which may acquire all or substantially all of the Company's assets and business or with or into which the Company may be consolidated, merged or reorganized. (b) The parties hereto agree that the Executive's services are personal and that this Agreement is executed with respect thereto. Accordingly, the Executive may not assign this Agreement nor any of his rights, duties or obligations created hereunder. 12. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be deemed to have been given and received forty-eight (48) hours after deposit thereof for mailing at any general or branch United States Post Office enclosed in a registered or certified postpaid envelope and addressed as follows: To the Executive: Dennis McClain 201 East Carpenter Freeway Dallas/Ft. Worth Airport, TX 75261-9200 14 With Copy to: Johnson & Gibbs, P.C. 900 Jackson Street, Suite 100 Dallas, TX 75202-4499 Attn: Richard A. Freling, Esq. To the Company: Temerlin McClain, Inc. 201 East Carpenter Freeway Irving, Texas 75062 Attn: Liener Temerlin, Chairman of the Board With Copies to: Bozell, Jacobs, Kenyon & Eckhardt, Inc. 40 West 23rd Street New York, New York 10010 Attn: Valentine J. Zammit Executive Vice President and Chief Financial Officer Loeb and Loeb 230 Park Avenue New York, New York 10169 Attn: William J. Marlow, Esq. The parties hereto may designate a different place at which notice shall be given provided, however, that any such notice of change of address shall be effective only upon receipt. 13. ENTIRE UNDERSTANDING. This Agreement and the other agreements and instruments referenced herein set forth the entire understanding of the parties hereto with respect to the subject matter thereof and no other representations, warranties or agreements whatsoever have been made to the Executive not herein or therein contained. This Agreement shall not be modified, amended or terminated except by another instrument in writing executed by the parties hereto. This Agreement supersedes, effective April 1, 1992, any and all agreements entered into prior thereto affecting the Executive's employment with BJK&E or any of its subsidiary corporations, the provisions of any such prior agreements remaining in effect only with regard to acts occurring prior to April 1, 1992. 14. SEVERABILITY. Each of the parties hereto specifically acknowledges that it is the desire and intent of the parties that the provisions of this Agreement, specifically including, without limitation, Paragraphs 8 and 10, shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular portion of any provision of this Agreement shall 15 be adjudicated to be invalid or unenforceable, then such provision shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of the applicable provision in the particular jurisdiction in which such adjudication is made. The failure by either party hereto, at any time, to require performance by the other party hereto of any of the provisions hereof, shall not be deemed a waiver of any kind nor in any way affect the respective rights of such party, to thereafter enforce the same. 15. INDEMNIFICATION RIGHTS. (a) GENERALLY. BJK&E and the Company agree that, in addition to any rights that the Executive may have under the certificates or articles of incorporation and by-laws of BJK&E and the Company as the same may be in effect from time to time hereafter as to indemnification and advancement of expenses, the Executive shall hereby, as a matter of separate contract, be entitled and continue to be entitled to all rights of indemnification and advancement of expenses provided to directors, officers, employees or agents of BJK&E and the Company or who serve or served at the request of BJK&E or the Company in any capacity with any other corporation or other enterprise, under the certificates or articles of incorporation and by-laws of BJK&E, the Company and such other companies as in effect on the date hereof (the provisions of which are incorporated herein by reference), regardless of any amendments thereto which thereafter occur, which rights BJK&E and the company expressly agree shall apply to the Executive as a director, officer, employee and agent of the Company, and which rights shall continue indefinitely in the Executive's favor as to any actions, suits, claims or proceedings now pending or threatened and as to any actions, suits, claims or proceedings which may hereafter be brought or threatened. Without limiting the terms of the immediately preceding provisions of this Section 15, BJK&E and the Company shall also indemnify and hold harmless the Executive to the fullest extent permitted by applicable law for any liabilities that he might incur as a result of, or in connection with, his service as a member of the boards of directors or other governing bodies of the Dallas Symphony Orchestra or the Boy Scouts of America or any other not-for-profit institution (provided that the Executive gives BJK&E prior written notice that he is going to serve on the board or other governing body of any other not-for-profit institution, in which case BJK&E hereby consents to such service), which indemnification by the Company, however, shall apply only to liability of the Executive remaining after application of the proceeds of any policy of insurance maintained by any such not-for-profit institution and by the Executive which is payable as a result of or in connection with such service by the Executive. BJK&E and the company hereby acknowledge and agree that the Executive's service on such boards and bodies is in the best interests of BJK&E and the Company. BJK&E and the Company shall be subrogated to all of Executive's rights of indemnification and/or contribution from any such not-for-profit institution. (b) BJK&E and the Company agree to include the Executive as an insured beneficiary of, and to furnish the Executive with coverage under, any and all director and officer liability insurance policies now or hereafter maintained by BJK&E or the Company or its affiliates to the same extent other current and/or former officers and 16 directors of BJK&E or the Company are provided coverage thereunder. Such coverage shall be furnished to the Executive until the expiration of the statutes of limitations applicable to the liabilities for which indemnification is provided herein. BJK&E and the Company agree to furnish the Executive with evidence of such coverage upon the Executive's written request. 16. GOVERNING LAW; JURISDICTION. The federal and state courts located in Dallas, Texas shall have exclusive jurisdiction regarding the interpretation and enforcement of this Agreement. This Agreement and all rights, obligations and liabilities arising hereunder shall be construed and enforced in accordance with the laws of the State of Texas, without regard to conflict of law principles. 17. LEGAL FEES. In the event suit is brought to enforce or interpret any part of this Agreement or the rights or obligations of any party to this Agreement, the prevailing party shall be entitled to recover, in addition to such other relief as to which it may be entitled, its reasonable attorney's fees and costs to be fixed by the court. 18. BY-LAWS. Paragraph 6 of the By-laws of the Company are attached hereto as Exhibit 5. The Company hereby agrees (on its behalf and on behalf of BJK&E) not to amend such paragraph during the Term without the prior written consent of the Executive and of BJK&E. 19. CERTAIN NOTICES OF RENEWAL OR NON-RENEWAL. 19.1 THE COMPANY'S WILLINGNESS OR THE EXECUTIVE'S UNWILLINGNESS TO RENEW. If either (a) the Company offers, at any time after September 30, 1996, and prior to March 1, 1998, by written notice to the Executive, to renew this Employment Agreement at the end of the Term, and the Executive does not accept such offer in writing within thirty (30) days of his receipt of such notice, or (b) the Executive at any time after September 30, 1996, and prior to March 1, 1998, notifies the Company in writing that he is unwilling to renew this Employment Agreement at the end of the Term, then the Executive's employment will be continued on all of the terms and conditions contained in this Employment Agreement for a period ending on the later of (x) March 31, 1998, and (y) one year after the date of the first receipt of either such notice by the Executive or by the Company, whichever is applicable (such date of termination being the "Actual Termination Date"). In the event of the occurrence of either (a) or (b) above, the agreements and representations of the Executive contained in 17 paragraphs 7 and 8 hereof shall, subject to paragraph 9(d) hereof, remain in effect in accordance with their terms for a period of one year subsequent to the Actual Termination Date and thereafter shall have no applicability to the Executive. 19.2 THE EXECUTIVE'S WILLINGNESS OR THE COMPANY'S UNWILLINGNESS TO RENEW. If either (a) the Executive offers, at any time after September 30, 1996, and prior to March 1, 1998, by written notice to the Company, to renew this Employment Agreement at the end of the Term, and the Company does not accept such offer in writing within thirty (30) days of its receipt of such notice, or (b) the Company at any time after September 30, 1996, and prior to March 1, 1998, notifies the Executive in writing that it is unwilling to renew this Employment Agreement at the end of the Term, then the Executive's employment will be continued on all of the terms and conditions contained in this Employment Agreement for a period ending on the later of (x) March 31, 1998, and (y) one year after the date of the first receipt of either such notice by the Executive or by the Company, whichever is applicable (such date of termination being the "Actual Termination Date"). In the event of the occurrence of either (a) or (b) above, the agreements and representations of the Executive contained in paragraphs of 7 and 8 hereof shall, subject to paragraph 9(d) hereof, cease on the Actual Termination Date and thereafter shall have no applicability to the Executive. 19.3 NONAPPLICABILITY OF THIS PARAGRAPH. This paragraph 19 shall be of no force or effect if the Executive's employment hereunder is terminated prior to April 1, 1998 without Cause or for Good Reason. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. TEMERLIN MCCLAIN, INC. A Texas Corporation By: /s/ Liener Temerlin --------------------------------------- "EXECUTIVE" /s/ Dennis McClain --------------------------------------- DENNIS McCLAIN The payment and performance by the Company of its obligations set forth in this Agreement are hereby guaranteed by Bozell, Jacobs, Kenyon & Eckhardt, Inc. BOZELL, JACOBS, KENYON & ECKHARDT, INC. 18 By /s/ Charles D. Peebler, Jr. ----------------------------- Chief Executive Officer EX-10.3 4 ex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 TRUE NORTH COMMUNICATIONS INC. ASSET PROTECTION PLAN AMENDED AND RESTATED AS OF JUNE 1, 2000 TRUE NORTH COMMUNICATIONS INC. ASSET PROTECTION PLAN True North Communications Inc. ("True North") currently maintains the True North Communications Inc. Asset Protection Plan (the "Plan"). Effective June 1, 2000, the Plan is hereby amended and restated in its entirety as follows: SECTION 1: PURPOSE OF THE PLAN. (a) PURPOSE. The purpose of the Plan is to secure continued service, dedication and objectivity of certain executive employees of True North and its subsidiaries (hereinafter individually or collectively, as the case may be, referred to as the "Company") in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control of True North, without concern as to whether such employees might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control. (b) CHANGE IN CONTROL DEFINED. For purposes of the Plan, the term "Change in Control" means one or more of the following: (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) other than: (A) a trustee or other fiduciary of securities held under an employee benefit plan of True North; (B) a corporation owned, directly or indirectly, by the stockholders of True North in substantially the same proportions as their ownership of True North; or (C) any person in which the Participant (as defined in Section 2(b))who is claiming that a Change in Control has occurred has a substantial equity interest (provided that the foregoing applies only in determining the rights under the Plan of that particular Participant); is or becomes a beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of stock of True North representing 20% or more of the total voting power of True North's then outstanding stock; (ii) a tender offer is made for the stock of True North by a person other than a person described in subparagraph (i)(A), (i)(B) or (i)(C) above, and one of the following occurs: (A) the person making the offer owns or has accepted for payment stock of True North representing 20% or more of the total voting power of True North's then outstanding stock; or (B) three business days before the offer is to terminate (unless the offer is withdrawn first) such person could own, by the terms of the offer plus any shares owned by such person, stock representing 20% or more of the total voting power of the True North's outstanding stock when the offer terminates; (iii) during any period of two consecutive years there shall cease to be a majority of the Board of Directors of True North (the "Board") comprised of individuals who (A) at the beginning of such period, were members of the Board, or (B) are new director(s) whose election by the Board or nomination for election by True North's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved; or (iv) the stockholders of True North approve a merger, consolidation or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of True North with any other company other than: (A) such a merger, consolidation or any sale, lease, exchange or other transfer of all, or substantially all, of the True North assets which would result in True North's voting stock outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting stock of the Surviving Entity) more than 70% of the combined voting power of True North's or such Surviving Entity's outstanding voting stock immediately after such merger or consolidation; or (B) such a merger, consolidation or any sale, lease, exchange or other transfer of all, or substantially all of the True North assets which would result in the directors of True North who were directors immediately prior thereto continuing to constitute at least 50% of the directors of the Surviving Entity immediately after such merger or consolidation. 2 For purposes of this subparagraph (iv), "Surviving Entity" shall mean only an entity in which all of True North's stockholders become stockholders by the terms of such merger or consolidation, and the phrase "directors of True North who were directors immediately prior thereto" shall not include: (I) any director of True North who was designated by a person who has entered into a separate agreement with True North to effect a transaction described in this subparagraph or in paragraph (i) above; or (II) any director who was not a director at the beginning of the 24-consecutive-month period preceding the date of such merger or consolidation unless his or her election by the Board or nomination for election by True North's stockholders, was approved by a vote of at least two-thirds of the directors then still in office who were directors before the beginning of such period. SECTION 2: ELIGIBILITY. (a) SELECTION BY THE COMMITTEE. Persons eligible to participate in this Plan are key employees of the Company who shall be selected by the Compensation Committee of the Board of Directors of True North (the "Committee") (or by any officer of True North who has been delegated such authority by the Committee, as provided in Section 3 below). In selecting the eligible Plan participants, the Committee shall take into consideration such factors as it deems relevant in connection with accomplishing the purposes of the Plan. (b) EXECUTED AGREEMENT REQUIRED FOR PARTICIPATION. Each key employee selected by the Committee shall be required to execute a separate Asset Protection Plan Participation Agreement with the Company (the "Agreement") which will provide for (i) the payment of benefits in accordance with the provisions of this Plan, and (ii) the terms and conditions by which the key employee agrees to be bound in order to participate in the Plan. A key employee selected by the Committee who has executed his or her Agreement is hereinafter referred to as a "Participant." SECTION 3: PLAN ADMINISTRATION. (a) COMMITTEE'S AUTHORITY. The Committee may establish such rules and regulations, not inconsistent with the provisions of the Plan, as it deems necessary for the proper administration of the Plan, and may amend or revoke any rule or regulation so established. The Committee may make such determinations and interpretations under or in connection with the Plan as it deems necessary or 3 advisable. All such rules, regulations, determinations and interpretations shall be binding and conclusive upon the Company, its officers, employees, shareholders, Participants, their respective legal representatives, beneficiaries, successors and assigns, and upon all other persons claiming under or through any of them. (b) DELEGATION OF COMMITTEE'S AUTHORITY. Notwithstanding the foregoing provisions of Section 2 and this Section 3, the Committee may delegate all or a portion of its authority for administering the Plan to an officer or officers of True North. To the extent so delegated, the term "Committee" hereunder shall be deemed to refer to such officer or officers. The Committee shall take such actions it deems necessary or desirable to ensure that such officer or officers have sufficient and appropriate authority for carrying out the intent and purpose of the Plan. SECTION 4: REQUIREMENTS FOR BENEFITS. (a) QUALIFYING TERMINATION OF EMPLOYMENT AS CONDITION FOR BENEFIT ELIGIBILITY. No benefits shall be payable under the Plan or any Agreement unless the Participant's employment is terminated pursuant to a Qualifying Termination. A "Qualifying Termination" shall mean a termination of employment of the Participant during the 24-month period beginning on the date of a Change in Control which occurs as follows: (i) involuntary termination of employment by the Company for any reason other than death, Cause (as defined in paragraph (b) below) or Disability (as defined in paragraph (c) below); or (ii) resignation by the Participant upon the occurrence of one of the following events without the Participant's consent: (A) any change or changes in the Participant's duties and responsibilities or position that, taken as a whole, result in a material diminution of the Participant duties and responsibilities or position as compared to such duties and responsibilities or position held immediately prior to the Change in Control; (B) a decrease in the Participant's base salary as in effect immediately prior to the Change in Control; or (C) the relocation of the Participant's office to a location more than 50 miles from the location of his or her office immediately prior to the Change in Control. Notwithstanding the provisions of this subparagraph (ii), to constitute a "Qualifying Termination" for purposes of this Plan and the Participant's Agreement, the Participant must notify the Company of his or her intent to 4 terminate employment within 60 days of the principal event or events giving rise to the Qualifying Termination. (b) DEFINITION OF CAUSE. The Company may terminate the Participant's employment for "Cause" if, in the reasonable determination of the Company, as set forth in a writing explaining in reasonable detail the reasons for such termination, (i) the Participant engages in conduct that violates significant policies of the Company, (ii) the Participant fails to perform the essential functions of his or her job (except for a failure resulting from a bona fide illness or incapacity) or fails to carry out the Company's reasonable directions, issued through its Chief Executive Officer, Board of Directors or other appropriate senior officer responsible for the Participant's business unit or area, with respect to material duties, (iii) the Participant engages in embezzlement or misappropriation of corporate funds or other acts of fraud, dishonesty or self-dealing, or commits a felony or any significant violation or any material statutory or common law duty of loyalty to the Company, or (iv) the Participant breaches a material provision of the Plan or the Agreement. (c) DEFINITION OF DISABILITY. Disability shall mean a good faith determination by the Company that the Participant is unable to perform regularly his or her duties on a full-time basis by reason of illness or incapacity for a period of more than three consecutive months. SECTION 5: CHANGE IN CONTROL BENEFITS. In the event of a Participant's Qualifying Termination, the Company shall pay the Participant the following: (a) LUMP-SUM PAYMENTS UPON A QUALIFYING TERMINATION. An amount equal to the sum of: (i) CURRENT-YEAR SALARY. The Participant's current annual base salary from the Company through the date of the Qualifying Termination to the extent not theretofore paid; PLUS (ii) CHANGE IN CONTROL SALARY. The Participant's annual rate of salary in effect on the date of his or her Qualifying Termination multiplied by the Participant's Income Multiple specified in the Participant's Agreement; PLUS (iii) CURRENT-YEAR BONUS. A pro rata portion of the Participant's current annual bonus from the Company determined by (A) calculating the Participant's average annual bonus paid or payable to him or her by the Company during the immediately three previous fiscal years (or such other relevant average if the Participant has been employed by the Company for less than three 5 years at the time of his or her Qualifying Termination) MULTIPLIED BY (B) a fraction, the numerator of which is the number of days in the current fiscal year through the date of the Qualifying Termination and the denominator of which is 365 or 366, as the case may be; PLUS (iv) CHANGE IN CONTROL BONUS. The Participant's Income Multiple as specified in the Participant's Agreement multiplied by the Participant's average annual bonus paid or payable to him or her by the Company during the immediately three previous fiscal years (or such other relevant average if the Participant has been employed by the Company for less than three years at the time of his or her Qualifying Termination). (b) MEDICAL, DENTAL AND LIFE INSURANCE BENEFITS CONTINUED FOR A DESIGNATED TERM. During the Benefit Period specified in the Participant's Agreement, the Participant shall continue to be entitled to medical, dental and life insurance benefits on the same basis and at the same cost as if he or she were still employed during the Benefit Period, but, except as otherwise required by law, in no event shall such benefits continue beyond the date on which the Participant accepts subsequent employment. Notwithstanding anything to the contrary, any welfare benefit plan continuation coverage required to be provided to a Participant under Part 6 of Title I, Subtitle B of the Employee Retirement Income Security Act of 1974, as amended, and Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code"), as a result of such Participant's Qualifying Termination, shall be offered and shall run concurrently with any welfare plan benefits provided under this paragraph (b). (c) CONDITIONS AND LIMITATIONS TO RECEIVING FULL CHANGE IN CONTROL BENEFITS. (i) ASSISTANCE TO COMPANY FOLLOWING QUALIFYING TERMINATION. The Participant shall be required to provide assistance to the Company following a Qualifying Termination in order to ensure a smooth transition with respect to such Participant's departure from the Company. Such assistance shall include, to the extent necessary, responses to any governmental agencies pertaining to areas of expertise that the Participant held during the scope of his or her employment with the Company, cooperation with any legal proceedings, and any other reasonable requests made by the Company during the Benefit Period. (ii) APPLICATION OF SECTION 4999 OF THE CODE. (A) PROVISIONAL REDUCTION IN BENEFITS. Notwithstanding anything to the contrary, if any payments pursuant to Section 5 of the Plan, after taking into account all other payments to which the 6 Participant is entitled from the Company, would be subject to the excise tax imposed under Section 4999 of the Code, such payments shall be reduced to the extent required to avoid such excise tax IF AND ONLY IF such reduction would result in a larger after-tax benefit to the Participant, taking into account all applicable local, state, federal and foreign income and excise taxes. (B) INDEPENDENT DETERMINATION. All determinations required to be made under sub-subparagraph (A) above, including whether and when a reduction in the amount payable hereunder pursuant to Section 5 is required and the amount of any such reduction and the assumptions to be utilized in arriving at such determination, shall be made by True North's public accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Participant within 15 business days of the receipt of notice from the Company that there has been a payment under Section 5 to the Participant, or such earlier time as is requested by the Company or the Participant. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group affecting the Change in Control, the Participant shall appoint another nationally recognized public accounting firm to make the determination required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines that no excise tax is payable by the Participant under Section 4999 of the Code, it shall furnish the Participant with the written opinion that failure to report such excise tax on the participant's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting firm hereunder, it is possible that the reduction in the amount payable hereunder pursuant to Section 5 of the Plan will not have been made consistent with the calculations required to be made hereunder. In that event, the Participant thereafter shall promptly pay to the Company the amount of the required reduction. (ii) TAX WITHHOLDING. All benefits payable under this Section 5 shall be reduced by any and all withholdings and deductions required or allowed under all applicable federal, state and local or other laws or regulations. (iii) RELEASE OF CLAIMS AND LIABILITY. Notwithstanding anything to the contrary under the Plan, the Participant shall be required to execute a 7 "Release of Claims and Liability" as approved by the Committee as a condition of receiving any payment under this Section 5. (iv) COMPLIANCE WITH ALL TERMS AND CONDITIONS. Notwithstanding anything to the contrary, all payments under this Section 5 are conditional on the Participant's full compliance with all of the terms and conditions set forth in this Plan and his or her Agreement. SECTION 6: NONSOLICITATION, CONFIDENTIALITY AND NONDISPARAGEMENT. The Plan is intended to mutually benefit both the Participant, through financial security, and the Company, through Participant's continuity in service. It is imperative that in order for both parties to benefit under the Plan, the Company's continued competitive position be maintained. To effectuate this, certain promises and covenants must be made regarding solicitation, confidentiality and disparagement. Therefore, any entitlement to any benefits under the Plan shall be conditioned upon acceptance of and compliance with all of the following rules and provisions: (a) NONSOLICITATION. During the course of a Participant's employment with the Company and during that same Participant's applicable Benefit Period, a Participant is prohibited from, directly or indirectly, either on his or her own behalf or on behalf of any other person, firm or corporation, soliciting any account that is a client of the business unit or units of the Company that employs such Participant (the "Business Unit") at the time of, or at any time within six months prior to, such Participant's termination of employment for any reason. A Participant is also prohibited from performing any services relating to advertising, marketing, research, public relations or related services for any such account. During the course of a Participant's employment with the Company and during that same Participant's applicable Benefit Period, a Participant is prohibited from, directly or indirectly, employing or attempting to employ or assist anyone else in attempting to employ any person who is at such time or who was within the six-month period immediately prior to such time in the employ of the Business Unit. (b) CONFIDENTIALITY. (i) All intellectual property created or conceived by a Participant during the course of his or her employment with the Company constitutes "work for hire" and is property of the Company, including all ideas, inventions, literary property, music, lyrics, scripts, themes, stories, characters, slogan, plots, story lines, titles, copy, art, photography and footage and any other idea (collectively the "Materials") that such Participant creates during the course of his or her employment with the Company or in connection with any of its clients or prospective clients. If for any reason the Materials cannot legally constitute a "work for hire," then a Participant is required to assign all rights, title and interest in said Materials to the Company and to 8 agree to execute such documents as may be necessary to evidence such assignment(s). (ii) A Participant retains ownership of any and all intellectual property created by him or her prior to his or her employment with the Company and that is not used with such Participant's permission by the Company or any of its clients. A Participant also retains ownership of any intellectual property created by him or her while employed by the Company if such intellectual property is created outside the scope of such Participant's employment and is not created during Company time, on Company property or with Company resources. (iii) A Participant must maintain all of his or her ideas and all other information concerning the business of the Company, its clients and prospective clients (collectively the "Confidential Information") in strictest confidence both during and at all times following such Participant's employment with the Company. A Participant is prohibited from, at any time during his or her employment or after his or her employment with the Company ends for any or no reason, except as directed or permitted by the Company in writing, disclosing or taking any action or inaction which could result in disclosure to any person, firm, corporation or other entity of any Confidential Information, or in any way directly or indirectly utilizing Confidential Information for any purpose, including without limitation for his or her own benefit or the benefit of others. Confidential Information includes, without limitation, business prospects, computer software, research techniques, research results, media plans, layouts, storyboards, scripts, reports and information regarding the Company's or its actual or prospective clients' advertising, marketing and sales promotion products, services and strategies, and any other information deemed confidential in the Non-Public and Confidential Information provision of the Company's Code of Conduct, which such Participant has received, whether imparted to him or her by the Company or its clients or prospective clients or obtained by him or her as part of his or her employment relationship, and whether or not marked confidential or proprietary. Notwithstanding the foregoing, information shall not be deemed Confidential Information if it has lawfully become publicly known outside of the Company through appropriate means, and other than through the act or omission of any person that has or had an obligation of non-disclosure or non-use with respect to such information. (c) NONDISPARAGEMENT. A Participant is prohibited from, at any time during his or her employment with the Company or thereafter, making any public or private statement to the news media, to any competitor or client of the Company, or to any other individual or entity, if such statement would disparage the Company, the Company's respective business or any director or officer of the Company or would have a deleterious effect upon the interests of the Company or the 9 stockholders or other owners of the Company. This subparagraph (i) will not be breached if the relevant statement(s) consist solely of: (i) private statements made to any officers, directors or employees of the Company by a Participant in the course of carrying out his or her duties, (ii) private statements made to persons other than clients or competitors of the Company (or its representatives) or members of the press or the financial community that do not have a material adverse effect upon the Company, or (iii) statements made in good faith that are required by law, regulation or order of any court or regulatory commission, department or agency. (d) ENFORCEMENT. By execution of an Agreement under the Plan, the Participant acknowledges and agrees that the Company would be damaged irreparably if any provision under this Section 6 was breached by him or her and money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Company and its successors or permitted assigns in order to protect its interests, shall pursue, in addition to other rights and remedies existing in its favor, an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). With respect to such enforcement, the Company shall be entitled to recover from a Participant any and all attorneys' fees, costs and expenses incurred by or on behalf of the Company in enforcing or attempting to enforce any provision under this Section 6 or any of the Company's rights under this Plan. SECTION 7: AMENDMENT OR TERMINATION. The Company reserves the right to have the Committee amend, modify, suspend, or terminate the Plan at any time prior to a Change in Control; provided, however, that without the consent of the Participant, no such amendment, modification, suspension or termination shall materially reduce or diminish his or her right to receive any payment or benefit then due and payable under the Plan immediately prior to such amendment, modification, suspension or termination; and provided further that the Plan may not be terminated or materially amended during any period of time when the Board of Directors of True North has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the reasonable opinion of the Committee, such person has abandoned or terminated its efforts to effect a Change in Control. SECTION 8: MISCELLANEOUS. (a) ARBITRATION. Any controversy or claim arising out of or relating to this Plan, or breach hereof, shall be settled by arbitration with an arbitrator acceptable to both parties. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association. The arbitrator's determination shall be final 10 and binding upon all parties and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, claims which the Company has or may have against the Participant based on violation or threatened violation of his or her obligations pursuant to Section 6 of the Plan are excluded from this arbitration provision. (b) NO FUNDING OF SEVERANCE BENEFITS. Nothing herein contained shall require or be deemed to require the Company to segregate, earmark or otherwise set aside any funds or other assets to provide for any payments made hereunder. The rights of any Participant under this Plan shall be solely those of a general creditor of the Company. However, in the event the Company foresees payment under the Plan, the Company may deposit cash or property, or both, equal in value to all or a portion of the benefits anticipated to be payable hereunder for any or all Participants into a trust, the assets of which are to be distributed at such times as are otherwise provided for in this Plan and are subject to the rights of the general creditors of the Company. (c) EFFECT OF DEATH. In the event of the Participant's death after termination of employment, any earned but unpaid lump-sum severance benefits under Section 5 shall be paid to the Participant's estate or designated beneficiaries in accordance with the provisions of Section 5. (d) NO ALIENATION OF BENEFITS. The Participant shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this Plan and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law. (e) INCAPACITY. If, in the opinion of the Committee, a Participant or other person entitled to benefits hereunder is physically or mentally incapable of personally receiving any payment due hereunder, the Committee may determine that payments be made to a person, persons or institution who, in the opinion of the Committee, maintains or has custody of the Participant, until claim is made by a conservator or guardian legally charged with the care of his or her person or his or her estate. Any payments hereunder shall constitute a full discharge of the liability of the Company to the extent thereof. (f) SUCCESSORS TO THE COMPANY. This Plan shall be binding upon the Company and any successor of the Company, including without limitation any corporation or other entity acquiring directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise. Such successor shall thereafter be deemed the "Company" for the purposes of this Plan. (g) COORDINATION WITH OTHER PLANS AND ARRANGEMENTS. Benefits payable under the Plan shall supersede benefits that would otherwise be payable concurrently under 11 any other Company plan or program. In addition, no key employee shall be eligible for participation under the Plan if such employee is or becomes covered under an individually-negotiated arrangement providing for severance benefits. Notwithstanding the foregoing, if, upon ultimate termination of employment, the number of weeks in the severance period that would apply to a Participant under the Company's regular severance policy applicable to employees generally would be greater than the Income Multiple times 52, then the Income Multiple and the Benefit Period for such Participant shall be increased to correspond to the severance period that would have applied under such severance policy. (h) EMPLOYMENT RIGHTS. Establishment of this Plan shall not be construed to give any Participant the right to be retained by the Employer or to any benefits not specifically provided by the Plan. (i) VALIDITY. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall continue in full force and effect. (j) EFFECTIVE DATE AND GOVERNING LAW. This amended and restated Plan shall be effective as of June 1, 2000 and shall be governed and construed in accordance with the laws of the State of Illinois. TRUE NORTH COMMUNICATIONS INC. By: /s/ Terry D. Peigh ---------------------------------- Its: Executive Vice President ---------------------------------- Dated: July 6, 2000 ---------------------------------- 12 EX-10.4 5 ex-10_4.txt EXHIBIT 10.4 EXHIBIT 10.4 TRUE NORTH COMMUNICATIONS INC. SENIOR MANAGEMENT INCOME PROTECTION PLAN ESTABLISHED EFFECTIVE JUNE 1, 2000 TRUE NORTH COMMUNICATIONS INC. SENIOR MANAGEMENT INCOME PROTECTION PLAN True North Communications Inc. ("True North") hereby establishes the True North Communications Inc. Senior Management Income Protection Plan (the "Plan") effective June 1, 2000. SECTION 1: PURPOSE OF THE PLAN. The purpose of the Plan is to advance the interests of True North and its subsidiaries (hereinafter individually or collectively, as the case may be, referred to as the "Company") and its shareholders by providing financial protection to selected key senior management employees of the Company. SECTION 2: ELIGIBILITY. Persons eligible to participate in this Plan are key employees of the Company who shall be selected by the Compensation Committee of the Board of Directors of the Company (the "Committee") (or any officer of True North who has been delegated such authority by the Committee, as provided in Section 3 below); provided that in no event shall a key employee be eligible for participation under the Plan if such employee is or becomes covered under another plan or negotiated arrangement providing for severance benefits (other than the Company's regular severance guidelines generally covering employees, which, subject to Section 8(b), shall be superseded by the Plan with respect to eligible Plan participants). In selecting the eligible Plan participants, the Committee shall take into consideration such factors as it deems relevant in connection with accomplishing the purposes of the Plan. Each key employee selected by the Committee shall be required to execute a separate Senior Management Income Protection Letter Agreement with the Company (the "Agreement") which will provide for (i) the payment of benefits in accordance with the provisions of this Plan, and (ii) the terms and conditions by which the key employee agrees to be bound in order to participate in the Plan. A key employee selected by the Committee who has executed an Agreement is hereinafter referred to as a "Participant." SECTION 3: PLAN ADMINISTRATION. The Committee or its delegates may establish such rules and regulations, not inconsistent with the provisions of the Plan, as it deems necessary for the proper administration of the Plan, and may amend or revoke any rule or regulation so established. The Committee may make such determinations and interpretations under or in connection with the Plan as it deems necessary or advisable. All such rules, regulations, determinations and interpretations shall be binding and conclusive upon the Company, its officers, employees, shareholders, Participants, their respective legal representatives, beneficiaries, successors and assigns, and upon all other persons claiming under or through any of them. Notwithstanding the foregoing provisions of Section 2 or this Section 3, the Committee may delegate all or a portion of its authority for administering the Plan to an officer or officers of True North. To the extent so delegated, the term "Committee" hereunder shall be deemed to refer to such officer or officers. The Committee shall take such actions it deems necessary or desirable to ensure that such officer or officers have sufficient and appropriate authority for carrying out the intent and purpose of the Plan. SECTION 4: REQUIREMENTS FOR BENEFITS. (a) INVOLUNTARY TERMINATION OF EMPLOYMENT BY COMPANY AS CONDITION FOR ELIGIBILITY. No benefits shall be payable under the Plan or any Agreement unless the Participant's employment is involuntarily terminated by the Company without Cause (a "Qualifying Termination"). (b) DEFINITION OF CAUSE. The Company may terminate the Participant's employment for "Cause" if, in the reasonable determination of the Company, as set forth in a writing explaining in reasonable detail the reasons for such termination, (i) the Participant engages in conduct that violates significant policies of the Company, (ii) the Participant fails to perform the essential functions of his or her job (except for a failure resulting from a bona fide illness or incapacity) or fails to carry out the Company's reasonable directions, issued through its Chief Executive Officer, Board of Directors or other appropriate senior officer responsible for the Participant's business unit or area, with respect to material duties, (iii) the Participant engages in embezzlement or misappropriation of corporate funds or other acts of fraud, dishonesty or self-dealing, or commits a felony or any significant violation or any material statutory or common law duty of loyalty to the Company, or (iv) the Participant breaches a material provision of the Plan or the Agreement. SECTION 5: SEVERANCE BENEFITS. In the event of a Participant's Qualifying Termination, the Company shall pay the Participant the following: (a) SALARY. Continued base salary, at the Participant's rate of salary in effect on the date of his or her Qualifying Termination, through the end of the Severance Period specified in the Participant's Agreement (the "Severance Period"). Such continued base salary shall be payable in accordance with the Company's regular payroll practices; (b) BONUS. The Participant shall receive a pro-rated bonus for the year in which his or her termination of employment occurs equal to 80% of (A x B), where: 2 A equals the Participant's average annual bonus paid or payable to him or her by the Company during the immediately three previous fiscal years (or such other relevant average if the Participant has been employed by the Company for less than three years at the time of his or her termination of employment); and B equals a fraction, the numerator of which is the number of days in the current fiscal year through the date of the Participant's termination of employment and the denominator of which is 365 or 366, as the case may be. (c) MEDICAL, DENTAL AND LIFE INSURANCE BENEFITS. The Participant shall continue to be entitled to medical, dental and life insurance benefits on the same basis and at the same cost as if he or she were still employed during the Severance Period, but, except as otherwise required by law, in no event shall such benefits continue beyond the date on which the Participant accepts subsequent employment. Notwithstanding anything to the contrary, any welfare benefit plan continuation coverage required to be provided to a Participant under Part 6 of Title I, Subtitle B of the Employee Retirement Income Security Act of 1974, as amended, and Section 4980B of the Internal Revenue Code of 1986, as amended, as a result of such Participant's Qualifying Termination, shall be offered and shall run concurrently with any welfare plan benefits provided under this paragraph (c). (d) STOCK OPTIONS. Any stock options granted to a Participant after the date he or she becomes eligible for participation in the Plan, which are unvested on the date of his or her Qualifying Termination but would have vested within the Severance Period, shall become fully vested as of such date and may be exercised in accordance with the terms and conditions set forth in the relevant grant agreement for such stock options. (e) PLACEMENT ASSISTANCE. The Participant shall be entitled to receive reimbursement for expenses incurred in connection with locating comparable employment with another employer solely as a result of such Participant's Qualifying Termination. Only placement expenses which are approved in advance by the Committee or its designee shall be covered under the Plan. Any submission for reimbursement must be substantiated in writing in accordance with procedures set by the Committee. In no event shall the total aggregate reimbursed expenses for any Participant exceed the maximum amount set forth in his or her Agreement. All severance benefits payable under this Section 5 shall be reduced by any and all withholdings and deductions required or allowed under all applicable federal, state and local or other laws or regulations. Notwithstanding anything to the contrary under the Plan: 3 (i) The Participant shall be required to execute a "Release of Claims and Liability" as approved by the Committee as a condition of receiving any payment under this Section 5; (ii) If the Participant's Severance Period is longer than six months, then after the first six months following a Participant's Qualifying Termination the Company reserves the right to reduce (or recover) in any manner the severance benefits described in paragraph (a) above to be paid for the remainder of the Severance Period, if any, by any other employment income earned by the Participant during the remainder of such Severance Period; and (iii) All payments under this Section 5 are conditioned on the Participant's full compliance with all of the terms and conditions set forth in this Plan and his or her Agreement SECTION 6: NONSOLICITATION, CONFIDENTIALITY AND NONDISPARAGEMENT. The Plan is intended to benefit mutually both the Participant, through financial security, and the Company, through the Participant's continuity in service. It is imperative that in order for both parties to benefit under the Plan, the Company's continued competitive position be maintained. To effectuate this, certain promises and covenants must be made regarding solicitation, confidentiality and disparagement. Therefore, any entitlement to benefits under the Plan shall be conditioned upon acceptance of and compliance with all of the following rules and provisions: (a) NONSOLICITATION. During the course of a Participant's employment with the Company and during the time period designated as the Severance Period (regardless of whether the Participant actually receives severance benefits during that period), a Participant is prohibited from, directly or indirectly, either on his or her own behalf or on behalf of any other person, firm or corporation, soliciting any account that is a client of the business unit or units of the Company that employs such Participant (the "Business Unit") at the time of, or at any time within six months prior to, such Participant's termination of employment for any reason or that was a client of the Business Unit at any time within six months prior to the date of such Participant's termination of employment for any reason. A Participant is also prohibited from performing any services relating to advertising, marketing, research, public relations or related services for any such account. During the course of a Participant's employment with the Company and during the time period designated as the Severance Period (regardless of whether the Participant actually receives severance benefits during that period), the Participant is prohibited from, directly or indirectly, employing or attempting to employ or assisting anyone else in attempting to employ any person who is at such time or 4 who was within the six-month period immediately prior to such time in the employ of the Business Unit. (b) CONFIDENTIALITY. (i) All intellectual property created or conceived by a Participant during the course of his or her employment with the Company constitutes "work for hire" and is property of the Company, including all ideas, inventions, literary property, music, lyrics, scripts, themes, stories, characters, slogan, plots, story lines, titles, copy, art, photography and footage and any other idea (collectively the "Materials") that such Participant creates during the course of his or her employment with the Company or in connection with any of its clients or prospective clients. If for any reason the Materials cannot legally constitute a "work for hire," then a Participant is required to assign all rights, title and interest in said Materials to the Company and to agree to execute such documents as may be necessary to evidence such assignment(s). (ii) A Participant retains ownership of any and all intellectual property created by him or her prior to his or her employment with the Company and that is not used with such Participant's permission by the Company or any of its clients. A Participant also retains ownership of any intellectual property created by him or her while employed by the Company if such intellectual property is created outside the scope of such Participant's employment and is not created during Company time, on Company property or with Company resources. (iii) A Participant must maintain all of his or her ideas and all other information concerning the business of the Company, its clients and prospective clients (collectively the "Confidential Information") in strictest confidence both during and at all times following such Participant's employment with the Company. A Participant is prohibited from, at any time during his or her employment or after his or her employment with the Company ends for any or no reason, except as directed or permitted by the Company in writing, disclosing or taking any action or inaction which could result in disclosure to any person, firm, corporation or other entity of any Confidential Information, or in any way directly or indirectly utilizing Confidential Information for any purpose, including without limitation for his or her own benefit or the benefit of others. Confidential Information includes, without limitation, business prospects, computer software, research techniques, research results, media plans, layouts, storyboards, scripts, reports and information regarding the Company's or its actual or prospective clients' advertising, marketing and sales promotion products, services and strategies, and any other information deemed confidential in the Non-Public and Confidential Information provision of the Company's 5 Code of Conduct, which such Participant has received, whether imparted to him or her by the Company or its clients or prospective clients or obtained by him or her as part of his or her employment relationship, and whether or not marked confidential or proprietary. Notwithstanding the foregoing, information shall not be deemed Confidential Information if it has lawfully become publicly known outside of the Company through appropriate means, and other than through the act or omission of any person that has or had an obligation of non-disclosure or non-use with respect to such information. (c) NONDISPARAGEMENT. A Participant is prohibited from, at any time during his or her employment with the Company or thereafter, making any public or private statement to the news media, to any competitor or client of the Company, or to any other individual or entity, if such statement would disparage the Company, the Company's respective business or any director or officer of the Company or would have a deleterious effect upon the interests of the Company or the stockholders or other owners of the Company. This paragraph (c) will not be breached if the relevant statement(s) consist solely of: (i) private statements made to any officers, directors or employees of the Company by a Participant in the course of carrying out his or her duties, (ii) private statements made to persons other than clients or competitors of the Company (or its representatives) or members of the press or the financial community that do not have a material adverse effect upon the Company, or (iii) statements made in good faith that are required by law, regulation or order of any court or regulatory commission, department or agency. (d) ENFORCEMENT. By execution of an Agreement under the Plan, the Participant acknowledges and agrees that the Company would be damaged irreparably if any provision under this Section 6 were breached by him or her and money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Company and its successors or permitted assigns in order to protect its interests, shall pursue, in addition to other rights and remedies existing in its favor, an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). With respect to such enforcement, the Company shall be entitled to recover from a Participant any and all attorneys' fees, costs and expenses incurred by or on behalf of the Company in enforcing or attempting to enforce any provision under this Section 6 or any of the Company's rights under this Plan. 6 SECTION 7: AMENDMENT OR TERMINATION. The Company reserves the right to have the Committee amend, modify, suspend, or terminate the Plan at any time; provided that without the consent of the Participant, no such amendment, modification, suspension or termination shall materially affect the terms of a Participant's existing Agreement without the Participant's written consent. SECTION 8: MISCELLANEOUS. (a) ARBITRATION. Any controversy or claim arising out of or relating to this Plan, or breach hereof, shall be settled by arbitration with an arbitrator appointed by the Company. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of an arbitrator. The arbitrator's determination shall be final and binding upon all parties and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, claims which the Company has or may have against the Participant based on violation or threatened violation of his or her obligations pursuant to Section 6 of the Plan are excluded from this arbitration provision. (b) COORDINATION WITH OTHER PLANS AND ARRANGEMENTS. No key employee shall be eligible for participation under the Plan if such employee is or becomes covered under an individually-negotiated arrangement providing for severance benefits. Notwithstanding the foregoing, if, upon ultimate termination of employment, the severance period that would apply to a Participant under the Company's regular severance policy applicable to employees generally would be greater than the Severance Period applicable pursuant to such Participant's Agreement, then such Participant's Severance Period shall be increased to correspond to the severance period that would have applied under such severance policy. (c) NO FUNDING OF SEVERANCE BENEFITS. Nothing herein contained shall require or be deemed to require the Company to segregate, earmark or otherwise set aside any funds or other assets to provide for any payments made hereunder. The rights of any Participant under this Plan shall be solely those of a general creditor of the Company. However, in the event the Company foresees payment under the Plan, the Company may deposit cash or property, or both, equal in value to all or a portion of the benefits anticipated to be payable hereunder for any or all Participants into a trust, the assets of which are to be distributed at such times as are otherwise provided for in this Plan and are subject to the rights of the general creditors of the Company. (d) EFFECT OF DEATH. In the event of the Participant's death after termination of employment, all benefits under this Plan shall cease (except for any life insurance benefits). 7 (e) AFFIRMATIVE DUTY TO SEEK EMPLOYMENT. The Participant shall be under a good faith duty and obligation to reasonably seek other employment after a Qualifying Termination during the Participant's applicable Severance Period. (f) NO ALIENATION OF BENEFITS. The Participant shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this Plan and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law. (g) INCAPACITY. If, in the opinion of the Committee, a Participant or other person entitled to benefits hereunder is physically or mentally incapable of personally receiving any payment due hereunder, the Committee may determine that payments be made to a person, persons or institution who, in the opinion of the Committee, maintains or has custody of the Participant, until claim is made by a conservator or guardian legally charged with the care of his or her person or his or her estate. Any payments hereunder shall constitute a full discharge of the liability of the Company to the extent thereof. (h) SUCCESSORS TO THE COMPANY. This Plan shall be binding upon the Company and any successor of the Company, including without limitation any corporation or other entity acquiring directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise. Such successor shall thereafter be deemed the "Company" for the purposes of this Plan. (i) EMPLOYMENT RIGHTS. Establishment of this Plan shall not be construed to give any Participant the right to be retained by the Company or to any benefits not specifically provided by the Plan. (j) VALIDITY. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall continue in full force and effect. (k) EFFECTIVE DATE AND GOVERNING LAW. This Plan shall be effective as of June 1, 2000 and shall be governed and construed in accordance with the laws of the State of Illinois. TRUE NORTH COMMUNICATIONS INC. By: /s/ Terry D. Peigh ----------------------------------------- Its: Executive Vice President ---------------------------------------- Dated: June 23, 2000 -------------------------------------- 8 EX-10.5 6 ex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 2000 (the "Effective Date") between True North Communications Inc., a Delaware corporation (the "Company" or "True North"), and J. Brendan Ryan (the "Executive"). WHEREAS, the Company is a global communications holding company with ownership interests in subsidiaries, affiliates and joint ventures that are engaged in the advertising agency business, the multimedia production business, the business of planning and buying of media time and space and related businesses (the Company and the subsidiaries, affiliates and joint ventures in which it from time to time has equity interests are hereinafter referred to collectively as the "True North Group"); WHEREAS, the Executive currently serves the Company as the Chief Executive Officer of FCB Worldwide L.L.C. ("FCB"); WHEREAS, the Executive and the Company have entered into an Employment Agreement dated December 31, 1996, as subsequently amended by a Letter Agreement dated July 30, 1997 (the "Prior Agreement"); and WHEREAS, the Company and the Executive desire to enter into this Agreement to replace the Prior Agreement and to provide for the continued employment of the Executive by the Company upon the terms and subject to the conditions set forth herein. Unless noted otherwise, all references herein to the Company shall include FCB. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereby agree as follows: 1. EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby agrees to be employed by the Company upon the terms and subject to the conditions contained in this Agreement. The initial term of employment of the Executive by the Company pursuant to this Agreement (the "Initial Term") shall commence on the Effective Date and, unless earlier terminated, shall end on the third annual anniversary of the Effective Date; provided that the term of this Agreement shall automatically be extended for three additional years as of the day immediately following the end of the Initial Term and as of the day immediately following the end of each subsequent three-year extended term hereof unless the Company or the Executive shall have terminated the automatic extension provisions of this sentence by giving written notice to the Executive or the Company, as the case may be, at least 60 days prior to the then applicable termination date. (The Initial Term and any extension of the term of this Agreement pursuant to this Section 1 are collectively referred to herein as the "Employment Period.") 2. POSITION AND DUTIES. The Company shall employ the Executive during the Employment Period with the title of Chief Executive Officer of FCB (or such other title(s) as may be mutually agreed upon by the Executive and the Company). The Executive shall report directly to the True North Chief Executive Officer (the "True North CEO") and shall be nominated by True North management to serve on the Board of Directors of True North. The Executive's principal place of business during the Employment Period shall be in New York City. Subject to the powers, authority and responsibilities vested in the True North Board of Directors (the "Board"), in duly constituted committees of the Board and in the True North CEO, the Executive shall have the duties and responsibilities commensurate with his position and title as are reasonably assigned to him from time to time by the True North CEO or the Board. During the Employment Period, the Executive shall perform faithfully and loyally and to the best of the Executive's abilities his duties hereunder, shall devote his full business time, attention and efforts to the affairs of the True North Group and shall use his reasonable best efforts to promote the interests of the Company. Notwithstanding the foregoing, the Executive may engage in charitable, civic or community activities, provided that they do not interfere with the performance of the Executive's duties hereunder. 3. COMPENSATION. (a) ANNUAL BASE SALARY. The Company shall pay to the Executive an annual base salary at the rate of $900,000 per annum in accordance with the Company's regular payroll practices. The annual base salary shall be reviewed periodically (for increase only) in accordance with guidelines applicable to the Company's senior executives generally. (b) INCENTIVE COMPENSATION. During the Employment Period, the Executive shall be entitled to participate in the True North Executive Compensation Program on terms that are comparable to those applicable to the most senior executives of the Company and its subsidiaries, and as such Program may be amended from time to time. (c) OTHER BENEFITS. During the Employment Period, the Executive shall be entitled to participate in the Company's employee benefit plans and programs and fringe benefits that are generally available to the most senior executives of the Company from time to time. All benefits referred to in this Section 3(c) are hereinafter referred to as the "Employee Benefits." (d) DIRECTORS PART-TIME EMPLOYMENT AGREEMENT PROGRAM. The Executive shall be entitled to participate in the Directors Part-Time Employment Agreement Program (the "DPTEA Program") in accordance with the terms set forth in the annexed Exhibit A; provided that, to the extent the Executive is entitled to receive benefits under that Program (i.e., upon his resignation or upon a Qualifying Termination, as defined below), the amount of annual compensation paid to the Executive under that Program shall be no less than $475,000; and provided further that such annual compensation and other benefits shall be paid for five years even if the Executive's termination of employment occurs after he attains age 60. (e) EXPENSE REIMBURSEMENT. During the Employment Period, the Company shall reimburse the Executive for all proper expenses incurred by him in the performance of his duties hereunder in accordance with the Company's policies and procedures. -2- -3- 4. TERMINATION OF EMPLOYMENT PERIOD. (a) QUALIFYING TERMINATION. For purposes of this Agreement, "Qualifying Termination" means the occurrence of any of the following events: (i) termination of the Executive's employment by the Company without Cause (as defined in subsection (b) below) during the Employment Period, (ii) expiration of this Agreement at the end of the Initial Term or at the end of any extension of the term hereof pursuant to a written notice given by the Company to the Executive in accordance with Section 1 hereof, (iii) termination of the Executive's employment by the Company on account of the Executive having become unable (as determined by the Company in good faith) to perform regularly his duties hereunder by reason of illness or incapacity for a period of more than three consecutive months (termination for "Disability"), (iv) termination of the Executive's employment on account of the Executive's death, or (v) termination of the Executive's employment by the Executive due to and by providing written notice within 60 days of the occurrence, without the Executive's consent, of any of the following events: (1) any change or changes in the Executive's duties and responsibilities that, taken as a whole, result in a material diminution of the Executive's duties and responsibilities with the Company, (2) a material adverse change in the Executive's title, offices or reporting lines within the Company, (3) a material breach of the Company's obligations set forth in this Agreement, including, without limitation, (A) a decrease in the Executive's base salary, (B) the failure of the Company to provide the Executive with participation in incentive compensation and other benefit programs that are generally made applicable to the most senior executives of the Company from time to time, (C) the failure of Company management for any reason whatsoever to continue to nominate the Executive for membership on the Board of Directors of the publicly-held company that ultimately controls FCB Worldwide L.L.C., or (D) any requirement of the Company that the location where the Executive is based be materially changed, or (4) the failure of the Company to obtain an assumption agreement from any successor as contemplated in Section 15. For purposes of this Agreement, an isolated, insubstantial and inadvertent action taken by the Company in good faith and which is remedied by the Company promptly shall not constitute a basis for a Qualifying Termination. As provided above, within 60 days of the occurrence of the event or events in question, the Executive shall notify the Company of his intention to terminate his employment pursuant to clause (v) above. If the Company intends to remedy its action(s), it shall provide written notice to the Executive within 20 days of receipt of the Executive's written notice, and the Company shall then have 45 additional days to remedy such action(s). The Executive may proceed with the Qualifying Termination pursuant to clause (v) above if the Company does not provide notice of intent to remedy within the initial 20-day period or if the Company does not adequately remedy its action(s) within the additional 45-day period. The foregoing shall be not be construed to limit the Company's rights to contest the basis for any Qualifying Termination under clause (v) above or to limit the Executive's rights to dispute whether a given action can be remedied or whether any actual remedy is sufficient. (b) DEFINITION OF CAUSE. (i) The Company may terminate the Executive's employment immediately for "Cause" if, in the reasonable determination of the Board or the Compensation Committee of -4- the Board, as set forth in an action of the Board or such Committee setting forth in reasonable detail the reasons for such termination, (A) the Executive engages in conduct that violates in any material respect one or more significant material written policies of the Company after the Executive is notified by the Company that he is engaging in such conduct and that such conduct will be deemed to be Cause; (B) the Executive fails to perform the essential functions of his job (except for a failure resulting from a bona fide illness or incapacity) or fails to carry out the True North CEO's or the Board's reasonable directions with respect to material duties after the Executive is notified by the True North CEO or the Board, as applicable, that he is failing to perform these essential functions or failing to carry out such reasonable directions and that such conduct will be deemed to be Cause; (C) the Executive engages in embezzlement or misappropriation of corporate funds or other acts of fraud, self-dealing or material dishonesty with respect to significant Company matters, or commits a felony or any significant violation of any statutory or common law duty of loyalty to the Company; or (D) the Executive breaches a material provision of this Agreement (including, but not limited to, the non-compete, non-solicitation, confidentiality, or non-disparagement provisions in Sections 7 and 8), after the Executive is notified by the Company that he has breached a material provision of this Agreement and that such breach will be deemed to be Cause. Prior to any termination of the Executive for Cause pursuant to clauses (A), (B) or (D) of this Section 4(b)(i), the Company shall give the Executive reasonable opportunity to remedy any condition, conduct, action or inaction of the Executive giving rise to the violation or breach of such clause if such violation or breach is remediable. (ii) Notwithstanding the foregoing, solely for purposes of determining whether the Executive is entitled to receive benefits under the DPTEA Program, subparagraph (i) above is modified by replacing subparts (B), (C) and (D) with the following subparts (B) and (C): (B) the Executive engages in a material breach of his duties and responsibilities hereunder as now in effect or as may hereafter be agreed to with the Executive's written consent (other than as a result of incapacity due to physical or mental illness), which is demonstrably willful and deliberate on the Executive's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied within 30 days (or sooner, as specified in such written notice, if the Company, in its good faith judgment, determines that the period must be shorter to avoid harm to the Company) after receipt of written notice from the Company specifying such breach; or (C) the Executive commits a felony involving moral turpitude. 5. CONSEQUENCES OF TERMINATION OF EMPLOYMENT PERIOD. (a) BENEFITS UPON TERMINATION. If the Employment Period terminates for any reason, the Executive (or the Executive's executor, administrator or other legal representative, as the case may be) shall be entitled to receive the following benefits: (i) Within 30 days after the amount in question is reasonably determinable (A) base salary payable through the date of termination of employment, (B) unpaid annual incentive compensation for the calendar year immediately preceding the date of such -5- termination, and (C) reimbursement of proper expenses incurred through the date of such termination. (ii) The vested and, unless such termination is for Cause as defined in Section 4(b)(i) above, unvested portion of the amounts in the Executive's deferred variable incentive compensation ("DVIC") account, such payments to be made in accordance with the terms of the Executive's DVIC agreement. (iii) Unless such termination is for Cause as defined in Section 4(b)(i) above, participation by the Executive and the Executive's qualified dependents through the Executive's attainment of age 65 in life insurance, medical and dental benefits, subject to modifications of general application to executives of the Company. (iv) Unless such termination is for Cause as defined in Section 4 (b)(i) above (as modified by Section 4(b)(ii) above), benefits payable under the terms of the DPTEA Program, subject to the modifications contained in Section 3(d) above, with all age and service requirements deemed to have been satisfied. (v) Participation (by the Executive or the Executive's qualified dependents, as the case may be) in all other applicable benefit plans or programs in accordance with the provisions thereof applicable to terminated employees (or their qualified dependents, as the case may be). (b) ADDITIONAL BENEFITS UPON QUALIFYING TERMINATION. If the Employment Period terminates upon the occurrence of a Qualifying Termination, the Executive (or the Executive's executor, administrator or other legal representative, as the case may be) shall be entitled to receive the following additional benefits: (i) Within 30 days after the amount in question is reasonably determinable, annual incentive compensation for the calendar year in which such termination shall have occurred, prorated through the date of such termination based on actual results of operations for such full calendar year. (ii) If the Qualifying Termination is for any reason other than death or Disability: (A) all equity-based awards subject to vesting requirements (including stock options and restricted stock) then held by the Executive shall on the date of such termination be 100% vested; and (B) for a period of three years commencing on the day immediately following the date of termination of the employment of the Executive, he shall be entitled to receive (1) an amount equal to the Executive's base salary, at the rate payable as of the date of such termination, payable in accordance with the Company's normal payroll policies and (2) within 30 days after the amount in question is reasonably determinable, annual incentive compensation at the -6- higher of (x) the amount payable to the Executive for the calendar year in which such termination shall have occurred or (y) the average of the amounts payable to the Executive for the three calendar years immediately preceding the year in which such termination shall have occurred (this three-year severance payment period, in which the Executive is receiving all the benefits provided in this Section 5, being hereinafter referred to as the "Severance Period"). (iii) Each stock option granted to the Executive by the Company then held by the Executive shall be exercisable (to the extent it is vested at the date of termination or to the extent it becomes vested in accordance with subparagraph (ii)(A) above) by the Executive or the Executive's executor, administrator or other legal representative, as the case may be, for up to three years after the date of termination, but in no case beyond a date 10 years following the date of grant of such option. (iv) Immediately following the expiration of the Severance Period (or immediately following the Executive's termination of employment, in the case of Disability or death), the Executive, or his executor, administrator or other legal representative, as the case may be, shall be entitled to compensation and benefits payable under the DPTEA Program, with all age and service requirements deemed to have been satisfied and assuming 30 years of credited service. (c) TERMINATION AFTER A CHANGE IN CONTROL. If the Executive incurs a Qualifying Termination within two years of the occurrence of a "Change in Control" under and as defined in the Company's Asset Protection Plan (or a similar replacement plan providing severance benefits to Company employees after a change in control), then, at the request of the Executive, the benefits payable to the Executive pursuant to Section 5(b)(ii)(B)(1) above upon such Qualifying Termination shall be paid to the Executive in one lump sum within 60 days of such Qualifying Termination, and the benefits payable to the Executive pursuant to Sections 5(b)(i) and 5(b)(ii)(B)(2) above upon such Qualifying Termination shall be paid to the Executive in one lump sum within 30 days after the amounts in question is reasonably determinable. At the request of the Executive, one or more of these payment(s) shall be reduced to the extent required to avoid the excise tax, if any, imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, but only if such reduction would result in a larger after-tax benefit to the Executive, after taking into account all applicable local, state, and federal income and excise taxes. 6. FEDERAL AND STATE WITHHOLDING. The Company shall deduct from the amounts payable to the Executive pursuant to this Agreement the amount of all required federal and state withholding taxes in accordance with the Executive's Form W-4 on file with the Company and all applicable social security and Medicare taxes. 7. NONCOMPETITION; NONSOLICITATION; CONFIDENTIALITY. (a) COVENANT NOT TO COMPETE. The Executive acknowledges that in the course of employment with the Company pursuant to this Agreement, the Executive will become familiar -7- with the Confidential Information (as defined below) of the Company and its subsidiaries, affiliates and clients, and that the Executive's services will be of special, unique and extraordinary value to the Company. Except with the prior written consent of the Board: (i) during the Employment Period and any Severance Period the Executive shall not engage in any activities, whether as employer, proprietor, principal, partner, stockholder (other than the holder of 1% or less of the stock of a corporation the securities of which are traded on a securities exchange or in the over-the-counter market), director, officer, employee or otherwise, in competition with (A) the businesses conducted at the date hereof by FCB Worldwide L.L.C. or any of its subsidiaries (the "FCB Group") or (B) any business in which the FCB Group is substantially engaged in or has taken significant steps (in which the Executive is involved) to become engaged in within the one-year period preceding the termination of Executive's employment with the Company; and (ii) during the Employment Period, any Severance Period and, subject to the last paragraph of this Section 7(a)(ii), any period during which the Executive is receiving benefits under the DPTEA Program, but in no event for less than the Employment Period and 12 months thereafter and in no event for more than the Employment Period and five years thereafter, the Executive shall not, directly or indirectly, either on the Executive's behalf or on behalf of any other person, firm or corporation: (A) solicit or call on any account that is a customer or client of the FCB Group at the time of the Executive's termination, or that was a customer, client or other business relationship of the FCB Group at any time within six months prior to the date of such termination; or (B) induce or attempt to persuade any employee of the FCB Group (except for the Executive's administrative assistant) or any senior executive within the True North Group to terminate the individual's employment relationship with the FCB Group or the True North Group. Notwithstanding the foregoing, at any time after the 12-month anniversary of the end of the Employment Period the Executive may elect to forego all remaining benefits under the DPTEA Program, by delivering written notice to the Company to that effect. If the Executive so notifies the Company, then the Executive shall not be subject to the restrictions set forth in this Section 7(ii) for what would have been the duration of his receipt of benefits under the DPTEA. This shall not in any way limit the Executive's obligations under this Section 7(ii) for the full duration of the Employment Period and any Severance Period. The Executive's obligations under this Section 7 are subject to the Company's obligation to pay all compensation and benefits to which the Executive is entitled under this Agreement. (b) CONFIDENTIAL INFORMATION AND TRADE SECRETS. The Executive agrees that the Company has a protectable interest in Company bidding information, trade secrets, client information, computer programs, financial information and other confidential information -8- (collectively, the "Confidential Information"). The Executive shall not, at any time during the Employment Period (except for the benefit of the Company within the scope of the Executive's duties) or thereafter, make use of any nor divulge any Confidential Information, except to the extent that such Confidential Information becomes publicly available (through sources other than the Executive), is published in a newspaper, magazine or other periodical available to the general public (other than as a result of disclosure by the Executive) or as the Company may so authorize in writing; and when the Executive shall cease to be employed by the Company, the Executive shall surrender to the Company all Confidential Information and records and other documents obtained by him or entrusted to the Executive during the course of the Executive's employment hereunder (together with all copies thereof) which pertain specifically to any of the businesses covered by the covenants in Section 7(a)(i) or which were paid for by the Company; provided, however, that the Executive may retain copies of such documents as necessary for the Executive's personal records for federal income tax purposes. The Executive also agrees that the Executive will not at any time (whether before or after the termination of the Executive's employment with the Company) disclose to anyone the terms of this Agreement, except to the Executive's counsel, accountants and members of the Executive's immediate family. (c) SCOPE OF COVENANTS; REMEDIES. The following provisions shall apply to the covenants of the Executive contained in this Section: (i) the covenants set forth in Sections 7(a)(i) and 7(a)(ii) shall apply within all territories in which the FCB Group is actively engaged in the conduct of business during the Employment Period, including, without limitation, the territories in which customers are then being solicited; (ii) the Executive expressly agrees and acknowledges that the covenants contained in Sections 7(a) and 7(b) are reasonable in all respects (including subject matter, time period and geography) and necessary because of the substantial and irreparable harm that would be caused to the Company by the Executive engaging in any of the prohibited activities contained in such Sections. The Executive expressly agrees and acknowledges that the covenants contained in this Agreement will not preclude the Executive from earning a livelihood, nor unreasonably limit the Executive's ability to earn a living, since the Executive has the ability and experience to engage in employment that will not breach or violate the covenants contained in this Agreement. Each party intends and agrees that if in any action before any court or agency legally empowered to enforce the covenants contained in Sections 7(a) and 7(b) any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and (iii) the covenants contained in Sections 7(a) and 7(b) shall survive the conclusion of the Executive's employment by the Company. 8. NONDISPARAGEMENT; COOPERATION. (a) The Executive shall not, at any time during his employment with the Company or thereafter, make any public or private statement to the -9- news media, to any True North Group competitor or client, or to any other individual or entity, if such statement would disparage any of the True North Group, any of their respective businesses or any director or officer of any of them or such businesses or would have a deleterious effect upon the interests of any of such businesses or the stockholders or other owners of any of them; provided, however, that the Executive shall not be in breach of this restriction if such statements consist solely of (i) private statements made to any officers, directors or employees of any of the True North Group by the Executive in the course of carrying out his duties pursuant to this Agreement or, to the extent applicable, his duties as a director or officer, or (ii) private statements made to persons other than clients or competitors of any of the True North Group (or their representatives) or members of the press or the financial community that do not have a material adverse effect upon any of the True North Group; and provided further that nothing contained in this Section 8(a) or in any other provision of this Agreement shall preclude the Executive from making any statement in good faith that is required by law, regulation or order of any court or regulatory commission, department or agency. (b) The Company shall not, at any time during the Executive's employment with the Company or thereafter, authorize any person to make, nor shall the Company condone the making of, any statement, publicly or privately, which would disparage the Executive; provided, however, that the Company shall not be in breach of this restriction if such statements consist solely of (i) private statements made to any officers, directors or employees of the True North Group or (ii) private statements made to persons other than clients or competitors of any of the True North Group (or their representatives) or members of the press or the financial community that do not have a material adverse effect upon the Executive; and provided further that nothing contained in this Section 8(b) or in any other provision of this Agreement shall preclude any officer, director, employee, agent or other representative of any of the True North Group from making any statement in good faith which is required by any law, regulation or order of any court or regulatory commission, department or agency. 9. ENFORCEMENT. The parties hereto agree that the Company would be damaged irreparably in the event that any provision of Section 7 or 8 of this Agreement were not performed in accordance with its terms or were otherwise breached and that money damages would be an inadequate remedy for any such nonperformance or breach. Accordingly, the Company and its successors or permitted assigns shall be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). Each of the parties agrees that he or it will submit himself or itself to the personal jurisdiction of the courts of the State of New York in any action by the other party to enforce an arbitration award against him or it or to obtain interim injunctive or other relief pending an arbitration decision. 10. SURVIVAL. Sections 7, 8, 9 and 11 of this Agreement shall survive and continue in full force and effect in accordance with their respective terms, notwithstanding any termination or expiration of the Employment Period. 11. ARBITRATION. Any dispute or controversy between the Company and the Executive, whether arising out of or relating to this Agreement, the breach of this Agreement, or -10- otherwise, shall be settled by arbitration administered by the American Arbitration Association ("AAA") and, in accordance with its Commercial Rules then in effect (to the extent applicable), and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Any arbitration shall be held before a single arbitrator who shall be selected by mutual agreement of the Company and the Executive, unless the parties are unable to agree to an arbitrator, in which case the arbitrator will be selected under the procedures of the AAA. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, the Company may, at its option without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy for the purpose of seeking injunctive or other equitable relief to enforce Sections 7, 8 and 9 of this Agreement. In connection with any arbitration initiated pursuant to this Section 11, the Company shall pay the costs of the arbitrator, and the Company shall reimburse the Executive, within a reasonable period of time following demand therefor, for attorneys' fees and related expenses reasonably incurred by the Executive in connection with the arbitration proceeding, as well as for costs and expenses reasonably incurred by the Executive to enter or enforce the award rendered by the arbitrator. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company and the Executive. The Company and the Executive acknowledge that this Agreement evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Agreement, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. 12. NOTICES. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when personally delivered or five days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed (a) if to the Executive, to the most recent address then shown on the employment records of the Company, and if to the Company, to True North Communications Inc., 101 East Erie Street, Chicago, Illinois 60611-2897, Attention: General Counsel, or (b) to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 13. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is determined to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement or the validity, legality or enforceability of such provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 14. ENTIRE AGREEMENT. This Agreement, together with the DPTEA Program documentation and all stock option, restricted stock agreements and DVIC agreements between the Executive and the Company, constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts the Prior Agreement, the Asset -11- Protection Plan Agreement previously signed by the Company and the Executive, and any other prior understandings, agreements or representations by or between the parties, written or oral, which may have related in any manner to the subject matter hereof. This Agreement is not intended to supplant any accrued benefits or rights of the Executive under any applicable Company benefit plans or programs. Without derogating any rights provided herein and without affecting the interpretation of this Agreement, the Company confirms that the Executive's rights to accelerated vesting and extended exercisability of outstanding stock options upon a Qualifying Termination, pursuant to Sections 5(b)(ii)(A) and 5(b)(iii) hereof, are retained from the Prior Agreement and are intended to constitute a continuation of the Prior Agreement. 15. SUCCESSORS AND ASSIGNS. This Agreement shall be enforceable by the Executive and the Executive's heirs, executors, administrators and legal representatives, and by the Company and its successors and permitted assigns. Any successor or permitted assign of the Company shall assume by instrument delivered to the Executive the liabilities of the Company hereunder. This Agreement shall not be assigned by the Company other than to a successor pursuant to a merger, consolidation or transfer of all or substantially all of the capital stock or assets of the Company. 16. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to principles of conflict of laws. 17. AMENDMENT AND WAIVER. The provisions of this Agreement may be amended or waived only by the written agreement of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement. 18. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument. -12- IN WITNESS WHEREOF, the parties hereto have executed this Agreement, to be effective as of the date first above written. TRUE NORTH COMMUNICATIONS INC. By: /s/ David A. Bell ---------------------------------------------------- David A. Bell, Chairman and Chief Executive Officer By: /s/ Marilyn R. Seymann ---------------------------------------------------- Marilyn R. Seymann, Chairman of the Compensation Committee of the Board of Directors EXECUTIVE: /s/ J. Brendan Ryan ------------------------------------------------------- J. Brendan Ryan -13- EXHIBIT A [LOGO] DIRECTORS PART-TIME EMPLOYMENT AGREEMENT RESOLVED, that the Company's policy permitting directors to terminate their full-time employment at the traditional age of 60 with the Company's consent and to continue on a part-time basis until age 65 is hereby amended and restated as follows: 1. Each director of the Company who at age 55 has been a director of the Company and a full-time employee of the Company or any subsidiary for a period of at least five years immediately prior thereto shall have the right, upon termination of the director's full-time employment prior to age 65 by the Company or with its consent to receive an annual salary from the Company until the earlier to occur of attainment of age 65 or payment of the amount for five years. The amount to be paid shall be 45% of the director's average annual compensation reduced 1/30 for each year that the director's service is less than 30 years. Average annual compensation and service are defined as follows: a. average annual compensation - one-fifth of the director's compensation (including bonus) during the five consecutive calendar years within the last ten calendar years prior to termination in which the director's compensation was highest. -14- b. service - the total of the years as determined in i and ii below. i. the total of all years of service with the Company or any subsidiary, plus ii. the total of years of service as a board member. The Company will provide each director with an agreement and payments will commence at the time of termination of the director's full-time employment. 2. If the full-time employment of any employee who at age 55 has been a director of the Company and a full-time employee of the Company or any subsidiary for a period of at least five years shall terminate by reason of the director's death or disability after age 55, the Company shall pay to the director or to the director's beneficiary in the event of the director's death, until the earlier to occur of attainment of age 65 or payment of the amount for five years, an annual amount determined in the same manner as described in 1 above. For this purpose, "beneficiary" shall mean any person or persons designated by the director or former director by written notice to the Company, or in the absence of such designation, the executor or administrator of the director or former director. 3. If the full-time employment of a director shall terminate within two years after a change in control of the Company, the director shall be entitled to a payment until the earlier to occur of attainment of age 65 or payment of the amount for five years, with such payment determined in the same manner as described in 1 above, except that the requirement for the director to have attained age 55 and have been a full-time employee for five or more years -15- shall be waived. A change in control shall mean (i) an acquisition (other than directly from the Company) of 15% or more of the beneficial interest in the voting stock of the Company by a party other than the Company or a Company sponsored benefit plan; or (ii) a change in the Board of Directors as a result of which the current directors (together with the successors they nominate or approve for nomination) cease to be a majority of the Board of Directors of the Company; or (iii) a merger, reorganization or consolidation whereby the existing shareholders of the Company do not own more than 66-2/3% of the then outstanding shares resulting from such merger, reorganization or consolidation. 4. A director eligible for salary as provided in 1 above at the time of termination will have the status of a part-time employee with continuation of life insurance, medical, dental, long-term disability, and business travel accident benefits. 5. A director eligible for salary as provided in 1 above will receive at the time of termination a $10,000 car allowance as an offset to the expense of purchasing the director's Company-leased car. 6. The policy set forth in these resolutions shall be subject to amendment or revocation at any time by the Board of Directors or its duly authorized committee, provided that, in consideration of the reliance of directors upon the Company's policy as heretofore in effect or as restated herein, no amendment or revocation after the date hereof shall adversely affect any director who at the time of such amendment or revocation shall have reached age 55 and have been a director of the Company and a full-time employee of the Company or any subsidiary for a period of at least five years. FURTHER RESOLVED, that the Secretary of the Company be and is hereby directed to -16- furnish a certified copy of these resolutions to each present director of the Company who is a full-time employee of the Company or any subsidiary. ------------------------------- (Name) ------------------------------- Date -17- EX-27 7 ex-27.txt EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 64,241 626 1,047,560 13,629 0 1,190,513 314,059 170,743 1,983,780 1,381,810 0 0 0 346,494 74,147 1,983,780 0 734,678 0 655,311 0 6,573 7,987 67,126 28,529 37,250 0 0 0 37,250 .76 .74
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