Prepared by MERRILL CORPORATION www.edgaradvantage.com

-----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, D6pV/vmex+IMiDoKgV1syhFnZ5N1vO+eDX6K7qxCI1RuDxGO9dUg/GUzbcAKRNK/ wEknDoWFReq4wbLTM9S6PA== /in/edgar/work/0000912057-00-049860/0000912057-00-049860.txt : 20001115 0000912057-00-049860.hdr.sgml : 20001115 ACCESSION NUMBER: 0000912057-00-049860 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 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: 766089 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 a2029940z10-q.htm 10-Q Prepared by MERRILL CORPORATION www.edgaradvantage.com QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
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 September 30, 2000

Commission file number 1-5029

True North Communications Inc.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		36-1088161 (IRS Employer Identification No.)
101 East Erie Street, Chicago, Illinois (Address of principal executive offices)		60611 (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, 33¹/3 cents per share par value, outstanding as of November 6, 2000 was 50,202,906.

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 Nine Months Ended September 30, 2000 and 1999.	3
	Condensed Consolidated Balance Sheets as of September 30, 2000 (Unaudited) and December 31, 1999.	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999.	5
	Notes to Unaudited Condensed Consolidated Financial Statements.	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	9
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	14
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings.	15
Item 6.	Exhibits and Reports on Form 8-K.	15

TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Amounts in thousands, except per share amounts)

			Three Months Ended September 30,						Nine Months Ended September 30,
			2000			1999			2000			1999
Commissions and Fees			$	381,161		$	356,722		$	1,115,839		$	1,015,820

Operating Expenses:
	Salaries and employee benefits			229,646			220,124			680,278			640,004
	Office and general			104,680			101,338			315,932			289,573
	Restructuring and other charges			(590	)		76,400			(590	)		76,400

		Total operating expenses		333,736			397,862			995,620			1,005,977

Operating Income (Loss)				47,425			(41,140	)		120,219			9,843

Other Income (Expense):
	Interest income			1,223			1,804			4,024			5,269
	Interest expense			(4,153	)		(3,930	)		(12,140	)		(13,777	)
	Gains on sales of marketable securities and other			683			1,158			201			6,638

		Total other income (expense)		(2,247	)		(968	)		(7,915	)		(1,870	)

Income (Loss) Before Taxes, Minority Interest and Equity Income				45,178			(42,108	)		112,304			7,973
	Provision (Benefit) For Income Taxes			19,200			(11,283	)		47,729			10,502

Income (Loss) Before Minority Interest and Equity Income				25,978			(30,825	)		64,575			(2,529	)
	Minority interests			(695	)		(1,235	)		(82	)		(2,014	)
	Equity income (loss) of affiliates			(1,088	)		410			(3,048	)		1,100

Net Income (Loss)			$	24,195		$	(31,650	)	$	61,445		$	(3,443	)

Per Share Information:
	Basic earnings (loss) per share		$	0.48		$	(0.66	)	$	1.24		$	(0.07	)

	Diluted earnings (loss) per share		$	0.47		$	(0.66	)	$	1.21		$	(0.07	)

	Average common shares outstanding			49,758			47,763			49,355			46,996

	Average common shares outstanding, assuming dilution			51,014			47,763			50,691			46,996

	Cash dividends per common share		$	0.15		$	0.15		$	0.45		$	0.45

See accompanying notes to financial statements.

TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(Amounts in thousands)

				September 30, 2000			December 31, 1999
CURRENT ASSETS:
	Cash and cash equivalents			$	54,435		$	118,265
	Short-term investments				—			16,858
	Marketable securities				525			2,076
	Accounts receivable, net				1,035,948			1,020,701
	Expenditures billable to clients				56,974			69,512
	Other current assets				19,933			19,529

		Total current assets			1,167,815			1,246,941

NONCURRENT ASSETS:
	Property and equipment, net				147,194			156,799
	Goodwill, net				474,563			487,787
	Investment in affiliated companies				133,706			32,871
	Other noncurrent assets				87,984			80,882

		Total noncurrent assets			843,447			758,339

			Total assets	$	2,011,262		$	2,005,280

CURRENT LIABILITIES:
	Accounts payable			$	1,039,423		$	1,034,980
	Short-term bank borrowings				131,036			117,847
	Income taxes payable				21,916			22,642
	Current portion of long-term debt				6,641			9,036
	Accrued expenses				171,027			210,283

		Total current liabilities			1,370,043			1,394,788

NONCURRENT LIABILITIES:
	Long-term debt				34,031			36,632
	Liability for deferred compensation				70,905			67,723
	Other noncurrent liabilities				89,385			139,761

		Total noncurrent liabilities			194,321			244,116

STOCKHOLDERS' EQUITY:
	Preferred stock				—			—
	Common stock				16,708			16,295
	Paid-in capital				343,943			293,435
	Retained earnings				119,705			80,615
	Unrealized gain on marketable securities				287			1,179
	Cumulative translation adjustment				(28,999	)		(22,304	)
	Less-Treasury stock				(1,601	)		(983	)
	Less-Deferred compensation				(3,145	)		(1,861	)

		Total stockholders' equity			446,898			366,376

			Total liabilities and stockholders' equity	$	2,011,262		$	2,005,280

See accompanying notes to financial statements.

TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Amounts in thousands)

				Nine Months Ended September 30,
				2000			1999
Cash flows provided (used) by operating activities:
	Net income (loss)			$	61,445		$	(3,443	)
	Adjustments to reconcile net income to net cash provided (used) by operating activities:
		Depreciation and amortization			45,176			39,315
		Equity income (loss) of affiliates			3,048			(686	)
		Restructuring and other charges, net of tax			(348	)		50,200
		Other			11,701			12,590
	Changes in assets and liabilities, net of acquisitions:
		Accounts receivable			(68,219	)		(59,304	)
		Other assets			(7,398	)		(19,400	)
		Accounts payable and accrued expenses			32,639			(90,237	)

			Net cash provided (used) by operating activities		78,044			(70,965	)

Cash flows provided (used) by investing activities:
	Purchases of property and equipment				(32,773	)		(35,494	)
	Acquisitions and investments in businesses				(95,289	)		(72,945	)
	Deconsolidation of subsidiary				(29,143	)		—
	Maturities of short-term investments				16,502			—
	Purchases of short-term investments				—			(15,800	)
	Proceeds from sale of marketable securities				—			140,864

		Net cash provided (used) by investing activities			(140,703	)		16,625

Cash flows provided (used) by financing activities:
	Increase (decrease) in short-term bank borrowings				13,189			78,099
	Proceeds from issuance of common stock				26,218			12,728
	Proceeds from issuance of long-term debt				—			26,545
	Payments of long-term debt				(3,953	)		(38,313	)
	Proceeds from initial public offering of subsidiary				—			42,048
	Cash dividends paid				(22,355	)		(21,348	)
	Payments for purchases of common stock				(10,669	)		(10,424	)

		Net cash provided by financing activities			2,430			89,335

Effects of exchange rates on cash and cash equivalents					(3,601	)		(1,363	)

Net increase (decrease) in cash and cash equivalents					(63,830	)		33,632
Cash and cash equivalents at beginning of year					118,265			88,685

Cash and cash equivalents at end of period				$	54,435		$	122,317

See accompanying notes to financial statements.

TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 nine months of the year are not necessarily indicative of the results for the year or other interim periods.

2. Acquisitions

In the first nine months of 2000, the cost of advertising and communication agencies acquired by True North in transactions accounted for as purchases were $39.9 million. The excess of the purchase price over the fair value of net identifiable assets acquired was $34.7 million and is being amortized over periods not exceeding 40 years.

In September 2000, True North acquired a 35.5% interest in Springer & Jacoby, Germany's largest independent advertising group, for an initial cash payment of $16.9 million, and, pursuant to the purchase agreement, the two largest shareholders of Springer & Jacoby shall have the right to sell all of their shares (put option) to True North in January 2003 at a combined fixed price of 53.0 million Deutsche marks. The additional shares to be purchased in January 2003 represent 15.5% of the outstanding shares of Springer & Jacoby. True North has recorded the estimated fair value of this put option as a liability at September 30, 2000, in the amount of $9.0 million. In October 2000, True North entered into forward exchange contracts to purchase 53.0 million Deutsche marks in January 2003 at a value of $23.2 million. Future changes in the fair value of the put option liability and the forward exchange contracts will be reflected as a component of pre-tax earnings.

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. Bozell Worldwide's international operations, along with Bozell Detroit and Bozell Costa Mesa, were merged with FCB Worldwide and now operate under the FCB Worldwide name. The restructuring initiatives also included the sale or closing of certain underperforming business units.

A summary of components of the restructuring charge is as follows (in millions):

		Severance and Termination Benefits			Lease Termination and Other Exit Costs			Impairment Loss			Total
Restructuring reserve, September 30, 1999		$	41.4		$	24.2		$	10.8		$	76.4
	1999 Write-downs		—			(0.9	)		(10.8	)		(11.7	)
	1999 Cash payments		(9.7	)		(3.2	)		—			(12.9	)

Balance, December 31, 1999			31.7			20.1			—			51.8
	2000 Write-downs		—			(4.3	)		—			(4.3	)
	2000 Cash payments		(22.5	)		(9.5	)		—			(32.0	)
	Long-term obligations secured		(9.6	)		(5.3	)		—			(14.9	)
	Excess reserve (net)		0.4			(1.0	)		—			(0.6	)

Balance, September 30, 2000		$	—		$	—		$	—		$	—

The restructuring program was completed during the third quarter of 2000. Approximately 640 positions were eliminated at a cost of $41.8 million, which was $0.4 million higher than the original estimate. In addition, approximately 30 facilities were abandoned or downsized at a cost of $23.2 million, which was $1.0 million lower than the original estimate. Accordingly, the net excess restructuring reserve of $0.6 million was reversed into income in the third quarter of 2000. The remaining severance liabilities of $9.6 million pertain to terminated individuals and will be paid over the next four years in accordance with contractually defined severance agreements. The remaining lease liabilities and other exit costs of $5.3 million pertain to non-cancellable lease committments in excess of sublease income for exited facilities that will 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 nine months ended September 30, 2000 and 1999 was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2000			1999			2000			1999
Net Income (loss)	$	24.2		$	(31.7	)	$	61.4		$	(3.4	)
Foreign currency translation		(3.7	)		1.5			(6.7	)		(10.1	)
Unrealized gains (losses) on marketable securities, net of deferred income taxes		(0.1	)		0.9			(0.9	)		(2.4	)

Total comprehensive income	$	20.4		$	(29.3	)	$	53.8		$	(15.9	)

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 to begin in July, 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

In April 2000, True North converted all of its shares of Modem Media 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 Media is no longer consolidated in True North's financial statements and is accounted for under the equity method.

7. Significant Account Loss

In September 2000, DaimlerChrysler Corporation, True North's largest account, announced that it was undertaking a review of its two advertising agencies to reduce the costs of its global advertising and media. DaimlerChrysler represents approximately $140 million, or nine percent, of True North's consolidated revenues.

8. New Accounting Standards

In June 2000, the Financial Accounting Standards Board (FASB) issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," which amends the accounting and reporting standards of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", for certain derivative instruments and hedging activities. SFAS No. 133 was previously amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral o the Effective Date of FASB Statement No. 133", which deferred the effective date of SFAS No. 133 to fiscal years commencing after June 15, 2000. True North will adopt SFAS No. 138 concurrently with SFAS No. 133, however, management does not believe that such adoptions will have a material impact on True North's financial condition or results of operations.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements", which provides guidance on applying generally accepted accounting principles to revenue recognition based on the interpretations and practices of the SEC. In June 2000, the SEC issued SAB No. 101B Second Amendment: Revenue Recognition in Financial Statements, which delays the implementation date of SAB 101 until the fourth quarter of fiscal years beginning after December 15, 1999. Management is currently evaluating the impact, if any, from the adoption of SAB 101.

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)

Certain statements contained in the Form 10-Q under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" constitute "forward-looking statements" within the meaning of Section 21E(i)(1) of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of True North to be materially different from any future results expressed or implied by these statements. Such factors include, among other things, the following: general economic and business conditions, changes in demand for the company's services, changes in competition, the ability of the company to integrate acquisitions or complete future acquisitions, interest rate fluctuations, dependence upon and availability of qualified personnel, and changes in government regulation. In light of these and other uncertainties, the forward-looking statements included in this document should not be regarded as a representation by True North that True North's plans and objectives will be achieved.

THREE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS 1999

General

True North's net income for the three months ended September 30, 2000, was $24.2 million, or $0.47 per diluted share. This compares a net loss of $31.7 million, or $(0.66) per share, for the three months ended September 30, 1999.

The third quarter of 1999 included a pre-tax charge of $76.4 million ($50.2 million after-tax or $1.05 per share) for the restructuring of its operations. The third quarter of 1999 also included a pre-tax gain of $1.1 million ($0.6 million after-tax or $0.01 per share) on the sale of marketable securities.

Excluding the restructuring charge and the gain on the sales of marketable securities, net income for the quarter ended September 30, 2000 was $23.8 million or $0.47 per diluted share compared to $17.9 million or $0.36 per diluted share in 1999.

Effective for the second quarter of 2000, True North's voting power in Modem Media was reduced to approximately 46%. As a result, Modem Media's results are no longer consolidated in True North's financial statements and are now reported under the equity method of accounting.

Significant Account Loss

On November 3, 2000, True North was informed that it was not selected as the agency of record. Although the transition plan is not yet known, the contract specifies that True North will continue to provide services and receive revenues from the account during a 180-day transition period. True North believes the annualized earnings per share impact of DaimlerChrysler's decision to move the account will be approximately $0.50 per diluted share and the operating margin will be negatively effected by approximately 200 basis points.

Revenues

Consolidated revenues increased $24.5 million, or 6.9%, to $381.2 million for the three months ended September 30, 2000, from $356.7 million in 1999. Revenues from the U.S. operations increased $20.5 million, or 7.6%, to $290.9 million in 2000, while international revenues increased 4.6%, or $4.0 million, to $90.3 million. Excluding the impact of changes in foreign exchange rates, international revenues increased by $10.0 million or 11.6%.

Excluding the impact of deconsolidating Modem Media in the second quarter of 2000, consolidated revenues increased $45.6 million or 13.6%. Approximately 3.7% of this worldwide growth was due to acquisitions (net of divestitures) while the impact of changes in foreign exchange rates decreased consolidated revenues by 1.8%. The resulting organic revenue growth from net new business wins and growth in existing client accounts was 11.7%.

Operating Expenses

Total consolidated operating expenses, excluding restructuring and other charges, increased $12.8 million to $334.3 million from $321.5 million in 1999. Acquisitions (net of divestitures) accounted for approximately $12.2 million of the increase. Excluding the effects of acquisitions, divestitures, changes in foreign exchange rates, and the Modem Media deconsolidation, total operating expenses increased 8.7% in the third quarter of 2000.

Salaries and benefits increased $9.5 million, or 4.3%, to $229.6 million in 2000 from $220.1 million in the comparable quarter of 1999. Acquisitions (net of divestitures) represented approximately $7.4 million of the increase, while the impact of changes in foreign exchange rates decreased salaries and related benefit expenses by approximately $5.2 million. Excluding the effects of the items noted above, as well as the effect of Modem Media's deconsolidation, salaries and related benefits increased by 9.3%, 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 $104.7 million for the three months ended September 30, 2000, compared to $101.3 million in 1999, a $3.4 million, or 3.3% increase. Acquisitions (net of divestitures) accounted for $4.5 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 Media's impact from deconsolidating its results, office and general expenses increased by 7.7% in 2000 versus 1999. This reflects higher goodwill amortization due to acquisitions, higher depreciation charges from upgrading the facilities and computer systems and higher bad debt expense.

Restructuring and Other Charges

remaining severance liabilities of $9.6 million pertain to terminated individuals and will be paid over the next four years in accordance with contractually defined severance agreements. The remaining lease liabilities and other exit costs of $5.3 million pertain to non-cancellable lease committments in excess of sublease income for exited facilities that will be paid out over the remaining lease periods, which range from one to five years.

True North anticipates net pre-tax expense savings of approximately $25.0 million on an annualized basis, with approximately seventy-five percent or more of such savings occurring in 2000 and the full amount realized in 2001 and thereafter.

Other Income (Expenses)

Interest income decreased by $0.6 million in the quarter ended September 30, 2000, compared to 1999 primarily due to the effect of deconsolidating Modem Media's results in the second quarter of 2000. Interest expense increased by $0.2 million in the third quarter of 2000 versus 1999 due primarily to higher short-term interest rates.

True North recognized a pre-tax gain of $1.1 million in the third quarter of 1999 on the sale of marketable securities.

Income Taxes

True North's effective tax rate was 42.5% in the third quarter of 2000 versus a tax benefit rate of 26.8% in 1999. The 1999 tax benefit rate was negatively impacted by the components of the restructuring charge, including the write-off of intangible assets and lower foreign tax rates. 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 third quarter of 2000 was $0.7 million versus $1.2 million in 1999. This reflects the impact of net losses in the operations of Modem Media in 1999 and its subsequent deconsolidation in the second quarter of 2000.

Equity Income (Loss)

Equity income (loss) of affiliates was a loss of $1.1 million for the third quarter of 2000, compared to income of $0.4 million in the corresponding period of 1999. This decrease is due primarily to True North's share of the net loss at Modem Media, which was included as a consolidated entity in 1999.

NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS 1999

General

True North's net income for the nine months ended September 30, 2000, was $61.4 million, or $1.21 per diluted share. This compares to a net loss of $3.4 million, or $0.07 per share, for the nine months ended September 30, 1999.

The nine months ended September 30, 1999, included a restructuring charge of $76.4 million ($50.2 million or $1.05 per share). The first nine months of 1999 also included gains on the sale of marketable securities of $5.1 million ($2.9 million after-tax or $0.06 per diluted share). Excluding these unusual items, net income for the first nine months of 1999 was $43.9 million or $0.90 per diluted share.

Revenues

Consolidated revenues increased $100.0 million, or 9.8%, to $1,115.8 million for the nine months ended September 30, 2000, from $1,015.8 million in 1999. Revenues from the U.S. operations increased $100.5 million, or 13.2%, to $859.0 million in 2000, while international revenues decreased 0.2%, or $0.5 million, to $256.8 million. Excluding the impact of changes in foreign exchange rates, international revenues increased 6.0%.

Excluding the impact of deconsolidating Modem Media in the second quarter of 2000, consolidated revenues increased $121.0 million or 12.5%. Approximately 4.1% of this worldwide growth was due to acquisitions (net of divestitures) while the impact of changes in foreign exchange rates decreased consolidated revenues by 1.7%. The resulting organic revenue growth from net new business wins and growth in existing client net accounts was 10.1%.

Operating Expenses

Total consolidated operating expenses, excluding restructuring and other charges, increased $66.6 million to $996.2 million in the first nine months of 2000 from $929.6 million in 1999. Acquisitions (net of divestitures) accounted for approximately $34.7 million of the increase. Excluding the effects of acquisitions, divestitures, changes in foreign exchange rates, and the impact of deconsolidating Modem Media in the second quarter of 2000, total operating expenses increased 7.2%.

Salaries and benefits increased $40.3 million, or 6.3%, to $680.3 million in 2000 from $640.0 million in the comparable period of 1999. Acquisitions (net of divestitures) represented approximately $23.1 million of the increase, while the impact of changes in foreign exchange rates decreased salaries and related benefit expenses by approximately $10.5 million. Excluding the effects of the items noted above, and Modem Media's deconsolidation, salaries and related benefits increased by 6.5%, 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 $315.9 million for the nine months ended September 30, 2000, compared to $289.6 million in 1999, a $26.3 million, or 9.1% increase. Acquisitions, net of divestitures, accounted for $11.7 million of the increase, while the impact of lower foreign exchange rates decreased those expenses by $4.9 million. Excluding the impact of acquisitions, divestitures, changes in foreign exchange rates, and the Modem Media deconsolidation, office and general expenses increased by 8.6% 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 $1.2 million in the nine months ended September 30, 2000, compared to 1999 primarily due to the impact of deconsolidating Modem Media. Interest expense decreased by $1.6 million in the first quarter of 2000 versus 1999 due primarily to lower average debt levels.

True North recognized pre-tax gains of $6.5 million in the first nine 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 nine months of 2000. The 1999 effective tax rate was impacted by the restructuring charge, including the write-off of intangible assets and lower foreign tax rates. Excluding the negative impact from the restructuring charge, the effective rate in the first nine months of 1999 was 43.5%. 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 first nine months of 2000 was $0.1 million versus $2.0 million in 1999. This reflects the impact of deconsolidating Modem Media in the second quarter of 2000.

Equity Income (Loss)

Equity income (loss) of affiliates was a loss of $3.0 million for the first nine months of 2000, compared to income of $1.1 million in the corresponding period of 1999. This decrease reflects the net losses sustained by Modem Media in the second and third quarters of 2000.

Liquidity and Capital Resources

As of September 30, 2000, True North's cash and cash equivalents totaled $54.4 million, which is a decrease of $63.9 million over the 1999 year-end balance of $118.3 million. This decrease is due primarily to the acquisition program and the impact of the deconsolidation of Modem Media.

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 $78.0 million in the first nine 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 $32.8 million for the nine months ended September 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 nine months 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 September 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 Media 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 Media postponed the offering due to adverse market conditions. True North will continue to explore potential opportunities in regard to its investment in Modem Media, including sales in the open market or a dividend to shareholders.

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.

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 nine months of 2000, True North purchased 255,000 shares at a cost of $10.7 million. Since the program's inception, True North has purchased 977,618 shares at a cost of $30.7 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 nine 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.

As discussed in Note 2, True North entered into forward exchange contracts in October 2000 to purchase 53.0 million Deutsche marks in January 2003. These contracts represent the amount True North is expected to pay for the exercise of put options given in connection with the acquisition of Springer & Jacoby.

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 6. Exhibits and Reports on Form 8-K.

(a)	Exhibits:
	10.1	Employment Agreement between Suzanne S. Bettman and Registrant dated as amended November 1, 2000.
	10.2	Employment Agreement between Ramesh Rajan and Registrant dated as of November 1, 2000.
(b)	Reports of Form 8-K:
	(1)	Form 8-K filed on July 26, 2000 reported Registrant's second quarter earnings release.
	(2)	Form 8-K filed on September 7, 2000, reported certain recent events concerning DaimlerChrysler Corporation's advertising review.

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)

		/s/ KEVIN J. SMITH (Signature)
		Kevin J. Smith Executive Vice President Chief Financial Officer
Date: November 14, 2000

QuickLinks

INDEX
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30 2000 AND 1999
CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30 2000 (UNAUDITED) AND DECEMBER 31 1999
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30 2000 AND 1999
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30 2000 AND 1999
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
EX-10.1 2 a2029940zex-10_1.txt EMPLOYEE AGREEMENT EXHIBIT 10.1 [CONFORMED COPY OF JANUARY 1, 2000 AGREEMENT, AS AMENDED ON NOVEMBER 1, 2000] EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 2000 (the "Effective Date") between True North Communications Inc., a Delaware corporation (the "Company"), and Suzanne S. Bettman (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"); and WHEREAS, the Company and the Executive desire to enter into this Agreement 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 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 shall have terminated the automatic extension provisions of this sentence by giving written notice to the Executive at least 30 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. As of the Effective Date, the Executive's title shall be Executive Vice President, General Counsel, and she shall report directly to the Company's Chief Executive Officer (the "CEO"). The Executive shall have the authority, duties and responsibilities commensurate with her position and title (at the relevant time) and such other duties and responsibilities (not inconsistent with her position) as are assigned to her from time to time by the CEO or the Board of Directors of the Company (the "Board"). During the Employment Period, the Executive shall perform faithfully and loyally and to the best of the Executive's abilities her duties hereunder, shall devote her full business time, attention and efforts to the affairs of the True North Group and shall use her 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 $260,000 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 Company's 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 the Company (or any successor management governing committee). (d) EXPENSE REIMBURSEMENT. During the Employment Period, the Company shall reimburse the Executive for all proper expenses incurred by her in the performance of her duties hereunder in accordance with the Company's policies and procedures for senior executives. The Executive shall submit appropriate invoices for all such expenses. 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 her duties hereunder by reason of illness or incapacity for a period of more than four 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 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 - 2 - diminution of the Executive's duties and responsibilities, including, but not limited to, and change resulting in the Executive no longer serving as the General Counsel of the publicly-held parent company of the True North Group, (2) a material breach of the Company's obligations set forth in this Agreement, (3) a decrease in the Executive's base salary, or (4) any requirement of the Company that the location where the Executive is based be materially changed. 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 (the later of 60 days or as soon as reasonably practicable) after receipt of written notice thereof given by the Executive shall not constitute a basis for a Qualifying Termination. (b) DEFINITION OF CAUSE. The Company may terminate the Executive's employment immediately for "Cause" if, in the reasonable determination of the Board, the Compensation Committee of the Board, or the CEO, as set forth in a writing setting forth in reasonable detail the reasons for such termination, (i) the Executive engages in conduct that violates significant policies of the Company; (ii) the Executive fails to perform the essential functions of her job (except for a failure resulting from a bona fide illness or incapacity) or fails to carry out the CEO's or the Board's reasonable directions with respect to material duties; (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 significant violation of any material statutory or common law duty of loyalty to the Company; 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 7 and 8). 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 (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 4(b) above), and (3) reimbursement of proper expenses incurred through the date of such termination; and (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). (b) ADDITIONAL BENEFITS UPON QUALIFYING TERMINATION. If the Employment Period terminates after the occurrence of a Qualifying Termination (as defined in Section 4(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: - 3 - (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 sentence of this Section 5(b), for a period of 24 months commencing on the day immediately following the date of termination of the employment of the Executive (the "Severance Period"), the Executive shall be entitled to receive (A) base salary, at the rate payable as of the date of such termination, payable in accordance with the Company's normal payroll policies and (B) annual incentive compensation at the rate of 50% of base salary; and (3) subject to the last sentence of this Section 5(b), during the Severance Period, the Executive shall be entitled to participate in life insurance, medical and dental benefits on terms no less favorable than on the termination date, subject to legal restrictions and to modifications of general application to all similarly situated employees; 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 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, containing a general release of claims. (c) TERMINATION AFTER A CHANGE IN CONTROL. If the Executive incurs a Qualifying Termination (other than a Qualifying Termination due to death or Disability) 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 (i) the benefits payable to the Executive pursuant to Section 5(b)(ii)(2) above upon such Qualifying Termination, if any, shall be paid to the - 4 - Executive in one lump sum within 60 days of such Qualifying Termination, (ii) the benefits payable to the Executive pursuant to Section 5(b)(i) upon such Qualifying Termination, if any, shall be paid to the Executive in one lump sum within 30 days after the amount in question is reasonably determinable, and (iii) the restrictions of Section 7(a)(i) shall not apply during the Severance Period. If mutually agreed upon between the Executive and the Company, these lump-sum payments shall be reduced to the extent necessary to maximize the total after-tax benefit to the Executive, after taking into account all applicable local, state, and federal income and excise taxes, including any applicable excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended. 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 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 (and subject to the last sentence of this Section 7(a)): (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 the True North Group or (B) any business in which the True North Group is substantially engaged in or proposed to be engaged in within the one year period preceding the termination of Executive's employment with the Company; and (ii) during the Employment Period (including the remainder of the then current three-year term of the Employment Period following the Executive's resignation or termination for "Cause") and 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 True North Group at the time of the Executive's termination, or that was a client of the True North Group 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 - 5 - Confidential Information relating to within the one-year period preceding the Executive's termination of employment with the Company; (B) perform any 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 True North Group. Notwithstanding the foregoing, the restrictions of Section 7(a)(i) and 7(a)(ii)(A-B) shall not apply to the Executive's practice of law following the Employment Period. (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 any nor divulge any Confidential Information, except to the extent that such Confidential Information becomes a matter of public record, 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 her 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 economic 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 True North 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 - 6 - 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 her employment with the Company or thereafter, make any public or private statement to the 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 her duties pursuant to this Agreement or, to the extent applicable, her 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. - 7 - 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 she or it will submit herself or itself to the personal jurisdiction of the courts of the State of Illinois in any action by the other party to enforce an arbitration award against her or it or to obtain interim injunctive or other relief pending an arbitration decision. 10. SURVIVAL. Sections 7, 8 and 9 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 otherwise, shall be settled by arbitration administered by the American Arbitration Association ("AAA") in accordance with its Commercial Rules then in effect 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. 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. 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, and if to the Company, to True North Communications Inc., 101 East Erie Street, Chicago, Illinois 60611-2897, Attention: Chief Financial Officer, or (b) to such other address as either party may have furnished to the other in - 8 - 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 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. 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 Illinois 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. - 9 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 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 EXECUTIVE /s/ Suzanne S. Bettman -------------------------------------------- Suzanne S. Bettman - 10 - EX-10.2 3 a2029940zex-10_2.txt EMPLOYEE AGREEMENT EXHIBIT 10.2 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 2000 (the "Effective Date") between True North Communications Inc., a Delaware corporation (the "Company"), and Ramesh Rajan (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 has served the Company as the Chief Financial Officer of Bozell Worldwide, Inc. (now known as Bozell Group, Inc.); and WHEREAS, the Company and the Executive desire to enter into this Agreement 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 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 either party shall have terminated the automatic extension provisions of this sentence by giving written notice to the other party 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 Executive Vice President - Operations and Business Development. The Executive shall report directly to the Company's Chief Executive Officer (the "CEO"), and he shall be based in New York City. 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) as are assigned to him from time to time by the CEO or the Board of Directors of the Company (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. During the Employment Period, the Company shall pay to the Executive an annual base salary at the rate of $300,000 per annum from the Effective Date through February 29, 2000, and at the rate of $350,000 per annum thereafter, 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 Company's 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 the Company (or any successor management governing committee). (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 appropriate invoices for all such expenses. 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 within 60 days of the occurrence, without the Executive's - 2 - 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 material adverse change in the Executive's reporting responsibilities with the Company (including, but not limited to, any change resulting in the Executive no longer reporting directly to the Chief Executive Officer of the publicly-held parent company of the True North Group), (3) a material breach of the Company's obligations set forth in this Agreement, (4) a decrease in the Executive's base salary, or (5) any requirement of the Company that the location where the Executive is based be materially changed. 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 (the later of 60 days or as soon as reasonably practicable) after receipt of written notice thereof given by the Executive shall not constitute a basis for a Qualifying Termination. (b) DEFINITION OF CAUSE. The Company may terminate the Executive's employment immediately for "Cause" if, in the reasonable determination of the Board or the Compensation Committee of the Board, as set forth in an action of the Board or such Committee setting forth in reasonable detail the reasons for such termination, (i) the Executive engages in conduct that violates significant policies of the Company after the Executive is notified by the Company that he is engaging in conduct that violates such policies and that such conduct will be deemed to be Cause; (ii) 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 Board's reasonable directions with respect to material duties after the Executive is notified by the Company 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; (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 significant violation of any material statutory or common law duty of loyalty to the Company; 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 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 (i), (ii) or (iv) of this Section 4(b), 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. (c) Notwithstanding anything in this Agreement to the contrary, the Executive shall have the right to resign from the Company and thereby terminate the Employment Period at any time during the Employment Period; subject to the provision by the Executive to the Company of at least 60 days' advance written notice. - 3 - 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 termination, and (C) reimbursement of proper expenses incurred through the date of such termination; and (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). (b) ADDITIONAL BENEFITS UPON QUALIFYING TERMINATION. If the Employment Period terminates for a reason set forth in Section 4(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: (A) 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 (this is independent of any similar rights provided pursuant to stock option and restricted stock agreements entered into prior to the Effective Date); (B) subject to the last sentence of this Section 5(b), for a period of 24 months commencing on the day immediately following the date of termination of the employment of the Executive (the "Severance Period"), the Executive shall be entitled to receive (1) base salary, at the rate payable as of the date of such termination, and (2) an annual bonus at the rate of 50% of base salary, with such salary and bonus to be paid evenly throughout the Severance Period in accordance with the Company's normal payroll policies; and (C) subject to the last sentence of this Section 5(b), during the Severance Period, the Executive shall be entitled to participate in life insurance, medical and - 4 - dental benefits on terms no less favorable than on the termination date, subject to legal restrictions and to modifications of general application to all similarly situated employees; 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 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 (this is independent of any similar rights provided pursuant to stock option agreements entered into prior to the Effective Date). As a condition to the receipt of the severance benefits described in subparagraphs (ii)(B) and (ii)(C) above, the Company reserves the right in accordance with the standard Company severance policy to require the Executive to sign a standard separation agreement, containing a general release of claims. This separation agreement shall be in the form attached hereto as Exhibit A. (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 (i) the benefits payable to the Executive pursuant to Section 5(b)(ii)(B)(1) and (2) above upon such Qualifying Termination, if any, shall be paid to the Executive in one lump sum within 60 days of such Qualifying Termination, and (ii) the benefits payable to the Executive pursuant to Section 5(b)(i) above upon such Qualifying Termination, if any, shall be paid to the Executive in one lump sum within 30 days after the amount in question is reasonably determinable. If mutually agreed upon between the Executive and the Company, these lump-sum payments 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 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 Employment 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 any business in which the True North Group is substantially engaged in or proposed to be engaged in; and (ii) during the Employment Period (including the remainder of the then current three-year term of the Employment Period following the Executive's resignation or termination for "Cause") and 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 or raid any account that is a client of the True North Group at the time of the Executive's termination, or that was a client of the True North Group 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; or (B) recruit or solicit, or attempt to recruit or solicit, 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 True North Group. (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 any nor divulge any Confidential Information, except to the extent that such Confidential Information becomes a matter of public record, 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 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, accountants and members of the Executive's immediate family. - 6 - (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 True North 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 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. - 7 - (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 and 9 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 otherwise, shall be settled by arbitration administered by the American Arbitration Association ("AAA") in accordance with its Commercial Rules then in effect 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. 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 - 8 - law provision included in this Agreement, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. 12. 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 Bruce Bodner, 250 Park Avenue South, New York, NY 10003 (fax: 212-353-8454), 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 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. 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. - 9 - 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. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. TRUE NORTH COMMUNICATIONS INC. By: /s/ David A. Bell ---------------------------------------- David A. Bell, Chief Executive Officer By: /s/ Marilyn R. Seymann ---------------------------------------- Marilyn R. Seymann, Chairman of the Compensation Committee of the Board of Directors EXECUTIVE /s/ Ramesh Rajan --------------------------------------- Ramesh Rajan - 10 - EXHIBIT A CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE FOR RAMESH RAJAN This shall confirm the arrangements relating to the termination of your employment with True North Communications Inc. (the "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 4 and 5 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, 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 5 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: - 11 - 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 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. - 12 - 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 Sections 8 and 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 7 and 9 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 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 - 13 - 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. 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. - 14 - 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. ---------------------------------------- Ramesh Rajan Dated: ---------------------------------- TRUE NORTH COMMUNICATIONS INC. By: ------------------------------------- [NAME AND TITLE] Dated: ---------------------------------- - 15 - EX-27 4 a2029940zex-27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 54,435 525 1,051,327 15,379 0 1,167,815 323,287 176,093 2,011,262 1,370,043 0 0 0 359,050 87,848 2,011,262 0 1,115,839 0 983,976 0 12,234 12,140 112,304 47,729 64,575 0 0 0 61,445 1.24 1.21

~~-----END PRIVACY-ENHANCED MESSAGE-----~~