<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarter ended June 30, 1996 Commission file no. 1-5029
TRUE NORTH COMMUNICATIONS INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1088161
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 EAST ERIE STREET, CHICAGO, ILLINOIS 60611
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number: (312) 751-7227
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
----- ----
There were 23,822,911 shares of the Registrant's 33 1/3 cents per share par
value Common Stock outstanding as of August 12, 1996.
<PAGE>
TRUE NORTH COMMUNICATIONS INC.
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Exhibits
Consolidated Statements of Income for the
Three Months Ended June 30, 1995 and 1996 3
Consolidated Statements of Income for the
Six Months Ended June 30, 1995 and 1996 4
Consolidated Balance Sheets as of June 30, 1995,
December 31, 1995, and June 30, 1996 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1996 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Operating Results 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended June 30
1995 1996
---------- ----------
<S> <C> <C>
Revenues $110,857 $118,429
-------- --------
Costs and Expenses:
Salaries and employee benefits $ 68,868 $ 78,833
Office and general expenses 32,416 38,380
Other (income) expense 1,456 1,122
-------- --------
Total Costs and Expenses $102,740 $118,335
-------- --------
Income Before Provision for Taxes on $ 8,117 $ 94
Income
Provision for Federal, Foreign & State
Income Taxes 3,841 47
-------- --------
$ 4,276 $ 47
Minority Interest Credit (Expense) 187 111
Equity in Earnings (Losses) of
Affiliated Companies 6,893 5,891
-------- --------
Net Income $ 11,356 $ 6,049
======== ========
Net Income Per Share $ .51 $ .26
======== ========
Average Number of Common and Common
Equivalent Shares Outstanding 22,482 23,525
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Six months ended June 30
1995 1996
--------- --------
<S> <C> <C>
Revenues $206,246 $224,363
-------- --------
Costs and Expenses:
Salaries and employee benefits $129,451 $152,907
Office and general expenses 61,542 73,008
Unusual items 10,185 --
Other (income) expense 3,136 1,128
-------- --------
Total Costs and Expenses $204,314 $227,043
-------- --------
Income Before Provision for Taxes on Income $ 1,932 $ (2,680)
Provision for Federal, Foreign & State
Income Taxes 1,707 (1,134)
-------- --------
$ 225 $ (1,546)
Minority Interest Credit (Expense) 136 462
Equity in Earnings (Losses) of Affiliated
Companies (33) 6,411
-------- --------
Net Income $ 328 $ 5,327
======== ========
Net Income Per Share $ .01 $ .23
======== ========
Average Number of Common and Common Equivalent
Shares Outstanding 22,417 23,316
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30 Dec. 31 June 30
1995 1995 1996
--------- --------- ---------
ASSETS:
- -------
<S> <C> <C> <C>
Cash and short-term investments $ 37,506 $ 56,981 $ 53,652
Accounts receivable, net 339,484 333,038 397,016
Other current assets 49,645 39,970 60,621
-------- -------- --------
Total current assets $426,635 $429,989 $511,289
Property and equipment, net 44,187 54,626 58,544
Goodwill 61,236 84,934 110,340
Investment in affiliated companies 183,350 187,456 192,733
Other noncurrent assets 12,039 9,097 6,456
-------- -------- --------
Total assets $727,447 $766,102 $879,362
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Accounts payable and accruals $405,771 $426,311 $481,123
Short-term bank borrowings 48,463 49,982 78,689
Current portion of long-term debt 5,342 199 225
-------- -------- --------
Total current liabilities $459,576 $476,492 $560,037
-------- -------- --------
Deferred taxes $ 4,304 $ 1,608 $ 116
-------- -------- --------
Long-term debt $ 4,994 $ 5,402 $ 30,873
-------- -------- --------
Accrued future compensation exp. $ 35,098 $ 36,538 $ 38,246
-------- -------- --------
Other noncurrent liabilities $ 18,047 $ 23,968 $ 21,692
-------- -------- --------
Common stock $ 7,830 $ 7,830 $ 7,931
Paid-in capital 116,857 116,483 122,104
Retained earnings 93,481 105,800 104,031
Less-Treasury stock (7,241) (2,661) (206)
Cumulative translation adjustment (5,499) (5,358) (5,462)
-------- -------- --------
Total stockholders' equity $205,428 $222,094 $228,398
-------- -------- --------
Total liabilities and
stockholders' equity $727,447 $766,102 $879,362
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30
1995 1996
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
- -------------------------------------
Net income $ 328 $ 5,327
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 8,197 8,797
Deferred compensation expense 2,494 1,736
Equity earnings of affiliates, net of dividends received 584 (5,223)
Accounts receivable (63,633) (62,836)
Accounts payable and accruals (12,333) 33,448
Other current assets (19,831) (20,651)
Noncurrent liabilities (6,095) (3,768)
Other 930 683
-------- --------
$(89,359) $(42,487)
-------- --------
Cash Provided By (Used For) Financing Activities:
- -------------------------------------------------
Short-term investments and marketable securities $ 47,013 $ (4,921)
Increase in liability for cash overdrafts 31,820 21,364
Additions to long-term debt -- 25,026
Payments of long-term debt (59) (143)
Cash dividends paid (6,858) (7,096)
Common stock issuances 5,476 8,177
Short-term borrowings 40,599 28,707
-------- --------
$117,991 $ 71,114
-------- --------
Cash Provided By (Used For) Investment Activities:
- --------------------------------------------------
Purchase of subsidiaries $ (8,788) $(26,702)
Purchase of interest in affiliated companies (7,645) (723)
Capital expenditures (4,743) (9,452)
-------- --------
$(21,176) $(36,877)
-------- --------
Increase (Decrease) In Cash $ 7,456 $ (8,250)
Balance at beginning of period 24,598 48,408
-------- --------
Balance at end of period $ 32,054 $ 40,158
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
(1) The condensed financial statements included herein have been prepared by
the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, and include all adjustments (which
comprise only normal recurring items) which the Company considers
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The
consolidated condensed financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
latest Annual Report on Form 10-K.
Revenues and net income for the first six months of the year should not be
considered reliable indicators of revenues or net income for the entire
year.
(2) The number of shares outstanding reflects the potential dilution of shares
expected to be earned through profit performance contracts and outstanding
stock options. Per share income amounts are not materially different on a
fully diluted basis.
7
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED JUNE 30, 1996
- ---------------------------
Results for the second quarter of 1996 were net income of $6,049 or $.26 per
share compared to $11,356 or $.51 per share in 1995.
Revenues increased 6.8% to $118,429 in 1996 from $110,857 in 1995. North
American revenues increased 13.4% to $95,851 in 1996 while international
revenues declined 14.2% to $22,578. Excluding the impact of acquisitions,
consolidated revenues declined approximately 5% due primarily to the previously
announced loss of two large clients, Colgate and Clorox, in late 1995. The
Company believes that the impact of new business from the previously announced
global consolidation of S.C. Johnson advertising with the Company will largely
offset the loss of revenues from Colgate and Clorox in future quarters.
During the latter part of 1995 and in 1996, the Company purchased the R/GA
Digital Media Group and several agencies in North America, Latin America and the
Pacific Rim. These acquisitions contributed $13,564 and $529 to the Company's
revenues and pretax income, respectively.
As previously disclosed, salaries and benefits expenses and office and general
expenses increased at a higher rate than the rate of growth of revenues due
primarily to the Company's continuing investment in digital advertising
technology. Excluding investment spending and the impact of acquisitions made in
the latter part of 1995 and in 1996, salaries and benefits expenses and office
and general expenses increased approximately 1.4% and 1.3% between years.
The components of "Other Expenses" in both years were as follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
- ----------------------------------------------------------
Interest expense $1,973 $ 2,578
- ----------------------------------------------------------
Interest income (230) (1,141)
- ----------------------------------------------------------
Unrealized (gain) loss on Shandwick
investment (287) (315)
- ----------------------------------------------------------
$1,456 $ 1,122
------------------
</TABLE>
Equity income, which consists primarily of the Company's share of European
operations, was $5,891 in 1996 compared to $6,893 in 1995. Approximately $421 of
the decline is due unfavorable currency exchange rates in 1996 as compared to
1995. The remainder of the decline is primarily due to the loss of Colgate. As
previously indicated, new business from S.C. Johnson should largely offset the
impact of this client loss in future quarters.
8
<PAGE>
SIX MONTHS ENDED JUNE 30,
- -------------------------
Results for the six months ended June 30, 1996 were net income of $5,327 or $.23
per share in 1996, compared to $328 or $.01 per share in 1995. As further
discussed below, 1995 results include a charge against income for unusual items
totaling $13,376.
Revenues increased 8.8% to $224,363 in 1996 from $206,246 in 1995. North
American revenues increased 12.8% to $182,787 in 1996 while international
revenues declined 5.9% to $41,576. Excluding the impact of acquisitions,
consolidated revenues declined approximately 3% due primarily to the previously
announced loss of two large clients, Colgate and Clorox, in late 1995. The
Company believes that the impact of new business from the previously announced
global consolidation of S.C. Johnson advertising with the Company will largely
offset the loss of revenues from Colgate and Clorox in future quarters.
During the latter part of 1995 and in 1996, the Company purchased the R/GA
Digital Media Group and several agencies in North America, Latin America and the
Pacific Rim. These acquisitions contributed $25,043 and $35 to the Company's
revenues and pretax loss, respectively.
As previously disclosed, salaries and benefits expenses and office and general
expenses increased at a higher rate than the rate of growth of revenues due
primarily to the Company's continuing investment in digital advertising
technology. Excluding investment spending and the impact of acquisitions made in
the latter part of 1995 and in 1996, salaries and benefits expenses and office
and general expenses increased approximately 4.6% and 0.9% between years.
In the first quarter of 1995, the Company recorded a pretax charge of $10,185
under the caption "Unusual Items". Of this amount, $3,560 related to the closure
of an FCB operation in the Pacific region and $6,625 represented the accrual of
charges related to its dispute with Publicis. Additionally, included in the
line, "Equity in Earnings (Losses) of Affiliated Companies", is a charge of
$7,034 related to the 1995 restructuring of the Italian operations of the
Publicis.FCB European joint venture. The after-tax impact of all unusual items
was a loss of $13,376.
The components of "Other Expenses" in both years were as follows:
<TABLE>
<CAPTION>
-------------------
1995 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Interest expense $ 3,376 $ 4,614
- ------------------------------------------------------------------------
Interest income (1,161) (2,009)
- ------------------------------------------------------------------------
Unrealized (gain) loss on Shandwick investment 125 (1,477)
- ------------------------------------------------------------------------
Unrealized loss on interest rate swap 796 --
- ------------------------------------------------------------------------
$ 3,136 $ 1,128
-------------------
</TABLE>
The effective tax rate for 1996 was $42.3% compared to 88.4% in 1995. The 1995
effective tax rate was impacted by unusual items. Excluding unusual items, the
effective tax rate for 1995 was $45.8%.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As more fully explained below, the increases in "Accounts receivable, net",
"Other current assets", and "Accounts payable and accruals" from the beginning
of the year reflect the cyclical nature of the advertising business and are
inter-related.
The increase in "Other current assets" is primarily due to the production of
client commercials which will be shown during the summer and fall months. The
costs related to these commercials are billed to clients during the third
quarter when the commercials are completed. Commercial production activity
during the last month of the year is typically low.
The increase in "Accounts receivable, net" and "Accounts payable and accruals"
is due to the fact that media billings for the month of June 1996 were higher
than those of December 1995. During 1996, the increase in "Accounts receivable"
was higher than the increase in "Accounts payable and accruals". The primary
reason for this is that the Company's accounts receivable to accounts payable
ratio was at optimal levels during the last quarter of 1995 and have shifted to
levels that are typical of this period of the year. This change in receivable
and payable balances was funded by the liquidation of short-term investments and
additional short-term debt.
As previously disclosed, the Company continues to contemplate strategic
acquisitions to enhance its worldwide network. During the first six months of
1996, the Company completed the acquisitions of agencies in China and North
America. In addition, it made contingent payments related to acquisitions made
in prior years. These payments were financed by the issuance of additional
short-term borrowings.
During the second quarter of 1996, the Company converted $25,000 of its short-
term borrowings into a three-year term loan with two banks.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 15, 1996, Registrant held its Annual Meeting. Holders of 20,960,614 of
Registrant's Common Shares were represented in person or by proxy at this
meeting. On May 15, Registrant had 23,694,207 Common Shares outstanding.
The following matters were submitted to a vote of security holders at this
meeting.
1. Annual Election of Directors - All Directors of Registrant stand for
election at each of Registrant's Annual Meetings. Following is the
tabulation of votes for each director:
<TABLE>
<CAPTION>
WITHHOLD
FOR AUTHORITY
- ----------------------------------- ---------
<S> <C> <C>
J. B. Ryan 20,773,127 187,487
Bruce Mason 20,772,412 188,202
Jack Balousek 20,772,507 188,107
Louis E. Scott 20,762,759 197,855
Stephen T. Vehslage 20,773,127 187,487
Newton N. Minow 20,761,542 199,072
Craig R. Wiggins 20,772,328 188,286
Maurice Levy 20,769,671 190,943
Gregory W. Blaine 20,763,209 197,405
Laurel Cutler 20,765,823 194,791
Terry M. Ashwill 20,764,779 195,835
William A. Schreyer 20,772,125 188,489
Richard S. Braddock 20,772,679 187,935
</TABLE>
No other person received any votes for election as director.
2. Approval of Arthur Andersen LLP as Registrant's auditors for 1996:
FOR AGAINST ABSTAIN
---------- ------- -------
20,849,668 66,117 44,829
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
10.4 Employment Agreement between Bruce Mason and Registrant
27. Financial Data Schedule
(b) Reports on Form 8-K -
In a report dated July 1, 1996, Registrant announced senior
management changes and a new alignment of responsibilities for
Registrant's relationship with Publics Communication.
11
<PAGE>
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/ John J. Rezich
-----------------------------
John J. Rezich
Controller and
Chief Accounting Officer
Date: August 14, 1996
12
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of July 17, 1996 between True North
Communications Inc., a Delaware corporation (the "Company"), and Bruce Mason
(the "Executive").
WHEREAS, the Company is a global communications holding company which owns
companies engaged in the advertising agency business, the multimedia production
business, the business of planning and buying of media time and space and
related businesses.
WHEREAS, the Executive currently serves as Chairman and Chief Executive
Officer of the Company; and
WHEREAS, the Company and the Executive desire to enter into this Agreement
to provide for the continued employment of the Executive by the Company upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive
hereby agrees to be employed by the Company upon the terms and subject to the
conditions contained in this Agreement. The term of full-time employment of the
Executive by the Company pursuant to this Agreement (the "Full-Time Employment
Period") shall commence on the date hereof and, unless earlier terminated
pursuant to Section 4, shall end on June 30, 1997; provided that the Full-Time
Employment Period may be extended by the Company as of June 30, 1997 for one
additional year and, if so extended, may be further extended by the Company as
of June 30, 1998 for an additional one year period and, if so extended, may be
further extended by the Company as of June 30, 1999 for the six-month period
ending on December 31, 1999, in each case upon written notice given to the
Executive not less than 60 nor more than 90 days prior to such June 30; provided
further that the Full-Time Employment Period shall not be so extended if the
Executive rejects such extension by giving written notice to the Company within
15 days after the Company shall have given such notice of extension.
2. Position and Duties; Responsibilities.
-------------------------------------
(a) Position and Duties. The Company shall employ the Executive during the
Full-Time Employment Period as its principal executive officer, with the title
of Chairman and Chief Executive Officer. During the Full-Time Employment
Period, the Executive shall perform faithfully and loyally and to the best of
his abilities the duties assigned to him hereunder, shall devote his
<PAGE>
full business time, attention and effort to the affairs of the Company 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 and, with the prior approval of the Board of Directors of
the Company (the "Board"), may serve as a director of any business corporation,
provided that such activities or service do not violate the terms of any of the
covenants contained in Section 10 or Section 11.
(b) Responsibilities. Subject to the powers, authority and
responsibilities vested in the Board and in duly constituted committees of the
Board, the Executive shall have the authority and responsibility for the
formulation and execution of the corporate policy of the Company. The Executive
shall also perform such other duties (not inconsistent with the position of
principal executive officer) on behalf of the Company and its subsidiaries as
may from time to time be authorized or directed by the Board and as are
customarily exercisable by a chief executive officer. The Special Committee
designated by the Board, consisting solely of outside directors, has full
responsibility for the Company's relationship with Publicis S.A., Publicis
Communication and Publicis.FCB B.V. and all subsidiaries, whether or not wholly-
owned, and all operating units, of Publicis Communication and Publicis.FCB B.V.
(other than the Company and any of its subsidiaries or affiliates in which
Publicis S.A., Publicis Communication and Publicis.FCB B.V. have no direct
ownership interest) (collectively, "Publicis") and for strategic acquisitions by
the Company. Notwithstanding the foregoing, the Executive, in his capacity as a
director of the Company, shall be advised of the status of any matter presented
to the full Board or to be voted on by the full Board, including any matter
relating to or affecting Publicis or any strategic acquisitions, in a manner
sufficient to enable him to cast his vote on such matter in an informed manner
as a director. For purposes of the preceding sentence, "full Board" means all
members of the Board acting in their capacities as such, except directors, if
any, who are absent from Board deliberations due to recusal or for any other
reason. Notwithstanding any other provision of this Agreement, the Executive
shall be permitted to express to the Board and to the stockholders of the
Company his views on any matter presented to, considered by or raised by the
Board or such stockholders.
3. Compensation.
------------
(a) Salary, VIC and DVIC. With respect to the Full-Time Employment Period,
the Company shall pay to the Executive an annual salary at the rate of $600,000
and variable incentive compensation ("VIC") and deferred variable incentive
compensation ("DVIC") in accordance with the Company's Performance Program,
provided that the aggregate amount of such salary, VIC and DVIC
-2-
<PAGE>
for calendar year 1996 and for each subsequent calendar year during the Full-
Time Employment Period shall be paid at an annual rate of not less than
$1,000,000 (the "Calendar Year Minimum Compensation") and that any payment
required to be made by this proviso shall be deemed to be VIC. Any amounts
payable pursuant to this Agreement which would otherwise not be deductible by
the Company under the Internal Revenue Code of 1986, as amended, by virtue of
Section 162(m) thereof shall be deferred to the earliest date on which payment
thereof shall no longer be subject to the deduction limit of Section 162(m).
Any amount deferred pursuant to the preceding sentence shall accrue interest at
the same rate as that accrued by DVIC.
(b) Stock Options. During the Full-Time Employment Period, the Executive
shall be entitled to receive variable incentive stock options in accordance with
the Company's variable incentive stock option program. In addition, the Company
covenants that the Compensation Committee and the Special Committee of the Board
shall take such actions as may be necessary, including (i) where required, to
cause the amendment of the Company's Stock Option Plan, (ii) amendment of the
Executive's currently outstanding stock option agreements and (iii) approval of
stock option agreements with respect to the future grant of stock options to the
Executive, so that upon the termination of the Full-Time Employment Period all
of the stock options theretofore granted to the Executive by the Company then
held by the Executive shall be fully exercisable until the end of the term
thereof. The Company assumes no responsibility for any liability of the
Executive under Section 16 of the Securities Exchange Act of 1934 relating in
any manner, directly or indirectly, to the amendment of such stock options.
(c) Other Benefits. During the Full-Time Employment Period, the Executive
shall be entitled to participate in the Company's employee benefit plans
generally available to senior executives of the Company, including group health,
life, short-term disability, long-term disability, pension, profit sharing,
stock purchase and nonqualified deferred compensation and retirement plans and
the plans or programs for the allowance for or the reimbursement of automobile
expenses, financial planning expenses and club dues and any other plans of
general application to employees on the date hereof and such plans and programs
adopted hereafter for the benefit of senior executives of the Company (all such
benefits being hereinafter referred to as the "Employee Benefits"), in the case
of plans or programs in effect on the date hereof on terms no less favorable
than their terms on the date hereof; provided that all retirement benefits shall
be based upon plans in effect on the date hereof, subject to modifications of
general application to all employees. The Executive shall be entitled to take
time off for vacation or illness in accordance with the Company's policy for
senior executives and to receive all other fringe benefits as are from
-3-
<PAGE>
time to time made generally available to senior executives of the Company.
(d) Expense Reimbursement. During the Full-Time 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.
4. Termination of Full-Time Employment Period; Suspension.
------------------------------------------------------
(a) Termination. The Full-Time Employment Period shall be terminated upon
the first to occur of (i) the expiration thereof pursuant to Section 1, (ii) the
expiration thereof on account of rejection by the Executive pursuant to Section
1 of an extension notice given by the Company pursuant to Section 1, (iii)
termination by the Company at any time without Cause (as such term is defined in
Section 4(b)) upon written notice given to the Executive at least 30 days prior
to such termination, (iv) termination by the Company at any time for Cause upon
written notice given to the Executive at least 10 days prior to such
termination, (v) termination by the Company on account of the Executive's having
become unable (as determined by the Board in good faith) to regularly perform
his duties hereunder by reason of illness or incapacity for a period of more
than six consecutive months ("Termination for Disability") or (vi) the
Executive's death. Upon termination of the Full-Time Employment Period, the
Executive shall automatically and without further action on his part be deemed
to have resigned from all offices and directorships with the Company and its
subsidiaries and affiliates.
(b) Definition of Cause. For purposes of this Agreement, "Cause" shall
mean (i) the commission of a felony, (ii) the commission of any act which
involves both dishonesty with respect to the Company or any of its subsidiaries
and moral turpitude and causes the Company to be viewed in a materially
unfavorable light by its customers, employees or investors, (iii) material
willful misconduct with respect to the Company or any of its subsidiaries,
provided that if it reasonably could be concluded that such alleged material
willful misconduct did not occur or was not material or willful or misconduct
and if such alleged material willful misconduct is curable, the Executive shall
have 30 days following written notice thereof to the Executive to cure such
alleged material willful misconduct unless the Company, in its good faith
judgment, determines that such cure period must be shorter to avoid harm to the
Company, in which case such cure period shall be such lesser number of days as
shall be determined in good faith by the Company and set forth in such written
notice to the Executive, commencing upon such
-4-
<PAGE>
written notice to the Executive, or (iv) breach of any provision of Section 10,
11 or 12.
(c) Suspension. If the Company shall determine that the Executive has
committed any act or acts which constitute Cause and shall notify the Executive
thereof in writing and if the Executive shall deny that he committed such act or
acts or that such act or acts constitute Cause and shall notify the Company of
such denial in writing within seven days following the Company's written notice
to the Executive, the Board may, in its sole and absolute discretion, suspend
the Executive with full compensation and benefits during the pendency of any
investigation or arbitration with respect thereto.
5. Consequences of Termination of Full-Time Employment Period.
----------------------------------------------------------
(a) Expiration or Termination Without Cause. If the Full-Time Employment
Period terminates for a reason set forth in clause (i) or (iii) of Section 4(a),
in lieu of the commencement of the Company's Directors Part-Time Employment
Agreement upon such termination and any severance amounts which otherwise would
be payable to the Executive:
(i) the Executive shall be entitled to receive (A) subject to Section
5(e), all salary payable with respect to the period through the date of
such termination, (B) unpaid VIC and DVIC for the prior calendar year, (C)
VIC and DVIC for the then current calendar year, prorated, subject to
Section 5(e), through the date of such termination based on actual results
of operations for such full calendar year and (D) reimbursement of expenses
incurred through the date of such termination; provided, that in
determining the aggregate amount of the salary payable pursuant to clause
(A) of this Section 5(a)(i) and the VIC and DVIC payable pursuant to clause
(C) of this Section 5(a)(i), the Calendar Year Minimum Compensation shall,
subject to Section 5(e), be prorated through the date of such termination;
(ii) each stock option theretofore granted to the Executive by the
Company then held by the Executive shall, on the date of such termination,
be exercisable for the full term of such option in accordance with the
applicable stock option agreement in effect at the time of such termination
(giving effect to this provision); and
(iii) the Executive shall become a part-time employee of the Company
entitled to the compensation and benefits payable during the Initial Part-
Time
-5-
<PAGE>
Employment Period (as such term is defined in Section 6(a)) in accordance
with Sections 6(c)(i) and 6(c)(iii).
(b) Rejection of Extension by Executive. If the Full-Time Employment
Period terminates for a reason set forth in clause (ii) of Section 4(a), in lieu
of commencement of the Company's Directors Part-Time Employment Agreement upon
such termination and any severance amounts which otherwise would be payable to
the Executive, the Executive shall be entitled to the compensation and benefits
set forth in Sections 5(a)(i) and 5(a)(ii) and the Executive shall become a
part-time employee of the Company during the Initial Part-Time Employment Period
and (i) he shall be entitled to the compensation and benefits payable in
accordance with Sections 6(c)(ii) and 6(c)(iii) if such rejection relates to an
extension notice given by the Company to extend the Full-Time Employment Period
from June 30, 1997 to June 30, 1998 or (ii) he shall be entitled to the
compensation and benefits set forth in the Company's Directors Part-Time
Employment Agreement upon the terms set forth therein on the date hereof and
payments thereunder shall be made for the period commencing upon termination of
the Full-Time Employment Period, if such rejection relates to an extension
notice given by the Company to extend the Full-Time Employment Period for a
period commencing on or after June 30, 1998.
(c) Termination for Cause. If the Full-Time Employment Period terminates
for any reason set forth in clause (iv) of Section 4(a), the Executive shall be
entitled to receive (i) all salary payable with respect to the period through
the date of such termination, (ii) unpaid VIC and DVIC for the prior calendar
year, (iii) VIC and DVIC for the then current calendar year, prorated through
the date of such termination based on actual results of operations for such full
calendar year, (iv) reimbursement of expenses incurred through the date of such
termination and (v) any other benefits accrued through the date of such
termination; provided that in determining the aggregate amount of the salary
payable pursuant to clause (i) of this Section 5(c) and the VIC and DVIC payable
pursuant to clause (iii) of this Section 5(c), the Calendar Year Minimum
Compensation shall be prorated through the date of such termination. The
Executive shall not be entitled to any compensation or benefits under the
Company's Directors Part-Time Employment Agreement or any other severance
payments.
(d) Disability or Death. If the Full-Time Employment Period terminates for
a reason set forth in clause (v) or (vi) of Section 4(a), in lieu of
commencement of the Company's Directors Part-Time Employment Agreement upon such
termination or any severance amounts which otherwise would be payable to the
Executive, the Executive or his executor, administrator or other legal
representative, as the case may be, shall be entitled to
-6-
<PAGE>
the payments and benefits set forth in Section 5(a)(i) (subject to Section 5(e))
and Section 5(a)(ii) and for the period commencing on the date of such
termination and ending on December 31, 1999, the Executive or his executor,
administrator or other legal representative, as the case may be, shall be
entitled to the compensation set forth in Section 6(c)(i), and (A) in the case
of Termination for Disability, the Executive shall be entitled to the benefits
set forth in Section 6(c)(iii) (and in the event the Executive dies prior to
December 31, 1999, the Executive's spouse shall be entitled to the continuation
of medical insurance coverage on the same basis as theretofore provided to the
Executive until December 31, 1999) or (B) in the case of termination on account
of the Executive's death, the Executive's spouse shall be entitled to the
continuation of medical insurance coverage on the same basis as theretofore
provided to the Executive until December 31, 1999 and, in either case, the
compensation and benefits set forth in the Company's Directors Part-Time
Employment Agreement shall become payable upon the terms set forth therein on
the date hereof for the period commencing on January 1, 2000.
(e) Termination Without Cause or for Disability or Death on or Prior to
June 30, 1997; Expiration on June 30, 1997. If the Full-Time Employment Period
terminates on or prior to June 30, 1997 for a reason set forth in clause (iii),
(v) or (vi) of Section 4(a), the salary specified by clause (A) of Section
5(a)(i) shall be payable with respect to the period through June 30, 1997, the
VIC and DVIC specified by clause (C) of Section 5(a)(i) shall be prorated
through June 30, 1997 and, in determining the aggregate amount of such salary,
VIC and DVIC, the Calendar Year Minimum Compensation shall be prorated through
June 30, 1997. In addition, any unpaid VIC and DVIC for calendar year 1996
shall be paid at the time such compensation is normally paid to senior
executives of the Company and, if variable incentive stock options for calendar
year 1997 are not awarded to the Executive by the Company prior to the
termination of the Full-Time Employment Period pursuant to clause (i), (iii) or
(v) of Section 4(a), the Company shall grant to the Executive the stock options
which the Executive would have been granted for calendar year 1997 but for such
termination, which stock options shall be fully exercisable upon the date of
grant for the full term of such options.
6. Initial Part-Time Employment Period.
-----------------------------------
(a) Commencement. If the Full-Time Employment Period terminates for a
reason set forth in clause (i) or clause (iii) of Section 4(a) or for rejection
by the Executive of an extension notice as set forth in clause (ii) of Section
4(a) and such rejection relates to an extension notice given by the Company to
extend the Full-Time Employment Period from June 30, 1997 to June 30, 1998, the
Executive shall become a part-time employee of the
-7-
<PAGE>
Company for the period commencing upon termination of the Full-Time Employment
Period and ending on December 31, 1999 (the "Initial Part-Time Employment
Period").
(b) Position and Duties. During the Initial Part-Time Employment Period
the Executive shall be a part-time employee of the Company and shall make
himself available, upon reasonable notice (reasonableness to include, but not be
limited to, a good faith effort to accommodate the schedules and time needs of
the parties), to perform services for the Company which (i) shall be related to
such projects and matters as the Board or the Chief Executive Officer of the
Company may designate from time to time, (ii) are commensurate with the
Executive's years of experience and level of skill and (iii) are similar to the
services rendered by the Executive prior to the termination of the Full-Time
Employment Period, including, but not limited to, the duties set forth in
Section 12. The Executive shall not be required to devote more than 10 days
during any calendar quarter to the performance of such services.
(c) Compensation. As compensation for the services to be performed by the
Executive during the Initial Part-Time Employment Period, the Executive shall
receive the following compensation and benefits in accordance with the Company's
normal payroll policies:
(i) cash compensation shall be paid to the Executive during the
Initial Part-Time Employment Period at the rate of $1,350,000 per year,
except as provided in Section 6(c)(ii);
(ii) if the Initial Part-Time Employment Period shall have commenced
as a result of the rejection by the Executive of an extension notice given
by the Company to extend the Full-Time Employment Period from June 30, 1997
to June 30, 1998, cash compensation shall be paid to the Executive at the
rate of $1,000,000 per year during the Initial Part-Time Employment Period;
(iii) the Employee Benefits shall continue to be paid to the Executive
during the Initial Part-Time Employment Period, in the case of Employee
Benefits in effect on the date hereof on terms no less favorable than their
terms on the date hereof; provided that coverage for the Executive under
the Company's long-term disability insurance plan shall cease upon
termination of the Full-Time Employment Period; provided further that all
retirement benefits shall be based upon plans in effect on the date hereof,
subject to modifications of general application to all employees; and
provided further that for the year ending on December 31, 1997,
contributions shall be
-8-
<PAGE>
made to a supplemental retirement plan for the benefit of the Executive in
an amount which, together with any contributions made for such year for the
benefit of the Executive under the Company's Profit Sharing Retirement
Plan, Profit Sharing Integration Plan, Stock Purchase Plan and Stock
Purchase Integration Plan, is equal to the contributions which would have
been made for such year for the benefit of the Executive under such plans
based upon compensation received by the Executive during such year
notwithstanding the hours of service conditions of such plans; and
(iv) the Company shall reimburse the Executive in accordance with the
Company's policies and procedures for all proper expenses incurred by him
in the performance of his duties during the Initial Part-Time Employment
Period.
7. Termination of Initial Part-Time Employment Period; Suspension.
--------------------------------------------------------------
(a) Termination. The Initial Part-Time Employment Period shall be
terminated on the first to occur, after the termination of the Full-Time
Employment Period, of (i) December 31, 1999, (ii) termination thereof by the
Company at any time for Cause upon written notice given to the Executive at
least 10 days prior to such termination, (iii) Termination for Disability or
(iv) the Executive's death.
(b) Suspension. If the Company shall determine that the Executive has
committed any act or acts which constitute Cause and shall notify the Executive
thereof in writing and if the Executive shall deny that he committed such act or
acts or that such act or acts constitute Cause and shall notify the Company of
such denial in writing within seven days following the Company's written notice
to the Executive, the Board may, in its sole and absolute discretion, suspend
the Executive with full compensation and benefits during the pendency of any
investigation or arbitration with respect thereto.
8. Consequences of Termination of Initial Part-Time Employment Period.
------------------------------------------------------------------
(a) Expiration. If the Initial Part-Time Employment Period terminates on
December 31, 1999, in lieu of any severance amounts which otherwise would be
payable to the Executive, the Executive shall thereafter be entitled to the
compensation and benefits set forth in the Company's Directors Part-Time
Employment Agreement upon the terms set forth therein on the date hereof and
payments thereunder shall be made for the period commencing on January 1, 2000.
-9-
<PAGE>
(b) Termination for Cause. If the Initial Part-Time Employment Period is
terminated by the Company for Cause, the Executive shall be entitled to receive
(i) all cash compensation payable with respect to the period through the date of
such termination, (ii) reimbursement of expenses, if any, incurred through the
date of such termination and (iii) other benefits, if any, accrued through the
date of such termination. The Executive shall not be entitled to any
compensation or benefits under the Company's Directors Part-Time Employment
Agreement or any other severance payments.
(c) Disability or Death. If the Initial Part-Time Employment Period
terminates as a result of a Termination for Disability or the Executive's death,
in lieu of any severance amounts which otherwise would be payable to the
Executive, the Executive or his executor, administrator or other legal
representative, as the case may be, shall be entitled to the compensation set
forth in Section 6(c)(i) or Section 6(c)(ii), whichever is then applicable,
until December 31, 1999 and (i) in the case of Termination for Disability, the
Executive shall be entitled to the benefits set forth in Section 6(c)(iii) until
December 31, 1999 (and, in the event the Executive dies prior to December 31,
1999, the Executive's spouse shall be entitled to the continuation of medical
insurance coverage on the same basis as theretofore provided to the Executive
until December 31, 1999) or (ii) in the case of termination on account of the
Executive's death, the Executive's spouse shall be entitled to the continuation
of medical insurance coverage on the same basis as theretofore provided to the
Executive until December 31, 1999 and, in either case, the compensation and
benefits set forth in the Company's Directors Part-Time Employment Agreement
shall become payable upon the terms set forth therein on the date hereof for the
period commencing on January 1, 2000.
9. 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 taxes.
10. Noncompetition; Nonsolicitation. (a) The Executive acknowledges that
in the course of his employment with the Company pursuant to this Agreement he
will become familiar, and during the course of his employment with the Company
or any of its subsidiaries prior to the date of this Agreement he has become
familiar, with trade secrets and customer lists of, and other confidential
information concerning, the Company and its subsidiaries, affiliates and clients
and that his services have been and will be of special, unique and extraordinary
value to the Company.
-10-
<PAGE>
(b) The Executive agrees that during the Full-Time Employment Period and
for a period of five years thereafter (the "Noncompetition Period") he shall not
in any manner, directly or indirectly, through any person, firm or corporation,
alone or as a member of a partnership or as an officer, director, stockholder,
investor or employee of or consultant to any other corporation or enterprise or
otherwise, engage or be engaged, or assist any other person, firm, corporation
or enterprise in engaging or being engaged, in any business being conducted by
the Company or any of its subsidiaries as of the termination of the Full-Time
Employment Period in any geographic area in which the Company or any of its
subsidiaries is then conducting such business. Within seven days following the
termination of the Full-Time Employment Period, the Company shall deliver to the
Executive a written description of the businesses being conducted by the Company
and its subsidiaries as of the date of such termination and the respective
geographic areas in which such businesses are then being conducted; provided,
however, that if the Company shall fail to deliver such written description
within such seven-day period, the Executive may deliver to the Company a written
demand therefor and the Company shall have seven days following the delivery of
such written demand to deliver such written description to the Executive. The
Executive shall have no liability for any breach of the covenant contained in
this Section 10(b) which may occur during the period commencing on the
termination of the Full-Time Employment Period and ending on the date of the
delivery of such written description to the Executive, provided that the
Executive shall have attempted in good faith to comply with such covenant during
such period. Notwithstanding the foregoing, subsequent to the termination of the
Full-Time Employment Period the Executive may engage or be engaged, or assist
any other person, firm, corporation or enterprise in engaging or being engaged,
in any business activity which is competitive with a business activity being
conducted by the Company or any of its subsidiaries at the time of termination
of the Full-Time Employment Period only if, at least 60 days prior to the
commencement of such competitive activity, the Executive delivers to the Company
a written release, in form and substance satisfactory to the Company, releasing
the Company from all further obligations to the Executive pursuant to this
Agreement, pursuant to the Company's Directors Part-Time Employment Agreement,
pursuant to any other agreement or arrangement with the Company or any
subsidiary of the Company or otherwise, other than the right of the Executive to
receive benefits under any retirement plan of the Company; and provided further,
that nothing contained in this Section 10(b) shall release or otherwise affect
the obligations of the Executive contained in Section 11 of this Agreement.
(c) The Executive further agrees that during the Noncompetition Period he
shall not (i) in any manner, directly or indirectly, induce or attempt to induce
any employee of the Company or any of its subsidiaries or affiliates to
terminate or abandon his or her employment for any purpose whatsoever, or (ii)
-11-
<PAGE>
in connection with any business to which Section 10(b) applies, call on,
service, solicit or otherwise do business with any client of the Company or any
of its subsidiaries; provided, however, that the restriction contained in clause
(i) of this Section 10(c) shall not apply to, or interfere with, the proper
performance by the Executive of his duties pursuant to Section 2 of this
Agreement.
(d) Nothing in this Section 10 shall prohibit the Executive from being (i)
a stockholder in a mutual fund or a diversified investment company or (ii) a
passive owner of not more than two percent of the outstanding stock of any class
of a corporation so long as the Executive has no active participation in the
business of such corporation.
(e) If, at any time of enforcement of this Section 10, a court or an
arbitrator holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
11. Confidentiality. The Executive shall not, at any time during the
Full-Time Employment Period, the Initial Part-Time Employment Period, the
duration of the Company's Directors Part-Time Employment Agreement or
thereafter, make use of or disclose, directly or indirectly, any (i) trade
secret or other confidential or secret information of the Company or of any of
its subsidiaries, affiliates or clients or (ii) other technical, business,
proprietary or financial information of the Company or of any of its
subsidiaries, affiliates or clients not available to the public generally or to
the competitors of the Company or to the competitors of any of its subsidiaries
or affiliates, in each case that the Executive obtained as a result of his
employment by the Company or any of its subsidiaries ("Confidential
Information"), except to the extent that such Confidential Information (a) is
used by the Executive during the Full-Time Employment Period in the proper
performance of his duties pursuant to this Agreement, (b) is disclosed by the
Executive to his legal counsel in connection with legal services performed by
such counsel for the Executive, provided that such disclosure is made on a
confidential basis, (c) becomes a matter of public record or is published in a
newspaper, magazine or other periodical available to the general public, other
than as a result of any act or omission of the Executive outside the proper
performance of his duties pursuant to this Agreement, or (d) is required to be
disclosed by any law, regulation or order of any court or regulatory commission,
department or agency. Promptly following the termination of the Full-Time
Employment Period, the Executive shall surrender to the Company all records,
memoranda, notes, plans, reports, computer tapes and software and other
-12-
<PAGE>
documents and data which constitute Confidential Information which he may then
possess or have under his control (together with all copies thereof); provided,
however, that the Executive may retain copies of such documents as are necessary
for the preparation of his federal or state income tax returns; and provided
further that if the Company believes that not all Confidential Information which
the Executive may then possess or have under his control has been surrendered to
the Company, the Company shall request with specificity the Confidential
Information to be surrendered by the Executive. The Executive shall have a
reasonable period of time following such request to surrender such Confidential
Information which in no event shall be less than 15 or more than 30 days
following such request and, if the Executive makes a good faith effort to comply
with such request, his failure to surrender any Confidential Information shall
not constitute Cause for purposes of Section 4(b)(iv) hereof.
12. Nondisparagement; Cooperation. (a) The Executive shall not, at any
time during the Full-Time Employment Period, the Initial Part-Time Employment
Period or the duration of the Company's Directors Part-Time Employment Agreement
or thereafter, make any statement, publicly or privately, which would disparage
the Company, its business or any director or officer of the Company or would
have a deleterious effect upon the interests of the Company's business or its
stockholders; provided, however, that the Executive shall not be in breach of
this restriction if such statements consist solely of (i) private statements
made to any officers, directors or employees of the Company by the Executive in
the course of carrying out his duties pursuant to this Agreement or (ii) private
statements made to persons other than clients or competitors of the Company or
any of its subsidiaries or its affiliates (or their representatives) or members
of the press or the financial community that do not have a material adverse
effect upon the Company; and provided further that nothing contained in this
Section 12(a) or in any other provision of this Agreement shall preclude the
Executive from making any statement in good faith which is required by law,
regulation or order of any court or regulatory commission, department or agency.
During the Full-Time Employment Period, the Initial Part-Time Employment Period
and the duration of the Company's Directors Part-Time Employment Agreement and
upon reasonable notice and at the expense of the Company, the Executive shall
take such actions as the Company shall reasonably request (reasonableness to
include, but not be limited to, a good faith effort to accommodate the schedules
and time needs of the parties) in furtherance of the client relationships of the
Company and its subsidiaries. Upon the termination of the Full-Time Employment
Period, the Executive shall urge the clients of the Company and its subsidiaries
to maintain their relationships with the Company and its subsidiaries, which
action, together with any other actions required under this Agreement, shall not
require the Executive to perform services (i) during the Initial Part-Time
Employment Period in excess of the limit of 10 days of
-13-
<PAGE>
service during any calendar quarter set forth in Section 6(b) or (ii) during the
duration of the Company's Directors Part-Time Employment Agreement in excess of
10 days during any calendar quarter.
(b) The Company shall not, at any time during the Full-Time Employment
Period, the Initial Part-Time Employment Period or the duration of the Company's
Directors Part-Time Employment Agreement or thereafter, authorize any person to
make or allow, nor shall the Company condone the making of, any statement,
publicly or privately, which would disparage the Executive; provided, however,
that the Company shall not be in breach of this restriction if such statements
consist solely of (i) private statements made to any officers, directors or
employees of the Company or (ii) private statements made to persons other than
clients or competitors of the Company or any of its subsidiaries or affiliates
(or their representatives) or members of the press or the financial community
that do not have a materially adverse effect upon the Executive; and provided
further that nothing contained in this Section 12(b) shall preclude any officer,
director, employee, agent or other representative of the Company from making any
statement in good faith which is required by any law, regulation or order of any
court or regulatory commission, department or agency.
13. Enforcement. The parties hereto agree that the Company would be
damaged irreparably in the event that any provision of Section 10, 11, or 12 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 Illinois 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.
14. Survival. Sections 10, 11, 12 and 13 of this Agreement shall survive
and continue in full force and effect in accordance with their respective terms,
notwithstanding any termination of the Full-Time Employment Period, the Initial
Part-Time Employment Period or the duration of the Company's Directors Part-Time
Employment Agreement.
15. 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 in accordance with its Commercial Rules
-14-
<PAGE>
then in effect and judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. 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, either party may, without inconsistency with this
arbitration provision, apply to any court having jurisdiction over such dispute
or controversy and seek interim provisional, injunctive or other equitable
relief until the arbitration award is rendered or the controversy is otherwise
resolved. 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.
16. Expenses of this Agreement. The Company shall pay the Executive's
legal fees and expenses incurred through the date of this Agreement, in an
amount not to exceed $65,000, promptly upon submission to the Company of a
detailed statement therefor.
17. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when (a) delivered
personally or by overnight courier to the following addresses of the other party
hereto and his or its counsel (or such other address for such party or his or
its counsel as shall be specified by notice given pursuant to this Section 17)
or (b) sent by facsimile to the following facsimile numbers of the other party
hereto and his or its counsel (or such other facsimile number for such party or
his or its counsel as shall be specified by notice given pursuant to this
Section 17), with the confirmatory copy delivered by overnight courier to the
addresses of such party and his or its counsel pursuant to this Section 17:
(a) if to the Company, to:
Chief Human Resources Officer
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611-2897
Facsimile No.: 312-440-8070
-15-
<PAGE>
with a copy to:
Thomas A. Cole
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Facsimile No.: 312-853-7036
(b) if to the Executive, to:
Bruce Mason
618 Dock Drive
Barrington, Illinois 60010
Facsimile No.: 847-381-8416
with a copy to:
Melvin S. Adess
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile No.: 312-861-2200
18. 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 held 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.
19. 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 understanding, agreements or representations
by or between the parties, written or oral, which may have related in any manner
to the subject matter hereof.
20. Successors and Assigns. This Agreement shall be enforceable by the
Executive and his heirs, executors, administrators and legal representatives,
and by the Company and its successors and permitted assigns. Any successor of
the Company shall assume 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-
<PAGE>
21. 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.
22. 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.
23. 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 written above.
TRUE NORTH COMMUNICATIONS INC.
By: /s/ Stephen T. Vehslage
________________________________
Stephen T. Vehslage,
Chairman of the Special
Committee, and member of
the Compensation Committee,
of the Board of Directors
/s/ Bruce Mason
___________________________________
Bruce Mason
-17-
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,327
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
