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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
COMMISSION FILE NO. 1-5029
TRUE NORTHCOMMUNICATIONS 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 60611-2897
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER: (312) 425-6500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
Common stock, par value New York Stock Exchange
33 1/3 cents per share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference or included in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of Common Stock, 33 1/3 cents par value, held by
non-affiliates of the Registrant, as of March 24, 1997 was $366,955,418.
There were 24,757,710 shares of Registrant's 33 1/3 cents per share par
value Common Stock outstanding as of March 24, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to shareholders for the year
ended December 31, 1996 are incorporated by reference into Parts I and II of
this report.
Portions of the Registrant's Proxy Statement relating to its annual meeting
of shareholders scheduled to be held on May 21, 1997 are incorporated by
reference into Part III.
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CERTAIN STATEMENTS CONTAINED IN REGISTRANT'S 1996 ANNUAL REPORT TO
SHAREHOLDERS UNDER THE CAPTIONS "ABOUT TRUE NORTH" AND "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 EXCHANGE ACT. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS OF THE COMPANY 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 GOVERNMENTAL REGULATION. IN LIGHT OF THESE AND OTHER
UNCERTAINTIES, THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT SHOULD
NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY THAT THE COMPANY'S PLANS
AND OBJECTIVES WILL BE ACHIEVED.
PART I
ITEM 1. BUSINESS:
GENERAL
Response to this item is incorporated by reference to the Registrant's
Annual Report to shareholders for fiscal year ended December 31, 1996 (the
"1996 Annual Report") on page 1.
REVENUES
Response to this item is incorporated by reference to pages 1 and 2 of the
Registrant's 1996 Annual Report.
CLIENTS
The Registrant and its subsidiaries (the Company) consider their relations
with their clients to be satisfactory. Due to the nature of the business,
however, any client could at some time in the future reduce its advertising
budget, or transfer to another agency all or part of its advertising presently
placed through the Company. Representation of a client does not necessarily
mean that all advertising for that client is handled by the Company
exclusively. In many cases, the Company handles the advertising of only a
portion of a client's products or services or only the advertising in
particular geographic areas.
COMPETITION
The advertising agency business is highly competitive, with agencies of all
sizes competing primarily on the basis of quality of service to attract and
retain clients and personnel. Advertisers are able to move from one agency to
another with relative ease, in part because accounts are terminable on short
notice, usually 90-180 days. Competition for clients by large agencies is
limited somewhat because many advertisers prefer not to be represented by an
agency which handles competing products or services for other advertisers.
REGULATION
Federal, state and local governments and governmental agencies in recent
years have adopted statutes and regulations affecting the advertising
activities of advertising agencies and their clients. For example, statutes
and regulations have prohibited television advertising for certain products
and have regulated the form and content of certain types of advertising for
many consumer products. The Federal Trade Commission ("FTC") has also required
proof of accuracy of advertising claims with respect to various products and,
in its enforcement policies, is seeking to establish more stringent standards
with respect to advertising practices. The FTC has the authority to
investigate and to institute proceedings against advertisers and their
advertising agencies for deceptive advertising. Proposals have also been made
for the adoption of additional statutes and regulations which would
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further restrict the advertising activities of advertising agencies and their
clients. The effect on the advertising business of future application of
existing statutes or regulations, or the extent, nature or effect of future
legislation or regulatory activity with respect to advertising, cannot be
predicted.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Response to this item is incorporated by reference to pages 2 and 17 of the
Registrant's 1996 Annual Report.
ITEM 2. PROPERTIES
Virtually all of the Company's operations are conducted in leased premises.
The Company's physical property consists primarily of leasehold improvements,
furniture, fixtures and equipment. However, the Company does own office
buildings in Puerto Rico and the Dominican Republic, neither of which is
material to the Company's consolidated financial statements.
Further information regarding the Company's leased premises, which it
considers to be adequate for its current operations, is incorporated by
reference to note 12 of Registrant's consolidated financial statements on page
19 of the Registrant's 1996 Annual Report.
ITEM 3. PENDING LEGAL PROCEEDINGS
Response to this item is incorporated by reference to note 7 of Registrant's
consolidated financial statements and the Publicis Relationship section of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 15 and 6 through 7, respectively of the 1996 Annual
Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
Response to this item is incorporated by reference to page 2 of the
Registrant's 1996 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
Response to this item is incorporated by reference to pages 2 and 3 of the
Registrant's 1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Response to this item is incorporated by reference to pages 3, 4, 5, 6 and 7
of the Registrant's 1996 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following consolidated financial statements of the Registrant and its
subsidiaries, included in the Registrant's 1996 Annual Report are incorporated
herein by reference:
Consolidated Balance Sheets--December 31, 1995 and 1996
Consolidated Income Statements--Years ended December 31, 1994, 1995 and
1996
Consolidated Statements of Stockholders' Equity--Years ended December 31,
1994, 1995 and 1996
Consolidated Statements of Cash Flows--Years ended December 31, 1994, 1995
and 1996
Notes to Consolidated Financial Statements--December 31, 1996
Unaudited Quarterly Financial Data--Years ended December 31, 1995 and 1996
Report of Independent Public Accountants
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ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Directors of the Registrant contained under
the heading "Proposal 1--Election of Directors" in the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 21, 1996
(the "Proxy Statement") is incorporated herein by reference. Information with
respect to executive officers of the Registrant who are not also Directors or
nominees to the Board of Directors is included below.
MITCHELL T. ENGEL (44) --Executive Vice President,
Corporate Operations
THEODORE J. THEOPHILOS (43) --Executive Vice President,
General Counsel
DALE F. PERONA (51) --Vice President, Corporate Development
Treasurer/Secretary
JOHN J. REZICH (41) --Vice President, Controller
(Chief Accounting Officer)
Mr. Theophilos joined the Company and became an officer during 1996.
Previous to that time, Mr. Theophilos was Senior Vice President and General
Counsel of A.C. Nielsen Company.
No officer of the Registrant is related to any other officer. All other
officers have been officers of the Registrant or have held senior executive
positions with the Company for the past five years, except as otherwise
disclosed above or in Registrant's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Except for information referred to in Item 402(a)(8) of Regulation S-K, the
information contained under the heading "Executive Compensation" in the Proxy
Statement and the information relating to the compensation of directors
contained under the heading "Proposal 1--Election of Directors" in the Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except for the first two paragraphs thereof, the information contained under
the heading "Voting Securities" in the Proxy Statement and the information
with respect to ownership of the Registrant's common stock contained under the
heading "Proposal 1--Election of Directors" in the Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
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PAGE
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Item 14(a)--List of Financial Statements.................................. 5
Report of Independent Public Accountants on Supplemental Note........... 6
Item 14(a)(1)--Supplemental Note to Consolidated Financial Statements:
A.Valuation Accounts.................................................... 7
Item 14(a)(2)--Schedules
Are not submitted because they are not required or because the required
information is included in the financial statements or notes thereto.
Item 14(a)(3)--Index of Exhibits
The index of exhibits immediately precedes the exhibits filed with the
Securities and Exchange Commission.
Exhibits 10.1 through 10.16 included in this index are the management
contracts and compensatory plans or arrangements required to be filed
as exhibits hereto pursuant to the requirements of Item 601 of
Regulation S-X.
Item 14(b)--Reports on Form 8-K
</TABLE>
Registrant filed the following reports on Form 8-K during the fourth quarter
of 1996 and the first quarter of 1997:
<TABLE>
<CAPTION>
DATE OF REPORT DESCRIPTION OF REPORTABLE EVENT
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<C> <S>
February 14, 1997 Under Item 5, Registrant reported that the Compensation
Committee of its Board of Directors, comprised solely of
outside Board members, negotiated and executed severance
agreements with John B. Balousek and Craig R. Wiggins,
former officers and members of Registrant's Board of
Directors.
</TABLE>
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FORM 10-K--ITEM 14(A)
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Registrant and the
Independent Public Accountant's Report covering these financial statements,
appearing in the Registrant's 1996 Annual Report on pages 8 through 23 are
incorporated herein by reference in Item 8:
Consolidated Balance Sheets--December 31, 1995 and 1996
Consolidated Statements of Income--Years ended December 31, 1994, 1995 and
1996
Consolidated Statements of Stockholders' Equity--Years ended December 31,
1994, 1995 and 1996
Consolidated Statements of Cash Flows--Years ended December 31, 1994, 1995
and 1996
Notes to Consolidated Financial Statements--December 31, 1996
Report of Independent Public Accountants
The audited financial statements of Publicis Communication, a 50% or less
owned foreign affiliate of the Registrant, were not available at the time this
Form 10-K was filed. Registrant will file these financial statements by
amendment to this Form 10-K.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, or are inapplicable, or the information called for
therein is included elsewhere in the financial statements or related notes
thereto contained in or incorporated by reference into this Report.
Accordingly, such schedules have been omitted.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL NOTE
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in True North Communications Inc.'s
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated March 6, 1997. Our report on the
consolidated financial statements includes an explanatory paragraph with
respect to the change in method of accounting for certain investments in debt
and equity securities, effective January 1, 1994, as discussed in Note 2 to the
consolidated financial statements. Our audits were made for the purpose of
forming an opinion on those financial statements taken as a whole. Supplemental
Note A is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic consolidated financial statements. Supplemental Note A
has been subjected to the auditing procedures applied in the audits of the
basic consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois,
March 6, 1997.
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FORM 10-K -- ITEM 14(A)(1)
NOTE A--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
(AMOUNTS IN 000'S)
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<CAPTION>
ADJUSTMENTS
BALANCE ADDITIONS AND BALANCE
AT CHARGED TO RECLASSI- AT END
BEGINNING COSTS AND FICATIONS OF
CLASSIFICATION OF PERIOD EXPENSES (DEDUCTIONS) (1) PERIOD
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ALLOWANCE FOR DOUBTFUL ACCOUNTS--
CURRENT
Year Ended December 31,
1994 (note 2)........... $5,760 $ 781 $(3,294) $ 53 $3,300
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Year Ended December 31,
1995.................... $3,300 $ (290) $ (274) $1,921 $4,657
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Year Ended December 31,
1996.................... $4,657 $ 626 $ (957) $ 630 $4,956
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NOTES:
(1) Amount consists of currency translation adjustment and adjustments made as
a result of subsidiaries acquired and sold during the year.
(2) 1994 deductions consist primarily of a write-off of a trade receivable from
Orion, which was adequately reserved in 1991.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 AND TO
THE POWER OF ATTORNEY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS (CONSTITUTING, AMONG
OTHERS, A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE REGISTRANT)
ON BEHALF OF THE REGISTRANT.
<TABLE>
<CAPTION>
SIGNATURE POSITION
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<S> <C>
Gregory W. Blaine*
Director
Richard S. Braddock*
Director
Laurel Cutler*
Director
Maurice Levy*
Director
Newton N. Minow*
Director
J. Brendan Ryan*
Director
William A. Schreyer*
Director
Louis E. Scott*
Director
Stephen T. Vehslage*
Director
</TABLE>
/s/ Bruce Mason
*By: ________________________________
Bruce Mason
as Attorney-in-Fact
Date: March 28, 1997
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PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Date: March 28, 1997
True North Communications Inc.
/s/ Bruce Mason
By: _________________________________
Bruce Mason
Chairman of the Board of
Directors and Chief Executive
Officer (Principal Executive
Officer)
/s/ Dale F. Perona
By: _________________________________
Dale F. Perona
Senior Vice President, Corporate
Development, Secretary/Treasurer
/s/ John J. Rezich
By: _________________________________
John J. Rezich
Vice President, Controller
(Chief Accounting Officer)
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INDEX OF EXHIBITS
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
3(i) Registrant's Restated Certificate of Incorporation, as amended,
filed with the Commission as Exhibit 3(I) to Registrant's Form 10-
K for the year ended December 31, 1994.
3(i) Certificate of Ownership and Merger changing Registrant's name to
True North Communications Inc. filed with the Commission as
Exhibit (3)(i) to Registrant's Current Report on Form 8-K filed
December 9, 1994.
3(ii) Registrant's By-laws, as amended, filed with the Commission as
Exhibit 4(d) to Registrant's Registration Statement on Form S-8
under the Securities Act of 1933, Registration No. 33-54279.
4.1 Rights Agreement dated as of November 16, 1988 between the
Registrant and Harris Trust and Savings Bank, as Rights Agent,
filed with the Commission as Exhibit 1 to the Registrant's
Registration Statement on Form 8-A under the Securities Exchange
Act of 1934 filed with the Commission on November 18, 1988.
10.1 Registrant's Stock Option Plan, filed with the Commission as
Appendix A to Registrant's Definitive Proxy Statement for its
Annual Meeting of Stockholders held on May 18, 1994.
10.2 Registrant's Outside Directors Stock Option Plan, filed with the
Commission as Appendix A to Registrant's Definitive Proxy
Statement for its Annual Meeting of Stockholders held on May 20,
1992.
10.3 Master Alliance Agreement between Publicis Communication and the
Registrant and FCB Stockholders Agreement between the same
parties, both dated as of January 1, 1989, filed with the
Commission as Exhibits to Registrant's Current Report on Form 8-K
filed February 6, 1989.
10.4 Employment Agreement between Bruce Mason and Registrant, filed
with the Commission as Exhibit 10.4 to Registrant's Form 10-Q for
the quarter ended June 30, 1996.
10.5 Separation Agreement between John B. Balousek and Registrant,
filed with the Commission as Exhibit 10.5 to Registrant's Current
Report on Form 8-K filed on February 14, 1997.
10.6 Separation Agreement between Craig R. Wiggins and Registrant,
filed with the Commission as Exhibit 10.6 to Registrant's Current
Report on Form 8-K filed on February 14, 1997.
*10.7 Employment Agreement between Gregory W. Blaine and Registrant
*10.8 Employment Agreement between Mitchell T. Engel and Registrant
*10.9 Employment Agreement between Theodore J. Theophilos and Registrant
*10.10 Asset Protection Plan between Bruce Mason and Registrant
*10.11 Asset Protection Plan between J. Brendan Ryan and Registrant
*10.12 Asset Protection Plan between Terry Ashwill and Registrant
*10.13 Asset Protection Plan between Mitchell T. Engel and Registrant
*10.14 Asset Protection Plan between Gregory W. Blaine and Registrant
*10.15 Asset Protection Plan between Theodore J. Theophilos and
Registrant
*10.16 Employment Agreement between J. Brendan Ryan and Registrant
*11 Statement re Computation of Per Share Earnings.
*13 Portions of Registrant's Annual Report to Security Holders
incorporated by reference into this Report on Form 10-K.
*21 Subsidiaries.
*23 Consent of Arthur Andersen LLP
*24 Power of Attorney
*27 Financial Data Schedule
*99.1 Press release dated February 19, 1997
*99.2 Memorandum of Agreement, dated February 19, 1997, among Publicis
S.A., Publicis Communication and Publicis.FCB Europe, on the one
hand, and the Registrant, Foote, Cone & Belding Communications,
Inc. and FCB International, Inc., on the other hand.
NOTE:
- -----
Except for the documents that are marked with an asterisk, each of the documents
listed above has heretofore been filed with the Securities and Exchange
Commission (the "Commission") and each such document is incorporated herein by
reference. Documents marked with an asterisk are filed herewith.
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EXHIBIT 10.7
[LOGO OF TRUE NORTH COMMUNICATIONS INC. APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT dated as of 10/24/96 between True North
Communications Inc., a Delaware corporation (the "Company"), and Gregory W.
Blaine (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 the Company as EVP, True North
Communications Inc. and Chairman and CEO, TN Technologies Inc.; 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
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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 shall end on December
31, 1997; provided that the Full-Time Employment Period may be extended by the
Company as of December 31, 1997 and each December 31 thereafter for one
additional year upon mutual consent of the Executive and the Company provided
written notice is given not less than six months prior to such December 31.
2. POSITION AND DUTIES. The Company shall employ the Executive
-------------------
during the Full-Time Employment Period, with the title of Chairman and CEO, TN
Technologies Inc. (or such other title as may be mutually agreed upon by the
Executive and the Company). During the Full-Time Employment Period, the
Executive shall perform faithfully and loyally and to the best of the
ExecutiveOs abilities the duties assigned hereunder, shall devote full business
time, attention
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and effort to the affairs of the Company and shall use 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 7.
3. COMPENSATION.
------------
(a) Annual Base Salary. With respect to the Full-Time Employment
------------------
Period, the Company shall pay to the Executive an annual salary not less than
the rate of $400,000 in accordance with the Company's regular payroll practices.
The annual base salary will be reviewed periodically in accordance with
guidelines applicable to the Company's senior executives generally. Base salary
will be adjusted as necessary to take into account any base salary payable from
TN Technologies Inc.
(b) Incentive Compensation. During the Full-Time Employment Period,
----------------------
the Executive will participate in the VIC, DVIC and VISO components of the
Company's Performance Program, pursuant to the terms of such plans as they may
be amended from time to time. However, for the 1996 bonus year, the VIC
component shall not be less than $200,000. Performance Program amounts will be
adjusted as necessary to take into account any amounts payable from TN
Technologies Inc. incentive compensation programs.
(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
medical, dental, salary continuance, short-term disability, long-term
disability, employee life, group life, travel accident insurance plans, 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, subject to
modifications of general application to senior executives or all other
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 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.
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4. TERMINATION OF FULL-TIME EMPLOYMENT PERIOD; SUSPENSION.
------------------------------------------------------
(a) Qualifying Termination. For purposes of this Agreement,
----------------------
"Qualifying Termination" means (i) termination of the Executive's employment by
the Company without cause, (ii) termination by the Company on account of the
Executive having become unable (as determined by the Company 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"), (iii)
the Executive's death or (iv) termination by the Executive due to the
occurrence, without the Executive's express written consent, of any of the
following events:
(1) any of (i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position(s), duties,
responsibilities or status with the Company at the effective date of this
Agreement, (ii) a change in the Executive's reporting responsibilities, titles
or offices with the Company, or (iii) any removal or involuntary termination of
the Executive from the Company otherwise than as expressly permitted by this
Agreement or any failure to re-elect the Executive to any position with the
Company held by the Executive at the effective date of this Agreement;
(2) a reduction by the Company in the Executive's rate of annual base
salary;
(3) any requirement of the Company that the Executive (i) be based
anywhere other than at the facility where the Executive is located at the
effective date of this Agreement or (ii) travel on Company business to an extent
substantially more burdensome than the travel obligations of the Executive at
the effective date of this Agreement;
(4) the failure of the Company to (i) continue in effect any employee
benefit plan, compensation plan or employee agreement (inclusive of this
Agreement) in which the Executive is participating, unless the Executive is
permitted to participate in other plans providing the Executive with
substantially comparable benefits, or the taking of any action by the Company
which would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such plan, (ii) provide the Executive
and the Executive's dependents welfare benefits including, without limitation,
medical, dental, disability, salary continuance, employee life, group life, and
travel accident insurance plans and programs in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer Executives of the Company and its affiliated companies, (iii) provide
fringe benefits in accordance with the most favorable plans, practices, programs
and policies of the Company and its affiliated companies in effect for the
Executive or, if more favorable to the Executive, as in
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effect generally at any time thereafter with respect to other peer Executives of
the Company and its affiliated companies, (iv) provide an office or offices of a
size and with furnishings and other appointments, together with exclusive
personal secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Executive by the Company and its affiliated
companies or, if more favorable to the Executive, as provided generally at any
time thereafter with respect to other peer Executives of the Company and its
affiliated companies, (v) provide the Executive with paid vacation in accordance
with the most favorable plans, policies, programs and practices of the Company
and its affiliated companies or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer Executives of
the Company and its affiliated companies, or (vi) reimburse the Executive
promptly for all reasonable employment expenses incurred by the Executive in
accordance with the most favorable policies, practices and procedures of the
Company and its affiliated companies, or if more favorable to the Executive, as
in effect generally at any time thereafter with respect to other peer Executives
of the Company and its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement from
any successor as contemplated in Section 15.
For purposes of the Agreement, any good faith determination of a
Qualifying Termination made by the Executive shall be conclusive; provided,
however, that an isolated, insubstantial and inadvertent action taken by the
Company in good faith and which is remedied by such Company promptly (the latter
of 60 days or as soon as reasonably practicable) after receipt of written notice
thereof given by the Executive shall not constitute a Qualifying Termination.
(b) Nonqualifying Termination. For purposes of this Agreement,
-------------------------
"Nonqualifying Termination" means a termination of the Executive's employment
(i) by the Company for Cause, or (ii) by the Executive for any reason other than
for a Qualifying Termination.
(c) Definition of Cause. For purposes of this Agreement, "Cause"
-------------------
means (i) a material breach by an Executive of those duties and responsibilities
of the Executive which do not differ in any material respect from the duties and
responsibilities of the Executive (other than as a result of incapacity due to
physical or mental illness), which is demonstrably willful and deliberate on the
Executive's part, which is committed in bad faith or without reasonable belief
that such breach is in the best interests of the Company and which is not
remedied in a reasonable period of time after receipt of written notice from the
Company specifying such breach or (ii) the commission by the Executive of a
felony involving moral turpitude.
(d) 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
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<PAGE>
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) Qualifying Termination, except for Death or Disability. If the
------------------------------------------------------
Full-Time Employment Period terminates for a reason set forth in clause (i) or
(iv) of Section 4(a):
(i) the Executive shall be entitled to receive (1) all salary
payable with respect to the period through the term of the Agreement
as specified in Section 1, hereinafter referred to as the Severance
Period, but in no instance, will such salary payments be for a period
less than 12 months, (2) unpaid VIC and DVIC and VISO awarded, but not
yet granted, for the prior calendar year, (3) the larger amount of (x)
or (y) determined as follows: (x) 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 or (y) a cash
incentive compensation payment equivalent to the average of the three
prior years' combined VIC and DVIC amounts, (4) reimbursement of
expenses incurred through the date of such termination, and (5) the
computer equipment, table, chairs and sideboard from the Executive's
office on the effective date of this Agreement.
(ii) each stock option granted to the Executive by the Company
then held by the Executive shall, on the date of such termination be
considered 100% vested, and be exercisable in full by the Executive
for the term of such option in accordance with the applicable stock
option agreement in effect at the time of such termination. The
Company covenants that the Compensation Committee of the Board shall
take such actions as necessary so that upon the termination of the
Executive's employment as provided in Section 5(a), all current and
future stock awards, are fully exercisable until the end of the term
of the option.
(iii) the Executive shall be entitled to receive all vested and
unvested amounts, including all credited interest, in the Executive's
DVIC account. Such payment will be made under the terms of the
Executive's DVIC Agreement and commence at the direction of the
Executive but no sooner than at the conclusion of payments under the
Severance Period. The Company covenants that the Compensation
Committee of the Board shall take such action as necessary so that
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<PAGE>
upon termination of the Executive as provided in Section 5(a), current
and future DVIC awards are fully vested
(iv) after expiration of salary payable under the Severance
Period, the Executive shall become a part-time employee of the Company
entitled to the compensation and benefits payable under the Directors
Part-Time Employment Agreement, with all age and service requirements
deemed to have been satisfied and with the benefit calculated at 45%
of the final average compensation, regardless of actual service
determined under the Directors Part-Time Employment Agreement.
(v) during the Severance Period and continuing through to age
65, the Executive shall be entitled to participate in the Company's
medical, dental and life insurance plans on terms no less favorable
than on the termination date.
(b) Qualifying Termination Due to Death or Disability. If the Full-
-------------------------------------------------
Time Employment Period terminates for a reason set forth in clause (ii) or (iii)
of Section 4(a):
(i) the Executive or the Executive's executor, administrator or
other legal representative, as the case may be, shall be entitled to
receive (1) all salary payable through the date of such termination,
(2) unpaid VIC and DVIC and VISO awarded, but not yet granted, for the
prior calendar year, (3) VIC and DVIC and VISO for the then current
calendar year, prorated through the date of such termination based on
actual results of operations for such full calendar year, and (4)
reimbursement of expenses incurred through the date of such
termination;
(ii) each stock option granted to the Executive by the Company
then held by the Executive shall continue to vest pursuant to the
normal schedule and shall be exercisable by the Executive or the
Executive's executor, administrator or other legal representative, as
the case may be, up to the term of such option in accordance with the
applicable stock option agreement in effect at the time of such
termination. The Company covenants that the Compensation Committee of
the Board shall take such actions as necessary so that upon the
termination of the Executive's employment as provided in Section 5(b),
all current and future stock awards, are exercisable until the end of
the term of the option.
(iii) the Executive or the Executive's executor, administrator or
other legal representative, as the case may be, shall be entitled to
receive all vested and unvested amounts, including all credited
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<PAGE>
under the terms of the Executive's DVIC Agreement and commence at the
direction of the Executive or the Executive's executor, administrator
or other legal representative, as the case may be. The Company
covenants that the Compensation Committee of the Board shall take such
actions as necessary so that upon the termination of the ExecutiveOs
employment as provided in Section 5(b), all current and future DVIC
awards, are fully vested.
(iv) the Executive or the Executive's qualified dependents, as the
case may be, shall be entitled to participate in the Company's
medical, dental and life insurance plans, as applicable, through age
65.
(v) the Executive shall become a part-time employee of the
Company, the Executive or the Executive's executor, administrator or
other legal representative, as the case may be, shall be entitled to
the compensation and benefits payable under the Directors Part-Time
Employment Agreement, with all age and service requirements deemed to
have been satisfied and with the benefit calculated at 45% of the
final average compensation, regardless of actual service determined
under the Directors Part-Time Employment Agreement. The payment of
these benefits shall commence immediately upon death or disability.
(c) Nonqualifying Termination. (i) If the Full-Time Employment
-------------------------
Period terminates for a reason set forth in clause (i) of Section 4(b):
(1) the Executive shall be entitled to receive (A) all salary
payable through the date of such termination, (B) unpaid VIC and DVIC
and VISO awarded, but not yet granted, for the prior calendar year,
and (C) reimbursement of expenses incurred through the date of such
termination;
(2) each stock option granted to the Executive by the Company then
held by the Executive shall, on the date of termination, be
exercisable pursuant to the terms of such option in accordance with
the applicable stock option agreement in effect at the time of such
termination.
(3) the Executive shall be entitled to receive the vested portion
of the amounts in the Executive's DVIC account. Such payments will be
made per terms of the Executive's DVIC Agreement.
(4) the Executive shall be entitled to participate in all other
applicable benefit plans or programs in accordance with the provisions
of such plans.
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<PAGE>
(ii) If the Full-Time Employment Period terminates for a reason set
forth in clause (ii) of Section 4(b):
(1) the Executive shall be entitled to receive (A) all salary
payable through the date of such termination, (B) unpaid VIC and DVIC
and VISO awarded, but not yet granted, for the prior calendar year,
(C) reimbursement of expenses incurred through the date of such
termination, and (D) the computer equipment, table, chairs and
sideboard from the Executive's office on the effective date of this
Agreement.
(2) each stock option granted to the Executive by the Company then
held by the Executive shall continue to vest pursuant to the normal
schedule, and be exercisable by the Executive up to the term of such
option in accordance with the applicable stock option agreement in
effect at the time of such termination. The Company covenants that
the Compensation Committee of the Board shall take such actions as
necessary so that upon the termination of the Executive's employment
as provided in Section 5(c), all current and future stock awards, are
exercisable until the end of the term of the option.
(3) the Executive shall be entitled to receive all vested and
unvested amounts, including all credited interest, in the Executive's
DVIC account. Such payment will be made under the terms of the
ExecutiveOs DVIC Agreement and commence at the direction of the
Executive. The Company covenants that the Compensation Committee of
the Board shall take such action as necessary so that upon termination
of the Executive as provided in Section 5(c), all current and future
DVIC awards are fully vested.
(4) the Executive shall become a part-time employee of the Company
and be entitled to the compensation and benefits payable under the
Directors Part-Time Employment Agreement, with all age and service
requirements deemed to have been satisfied and with the benefit
calculated at 45% of the final average compensation, regardless of
actual service determined under the Directors Part-Time Employment
Agreement. The payment of these benefits shall commence immediately
upon the Executive's termination.
(5) the Executive or the Executive's qualified dependents, as the
case may be, shall be entitled to participate in the Company's
medical, dental and life insurance plans, as applicable, through age
65 on terms no less favorable than on the termination date.
(d) After a Change in Control. In the event of a termination, as
-------------------------
defined in the Company's Asset Protection Plan, after a Change in Control, as
defined in the Company's Asset Protection Plan, the Executive shall be entitled
to
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<PAGE>
payments in accordance with the Company's Asset Protection Plan. The Asset
Protection Plan supersedes this Agreement and no payments shall be made under
this Agreement if termination occurs after a Change in Control and payments are
made pursuant to the terms of the Asset Protection Plan.
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 taxes.
7. NONCOMPETITION. (a) Covenant Not to Compete. During the period
-------------- -----------------------
of the Executive's employment by the Company and for a period of one year
thereafter following any termination and during any time the Executive is
receiving payments under the Company's Directors Part-Time Employment Agreement,
except with the prior written consent of the Board, the Executive:
(1) shall not engage in any activities whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of the
stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at the
date hereof by the Company or any of its subsidiaries or affiliates ("True North
Group"), or (ii) any business in which the True North Group is substantially
engaged at any time during the Employment Period;
(2) shall not solicit, in competition with the True North Group, any
person who is a customer of the businesses conducted by the True North Group at
the date hereof or of any business in which the True North Group is
substantially engaged at any time during the Employment Period; and
(3) shall not induce or attempt to persuade any employee of the True
North Group to terminate the employment relationship with any of the True North
Group.
(b) Confidential Information and Trade Secrets. The Executive shall
------------------------------------------
not, at any time during the Employment Period or thereafter, make use of any
bidding information (or computer programs thereof) of any of the True North
Group, nor divulge any trade secrets or other confidential information of any of
the True North Group, except to the extent that such information becomes a
matter of public record, is published in a newspaper, magazine or other
periodical available to the general public or as the Company may so authorize in
writing; and when an Executive shall cease to be employed by the Company, the
Executive shall surrender to the Company all records and other documents
obtained by him or entrusted to him during the course of his employment
hereunder (together with all copies thereof) which pertain specifically to any
of the businesses covered by the covenants in Section 7(a)(1) or which were paid
for by any of the True North Group; provided,
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<PAGE>
however, that the Executive may retain copies of such documents as necessary for
the Executive's personal records for federal income tax purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
----------------------------
apply to the covenants of the Executive contained in this Section:
(1) the covenants covered in Section 7(a)(1) and 7(a)(2) shall apply
within all territories in which any of 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;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive of the
covenants contained in Sections 7(a) and 7(b), including the cessation and
recovery of payments and benefits paid and provided under this Agreement, it is
expressly agreed that such other remedies cannot fully compensate the Company
for any such violation and that the Company shall be entitled to injunctive
relief to prevent any such violation or any continuing violation thereof;
(3) 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
(4) 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. The Executive shall not, at any
-----------------------------
time during the Full-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 CompanyOs 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 8 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.
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<PAGE>
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 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.
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 of the Full-Time Employment Period or while the
Executive is receiving payments under the Company's Directors Part-Time
Employment Agreement.
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 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. 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 State Federal
Arbitration Act shall govern the interpretation and enforcement of this
arbitration provision.
12. REIMBURSEMENT OF LEGAL EXPENSES. If any contest or dispute shall
arise under this Plan involving termination of an Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the Executive,
on a current basis, for all legal fees and expenses, if any, incurred by the
Executive in connection with such contest or dispute, together with interest in
an amount equal
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<PAGE>
to the prime rate of Citibank, N.A. from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives the Executive's statement
for such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Executive's claims in such contest or
dispute, the Executive shall be required to reimburse the Company, over a period
of 12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 12.
13. NOTICE. All notices and other communications required or
------
permitted hereunder shall be in writing and shall be deemed to have been duly
given when personally delivered or five days after deposit in the United States
mail, certified and return receipt requested, postage prepaid, addressed (1) if
to the Executive, to the most recent address then shown on the employment
records of the Executive's Employer, and if to the Company, to True North
Communications Inc., 101 East Erie Street, Chicago, Illinois 60611-2897,
Attention: Secretary, or (2) to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
14. SEVERABILITY. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is determined to be
invalid, illegal or unenforceable in any respect under applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of any other provision of this
Agreement or the validity, legality or enforceability of such provision in any
other jurisdiction, but this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. ENTIRE AGREEMENT. This Agreement 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.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be enforceable by
----------------------
the Executive and the Executive's heirs, executors, administrators and legal
representatives, and by the Company and its successors and permitted assigns.
Any successor 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.
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<PAGE>
17. 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.
18. AMENDMENT AND WAIVER. The provisions of this Agreement may be
--------------------
amended or waived only by the written agreement of the Company and the
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in two counterparts,
------------
each of which shall be deemed to be an original and both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TRUE NORTH COMMUNICATIONS INC.
By: WILLIAM A. SCHREYER
------------------------------------------
William A. Schreyer
Chairman of the Compensation
Committee of the Board of Directors
GREGORY W. BLAINE
------------------------------------------
Gregory W. Blaine
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<PAGE>
EXHIBIT 10.8
[LOGO OF TRUE NORTH COMMUNICATION APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 14, 1997 between True North
Communications Inc., a Delaware corporation (the "Company"), and Mitchell T.
Engel (the "Executive").
WHEREAS, the Company is a global communications holding company with
ownership interests in subsidiaries, affiliates and joint ventures that are
engaged in the advertising agency business, the multimedia production business,
the business of planning and buying of media time and space and related
businesses (the Company and the subsidiaries, affiliates and joint ventures in
which it from time to time has equity interests are hereinafter referred to
collectively as the "True North Group");
WHEREAS, the Executive currently serves the Company as President,
Associated Communications Companies and Corporate Operations; 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 shall end on December
31, 1999; provided that the Full-Time Employment Period may be extended by the
Company as of December 31, 1999 and each December 31 thereafter for one
additional year upon mutual consent of the Executive and the Company; and
further provided that the Full-Time Employment Period may be terminated as
contemplated in Section 4.
2. POSITION AND DUTIES. The Company shall employ the Executive
-------------------
during the Full-Time Employment Period, with the title of President, Associated
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Communications Companies and Corporate Operations (or such other title as may be
mutually agreed upon by the Executive and the Company). The Executive's duties
and responsibilities shall be those existing as of the date of this Agreement
and any other duties and responsibilities existing subsequent hereto if agreed
to in writing by the Executive. During the Full-Time Employment Period, the
Executive shall perform faithfully and loyally and to the best of the
Executive's abilities his duties hereunder, shall devote full business time,
attention and effort to the affairs of the True North Group and shall use
reasonable best efforts to promote the interests of the True North Group.
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 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 service does not violate the terms of any of the
covenants contained in Section 7.
3. COMPENSATION.
------------
(a) Annual Base Salary. With respect to the Full-Time Employment
------------------
Period, the Company shall pay to the Executive an annual salary not less than
the rate of $325,000 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 Full-Time Employment Period,
----------------------
the Executive shall participate in the VIC, DVIC and VISO components of the
Company's Performance Program, pursuant to the terms of such plans as they may
be amended from time to time.
(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
medical, dental, salary continuance, short-term disability, long-term
disability, employee life, group life, travel accident insurance plans, 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, subject to
modifications of general application to senior executives or all other
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 time to time made generally
available to senior executives of the Company.
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(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) Qualifying Termination. For purposes of this Agreement,
----------------------
"Qualifying Termination" means (i) termination of the Executive's employment by
the Company without Cause, (ii) termination by the Company on account of the
Executive having become unable (as determined by the Company 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"), (iii)
termination on account of the Executive's death or (iv) termination by the
Executive due to the occurrence, without the Executive's express written
consent, of any of the following events:
(1) any of (i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position(s), duties,
responsibilities or status with the Company at the date of this Agreement (or
subsequent hereto if such new position(s), duties, responsibilities or status
were agreed to in writing by the Executive), (ii) an adverse change in the
Executive's reporting responsibilities, titles or offices with the Company, or
(iii) any removal or involuntary termination of the Executive from the Company
otherwise than as expressly permitted by this Agreement or any failure to re-
elect or re-appoint the Executive to any position with the Company held by the
Executive at the date of this Agreement (or subsequent hereto if held pursuant
to the written agreement of the Executive);
(2) a reduction by the Company in the Executive's rate of annual base
salary in effect at the date of this Agreement, or, if greater, in effect at any
time subsequent hereto;
(3) any requirement of the Company that the Executive (i) be based
anywhere other than at the facility where the Executive is located at the date
of this Agreement (or subsequent hereto if agreed to by the Executive in
writing) or (ii) travel on Company business to an extent substantially more
burdensome than the extent of the Executive's travel during the twelve months
ending on the date of this Agreement;
(4) the failure of the Company to (i) continue in effect any employee
benefit plan, compensation plan or employee agreement (inclusive of this
Agreement) in which the Executive is participating, unless the Executive is
permitted to participate in other plans providing the Executive with
substantially comparable benefits, or the taking of any action by the Company
which would adversely affect the Executive's participation in or materially
reduce the Executive's
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benefits under any such plan or agreement, (ii) provide the Executive and the
Executive's dependents welfare benefits including, without limitation, medical,
dental, disability, salary continuance, employee life, group life, and travel
accident insurance plans and programs in accordance with the most favorable
plans, practices, programs and policies of the True North Group in effect for
the Executive at the date of this Agreement or, if more favorable to the
Executive, as in effect generally at any time hereafter with respect to peer
executives of the True North Group, (iii) provide fringe benefits in accordance
with the most favorable plans, practices, programs and policies of the True
North Group in effect for the Executive at the date of this Agreement or, if
more favorable to the Executive, as in effect generally at any time hereafter
with respect to peer executives of the True North Group, (iv) provide an office
or offices of a size and with furnishings and other appointments, together with
exclusive personal secretarial and other assistance, at least equal to the most
favorable of the foregoing provided to the Executive at the date of this
Agreement by the True North Group or, if more favorable to the Executive, as
provided generally at any time hereafter with respect to peer executives of the
True North Group, (v) provide the Executive with paid vacation in accordance
with the most favorable plans, policies, programs and practices of the True
North Group in effect for the Executive at the date of this Agreement or, if
more favorable to the Executive, as in effect generally at any time hereafter
with respect to peer executives of the True North Group, or (vi) reimburse the
Executive promptly for all reasonable employment expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the True North Group in effect for the Executive at the date of
this Agreement or, if more favorable to the Executive, as in effect generally at
any time hereafter with respect to peer executives of the True North Group; or
(5) the failure of the Company to obtain an assumption agreement from
any successor or permitted assign as contemplated in Section 15.
For purposes of this Agreement, (i) expiration of this Agreement at
the end of its stated term or any mutually consented to extension thereof shall
not constitute a Qualifying Termination and (ii) any good faith determination of
a Qualifying Termination made by the Executive shall be conclusive; provided,
however, that 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) Nonqualifying Termination. For purposes of this Agreement,
-------------------------
"Nonqualifying Termination" means a termination of the Executive's employment
(i) by the Company for Cause, or (ii) by the Executive for any reason other than
for a Qualifying Termination.
(c) Definition of Cause. For purposes of this Agreement, "Cause"
-------------------
means (i) a material breach by an Executive of the duties and responsibilities
of the
-4-
<PAGE>
Executive hereunder (other than as a result of incapacity due to physical or
mental illness), which is demonstrably willful and deliberate on the Executive's
part, which is committed in bad faith or without reasonable belief that such
breach is in the best interests of the Company and which is not remedied within
30 days (or sooner, as specified in such written notice, if the Company, in its
good faith judgment, determines that the period must be shorter to avoid harm to
the Company) after receipt of written notice from the Company specifying such
breach or (ii) the commission by the Executive of a felony involving moral
turpitude.
(d) Suspension. If the Company shall conclude 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 by the Company or arbitration with respect thereto.
5. CONSEQUENCES OF TERMINATION OF FULL-TIME EMPLOYMENT PERIOD.
----------------------------------------------------------
(a) Qualifying Termination, except for Death or Disability. If the
------------------------------------------------------
Full-Time Employment Period terminates for a reason set forth in clause (i) or
(iv) of Section 4(a):
(i) the Executive shall be entitled to receive (1) all salary
payable with respect to the period through the term of this Agreement
as specified in Section 1 and any mutually consented to extension
thereof or, if longer, the period of twelve months following such
termination (hereinafter referred to as the "Severance Period"), in
accordance with the Company's regular payroll practices, and (2)
within 30 days after the amount in question is reasonably
determinable, (A) unpaid VIC and DVIC and VISO awarded, but not yet
granted, for the prior calendar year, (B) the larger amount of (x) or
(y) determined as follows: (x) 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 or (y) a cash
incentive compensation payment equivalent to the average of the three
prior years' combined VIC and DVIC amounts, and (C) reimbursement of
proper expenses incurred through the date of such termination;
(ii) each stock option granted to the Executive by the Company
then held by the Executive shall on the date of such termination be
100% vested, and shall thereafter be exercisable in full by the
Executive 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. The Company covenants that the Compensation Committee of the
Board
-5-
<PAGE>
shall take such actions as necessary so that upon the termination of
the Executive's employment as provided in the introduction to this
Section 5(a), all current and future stock awards are fully
exercisable for the three-year period, or if shorter until a date 10
years following the date of grant of such option;
(iii) the Executive shall be entitled to receive all vested and
unvested amounts, including all credited interest, in the Executive's
DVIC account. Such payment shall be made under the terms of the
Executive's DVIC Agreement and shall commence at the conclusion of the
Severance Period. The Company covenants that the Compensation
Committee of the Board shall take such action as necessary so that
upon termination of the Executive's employment as provided in the
introduction to this Section 5(a), all current and future DVIC awards
are fully vested.
(iv) 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
modifications of general application to all similarly situated
employees.
(v) after expiration of the Severance Period, the Executive
shall be entitled to compensation and benefits payable under the
Directors Part-Time Employment Agreement, with all age and service
requirements deemed to have been satisfied. Service credit under the
Directors Part-Time Employment Agreement shall be calculated as if the
Executive were a Director and shall include the Severance Period.
(vi) the Executive shall be entitled to participate in all
other applicable benefit plans or programs in accordance with the
provisions thereof applicable to terminated employees.
(b) Qualifying Termination Due to Death or Disability. If the Full-
-------------------------------------------------
Time Employment Period terminates for a reason set forth in clause (ii) or (iii)
of Section 4(a):
(i) the Executive or the Executive's executor, administrator
or other legal representative, as the case may be, shall be entitled
to receive within 30 days after the amount in question is reasonably
determinable (1) all salary payable through the date of such
termination, (2) unpaid VIC and DVIC and VISO awarded, but not yet
granted, for the prior calendar year, (3) VIC and DVIC and VISO for
the then current calendar year, prorated through the date of such
termination based on actual results of operations for such full
calendar year, and (4) reimbursement of proper expenses incurred
through the date of such termination;
-6-
<PAGE>
(ii) each stock option granted to the Executive by the Company
then held by the Executive shall be exercisable to the extent it is
vested at the date of termination 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. The Company covenants that the Compensation Committee of the
Board shall take such actions as necessary so that upon the
termination of the Executive's employment as provided in the
introduction to this Section 5(b), all current and future stock awards
are exercisable to such extent for the three-year period, or if
shorter until a date 10 years following the date of grant of such
option;
(iii) the Executive or the Executive's executor, administrator
or other legal representative, as the case may be, shall be entitled
to receive all vested and unvested amounts, including all credited
interest, in the Executive's DVIC account. Such payment shall be made
under the terms of the Executive's DVIC Agreement. The Company
covenants that the Compensation Committee of the Board shall take such
actions as necessary so that upon the termination of the Executive's
employment as provided in the introduction to this Section 5(b), all
current and future DVIC awards are fully vested.
(iv) the Executive (or the Executive's qualified dependents, as
the case may be), shall be entitled to participate 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).
(c) Nonqualifying Termination. If the Full-Time Employment Period
-------------------------
terminates for a reason set forth in Section 4(b):
(i) the Executive shall be entitled to receive within 30 days
after the amount in question is reasonably determinable (1) all salary
payable through the date of such termination, (2) unpaid VIC and DVIC
and VISO awarded, but not yet granted, for the prior calendar year,
and (3) reimbursement of proper expenses incurred through the date of
such termination;
(ii) each stock option granted to the Executive by the Company
then held by the Executive shall be exercisable pursuant to the terms
of such option in accordance with the applicable stock option
agreement in effect at the time of such termination.
-7-
<PAGE>
(iii) the Executive shall be entitled to receive the vested
portion of the amounts in the Executive's DVIC account. Such payments
will be made in accordance with the terms of the Executive's DVIC
Agreement.
(iv) the Executive shall be entitled to participate in all
other applicable benefit plans or programs in accordance with the
provisions thereof applicable to terminated employees.
(d) Termination after a Change in Control. In the event of a
-------------------------------------
Qualifying Termination, as defined in the Company's Asset Protection Plan, the
Executive shall be entitled to payments in accordance with the Company's Asset
Protection Plan. The Asset Protection Plan shall supersede this Agreement, and
no payments shall be made under this Agreement, if termination occurs after a
Change in Control, as defined in the Company's Asset Protection Plan, and
payments are made pursuant to the terms of the Asset Protection Plan; it being
expressly understood, however, that the Executive's rights independent of this
Agreement under the VIC and DVIC components of the Company's Performance Program
and under stock options held by the Executive shall not be affected.
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 taxes.
7. NONCOMPETITION; NONSOLICITATION; CONFIDENTIALITY. (a) Covenant
------------------------------------------------ --------
Not to Compete. During the Full-Time Employment Period and for any applicable
- --------------
additional period specified in (2) and (3) below, except with the prior written
consent of the Board:
(1) the Executive shall not engage in any activities whether as
employer, proprietor, partner, stockholder (other than the holder of less than
5% of the stock of a corporation the securities of which are traded on a
national securities exchange or in the over-the-counter market), director,
officer, employee or otherwise, in competition with (i) the businesses conducted
at the date hereof by the True North Group, or (ii) any business in which the
True North Group is substantially engaged at any time during the Full-Time
Employment Period;
(2) during the Severance Period and during any time the Executive is
receiving payments under the Company's Directors Part-Time Employment Agreement,
the Executive shall not solicit, directly or indirectly, any existing business
relationship of clients of the True North Group existing at the end of the Full-
Time Employment Period in which the True North Group is substantially engaged at
any time during the Full-Time Employment Period, the Severance Period or the
period during which the Executive is receiving payments under the Directors
Part-Time Employment Agreement; and
-8-
<PAGE>
(3) during the Severance Period and during any time the Executive is
receiving payments under the Company's Directors Part-Time Employment Agreement,
the Executive shall not induce or attempt to persuade any employee of the True
North Group to terminate the employment relationship with any of the True North
Group.
(b) Confidential Information and Trade Secrets. The Executive shall
------------------------------------------
not, at any time during the Full-Time Employment Period or thereafter, make use
of any bidding information (or computer programs thereof) of any of the True
North Group, nor divulge any trade secrets or other confidential information of
any of the True North Group, except to the extent that such information becomes
a matter of public record, is published in a newspaper, magazine or other
periodical available to the general public 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 records and other documents
obtained by him or entrusted to him during the course of his employment
hereunder (together with all copies thereof) which pertain specifically to any
of the businesses covered by the covenants in Section 7(a)(1) or which were paid
for by any of the True North Group; provided, however, that the Executive may
retain copies of such documents as necessary for the Executive's personal
records for federal income tax purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
----------------------------
apply to the covenants of the Executive contained in this Section:
(1) the covenants covered in Section 7(a)(1) and 7(a)(2) shall apply
within all territories in which any of 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;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive of the
covenants contained in Sections 7(a) and 7(b), including the cessation and
recovery of payments and benefits paid and provided under this Agreement, it is
expressly agreed that such other remedies cannot fully compensate the Company
for any such violation and that the Company shall be entitled to injunctive
relief to prevent any such violation or any continuing violation thereof;
(3) 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
-9-
<PAGE>
(4) 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 the Full-Time Employment Period or the Severance Period or the
duration of the Company's Directors Part-Time Employment Agreement or
thereafter, make any statement, publicly or privately, which would disparage and
of the True North Group, any of their respective business or any director or
officer of any of them 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 of any 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 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 which 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 Full-Time
Employment Period or the Severance 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 any 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 materially 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
-10-
<PAGE>
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.
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 of the Full-Time Employment Period.
11. ARBITRATION; CERTAIN COSTS. 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 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. The Company shall reimburse the Executive, upon demand, for
all costs and expenses (including without limitation attorneys' fees) reasonably
incurred by the Executive in connection with any such application undertaken by
the Executive in good faith, as well as for all such costs and expenses
reasonably incurred by the Executive in connection with entering and/or
enforcing the award rendered by the arbitrator. Except as necessary in court
proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Company and the Executive. The Company and the
Executive acknowledge that this Agreement evidences a transaction involving
interstate commerce. Notwithstanding any choice of law provision included in
this Agreement, the United State 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 (1) 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: Secretary,
or (2) 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.
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<PAGE>
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 understanding, 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TRUE NORTH COMMUNICATIONS INC.
By: WILLIAM A. SCHREYER
-----------------------------------
William A. Schreyer
Chairman of the Compensation
Committee of the Board of Directors
MITCHELL T. ENGEL
----------------------------------
Mitchell T. Engel
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<PAGE>
EXHIBIT 10.9
[LOGO OF TRUE NORTH COMMUNICATIONS INC. APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT effective as of October 15, 1996 between True North
Communications Inc., a Delaware corporation (the "Company"), and Theodore J.
Theophilos (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 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.
2. POSITION AND DUTIES. The Company shall employ the Executive with the
-------------------
title of Executive Vice President & General Counsel of True North Communications
Inc. The Executive will be a member of the Management Board of True North
Communications Inc. The Executive will report directly to the Chairman of the
Board of Directors and CEO of True North Communications Inc. The Executive shall
be responsible for the global legal matters pertaining to True North
Communications Inc., its Board of Directors, all committees of the Board of
Directors, all subsidiaries and all affiliates of the Company. In accordance
with the general practices of a general counsel of a publicly traded company,
Executive will be responsible for all matters pertaining to the Company's
compliance with Securities and Exchange Commission, New York Stock Exchange and
other governmental laws and regulations. Executive will have responsibility for
the hiring, retention
-1-
<PAGE>
and supervision for the in-house legal staff of the True North Group. Executive
will be responsible for and make relevant determinations concerning the
retention, hiring and supervision of outside counsel for True North
Communications Inc., its Board of Directors, all committees of the Board of
Directors and the True North Group. In accordance with corporate policy
Executive will approve all payments for legal fees and charges at limits
prescribed by the Company's management. The Executive shall perform faithfully
and loyally and to the best of the Executive's abilities his duties hereunder,
shall devote full business time, attention and effort to the affairs of the True
North Group and shall use reasonable best efforts to promote the interests of
the True North Group. 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 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 service does not violate
the terms of any of the covenants contained herein.
3. COMPENSATION.
------------
A) Base Salary: $300,000 per year.
-----------
B) Incentive Compensation: As a senior executive of True North
----------------------
Communications Inc., Executive will participate in the Company's Performance
Program. Executive's participation will begin with the first full year, 1997.
This program provides for three variable incentive compensation components with
payouts based on the overall performance of the Company and attainment of
individual goals and objectives. The three components are:
(1) Variable Incentive Compensation (VIC) is based on a sliding scale as
-------------------------------------
determined by the yearly increase in Company net income. This component
can provide up to 105% of base salary.
(2) Deferred Variable Incentive Compensation (DVIC) is based on the yearly
-----------------------------------------------
net income increase as well and can provide up to 50% of base salary.
(3) Variable Incentive Stock Options (VISO) are determined as equivalent
---------------------------------------
in grant value up to 100% of the base salary on a sliding scale.
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<PAGE>
Two examples of the award levels based on net earnings' increases of 7% or 14%
are.
7%* 14%
--- ---
VIC
(Annual Bonus) $108M $315M
DVIC
(Deferred) 0 $150M
------ ----
$108M $465M
Stock Option Shares
(@ $23/share) 3,300 13,000
*These amounts guaranteed as minimum for 1997.
--------------------------------------- ----
C) Stock Options: Upon arrival, the Executive will receive an option on 5,000
-------------
shares of True North common stock. These shares will be issued at the
prevailing market rate.
D) Directors Part-Time Employment Agreement: As a member of the Management
----------------------------------------
Board, Executive will participate in this Program. The Plan provides an annual
benefit of up to 45% of final five-year average compensation (base plus bonus)
payable for five years. The benefit is prorated for years of service less than
30 years, however, the Executive receives an additional year of credited service
for each year served as a Board member. The benefit can begin at age 55 or later
and attainment of 10 or more years of service.
E) Profit Sharing: True North's primary retirement program is a qualified plan
--------------
and noncontributory on employee's part. Company contribution up to 15% of total
compensation each year depending on overall financial performance. (Recent
history, 6-10%.) Executive will enter plan in January or July following 2-year
Anniversary. Contributions begin after 2-year eligibility period. All
contributions are 100% vested. During the two-year eligibility waiting period,
Executive will be provided with a phantom profit sharing contribution equivalent
to that which Executive would have earned as a participant in this Plan. The
amount determined will be credited annually to an account established on the
Executive's behalf in the Stock Purchase Integration Plan (see below).
F) Profit Sharing Integration Plan: If the Profit Sharing Plan's contribution
-------------------------------
is limited by IRS salary or contribution caps, this Plan will provide for the
additional contribution to which Executive is entitled. These funds are 100%
vested immediately and accrue interest at the 5-Year T-Note rate. All
contributions and investment earnings are tax deferred.
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<PAGE>
G) Stock Purchase Plan : The plan is a qualified 401(k) savings plan. The
--------------------
Executive is immediate eligibility. The Executive's Participation begins
coincident with, or on next calendar quarter after date of hire. Contributions
are made up to 6-2/3% of total compensation through payroll deduction up to IRS
limit ($9,500 in 1996); All contributions are on a pretax basis. Immediate
company matching contribution are made equal to 50% of employee's contribution.
All contributions are used to purchase True North stock and are immediately 100%
vested. All shares earn quarterly dividends which are used to purchase
additional shares. In-service loans and withdrawals are available under certain
circumstances.
H) Stock Purchase Integration Plan: Once the Stock Purchase Plan IRS
-------------------------------
contribution limit is achieved ($9,500 in 1996), The Executive is eligible for
the Stock Purchase Integration Plan. This Plan allows continued contributions
above the $9,500 limit with the company contributing 50c on each $1.00 invested.
These funds are 100% vested immediately and accrue interest at the 5-Year T-Note
rate. All contributions and investment earnings are tax deferred.
I) Employee Stock Incentive Plan: An annual award of eight shares of True
-----------------------------
North common stock is made to the Executive if the company meets financial
goals. The award is credited to the Executive's Stock Purchase Plan account.
J) Supplemental Pension Plan : The Executive will receive a guaranteed benefit
--------------------------
if profit sharing and social security do not meet minimum goal of 45% of final
average pay. (Benefit is prorated for retirement with less than 30 years'
service and retirement prior to age 65.)
K) Retirement Account Rollover: Funds from any qualified retirement plan may
---------------------------
be rolled over to True North's Profit Sharing Trust and will earn accrued
interest based on financial performance. Three investment options are
available: a Balanced Fund, a Fixed Fund and a Money Market Fund.
L) Select Executive Plan: This Plan is provided exclusively to our most senior
---------------------
management, this Plan combines $1 million of company paid term Life Insurance
and an 13-option investment plan which can accept employee contributions of
after-tax dollars which earn tax-deferred interest. The $1 million coverage is
guaranteed with no physical required. Additional amounts above $1 million can
be purchased by the Executive. Upon arrival, a session will be scheduled between
the Executive and the Plan Consultant to describe this unique Program.
4. NON-FINANCIAL BENEFITS.
----------------------
A) Medical Coverage: The coverage is provided to our most senior management,
----------------
this comprehensive plan provides reimbursement of 100% of all eligible medical
expenses including prescription drugs. The Executive will share in
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the cost of the Plan on a pretax basis. All benefits paid by the Plan are tax
free to the Executive. Coverage is available first day.
B) Dental Coverage: The coverage provided to our most senior management, this
---------------
comprehensive plan provides reimbursement of 100% of all eligible dental
expenses. The Executive shares in the cost of the Plan on a pretax basis. All
benefits paid by the Plan are tax free to the Executive. Coverage is available
first day.
C) Disability Plans: Short-term disability coverage initially provides 100% of
----------------
pay for first four weeks, and 50% of pay for 22 weeks. Number of weeks paid at
100% increase as years of service increase. This Coverage is completely Company
paid. Long-term disability coverage provides 40% of pay up to $4,000 of
coverage per month, payable to age 65, paid for by the Company. The Executive
can purchase an additional 20% up to a total of $10,000 of coverage per month.
Coverage is effective the first of the month following date of hire.
D) Benefit Reimbursement : Allows up to $12,000 per year to be set aside on a
----------------------
pretax basis to meet eligible expenses for medical and dependent care ($5,000
cap on dependent care). Participation can start as of the first day of
employment.
E) Voluntary Life Insurance: In addition to the Select Exec Plan, an
--------------------------
additional $300,000 of life insurance may be purchased by the Executive .
F) Company Car: True North will furnish the Executive, through purchase or
-----------
lease, an automobile at a value of up to $40,000, or an annual allowance of
approximately $9,000. True North will cover the cost of insurance, maintenance
and fuel for the car. In addition, the Company will provide in-building
parking.
G) Vacation/Holidays: The Executive will be entitled to unlimited vacation,
-----------------
(however, for accounting purposes, the entitlement will be for four weeks). True
North typically honors 10 to 11 holidays per year, including one personal
holiday to be used at the Executive's discretion for a civic or religious
obligation.
H) Physical Examination: Company will pay for Executive's comprehensive
--------------------
physical exam bi-annually to age 45, then annually thereafter.
I) Air Travel: The Executive's First-class air travel will be reimbursed,
----------
beginning as of January 1, 1997.
J) Financial Planning: An annual allowance of $4,000 for financial planning is
------------------
provided to the Executive. Arrangements have been made with Arthur Andersen to
provide this service, but the Executive can utilize other individuals at their
discretion.
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<PAGE>
K) Foundation Contributions: An annual allowance of $2,000 is made available
------------------------
for charitable contributions of the Executive's choice from the Company's
Foundation budget.
5. TERMINATION.
-----------
A) If the Company terminates the Executive's employment prior to December 31,
1997, base salary and benefits will continue for the balance of the year. In
addition, the Executive is entitled to an amount equal to 1-1/2 times annual
base salary, payable as a lump sum.
B) The Executive will participate in the Company's Asset Protection Plan which
provides benefits equal to three times compensation if termination occurs as a
result of a change-in-control.
C) If contemporaneous with or after a change in the Chief Executive Officer of
the Company, the Executive is terminated (or, without Executive's express
written consent, Executive's responsibilities, title, lines of reporting or
compensation are diminished or reduced or the location of Executive's place of
business is materially changed), then Executive's base salary and benefits will
continue for the balance of the year of the termination. In addition, the
Executive will receive a lump sum payment equal to two times the Executive's
annual aggregate compensation (defined as base salary plus variable incentive
compensation) for 1997 or the last preceding full year of Executive's
employment.
6. 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 (1) 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: Secretary,
or (2) 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.
7. 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
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<PAGE>
this Agreement shall be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never been contained
herein.
8. 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.
9. 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.
10. 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.
11. 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.
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<PAGE>
12. 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.
/s/ Theodore J. Theophilos
----------------------------------
Theodore J. Theophilos
TRUE NORTH COMMUNICATIONS INC.
By: /s/ Bruce Mason
-------------------------------
Bruce Mason
Chief Executive Officer and Chairman
of the Board of Directors
TRUE NORTH COMMUNICATIONS INC.
By:
-------------------------------
Greg Blaine
Executive Vice President
TRUE NORTH COMMUNICATIONS INC.
By: /s/ William A. Schreyer
-----------------------------
William A. Schreyer
Chairman of the Compensation
Committee of the Board of Directors
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<PAGE>
EXHIBIT 10.10
[LOGO OF TRUE NORTH APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
ASSET PROTECTION PLAN
1. PURPOSE. The purpose of this Asset Protection Plan (the "Plan") is to
-------
secure continued services, dedication and objectivity of certain executive
employees of True North Communications Inc. (the "Company") and its
subsidiaries in the event of any threat or occurrence of, or negotiation or
other hostile action that could lead to, or create the possibility of, a
hostile Change in Control (as defined in Section 2) of the Company, without
concern as to whether such employees might be hindered or distracted by
personal uncertainties and risks created by any such possible hostile
Change in Control.
2. DEFINITIONS. As used in this Agreement, the following terms, when
-----------
capitalized, shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by a Participant of those duties
and responsibilities of the Participant which do not differ in any material
respect from the duties and responsibilities of the Participant during the
90-day period immediately prior to a Change in Control (other than as a
result of incapacity due to physical or mental illness), which is
demonstrably willful and deliberate on the Participant's part, which is
committed in bad faith or without reasonable belief that such breach is in
the best interests of the Company and which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying
such breach or (2) the commission by the Participant of a felony involving
moral turpitude.
(c) "Change in Control" means (i) an acquisition (other than directly from
the Company) of 15% or more of the beneficial interest in the voting stock
of the Company by a party other than the Company or a Company sponsored
benefit plan; or (ii) a change in the Board of Directors as a result of
which the current directors (together with the successors they nominate or
approve for nomination) cease to be a majority of the Board of Directors of
the Company; or (iii) a merger, reorganization or consolidation whereby the
existing shareholders of the Company do not own more than 66-2/3% of the
then outstanding shares resulting from such merger, reorganization
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<PAGE>
or consolidation, provided, however, that none of the foregoing shall be
considered a Change in Control if it is a result of a direct action
initiated by the Company.
(d) "Company" means True North Communications Inc., a Delaware
corporation.
(e) "Compensation" means the Participant's annual rate of pay in effect
immediately before a Change in Control occurs, plus the amount of the
highest annual bonus awarded to the Participant in any of the three
calendar years preceding the year in which a Change in Control occurs.
(f) "Date of Termination" means (1) the effective date on which a
Participant's employment by the Company terminates or (2) if the
Participant's employment by the Company terminates by reason of death, the
date of death of the Participant.
(g) "Employee" means an individual whose relationship with an Employer is,
under common law, that of an employee and who performs services for one or
more Employers on a full-time basis.
(h) "Employer" means the Company and any of its affiliates which, with the
consent of the Company, has adopted this Plan.
(i) "Nonqualifying Termination" means a termination of the Participant's
employment (1) by the Participant's Employer for Cause, (2) as a result of
the Participant's death, (3) by the Company due to the Participant's
absence from his duties with the Company on a full-time basis for at least
180 consecutive days as a result of the Participant's incapacity due to
physical or mental illness as is consistent with Company policy and
programs or (4) by the Participant for any reason other than for a
Qualifying Termination.
(j) "Participant" shall mean an Employee who, at the time a Change in
Control occurs, is a member of the Company's Management Board.
(k) "Qualifying Termination" means a termination of the Participant's
employment due to the occurrence, without the Participant's expressed
written consent, of any of the following events after the occurrence of a
Change in Control:
(1) any of (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's position(s),
duties, responsibilities or status with the Company immediately prior to
such Change in Control, (ii) a change in the Participant's reporting
responsibilities, titles or offices with the Company as in effect
immediately prior to such Change in Control or (iii) any removal or
involuntary
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<PAGE>
termination of the Participant from the Company otherwise than as expressly
permitted by this Agreement or any failure to re-elect the Participant to
any position with the Company held by the Participant immediately prior to
such Change in Control;
(2) a reduction by the Company in the Participant's rate of annual
base salary as in effect immediately prior to such Change in Control or as
the same may be increased from time to time thereafter;
(3) any requirement of the Company that the Participant (i) be based
anywhere other than at the facility where the Participant is located at the
time of the Change in Control or (ii) travel on Company business to an
extent substantially more burdensome than the travel obligations of the
Participant immediately prior to such Change in Control;
(4) the failure of any Employer to (i) continue in effect any
employee benefit plan or compensation plan in which the Participant is
participating immediately prior to such Change in Control, unless the
Participant is permitted to participate in other plans providing the
Participant with substantially comparable benefits, or the taking of any
action by the Company which would adversely affect the Participant's
participation in or materially reduce the Participant's benefits under any
such plan, (ii) provide the Participant and the Participant's dependents
welfare benefits including, without limitation, medical, dental,
disability, salary continuance, employee life, group life, and travel
accident insurance plans and programs in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Participant immediately prior to such Change in
Control or, if more favorable to the Participant, as in effect generally at
any time thereafter with respect to other peer Participants of the Company
and its affiliated companies, (iii) provide fringe benefits in accordance
with the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Participant
immediately prior to such Change in Control or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to
other peer Participants of the Company and its affiliated companies, (iv)
provide an office or offices of a size and with furnishings and other
appointments, together with exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Participant by the Company and its affiliated companies immediately
prior to such Change in Control or, if more favorable to the Participant,
as provided generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies, (v) provide the
Participant with paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies as in effect for the Participant immediately prior to such Change
in Control or, if more
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<PAGE>
favorable to the Participant, as in effect generally at any time thereafter
with respect to other peer Participants of the Company and its affiliated
companies, or (vi) reimburse the Participant promptly for all reasonable
employment expenses incurred by the Participant in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Participant immediately prior to
such Change in Control, or if more favorable to the Participant, as in
effect generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 11(b).
For purposes of the Agreement, any good faith determination of a
Qualifying Termination made by the Participant shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken by an Employer in good faith and which is remedied by such Employer
promptly after receipt of notice thereof given by the Participant shall not
constitute a Qualifying Termination.
(l) "Termination Period" means the period of time beginning with a Change
in Control and ending on the earliest to occur of (1) the Participant's
death, and (2) two years following such Change in Control.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT. (a) If during the Termination
---------------------------------------
Period the employment of a Participant shall terminate, by reason of a
Qualifying Termination, then the Company shall pay to the Participant (or
the Participant's beneficiary or estate) within 30 days following the Date
of Termination, as compensation for services rendered to one or more
Employers:
(1) a cash amount equal to the sum of (i) the Participant's full
annual base salary from the Employers through the Date of Termination, to
the extent not theretofore paid, (ii) the Participant's annual bonus in an
amount at least equal to the highest annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Participant has been employed by the Employers for less than 12 full
months) bonus paid or payable, including by reason of any deferral, to the
Participant by the Employers in respect of the three fiscal years of the
Employers (or such portion thereof during which the Participant performed
services for the Employers if the Participant shall have been employed by
the Employers for less than such three fiscal year period) immediately
preceding the fiscal year in which the Change in Control occurs, multiplied
by a fraction, the numerator of which is the number of days in the fiscal
year in which the Change in Control occurs through the Date of Termination
and the denominator of which is 365 or 366, as
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<PAGE>
applicable, and (iii) any compensation previously deferred by the
Participant (together with any interest and earnings thereon) to the extent
not theretofore paid; plus
(2) a lump-sum cash amount (subject to any applicable payroll or
other taxes required to be withheld pursuant to Section 4) in an amount
equal to three (3) times the Participant's Compensation.
(b) For a period of two years commencing on the Date of Termination, the
Company shall continue to keep in full force and effect all policies of
medical, dental, disability, salary continuance, employee life and group
life insurance with respect to the Participant and his dependents with the
same level of coverage, upon the same terms and otherwise to the same
extent as such policies shall have been in effect immediately prior to the
Date of Termination or, if more favorable to the Participant, as provided
generally with respect to other peer Participants of the Employers, and the
Employers and the Participant shall share the costs of the continuation of
such insurance coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. At the end of the two year
period, the Participant shall be eligible to continued benefits as provided
in the Consolidated Omnibus Budget Reconciliation Act. In addition, for
purposes of determining the Participant's eligibility for participation in
the Employer's retiree medical plan, the Participant shall upon the
Participant's Date of Termination be treated as if he or she is five years
older (but not older than age 55) than on such date and as if he or she had
five additional years of service.
(c) If during the Termination Period the employment of a Participant shall
terminate by reason of a Nonqualifying Termination, then no compensation is
payable nor are benefits extended for the two-year period as provided in
(a) and (b) above.
4. WITHHOLDING TAXES. The Company may withhold from all payments due to the
-----------------
Participant (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise under
-------------------------
this Plan involving termination of a Participant's employment with the
Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Participant, on a current basis, for all legal fees and expenses, if any,
incurred by the Participant in connection with such contest or dispute,
together with interest in an amount equal to the prime rate of Citibank,
N.A. from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to
-5-
<PAGE>
accrue from the date the Company receives the Participant's statement for
such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Participant's claims in such
contest or dispute, the Participant shall be required to reimburse the
Company, over a period of 12 months from the date of such resolution, for
all sums advanced to the Participant pursuant to this Section 5.
6. OPERATIVE EVENT. Notwithstanding any provision herein to the contrary, no
---------------
amounts shall be payable hereunder unless and until there is a Change in
Control at a time when the Participant is employed by an Employer.
7. TERMINATION OF PLAN. This Plan shall be effective on the date hereof and
-------------------
shall continue until terminated by the Company as provided in this
paragraph. The Company shall have the right, prior to a Change in Control,
in its sole discretion, pursuant to action by the Board, to approve the
termination or amendment of this Plan; provided, however, that no such
action shall be taken by the Board during any period of time when the Board
has knowledge that any person has taken steps reasonably calculated to
effect a Change in Control until, in the opinion of the Board, such person
has abandoned or terminated its efforts to effect a Change in Control.
8. PROVISIONAL REDUCTION IN BENEFITS. (a) Notwithstanding anything in this
---------------------------------
Plan to the contrary, (i) if it shall be determined that any payment or
distribution by the Employers to or for the benefit of a Participant
(whether paid or payable or distributed or distributable pursuant to the
terms of this Plan or otherwise, but determined without regard to any
adjustment required under this Section 8) (in the aggregate, the "Total
Payments") would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), and (ii) if after reduction by the amount of
such Excise Tax the amount of the Total Payments would be less than the
maximum amount that could be paid to the Participant without the imposition
of such Excise Tax, then the payments due hereunder shall be reduced so
that the Total Payments are One Dollar ($1) less than such maximum amount.
(b) All determinations required to be made under this Section 8, including
whether and when a reduction in the amount payable hereunder pursuant to
Section 3(a) is required and the amount of any such reduction and the
assumptions to be utilized in arriving at such determination, shall be made
by the Company's public accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is
requested by the Company or the Participant. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
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<PAGE>
entity or group effecting the Change in Control, the Employee shall appoint
another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. If the Accounting
Firm determines that no Excise Tax is payable by the Participant, it shall
furnish the Employee with the a written opinion that failure to report the
Excise Tax on the Employee's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company, the
Subsidiary and the Participant. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that the
reduction in the amount payable hereunder pursuant to Section 3(a) will not
have been made consistent with the calculations required to be made
hereunder. In that event the Participant thereafter shall promptly pay to
the Company the amount of the required reduction.
9. NONCOMPETITION. (a) Covenant Not to Compete. During the period of the
--------------
Participant's employment by the Company and for a period of one year
thereafter following a Qualifying Termination, except with the prior
written consent of the Board, a Participant:
(1) shall not engage in any activities whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of
the stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at
the date hereof by the Company or any of its subsidiaries or affiliates
over which he shall have exercised, directly or indirectly, any
supervisory, management, fiscal or operating control during the Employment
Period (the "Managed Companies"), or (ii) any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period;
(2) shall not solicit, in competition with the Managed Companies, any
person who is a customer of the businesses conducted by the Managed
Companies at the date hereof or of any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period; and
(3) shall not induce or attempt to persuade any employee of the
Managed Companies to terminate his employment relationship in order to
enter into competitive employment.
(b) Trade Secrets. No Participant shall, at any time during the
Employment Period or thereafter, make use of any bidding information (or
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<PAGE>
computer programs thereof) of any of the Managed Companies, nor divulge any
trade secrets or other confidential information of any of the Managed
Companies, except to the extent that such information becomes a matter of
public record, is published in a newspaper, magazine or other periodical
available to the general public or as the Company CEO may so authorize in
writing; and when a Participant shall cease to be employed by the Company,
the Participant shall surrender to the Company all records and other
documents obtained by him or entrusted to him during the course of his
employment hereunder (together with all copies thereof) which pertain
specifically to any of the businesses covered by the covenants in Section
4.01 or which were paid for by any of the Managed Companies; provided,
however, that the Participant may retain copies of such documents as
necessary for the Participant's personal records for federal income tax
purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Participants contained in this Section:
(1) the covenants contained in paragraphs (1) and (2) of Section 10
(a) shall apply within all territories in which any of the Managed
Companies are actively engaged in the conduct of business during the
Employment Period, including, without limitation, the territories in which
customers are then being solicited;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by a Participant of
the covenants contained in Sections 10 (a) and 10 (b), including the
cessation and recovery of payments and benefits paid and provided under
this Plan, it is expressly agreed that such other remedies cannot fully
compensate the Company for any such violation and that the Company shall be
entitled to injunctive relief to prevent any such violation or any
continuing violation thereof;
(3) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 10 (a) and 10 (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
(4) the covenants contained in Sections 10 (a) and 10 (b) shall
survive the conclusion of the Participant's employment by the Company.
10. SCOPE OF PLAN. Nothing in this Plan shall be deemed to entitle the
-------------
Participant to continued employment with any Employer, and if the
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<PAGE>
Participant's employment with the Employers shall terminate prior to a
Change in Control, then the Participant shall have no further rights under
this Plan; provided, however, that any termination of the Participant's
employment following a Change in Control shall be subject to all of the
provisions of this Plan.
11. SUCCESSORS; BINDING PLAN. (a) This Plan shall not be terminated by any
------------------------
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such
merger, consolidation or transfer of assets, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or the person
or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer of assets referred to in paragraph (a) of this Section 11, it will
cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Participant (or his beneficiary or estate), all
of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Plan and
shall entitle the Participant to compensation and other benefits from the
Company in the same amount and on the same terms as the Participant would
be entitled hereunder if the Participant's employment were terminated
following a Change in Control other than by reason of a Nonqualifying
Termination. For purposes of implementing the foregoing, the date on which
any such merger, consolidation or transfer becomes effective shall be
deemed the Date of Termination.
(c) This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Participant
shall die while any amounts would be payable to the Participant hereunder
had the Participant continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Plan to
such person or persons appointed in writing by the Participant to receive
such amounts or, if no person is so appointed, to the Participant's estate.
12. NOTICE. For purposes of the Plan, all notices and other communications
------
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage
prepaid, addressed (1) if to the Participant, to the most recent address
then shown on the employment records of the Participant's Employer, and if
to the Company, to True North Communications Inc., 101 East Erie Street,
Chicago, Illinois 60611-2897, Attention: Secretary, or (2) to such other
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<PAGE>
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. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's obligation
----------------------------------------
to make any payments provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Employers may
have against the Participant or others. In no event shall the Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Participant under any of the
provisions of this Plan and, such amounts shall not be reduced whether or
not the Participant obtains other employment.
(b) If there shall be any dispute between the Employers and the
Participant in the event of any termination of the Participant's
employment, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that such termination was
for Cause, that the determination by the Participant of the existence of a
Qualifying Termination was not made in good faith, or that the Company is
not otherwise obligated to pay any amount or provide any benefit to the
Participant and his dependents or other beneficiaries, as the case may be,
under paragraphs (a) and (b) of Section 3, the Company shall pay all
amounts, and provide all benefits, to the Participant and his dependents or
other beneficiaries, as the case may be, that the Company would be required
to pay or provide pursuant to paragraphs (a) and (b) of Section 3 as though
such termination were by the Company without Cause or by the Participant as
a Qualifying Termination.
14. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of
----------------------------
this Plan shall include employment with any corporation or other entity in
which the Company has direct or indirect ownership interest of 50% or more
of the total combined voting power of the then outstanding securities of
such corporation or other entity entitled to vote generally in the election
of directors.
15. GOVERNING LAW; VALIDITY. The interpretation, construction and performance
-----------------------
of this Plan shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Plan shall not affect the validity or enforceability of
any other provision of this Plan, which other provisions shall remain in
full force and effect.
16. MISCELLANEOUS. Subject to the Company's power of amendment contained in
-------------
Section 7, no provision of this Plan may be modified or waived unless
-10-
<PAGE>
such modification or waiver is agreed to in writing and signed by the
Participant and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Plan to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
Failure by the Participant or the Company to insist upon strict compliance
with any provision of this Plan or to assert any right the Participant or
the Company may have hereunder, including, without limitation, the right of
the Participant to terminate employment for a Qualifying Termination, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Plan. The rights of, and benefits payable to,
the Participant, his estate or his beneficiaries pursuant to this Plan are
in addition to any rights of, or benefits payable to, the Participant, his
estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company, except benefits payable under the
Company's Severance Policy or for any payments that may be required by
statute by reason of termination of employment, except for Unemployment
Compensation, which are inclusive of the payments required under this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a
duly authorized officer of the Company on this 4TH day of JUNE, 1996.
TRUE NORTH COMMUNICATIONS INC.
By:/S/ GREGORY W. BLAINE
---------------------------
Title: EVP
------------------------
Employee:
/S/ BRUCE MASON
------------------------------
-11-
<PAGE>
EXHIBIT 10.11
[LOGO OF TRUE NORTH COMMUNICATIONS INC. APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
ASSET PROTECTION PLAN
1. PURPOSE. The purpose of this Asset Protection Plan (the "Plan") is to
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secure continued services, dedication and objectivity of certain executive
employees of True North Communications Inc. (the "Company") and its
subsidiaries in the event of any threat or occurrence of, or negotiation or
other hostile action that could lead to, or create the possibility of, a
hostile Change in Control (as defined in Section 2) of the Company, without
concern as to whether such employees might be hindered or distracted by
personal uncertainties and risks created by any such possible hostile
Change in Control.
2. DEFINITIONS. As used in this Agreement, the following terms, when
-----------
capitalized, shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by a Participant of those duties
and responsibilities of the Participant which do not differ in any material
respect from the duties and responsibilities of the Participant during the
90-day period immediately prior to a Change in Control (other than as a
result of incapacity due to physical or mental illness), which is
demonstrably willful and deliberate on the Participant's part, which is
committed in bad faith or without reasonable belief that such breach is in
the best interests of the Company and which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying
such breach or (2) the commission by the Participant of a felony involving
moral turpitude.
(c) "Change in Control" means (i) an acquisition (other than directly from
the Company) of 15% or more of the beneficial interest in the voting stock
of the Company by a party other than the Company or a Company sponsored
benefit plan; or (ii) a change in the Board of Directors as a result of
which the current directors (together with the successors they nominate or
approve for nomination) cease to be a majority of the Board of Directors of
the Company; or (iii) a merger, reorganization or consolidation whereby the
existing shareholders of the Company do not own more than 66-2/3% of the
then outstanding shares resulting from such merger, reorganization
-1-
<PAGE>
or consolidation, provided, however, that none of the foregoing shall be
considered a Change in Control if it is a result of a direct action
initiated by the Company.
(d) "Company" means True North Communications Inc., a Delaware
corporation.
(e) "Compensation" means the Participant's annual rate of pay in effect
immediately before a Change in Control occurs, plus the amount of the
highest annual bonus awarded to the Participant in any of the three
calendar years preceding the year in which a Change in Control occurs.
(f) "Date of Termination" means (1) the effective date on which a
Participant's employment by the Company terminates or (2) if the
Participant's employment by the Company terminates by reason of death, the
date of death of the Participant.
(g) "Employee" means an individual whose relationship with an Employer is,
under common law, that of an employee and who performs services for one or
more Employers on a full-time basis.
(h) "Employer" means the Company and any of its affiliates which, with the
consent of the Company, has adopted this Plan.
(i) "Nonqualifying Termination" means a termination of the Participant's
employment (1) by the Participant's Employer for Cause, (2) as a result of
the Participant's death, (3) by the Company due to the Participant's
absence from his duties with the Company on a full-time basis for at least
180 consecutive days as a result of the Participant's incapacity due to
physical or mental illness as is consistent with Company policy and
programs or (4) by the Participant for any reason other than for a
Qualifying Termination.
(j) "Participant" shall mean an Employee who, at the time a Change in
Control occurs, is a member of the Company's Management Board.
(k) "Qualifying Termination" means a termination of the Participant's
employment due to the occurrence, without the Participant's expressed
written consent, of any of the following events after the occurrence of a
Change in Control:
(1) any of (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's position(s),
duties, responsibilities or status with the Company immediately prior to
such Change in Control, (ii) a change in the Participant's reporting
responsibilities, titles or offices with the Company as in effect
immediately prior to such Change in Control or (iii) any removal or
involuntary
-2-
<PAGE>
termination of the Participant from the Company otherwise than as expressly
permitted by this Agreement or any failure to re-elect the Participant to
any position with the Company held by the Participant immediately prior to
such Change in Control;
(2) a reduction by the Company in the Participant's rate of annual
base salary as in effect immediately prior to such Change in Control or as
the same may be increased from time to time thereafter;
(3) any requirement of the Company that the Participant (i) be based
anywhere other than at the facility where the Participant is located at the
time of the Change in Control or (ii) travel on Company business to an
extent substantially more burdensome than the travel obligations of the
Participant immediately prior to such Change in Control;
(4) the failure of any Employer to (i) continue in effect any
employee benefit plan or compensation plan in which the Participant is
participating immediately prior to such Change in Control, unless the
Participant is permitted to participate in other plans providing the
Participant with substantially comparable benefits, or the taking of any
action by the Company which would adversely affect the Participant's
participation in or materially reduce the Participant's benefits under any
such plan, (ii) provide the Participant and the Participant's dependents
welfare benefits including, without limitation, medical, dental,
disability, salary continuance, employee life, group life, and travel
accident insurance plans and programs in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Participant immediately prior to such Change in
Control or, if more favorable to the Participant, as in effect generally at
any time thereafter with respect to other peer Participants of the Company
and its affiliated companies, (iii) provide fringe benefits in accordance
with the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Participant
immediately prior to such Change in Control or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to
other peer Participants of the Company and its affiliated companies, (iv)
provide an office or offices of a size and with furnishings and other
appointments, together with exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Participant by the Company and its affiliated companies immediately
prior to such Change in Control or, if more favorable to the Participant,
as provided generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies, (v) provide the
Participant with paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies as in effect for the Participant immediately prior to such Change
in Control or, if more
-3-
<PAGE>
favorable to the Participant, as in effect generally at any time thereafter
with respect to other peer Participants of the Company and its affiliated
companies, or (vi) reimburse the Participant promptly for all reasonable
employment expenses incurred by the Participant in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Participant immediately prior to
such Change in Control, or if more favorable to the Participant, as in
effect generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 11(b).
For purposes of the Agreement, any good faith determination of a
Qualifying Termination made by the Participant shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken by an Employer in good faith and which is remedied by such Employer
promptly after receipt of notice thereof given by the Participant shall not
constitute a Qualifying Termination.
(l) "Termination Period" means the period of time beginning with a Change
in Control and ending on the earliest to occur of (1) the Participant's
death, and (2) two years following such Change in Control.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT. (a) If during the Termination
---------------------------------------
Period the employment of a Participant shall terminate, by reason of a
Qualifying Termination, then the Company shall pay to the Participant (or
the Participant's beneficiary or estate) within 30 days following the Date
of Termination, as compensation for services rendered to one or more
Employers:
(1) a cash amount equal to the sum of (i) the Participant's full
annual base salary from the Employers through the Date of Termination, to
the extent not theretofore paid, (ii) the Participant's annual bonus in an
amount at least equal to the highest annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Participant has been employed by the Employers for less than 12 full
months) bonus paid or payable, including by reason of any deferral, to the
Participant by the Employers in respect of the three fiscal years of the
Employers (or such portion thereof during which the Participant performed
services for the Employers if the Participant shall have been employed by
the Employers for less than such three fiscal year period) immediately
preceding the fiscal year in which the Change in Control occurs, multiplied
by a fraction, the numerator of which is the number of days in the fiscal
year in which the Change in Control occurs through the Date of Termination
and the denominator of which is 365 or 366, as
-4-
<PAGE>
applicable, and (iii) any compensation previously deferred by the
Participant (together with any interest and earnings thereon) to the extent
not theretofore paid; plus
(2) a lump-sum cash amount (subject to any applicable payroll or
other taxes required to be withheld pursuant to Section 4) in an amount
equal to three (3) times the Participant's Compensation.
(b) For a period of two years commencing on the Date of Termination, the
Company shall continue to keep in full force and effect all policies of
medical, dental, disability, salary continuance, employee life and group
life insurance with respect to the Participant and his dependents with the
same level of coverage, upon the same terms and otherwise to the same
extent as such policies shall have been in effect immediately prior to the
Date of Termination or, if more favorable to the Participant, as provided
generally with respect to other peer Participants of the Employers, and the
Employers and the Participant shall share the costs of the continuation of
such insurance coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. At the end of the two year
period, the Participant shall be eligible to continued benefits as provided
in the Consolidated Omnibus Budget Reconciliation Act. In addition, for
purposes of determining the Participant's eligibility for participation in
the Employer's retiree medical plan, the Participant shall upon the
Participant's Date of Termination be treated as if he or she is five years
older (but not older than age 55) than on such date and as if he or she had
five additional years of service.
(c) If during the Termination Period the employment of a Participant shall
terminate by reason of a Nonqualifying Termination, then no compensation is
payable nor are benefits extended for the two-year period as provided in
(a) and (b) above.
4. WITHHOLDING TAXES. The Company may withhold from all payments due to the
-----------------
Participant (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise under
-------------------------
this Plan involving termination of a Participant's employment with the
Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Participant, on a current basis, for all legal fees and expenses, if any,
incurred by the Participant in connection with such contest or dispute,
together with interest in an amount equal to the prime rate of Citibank,
N.A. from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to
-5-
<PAGE>
accrue from the date the Company receives the Participant's statement for
such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Participant's claims in such
contest or dispute, the Participant shall be required to reimburse the
Company, over a period of 12 months from the date of such resolution, for
all sums advanced to the Participant pursuant to this Section 5.
6. OPERATIVE EVENT. Notwithstanding any provision herein to the contrary, no
---------------
amounts shall be payable hereunder unless and until there is a Change in
Control at a time when the Participant is employed by an Employer.
7. TERMINATION OF PLAN. This Plan shall be effective on the date hereof and
-------------------
shall continue until terminated by the Company as provided in this
paragraph. The Company shall have the right, prior to a Change in Control,
in its sole discretion, pursuant to action by the Board, to approve the
termination or amendment of this Plan; provided, however, that no such
action shall be taken by the Board during any period of time when the Board
has knowledge that any person has taken steps reasonably calculated to
effect a Change in Control until, in the opinion of the Board, such person
has abandoned or terminated its efforts to effect a Change in Control.
8. PROVISIONAL REDUCTION IN BENEFITS. (a) Notwithstanding anything in this
---------------------------------
Plan to the contrary, (i) if it shall be determined that any payment or
distribution by the Employers to or for the benefit of a Participant
(whether paid or payable or distributed or distributable pursuant to the
terms of this Plan or otherwise, but determined without regard to any
adjustment required under this Section 8) (in the aggregate, the "Total
Payments") would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), and (ii) if after reduction by the amount of
such Excise Tax the amount of the Total Payments would be less than the
maximum amount that could be paid to the Participant without the imposition
of such Excise Tax, then the payments due hereunder shall be reduced so
that the Total Payments are One Dollar ($1) less than such maximum amount.
(b) All determinations required to be made under this Section 8, including
whether and when a reduction in the amount payable hereunder pursuant to
Section 3(a) is required and the amount of any such reduction and the
assumptions to be utilized in arriving at such determination, shall be made
by the Company's public accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is
requested by the Company or the Participant. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
-6-
<PAGE>
entity or group effecting the Change in Control, the Employee shall appoint
another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the
Accounting Firm determines that no Excise Tax is payable by the
Participant, it shall furnish the Employee with the a written opinion that
failure to report the Excise Tax on the Employee's applicable federal
income tax return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be binding
upon the Company, the Subsidiary and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that the reduction in the amount payable hereunder pursuant to Section 3(a)
will not have been made consistent with the calculations required to be
made hereunder. In that event the Participant thereafter shall promptly
pay to the Company the amount of the required reduction.
9. NONCOMPETITION. (a) Covenant Not to Compete. During the period of the
--------------
Participant's employment by the Company and for a period of one year
thereafter following a Qualifying Termination, except with the prior
written consent of the Board, a Participant:
(1) shall not engage in any activities whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of
the stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at
the date hereof by the Company or any of its subsidiaries or affiliates
over which he shall have exercised, directly or indirectly, any
supervisory, management, fiscal or operating control during the Employment
Period (the "Managed Companies"), or (ii) any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period;
(2) shall not solicit, in competition with the Managed Companies, any
person who is a customer of the businesses conducted by the Managed
Companies at the date hereof or of any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period; and
(3) shall not induce or attempt to persuade any employee of the
Managed Companies to terminate his employment relationship in order to
enter into competitive employment.
(b) Trade Secrets. No Participant shall, at any time during the
Employment Period or thereafter, make use of any bidding information (or
-7-
<PAGE>
computer programs thereof) of any of the Managed Companies, nor divulge any
trade secrets or other confidential information of any of the Managed
Companies, except to the extent that such information becomes a matter of
public record, is published in a newspaper, magazine or other periodical
available to the general public or as the Company CEO may so authorize in
writing; and when a Participant shall cease to be employed by the Company,
the Participant shall surrender to the Company all records and other
documents obtained by him or entrusted to him during the course of his
employment hereunder (together with all copies thereof) which pertain
specifically to any of the businesses covered by the covenants in Section
4.01 or which were paid for by any of the Managed Companies; provided,
however, that the Participant may retain copies of such documents as
necessary for the Participant's personal records for federal income tax
purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Participants contained in this Section:
(1) the covenants contained in paragraphs (1) and (2) of Section 10
(a) shall apply within all territories in which any of the Managed
Companies are actively engaged in the conduct of business during the
Employment Period, including, without limitation, the territories in which
customers are then being solicited;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by a Participant of
the covenants contained in Sections 10 (a) and 10 (b), including the
cessation and recovery of payments and benefits paid and provided under
this Plan, it is expressly agreed that such other remedies cannot fully
compensate the Company for any such violation and that the Company shall be
entitled to injunctive relief to prevent any such violation or any
continuing violation thereof;
(3) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 10 (a) and 10 (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
(4) the covenants contained in Sections 10 (a) and 10 (b) shall
survive the conclusion of the Participant's employment by the Company.
10. SCOPE OF PLAN. Nothing in this Plan shall be deemed to entitle the
-------------
Participant to continued employment with any Employer, and if the
-8-
<PAGE>
Participant's employment with the Employers shall terminate prior to a
Change in Control, then the Participant shall have no further rights under
this Plan; provided, however, that any termination of the Participant's
employment following a Change in Control shall be subject to all of the
provisions of this Plan.
11. SUCCESSORS; BINDING PLAN. (a) This Plan shall not be terminated by any
------------------------
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such
merger, consolidation or transfer of assets, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or the person
or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer of assets referred to in paragraph (a) of this Section 11, it will
cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Participant (or his beneficiary or estate), all
of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Plan and
shall entitle the Participant to compensation and other benefits from the
Company in the same amount and on the same terms as the Participant would
be entitled hereunder if the Participant's employment were terminated
following a Change in Control other than by reason of a Nonqualifying
Termination. For purposes of implementing the foregoing, the date on which
any such merger, consolidation or transfer becomes effective shall be
deemed the Date of Termination.
(c) This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Participant
shall die while any amounts would be payable to the Participant hereunder
had the Participant continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Plan to
such person or persons appointed in writing by the Participant to receive
such amounts or, if no person is so appointed, to the Participant's estate.
12. NOTICE. For purposes of the Plan, all notices and other communications
------
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage
prepaid, addressed (1) if to the Participant, to the most recent address
then shown on the employment records of the Participant's Employer, and if
to the Company, to True North Communications Inc., 101 East Erie Street,
Chicago, Illinois 60611-2897, Attention: Secretary, or (2) to such other
-9-
<PAGE>
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. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's obligation
----------------------------------------
to make any payments provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Employers may
have against the Participant or others. In no event shall the Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Participant under any of the
provisions of this Plan and, such amounts shall not be reduced whether or
not the Participant obtains other employment.
(b) If there shall be any dispute between the Employers and the
Participant in the event of any termination of the Participant's
employment, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that such termination was
for Cause, that the determination by the Participant of the existence of a
Qualifying Termination was not made in good faith, or that the Company is
not otherwise obligated to pay any amount or provide any benefit to the
Participant and his dependents or other beneficiaries, as the case may be,
under paragraphs (a) and (b) of Section 3, the Company shall pay all
amounts, and provide all benefits, to the Participant and his dependents or
other beneficiaries, as the case may be, that the Company would be required
to pay or provide pursuant to paragraphs (a) and (b) of Section 3 as though
such termination were by the Company without Cause or by the Participant as
a Qualifying Termination.
14. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of
----------------------------
this Plan shall include employment with any corporation or other entity in
which the Company has direct or indirect ownership interest of 50% or more
of the total combined voting power of the then outstanding securities of
such corporation or other entity entitled to vote generally in the election
of directors.
15. GOVERNING LAW; VALIDITY. The interpretation, construction and performance
-----------------------
of this Plan shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Plan shall not affect the validity or enforceability of
any other provision of this Plan, which other provisions shall remain in
full force and effect.
16. MISCELLANEOUS. Subject to the Company's power of amendment contained in
-------------
Section 7, no provision of this Plan may be modified or waived unless
-10-
<PAGE>
such modification or waiver is agreed to in writing and signed by the
Participant and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Plan to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
Failure by the Participant or the Company to insist upon strict compliance
with any provision of this Plan or to assert any right the Participant or
the Company may have hereunder, including, without limitation, the right of
the Participant to terminate employment for a Qualifying Termination, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Plan. The rights of, and benefits payable to,
the Participant, his estate or his beneficiaries pursuant to this Plan are
in addition to any rights of, or benefits payable to, the Participant, his
estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company, except benefits payable under the
Company's Severance Policy or for any payments that may be required by
statute by reason of termination of employment, except for Unemployment
Compensation, which are inclusive of the payments required under this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a
duly authorized officer of the Company on this 5TH day of JUNE, 1996.
TRUE NORTH COMMUNICATIONS INC.
By:/S/ MITCHELL T. ENGEL
---------------------------
Title: EXEC. V.P.
------------------------
Employee:
/S/ J. BRENDAN RYAN
------------------------------
-11-
<PAGE>
EXHIBIT 10.12
[LOGO OF TRUE NORTH COMMUNICATIONS APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
ASSET PROTECTION PLAN
1. PURPOSE. The purpose of this Asset Protection Plan (the "Plan") is to
-------
secure continued services, dedication and objectivity of certain executive
employees of True North Communications Inc. (the "Company") and its
subsidiaries in the event of any threat or occurrence of, or negotiation or
other hostile action that could lead to, or create the possibility of, a
hostile Change in Control (as defined in Section 2) of the Company, without
concern as to whether such employees might be hindered or distracted by
personal uncertainties and risks created by any such possible hostile Change
in Control.
2. DEFINITIONS. As used in this Agreement, the following terms, when
-----------
capitalized, shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by a Participant of those duties and
responsibilities of the Participant which do not differ in any material
respect from the duties and responsibilities of the Participant during the
90-day period immediately prior to a Change in Control (other than as a
result of incapacity due to physical or mental illness), which is
demonstrably willful and deliberate on the Participant's part, which is
committed in bad faith or without reasonable belief that such breach is in
the best interests of the Company and which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying
such breach or (2) the commission by the Participant of a felony involving
moral turpitude.
(c) "Change in Control" means (i) an acquisition (other than directly from
the Company) of 15% or more of the beneficial interest in the voting stock of
the Company by a party other than the Company or a Company sponsored benefit
plan; or (ii) a change in the Board of Directors as a result of which the
current directors (together with the successors they nominate or approve for
nomination) cease to be a majority of the Board of Directors of the Company;
or (iii) a merger, reorganization or consolidation whereby the existing
shareholders of the Company do not own more than 66-2/3% of the then
outstanding shares resulting from such merger, reorganization
-1-
<PAGE>
or consolidation, provided, however, that none of the foregoing shall be
considered a Change in Control if it is a result of a direct action initiated
by the Company.
(d) "Company" means True North Communications Inc., a Delaware corporation.
(e) "Compensation" means the Participant's annual rate of pay in effect
immediately before a Change in Control occurs, plus the amount of the highest
annual bonus awarded to the Participant in any of the three calendar years
preceding the year in which a Change in Control occurs.
(f) "Date of Termination" means (1) the effective date on which a
Participant's employment by the Company terminates or (2) if the
Participant's employment by the Company terminates by reason of death, the
date of death of the Participant.
(g) "Employee" means an individual whose relationship with an Employer is,
under common law, that of an employee and who performs services for one or
more Employers on a full-time basis.
(h) "Employer" means the Company and any of its affiliates which, with the
consent of the Company, has adopted this Plan.
(i) "Nonqualifying Termination" means a termination of the Participant's
employment (1) by the Participant's Employer for Cause, (2) as a result of
the Participant's death, (3) by the Company due to the Participant's absence
from his duties with the Company on a full-time basis for at least 180
consecutive days as a result of the Participant's incapacity due to physical
or mental illness as is consistent with Company policy and programs or (4) by
the Participant for any reason other than for a Qualifying Termination.
(j) "Participant" shall mean an Employee who, at the time a Change in
Control occurs, is a member of the Company's Management Board.
(k) "Qualifying Termination" means a termination of the Participant's
employment due to the occurrence, without the Participant's expressed written
consent, of any of the following events after the occurrence of a Change in
Control:
(1) any of (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's position(s),
duties, responsibilities or status with the Company immediately prior to such
Change in Control, (ii) a change in the Participant's reporting
responsibilities, titles or offices with the Company as in effect immediately
prior to such Change in Control or (iii) any removal or involuntary
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<PAGE>
termination of the Participant from the Company otherwise than as expressly
permitted by this Agreement or any failure to re-elect the Participant to any
position with the Company held by the Participant immediately prior to such
Change in Control;
(2) a reduction by the Company in the Participant's rate of annual base
salary as in effect immediately prior to such Change in Control or as the
same may be increased from time to time thereafter;
(3) any requirement of the Company that the Participant (i) be based
anywhere other than at the facility where the Participant is located at the
time of the Change in Control or (ii) travel on Company business to an extent
substantially more burdensome than the travel obligations of the Participant
immediately prior to such Change in Control;
(4) the failure of any Employer to (i) continue in effect any employee
benefit plan or compensation plan in which the Participant is participating
immediately prior to such Change in Control, unless the Participant is
permitted to participate in other plans providing the Participant with
substantially comparable benefits, or the taking of any action by the Company
which would adversely affect the Participant's participation in or materially
reduce the Participant's benefits under any such plan, (ii) provide the
Participant and the Participant's dependents welfare benefits including,
without limitation, medical, dental, disability, salary continuance, employee
life, group life, and travel accident insurance plans and programs in
accordance with the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for the Participant
immediately prior to such Change in Control or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to
other peer Participants of the Company and its affiliated companies, (iii)
provide fringe benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies
in effect for the Participant immediately prior to such Change in Control or,
if more favorable to the Participant, as in effect generally at any time
thereafter with respect to other peer Participants of the Company and its
affiliated companies, (iv) provide an office or offices of a size and with
furnishings and other appointments, together with exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Participant by the Company and its affiliated
companies immediately prior to such Change in Control or, if more favorable
to the Participant, as provided generally at any time thereafter with respect
to other peer Participants of the Company and its affiliated companies, (v)
provide the Participant with paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Participant immediately prior to
such Change in Control or, if more
-3-
<PAGE>
favorable to the Participant, as in effect generally at any time thereafter
with respect to other peer Participants of the Company and its affiliated
companies, or (vi) reimburse the Participant promptly for all reasonable
employment expenses incurred by the Participant in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Participant immediately prior to such
Change in Control, or if more favorable to the Participant, as in effect
generally at any time thereafter with respect to other peer Participants of
the Company and its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement from
any successor as contemplated in Section 11(b).
For purposes of the Agreement, any good faith determination of a
Qualifying Termination made by the Participant shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken by an Employer in good faith and which is remedied by such Employer
promptly after receipt of notice thereof given by the Participant shall not
constitute a Qualifying Termination.
(l) "Termination Period" means the period of time beginning with a Change in
Control and ending on the earliest to occur of (1) the Participant's death,
and (2) two years following such Change in Control.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT. (a) If during the Termination
---------------------------------------
Period the employment of a Participant shall terminate, by reason of a
Qualifying Termination, then the Company shall pay to the Participant (or the
Participant's beneficiary or estate) within 30 days following the Date of
Termination, as compensation for services rendered to one or more Employers:
(1) a cash amount equal to the sum of (i) the Participant's full annual
base salary from the Employers through the Date of Termination, to the extent
not theretofore paid, (ii) the Participant's annual bonus in an amount at
least equal to the highest annualized (for any fiscal year consisting of less
than 12 full months or with respect to which the Participant has been
employed by the Employers for less than 12 full months) bonus paid or
payable, including by reason of any deferral, to the Participant by the
Employers in respect of the three fiscal years of the Employers (or such
portion thereof during which the Participant performed services for the
Employers if the Participant shall have been employed by the Employers for
less than such three fiscal year period) immediately preceding the fiscal
year in which the Change in Control occurs, multiplied by a fraction, the
numerator of which is the number of days in the fiscal year in which the
Change in Control occurs through the Date of Termination and the denominator
of which is 365 or 366, as
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<PAGE>
applicable, and (iii) any compensation previously deferred by the Participant
(together with any interest and earnings thereon) to the extent not
theretofore paid; plus
(2) a lump-sum cash amount (subject to any applicable payroll or other
taxes required to be withheld pursuant to Section 4) in an amount equal to
three (3) times the Participant's Compensation.
(b) For a period of two years commencing on the Date of Termination, the
Company shall continue to keep in full force and effect all policies of
medical, dental, disability, salary continuance, employee life and group life
insurance with respect to the Participant and his dependents with the same
level of coverage, upon the same terms and otherwise to the same extent as
such policies shall have been in effect immediately prior to the Date of
Termination or, if more favorable to the Participant, as provided generally
with respect to other peer Participants of the Employers, and the Employers
and the Participant shall share the costs of the continuation of such
insurance coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. At the end of the two year
period, the Participant shall be eligible to continued benefits as provided
in the Consolidated Omnibus Budget Reconciliation Act. In addition, for
purposes of determining the Participant's eligibility for participation in
the Employer's retiree medical plan, the Participant shall upon the
Participant's Date of Termination be treated as if he or she is five years
older (but not older than age 55) than on such date and as if he or she had
five additional years of service.
(c) If during the Termination Period the employment of a Participant shall
terminate by reason of a Nonqualifying Termination, then no compensation is
payable nor are benefits extended for the two-year period as provided in (a)
and (b) above.
4. WITHHOLDING TAXES. The Company may withhold from all payments due to the
-----------------
Participant (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise under this
-------------------------
Plan involving termination of a Participant's employment with the Company or
involving the failure or refusal of the Company to perform fully in
accordance with the terms hereof, the Company shall reimburse the
Participant, on a current basis, for all legal fees and expenses, if any,
incurred by the Participant in connection with such contest or dispute,
together with interest in an amount equal to the prime rate of Citibank, N.A.
from time to time in effect, but in no event higher than the maximum legal
rate permissible under applicable law, such interest to
-5-
<PAGE>
accrue from the date the Company receives the Participant's statement for
such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Participant's claims in such
contest or dispute, the Participant shall be required to reimburse the
Company, over a period of 12 months from the date of such resolution, for all
sums advanced to the Participant pursuant to this Section 5.
6. OPERATIVE EVENT. Notwithstanding any provision herein to the contrary, no
---------------
amounts shall be payable hereunder unless and until there is a Change in
Control at a time when the Participant is employed by an Employer.
7. TERMINATION OF PLAN. This Plan shall be effective on the date hereof and
-------------------
shall continue until terminated by the Company as provided in this paragraph.
The Company shall have the right, prior to a Change in Control, in its sole
discretion, pursuant to action by the Board, to approve the termination or
amendment of this Plan; provided, however, that no such action shall be taken
by the Board during any period of time when the Board has knowledge that any
person has taken steps reasonably calculated to effect a Change in Control
until, in the opinion of the Board, such person has abandoned or terminated
its efforts to effect a Change in Control.
8. PROVISIONAL REDUCTION IN BENEFITS. (a) Notwithstanding anything in this
---------------------------------
Plan to the contrary, (i) if it shall be determined that any payment or
distribution by the Employers to or for the benefit of a Participant (whether
paid or payable or distributed or distributable pursuant to the terms of this
Plan or otherwise, but determined without regard to any adjustment required
under this Section 8) (in the aggregate, the "Total Payments") would be
subject to the excise tax imposed by Section 4999 of the Code (the "Excise
Tax"), and (ii) if after reduction by the amount of such Excise Tax the
amount of the Total Payments would be less than the maximum amount that could
be paid to the Participant without the imposition of such Excise Tax, then
the payments due hereunder shall be reduced so that the Total Payments are
One Dollar ($1) less than such maximum amount.
(b) All determinations required to be made under this Section 8, including
whether and when a reduction in the amount payable hereunder pursuant to
Section 3(a) is required and the amount of any such reduction and the
assumptions to be utilized in arriving at such determination, shall be made
by the Company's public accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Employee
within 15 business days of the receipt of notice from the Participant that
there has been a Payment, or such earlier time as is requested by the Company
or the Participant. In the event that the Accounting Firm is serving as
accountant or auditor for the individual,
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<PAGE>
entity or group effecting the Change in Control, the Employee shall appoint
another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. If the Accounting Firm
determines that no Excise Tax is payable by the Participant, it shall
furnish the Employee with the a written opinion that failure to report the
Excise Tax on the Employee's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company, the
Subsidiary and the Participant. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that the
reduction in the amount payable hereunder pursuant to Section 3(a) will not
have been made consistent with the calculations required to be made
hereunder. In that event the Participant thereafter shall promptly pay to
the Company the amount of the required reduction.
9. NONCOMPETITION. (a) Covenant Not to Compete. During the period of the
--------------
Participant's employment by the Company and for a period of one year
thereafter following a Qualifying Termination, except with the prior written
consent of the Board, a Participant:
(1) shall not engage in any activities whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of
the stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at
the date hereof by the Company or any of its subsidiaries or affiliates over
which he shall have exercised, directly or indirectly, any supervisory,
management, fiscal or operating control during the Employment Period (the
"Managed Companies"), or (ii) any business in which the Managed Companies
are substantially engaged at any time during the Employment Period;
(2) shall not solicit, in competition with the Managed Companies, any
person who is a customer of the businesses conducted by the Managed
Companies at the date hereof or of any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period; and
(3) shall not induce or attempt to persuade any employee of the
Managed Companies to terminate his employment relationship in order to enter
into competitive employment.
(b) Trade Secrets. No Participant shall, at any time during the
Employment Period or thereafter, make use of any bidding information (or
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<PAGE>
computer programs thereof) of any of the Managed Companies, nor divulge any
trade secrets or other confidential information of any of the Managed
Companies, except to the extent that such information becomes a matter of
public record, is published in a newspaper, magazine or other periodical
available to the general public or as the Company CEO may so authorize in
writing; and when a Participant shall cease to be employed by the Company,
the Participant shall surrender to the Company all records and other
documents obtained by him or entrusted to him during the course of his
employment hereunder (together with all copies thereof) which pertain
specifically to any of the businesses covered by the covenants in Section
4.01 or which were paid for by any of the Managed Companies; provided,
however, that the Participant may retain copies of such documents as
necessary for the Participant's personal records for federal income tax
purposes.
(c) Scope of Covenants; Remedies. The following provisions shall apply
to the covenants of the Participants contained in this Section:
(1) the covenants contained in paragraphs (1) and (2) of Section 10 (a)
shall apply within all territories in which any of the Managed Companies are
actively engaged in the conduct of business during the Employment Period,
including, without limitation, the territories in which customers are then
being solicited;
(2) without limiting the right of the Company to pursue all other legal
and equitable remedies available for violation by a Participant of the
covenants contained in Sections 10 (a) and 10 (b), including the cessation
and recovery of payments and benefits paid and provided under this Plan, it
is expressly agreed that such other remedies cannot fully compensate the
Company for any such violation and that the Company shall be entitled to
injunctive relief to prevent any such violation or any continuing violation
thereof;
(3) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 10 (a) and 10 (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
(4) the covenants contained in Sections 10 (a) and 10 (b) shall survive
the conclusion of the Participant's employment by the Company.
10. SCOPE OF PLAN. Nothing in this Plan shall be deemed to entitle the
-------------
Participant to continued employment with any Employer, and if the
-8-
<PAGE>
Participant's employment with the Employers shall terminate prior to a
Change in Control, then the Participant shall have no further rights under
this Plan; provided, however, that any termination of the Participant's
employment following a Change in Control shall be subject to all of the
provisions of this Plan.
11. SUCCESSORS; BINDING PLAN. (a) This Plan shall not be terminated by any
------------------------
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such
merger, consolidation or transfer of assets, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or the person
or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer of assets referred to in paragraph (a) of this Section 11, it will
cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Participant (or his beneficiary or estate), all
of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Plan and shall
entitle the Participant to compensation and other benefits from the Company
in the same amount and on the same terms as the Participant would be
entitled hereunder if the Participant's employment were terminated following
a Change in Control other than by reason of a Nonqualifying Termination. For
purposes of implementing the foregoing, the date on which any such merger,
consolidation or transfer becomes effective shall be deemed the Date of
Termination.
(c) This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Participant
shall die while any amounts would be payable to the Participant hereunder
had the Participant continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Plan to
such person or persons appointed in writing by the Participant to receive
such amounts or, if no person is so appointed, to the Participant's estate.
12. NOTICE. For purposes of the Plan, all notices and other communications
------
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the United
States mail, certified and return receipt requested, postage prepaid,
addressed (1) if to the Participant, to the most recent address then shown
on the employment records of the Participant's Employer, and if to the
Company, to True North Communications Inc., 101 East Erie Street, Chicago,
Illinois 60611-2897, Attention: Secretary, or (2) to such other
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<PAGE>
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. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's obligation to
----------------------------------------
make any payments provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Employers may
have against the Participant or others. In no event shall the Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Participant under any of the
provisions of this Plan and, such amounts shall not be reduced whether or
not the Participant obtains other employment.
(b) If there shall be any dispute between the Employers and the Participant
in the event of any termination of the Participant's employment, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause, that
the determination by the Participant of the existence of a Qualifying
Termination was not made in good faith, or that the Company is not otherwise
obligated to pay any amount or provide any benefit to the Participant and
his dependents or other beneficiaries, as the case may be, under paragraphs
(a) and (b) of Section 3, the Company shall pay all amounts, and provide all
benefits, to the Participant and his dependents or other beneficiaries, as
the case may be, that the Company would be required to pay or provide
pursuant to paragraphs (a) and (b) of Section 3 as though such termination
were by the Company without Cause or by the Participant as a Qualifying
Termination.
14. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of
----------------------------
this Plan shall include employment with any corporation or other entity in
which the Company has direct or indirect ownership interest of 50% or more
of the total combined voting power of the then outstanding securities of
such corporation or other entity entitled to vote generally in the election
of directors.
15. GOVERNING LAW; VALIDITY. The interpretation, construction and performance
-----------------------
of this Plan shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Plan shall not affect the validity or enforceability of
any other provision of this Plan, which other provisions shall remain in
full force and effect.
16. MISCELLANEOUS. Subject to the Company's power of amendment contained in
-------------
Section 7, no provision of this Plan may be modified or waived unless
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<PAGE>
such modification or waiver is agreed to in writing and signed by the
Participant and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Plan to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
Failure by the Participant or the Company to insist upon strict compliance
with any provision of this Plan or to assert any right the Participant or
the Company may have hereunder, including, without limitation, the right of
the Participant to terminate employment for a Qualifying Termination, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Plan. The rights of, and benefits payable to, the
Participant, his estate or his beneficiaries pursuant to this Plan are in
addition to any rights of, or benefits payable to, the Participant, his
estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company, except benefits payable under the
Company's Severance Policy or for any payments that may be required by
statute by reason of termination of employment, except for Unemployment
Compensation, which are inclusive of the payments required under this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a
duly authorized officer of the Company on this 5TH day of JUNE 1996.
--- ----------
TRUE NORTH COMMUNICAIONS INC.
By:/s/ GREGORY W. BLAINE
-----------------------------------
Title: EVP
------------------------------
Employee:
/s/ TERRY ASHWILL
--------------------------------------
-11-
<PAGE>
EXHIBIT 10.13
[LOGO OF TRUE NORTH COMMUNICATIONS INC. APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
ASSET PROTECTION PLAN
1. PURPOSE. The purpose of this Asset Protection Plan (the "Plan") is to
-------
secure continued services, dedication and objectivity of certain executive
employees of True North Communications Inc. (the "Company") and its
subsidiaries in the event of any threat or occurrence of, or negotiation or
other hostile action that could lead to, or create the possibility of, a
hostile Change in Control (as defined in Section 2) of the Company, without
concern as to whether such employees might be hindered or distracted by
personal uncertainties and risks created by any such possible hostile
Change in Control.
2. DEFINITIONS. As used in this Agreement, the following terms, when
-----------
capitalized, shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by a Participant of those duties
and responsibilities of the Participant which do not differ in any material
respect from the duties and responsibilities of the Participant during the
90-day period immediately prior to a Change in Control (other than as a
result of incapacity due to physical or mental illness), which is
demonstrably willful and deliberate on the Participant's part, which is
committed in bad faith or without reasonable belief that such breach is in
the best interests of the Company and which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying
such breach or (2) the commission by the Participant of a felony involving
moral turpitude.
(c) "Change in Control" means (i) an acquisition (other than directly from
the Company) of 15% or more of the beneficial interest in the voting stock
of the Company by a party other than the Company or a Company sponsored
benefit plan; or (ii) a change in the Board of Directors as a result of
which the current directors (together with the successors they nominate or
approve for nomination) cease to be a majority of the Board of Directors of
the Company; or (iii) a merger, reorganization or consolidation whereby the
existing shareholders of the Company do not own more than 66-2/3% of the
then outstanding shares resulting from such merger, reorganization
-1-
<PAGE>
or consolidation, provided, however, that none of the foregoing shall be
considered a Change in Control if it is a result of a direct action
initiated by the Company.
(d) "Company" means True North Communications Inc., a Delaware
corporation.
(e) "Compensation" means the Participant's annual rate of pay in effect
immediately before a Change in Control occurs, plus the amount of the
highest annual bonus awarded to the Participant in any of the three
calendar years preceding the year in which a Change in Control occurs.
(f) "Date of Termination" means (1) the effective date on which a
Participant's employment by the Company terminates or (2) if the
Participant's employment by the Company terminates by reason of death, the
date of death of the Participant.
(g) "Employee" means an individual whose relationship with an Employer is,
under common law, that of an employee and who performs services for one or
more Employers on a full-time basis.
(h) "Employer" means the Company and any of its affiliates which, with the
consent of the Company, has adopted this Plan.
(i) "Nonqualifying Termination" means a termination of the Participant's
employment (1) by the Participant's Employer for Cause, (2) as a result of
the Participant's death, (3) by the Company due to the Participant's
absence from his duties with the Company on a full-time basis for at least
180 consecutive days as a result of the Participant's incapacity due to
physical or mental illness as is consistent with Company policy and
programs or (4) by the Participant for any reason other than for a
Qualifying Termination.
(j) "Participant" shall mean an Employee who, at the time a Change in
Control occurs, is a member of the Company's Management Board.
(k) "Qualifying Termination" means a termination of the Participant's
employment due to the occurrence, without the Participant's expressed
written consent, of any of the following events after the occurrence of a
Change in Control:
(1) any of (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's position(s),
duties, responsibilities or status with the Company immediately prior to
such Change in Control, (ii) a change in the Participant's reporting
responsibilities, titles or offices with the Company as in effect
immediately prior to such Change in Control or (iii) any removal or
involuntary
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<PAGE>
termination of the Participant from the Company otherwise than as expressly
permitted by this Agreement or any failure to re-elect the Participant to
any position with the Company held by the Participant immediately prior to
such Change in Control;
(2) a reduction by the Company in the Participant's rate of annual
base salary as in effect immediately prior to such Change in Control or as
the same may be increased from time to time thereafter;
(3) any requirement of the Company that the Participant (i) be based
anywhere other than at the facility where the Participant is located at the
time of the Change in Control or (ii) travel on Company business to an
extent substantially more burdensome than the travel obligations of the
Participant immediately prior to such Change in Control;
(4) the failure of any Employer to (i) continue in effect any
employee benefit plan or compensation plan in which the Participant is
participating immediately prior to such Change in Control, unless the
Participant is permitted to participate in other plans providing the
Participant with substantially comparable benefits, or the taking of any
action by the Company which would adversely affect the Participant's
participation in or materially reduce the Participant's benefits under any
such plan, (ii) provide the Participant and the Participant's dependents
welfare benefits including, without limitation, medical, dental,
disability, salary continuance, employee life, group life, and travel
accident insurance plans and programs in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Participant immediately prior to such Change in
Control or, if more favorable to the Participant, as in effect generally at
any time thereafter with respect to other peer Participants of the Company
and its affiliated companies, (iii) provide fringe benefits in accordance
with the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Participant
immediately prior to such Change in Control or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to
other peer Participants of the Company and its affiliated companies, (iv)
provide an office or offices of a size and with furnishings and other
appointments, together with exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Participant by the Company and its affiliated companies immediately
prior to such Change in Control or, if more favorable to the Participant,
as provided generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies, (v) provide the
Participant with paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies as in effect for the Participant immediately prior to such Change
in Control or, if more
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<PAGE>
favorable to the Participant, as in effect generally at any time thereafter
with respect to other peer Participants of the Company and its affiliated
companies, or (vi) reimburse the Participant promptly for all reasonable
employment expenses incurred by the Participant in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Participant immediately prior to
such Change in Control, or if more favorable to the Participant, as in
effect generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 11(b).
For purposes of the Agreement, any good faith determination of a
Qualifying Termination made by the Participant shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken by an Employer in good faith and which is remedied by such Employer
promptly after receipt of notice thereof given by the Participant shall not
constitute a Qualifying Termination.
(l) "Termination Period" means the period of time beginning with a Change
in Control and ending on the earliest to occur of (1) the Participant's
death, and (2) two years following such Change in Control.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT. (a) If during the Termination
---------------------------------------
Period the employment of a Participant shall terminate, by reason of a
Qualifying Termination, then the Company shall pay to the Participant (or
the Participant's beneficiary or estate) within 30 days following the Date
of Termination, as compensation for services rendered to one or more
Employers:
(1) a cash amount equal to the sum of (i) the Participant's full
annual base salary from the Employers through the Date of Termination, to
the extent not theretofore paid, (ii) the Participant's annual bonus in an
amount at least equal to the highest annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Participant has been employed by the Employers for less than 12 full
months) bonus paid or payable, including by reason of any deferral, to the
Participant by the Employers in respect of the three fiscal years of the
Employers (or such portion thereof during which the Participant performed
services for the Employers if the Participant shall have been employed by
the Employers for less than such three fiscal year period) immediately
preceding the fiscal year in which the Change in Control occurs, multiplied
by a fraction, the numerator of which is the number of days in the fiscal
year in which the Change in Control occurs through the Date of Termination
and the denominator of which is 365 or 366, as
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applicable, and (iii) any compensation previously deferred by the
Participant (together with any interest and earnings thereon) to the extent
not theretofore paid; plus
(2) a lump-sum cash amount (subject to any applicable payroll or
other taxes required to be withheld pursuant to Section 4) in an amount
equal to three (3) times the Participant's Compensation.
(b) For a period of two years commencing on the Date of Termination, the
Company shall continue to keep in full force and effect all policies of
medical, dental, disability, salary continuance, employee life and group
life insurance with respect to the Participant and his dependents with the
same level of coverage, upon the same terms and otherwise to the same
extent as such policies shall have been in effect immediately prior to the
Date of Termination or, if more favorable to the Participant, as provided
generally with respect to other peer Participants of the Employers, and the
Employers and the Participant shall share the costs of the continuation of
such insurance coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. At the end of the two year
period, the Participant shall be eligible to continued benefits as provided
in the Consolidated Omnibus Budget Reconciliation Act. In addition, for
purposes of determining the Participant's eligibility for participation in
the Employer's retiree medical plan, the Participant shall upon the
Participant's Date of Termination be treated as if he or she is five years
older (but not older than age 55) than on such date and as if he or she had
five additional years of service.
(c) If during the Termination Period the employment of a Participant shall
terminate by reason of a Nonqualifying Termination, then no compensation is
payable nor are benefits extended for the two-year period as provided in
(a) and (b) above.
4. WITHHOLDING TAXES. The Company may withhold from all payments due to the
-----------------
Participant (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise under
-------------------------
this Plan involving termination of a Participant's employment with the
Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Participant, on a current basis, for all legal fees and expenses, if any,
incurred by the Participant in connection with such contest or dispute,
together with interest in an amount equal to the prime rate of Citibank,
N.A. from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to
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<PAGE>
accrue from the date the Company receives the Participant's statement for
such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Participant's claims in such
contest or dispute, the Participant shall be required to reimburse the
Company, over a period of 12 months from the date of such resolution, for
all sums advanced to the Participant pursuant to this Section 5.
6. OPERATIVE EVENT. Notwithstanding any provision herein to the contrary, no
---------------
amounts shall be payable hereunder unless and until there is a Change in
Control at a time when the Participant is employed by an Employer.
7. TERMINATION OF PLAN. This Plan shall be effective on the date hereof and
-------------------
shall continue until terminated by the Company as provided in this
paragraph. The Company shall have the right, prior to a Change in Control,
in its sole discretion, pursuant to action by the Board, to approve the
termination or amendment of this Plan; provided, however, that no such
action shall be taken by the Board during any period of time when the Board
has knowledge that any person has taken steps reasonably calculated to
effect a Change in Control until, in the opinion of the Board, such person
has abandoned or terminated its efforts to effect a Change in Control.
8. PROVISIONAL REDUCTION IN BENEFITS. (a) Notwithstanding anything in this
---------------------------------
Plan to the contrary, (i) if it shall be determined that any payment or
distribution by the Employers to or for the benefit of a Participant
(whether paid or payable or distributed or distributable pursuant to the
terms of this Plan or otherwise, but determined without regard to any
adjustment required under this Section 8) (in the aggregate, the "Total
Payments") would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), and (ii) if after reduction by the amount of
such Excise Tax the amount of the Total Payments would be less than the
maximum amount that could be paid to the Participant without the imposition
of such Excise Tax, then the payments due hereunder shall be reduced so
that the Total Payments are One Dollar ($1) less than such maximum amount.
(b) All determinations required to be made under this Section 8, including
whether and when a reduction in the amount payable hereunder pursuant to
Section 3(a) is required and the amount of any such reduction and the
assumptions to be utilized in arriving at such determination, shall be made
by the Company's public accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is
requested by the Company or the Participant. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
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<PAGE>
entity or group effecting the Change in Control, the Employee shall appoint
another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the
Accounting Firm determines that no Excise Tax is payable by the
Participant, it shall furnish the Employee with the a written opinion that
failure to report the Excise Tax on the Employee's applicable federal
income tax return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be binding
upon the Company, the Subsidiary and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that the reduction in the amount payable hereunder pursuant to Section 3(a)
will not have been made consistent with the calculations required to be
made hereunder. In that event the Participant thereafter shall promptly
pay to the Company the amount of the required reduction.
9. NONCOMPETITION. (a) Covenant Not to Compete. During the period of the
--------------
Participant's employment by the Company and for a period of one year
thereafter following a Qualifying Termination, except with the prior
written consent of the Board, a Participant:
(1) shall not engage in any activities whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of
the stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at
the date hereof by the Company or any of its subsidiaries or affiliates
over which he shall have exercised, directly or indirectly, any
supervisory, management, fiscal or operating control during the Employment
Period (the "Managed Companies"), or (ii) any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period;
(2) shall not solicit, in competition with the Managed Companies, any
person who is a customer of the businesses conducted by the Managed
Companies at the date hereof or of any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period; and
(3) shall not induce or attempt to persuade any employee of the
Managed Companies to terminate his employment relationship in order to
enter into competitive employment.
(b) Trade Secrets. No Participant shall, at any time during the
Employment Period or thereafter, make use of any bidding information (or
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<PAGE>
computer programs thereof) of any of the Managed Companies, nor divulge any
trade secrets or other confidential information of any of the Managed
Companies, except to the extent that such information becomes a matter of
public record, is published in a newspaper, magazine or other periodical
available to the general public or as the Company CEO may so authorize in
writing; and when a Participant shall cease to be employed by the Company,
the Participant shall surrender to the Company all records and other
documents obtained by him or entrusted to him during the course of his
employment hereunder (together with all copies thereof) which pertain
specifically to any of the businesses covered by the covenants in Section
4.01 or which were paid for by any of the Managed Companies; provided,
however, that the Participant may retain copies of such documents as
necessary for the Participant's personal records for federal income tax
purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Participants contained in this Section:
(1) the covenants contained in paragraphs (1) and (2) of Section 10
(a) shall apply within all territories in which any of the Managed
Companies are actively engaged in the conduct of business during the
Employment Period, including, without limitation, the territories in which
customers are then being solicited;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by a Participant of
the covenants contained in Sections 10 (a) and 10 (b), including the
cessation and recovery of payments and benefits paid and provided under
this Plan, it is expressly agreed that such other remedies cannot fully
compensate the Company for any such violation and that the Company shall be
entitled to injunctive relief to prevent any such violation or any
continuing violation thereof;
(3) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 10 (a) and 10 (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
(4) the covenants contained in Sections 10 (a) and 10 (b) shall
survive the conclusion of the Participant's employment by the Company.
10. SCOPE OF PLAN. Nothing in this Plan shall be deemed to entitle the
-------------
Participant to continued employment with any Employer, and if the
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<PAGE>
Participant's employment with the Employers shall terminate prior to a
Change in Control, then the Participant shall have no further rights under
this Plan; provided, however, that any termination of the Participant's
employment following a Change in Control shall be subject to all of the
provisions of this Plan.
11. SUCCESSORS; BINDING PLAN. (a) This Plan shall not be terminated by any
------------------------
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such
merger, consolidation or transfer of assets, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or the person
or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer of assets referred to in paragraph (a) of this Section 11, it will
cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Participant (or his beneficiary or estate), all
of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Plan and
shall entitle the Participant to compensation and other benefits from the
Company in the same amount and on the same terms as the Participant would
be entitled hereunder if the Participant's employment were terminated
following a Change in Control other than by reason of a Nonqualifying
Termination. For purposes of implementing the foregoing, the date on which
any such merger, consolidation or transfer becomes effective shall be
deemed the Date of Termination.
(c) This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Participant
shall die while any amounts would be payable to the Participant hereunder
had the Participant continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Plan to
such person or persons appointed in writing by the Participant to receive
such amounts or, if no person is so appointed, to the Participant's estate.
12. NOTICE. For purposes of the Plan, all notices and other communications
------
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage
prepaid, addressed (1) if to the Participant, to the most recent address
then shown on the employment records of the Participant's Employer, and if
to the Company, to True North Communications Inc., 101 East Erie Street,
Chicago, Illinois 60611-2897, Attention: Secretary, or (2) to such other
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<PAGE>
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. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's obligation
----------------------------------------
to make any payments provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Employers may
have against the Participant or others. In no event shall the Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Participant under any of the
provisions of this Plan and, such amounts shall not be reduced whether or
not the Participant obtains other employment.
(b) If there shall be any dispute between the Employers and the
Participant in the event of any termination of the Participant's
employment, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that such termination was
for Cause, that the determination by the Participant of the existence of a
Qualifying Termination was not made in good faith, or that the Company is
not otherwise obligated to pay any amount or provide any benefit to the
Participant and his dependents or other beneficiaries, as the case may be,
under paragraphs (a) and (b) of Section 3, the Company shall pay all
amounts, and provide all benefits, to the Participant and his dependents or
other beneficiaries, as the case may be, that the Company would be required
to pay or provide pursuant to paragraphs (a) and (b) of Section 3 as though
such termination were by the Company without Cause or by the Participant as
a Qualifying Termination.
14. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of
----------------------------
this Plan shall include employment with any corporation or other entity in
which the Company has direct or indirect ownership interest of 50% or more
of the total combined voting power of the then outstanding securities of
such corporation or other entity entitled to vote generally in the election
of directors.
15. GOVERNING LAW; VALIDITY. The interpretation, construction and performance
-----------------------
of this Plan shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Plan shall not affect the validity or enforceability of
any other provision of this Plan, which other provisions shall remain in
full force and effect.
16. MISCELLANEOUS. Subject to the Company's power of amendment contained in
-------------
Section 7, no provision of this Plan may be modified or waived unless
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<PAGE>
such modification or waiver is agreed to in writing and signed by the
Participant and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Plan to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
Failure by the Participant or the Company to insist upon strict compliance
with any provision of this Plan or to assert any right the Participant or
the Company may have hereunder, including, without limitation, the right of
the Participant to terminate employment for a Qualifying Termination, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Plan. The rights of, and benefits payable to,
the Participant, his estate or his beneficiaries pursuant to this Plan are
in addition to any rights of, or benefits payable to, the Participant, his
estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company, except benefits payable under the
Company's Severance Policy or for any payments that may be required by
statute by reason of termination of employment, except for Unemployment
Compensation, which are inclusive of the payments required under this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a
duly authorized officer of the Company on this 5TH day of JUNE, 1996.
TRUE NORTH COMMUNICATIONS INC.
By:/S/ GREGORY W. BLAINE
---------------------------
Title: EVP
------------------------
Employee:
/S/ MITCHELL T. ENGEL
------------------------------
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<PAGE>
EXHIBIT 10.14
[LOGO OF TRUE NORTH COMMUNICATIONS INC. APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
ASSET PROTECTION PLAN
1. PURPOSE. The purpose of this Asset Protection Plan (the "Plan") is to
-------
secure continued services, dedication and objectivity of certain executive
employees of True North Communications Inc. (the "Company") and its
subsidiaries in the event of any threat or occurrence of, or negotiation or
other hostile action that could lead to, or create the possibility of, a
hostile Change in Control (as defined in Section 2) of the Company, without
concern as to whether such employees might be hindered or distracted by
personal uncertainties and risks created by any such possible hostile
Change in Control.
2. DEFINITIONS. As used in this Agreement, the following terms, when
-----------
capitalized, shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by a Participant of those duties
and responsibilities of the Participant which do not differ in any material
respect from the duties and responsibilities of the Participant during the
90-day period immediately prior to a Change in Control (other than as a
result of incapacity due to physical or mental illness), which is
demonstrably willful and deliberate on the Participant's part, which is
committed in bad faith or without reasonable belief that such breach is in
the best interests of the Company and which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying
such breach or (2) the commission by the Participant of a felony involving
moral turpitude.
(c) "Change in Control" means (i) an acquisition (other than directly from
the Company) of 15% or more of the beneficial interest in the voting stock
of the Company by a party other than the Company or a Company sponsored
benefit plan; or (ii) a change in the Board of Directors as a result of
which the current directors (together with the successors they nominate or
approve for nomination) cease to be a majority of the Board of Directors of
the Company; or (iii) a merger, reorganization or consolidation whereby the
existing shareholders of the Company do not own more than 66-2/3% of the
then outstanding shares resulting from such merger, reorganization
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<PAGE>
or consolidation, provided, however, that none of the foregoing shall be
considered a Change in Control if it is a result of a direct action
initiated by the Company.
(d) "Company" means True North Communications Inc., a Delaware
corporation.
(e) "Compensation" means the Participant's annual rate of pay in effect
immediately before a Change in Control occurs, plus the amount of the
highest annual bonus awarded to the Participant in any of the three
calendar years preceding the year in which a Change in Control occurs.
(f) "Date of Termination" means (1) the effective date on which a
Participant's employment by the Company terminates or (2) if the
Participant's employment by the Company terminates by reason of death, the
date of death of the Participant.
(g) "Employee" means an individual whose relationship with an Employer is,
under common law, that of an employee and who performs services for one or
more Employers on a full-time basis.
(h) "Employer" means the Company and any of its affiliates which, with the
consent of the Company, has adopted this Plan.
(i) "Nonqualifying Termination" means a termination of the Participant's
employment (1) by the Participant's Employer for Cause, (2) as a result of
the Participant's death, (3) by the Company due to the Participant's
absence from his duties with the Company on a full-time basis for at least
180 consecutive days as a result of the Participant's incapacity due to
physical or mental illness as is consistent with Company policy and
programs or (4) by the Participant for any reason other than for a
Qualifying Termination.
(j) "Participant" shall mean an Employee who, at the time a Change in
Control occurs, is a member of the Company's Management Board.
(k) "Qualifying Termination" means a termination of the Participant's
employment due to the occurrence, without the Participant's expressed
written consent, of any of the following events after the occurrence of a
Change in Control:
(1) any of (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's position(s),
duties, responsibilities or status with the Company immediately prior to
such Change in Control, (ii) a change in the Participant's reporting
responsibilities, titles or offices with the Company as in effect
immediately prior to such Change in Control or (iii) any removal or
involuntary
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<PAGE>
termination of the Participant from the Company otherwise than as expressly
permitted by this Agreement or any failure to re-elect the Participant to
any position with the Company held by the Participant immediately prior to
such Change in Control;
(2) a reduction by the Company in the Participant's rate of annual
base salary as in effect immediately prior to such Change in Control or as
the same may be increased from time to time thereafter;
(3) any requirement of the Company that the Participant (i) be based
anywhere other than at the facility where the Participant is located at the
time of the Change in Control or (ii) travel on Company business to an
extent substantially more burdensome than the travel obligations of the
Participant immediately prior to such Change in Control;
(4) the failure of any Employer to (i) continue in effect any
employee benefit plan or compensation plan in which the Participant is
participating immediately prior to such Change in Control, unless the
Participant is permitted to participate in other plans providing the
Participant with substantially comparable benefits, or the taking of any
action by the Company which would adversely affect the Participant's
participation in or materially reduce the Participant's benefits under any
such plan, (ii) provide the Participant and the Participant's dependents
welfare benefits including, without limitation, medical, dental,
disability, salary continuance, employee life, group life, and travel
accident insurance plans and programs in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Participant immediately prior to such Change in
Control or, if more favorable to the Participant, as in effect generally at
any time thereafter with respect to other peer Participants of the Company
and its affiliated companies, (iii) provide fringe benefits in accordance
with the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Participant
immediately prior to such Change in Control or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to
other peer Participants of the Company and its affiliated companies, (iv)
provide an office or offices of a size and with furnishings and other
appointments, together with exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Participant by the Company and its affiliated companies immediately
prior to such Change in Control or, if more favorable to the Participant,
as provided generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies, (v) provide the
Participant with paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies as in effect for the Participant immediately prior to such Change
in Control or, if more
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<PAGE>
favorable to the Participant, as in effect generally at any time thereafter
with respect to other peer Participants of the Company and its affiliated
companies, or (vi) reimburse the Participant promptly for all reasonable
employment expenses incurred by the Participant in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Participant immediately prior to
such Change in Control, or if more favorable to the Participant, as in
effect generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 11(b).
For purposes of the Agreement, any good faith determination of a
Qualifying Termination made by the Participant shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken by an Employer in good faith and which is remedied by such Employer
promptly after receipt of notice thereof given by the Participant shall not
constitute a Qualifying Termination.
(l) "Termination Period" means the period of time beginning with a Change
in Control and ending on the earliest to occur of (1) the Participant's
death, and (2) two years following such Change in Control.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT. (a) If during the Termination
---------------------------------------
Period the employment of a Participant shall terminate, by reason of a
Qualifying Termination, then the Company shall pay to the Participant (or
the Participant's beneficiary or estate) within 30 days following the Date
of Termination, as compensation for services rendered to one or more
Employers:
(1) a cash amount equal to the sum of (i) the Participant's full
annual base salary from the Employers through the Date of Termination, to
the extent not theretofore paid, (ii) the Participant's annual bonus in an
amount at least equal to the highest annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Participant has been employed by the Employers for less than 12 full
months) bonus paid or payable, including by reason of any deferral, to the
Participant by the Employers in respect of the three fiscal years of the
Employers (or such portion thereof during which the Participant performed
services for the Employers if the Participant shall have been employed by
the Employers for less than such three fiscal year period) immediately
preceding the fiscal year in which the Change in Control occurs, multiplied
by a fraction, the numerator of which is the number of days in the fiscal
year in which the Change in Control occurs through the Date of Termination
and the denominator of which is 365 or 366, as
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applicable, and (iii) any compensation previously deferred by the
Participant (together with any interest and earnings thereon) to the extent
not theretofore paid; plus
(2) a lump-sum cash amount (subject to any applicable payroll or
other taxes required to be withheld pursuant to Section 4) in an amount
equal to three (3) times the Participant's Compensation.
(b) For a period of two years commencing on the Date of Termination, the
Company shall continue to keep in full force and effect all policies of
medical, dental, disability, salary continuance, employee life and group
life insurance with respect to the Participant and his dependents with the
same level of coverage, upon the same terms and otherwise to the same
extent as such policies shall have been in effect immediately prior to the
Date of Termination or, if more favorable to the Participant, as provided
generally with respect to other peer Participants of the Employers, and the
Employers and the Participant shall share the costs of the continuation of
such insurance coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. At the end of the two year
period, the Participant shall be eligible to continued benefits as provided
in the Consolidated Omnibus Budget Reconciliation Act. In addition, for
purposes of determining the Participant's eligibility for participation in
the Employer's retiree medical plan, the Participant shall upon the
Participant's Date of Termination be treated as if he or she is five years
older (but not older than age 55) than on such date and as if he or she had
five additional years of service.
(c) If during the Termination Period the employment of a Participant shall
terminate by reason of a Nonqualifying Termination, then no compensation is
payable nor are benefits extended for the two-year period as provided in
(a) and (b) above.
4. WITHHOLDING TAXES. The Company may withhold from all payments due to the
-----------------
Participant (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise under
-------------------------
this Plan involving termination of a Participant's employment with the
Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Participant, on a current basis, for all legal fees and expenses, if any,
incurred by the Participant in connection with such contest or dispute,
together with interest in an amount equal to the prime rate of Citibank,
N.A. from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to
-5-
<PAGE>
accrue from the date the Company receives the Participant's statement for
such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Participant's claims in such
contest or dispute, the Participant shall be required to reimburse the
Company, over a period of 12 months from the date of such resolution, for
all sums advanced to the Participant pursuant to this Section 5.
6. OPERATIVE EVENT. Notwithstanding any provision herein to the contrary, no
---------------
amounts shall be payable hereunder unless and until there is a Change in
Control at a time when the Participant is employed by an Employer.
7. TERMINATION OF PLAN. This Plan shall be effective on the date hereof and
-------------------
shall continue until terminated by the Company as provided in this
paragraph. The Company shall have the right, prior to a Change in Control,
in its sole discretion, pursuant to action by the Board, to approve the
termination or amendment of this Plan; provided, however, that no such
action shall be taken by the Board during any period of time when the Board
has knowledge that any person has taken steps reasonably calculated to
effect a Change in Control until, in the opinion of the Board, such person
has abandoned or terminated its efforts to effect a Change in Control.
8. PROVISIONAL REDUCTION IN BENEFITS. (a) Notwithstanding anything in this
---------------------------------
Plan to the contrary, (i) if it shall be determined that any payment or
distribution by the Employers to or for the benefit of a Participant
(whether paid or payable or distributed or distributable pursuant to the
terms of this Plan or otherwise, but determined without regard to any
adjustment required under this Section 8) (in the aggregate, the "Total
Payments") would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), and (ii) if after reduction by the amount of
such Excise Tax the amount of the Total Payments would be less than the
maximum amount that could be paid to the Participant without the imposition
of such Excise Tax, then the payments due hereunder shall be reduced so
that the Total Payments are One Dollar ($1) less than such maximum amount.
(b) All determinations required to be made under this Section 8, including
whether and when a reduction in the amount payable hereunder pursuant to
Section 3(a) is required and the amount of any such reduction and the
assumptions to be utilized in arriving at such determination, shall be made
by the Company's public accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is
requested by the Company or the Participant. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
-6-
<PAGE>
entity or group effecting the Change in Control, the Employee shall appoint
another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. If the Accounting
Firm determines that no Excise Tax is payable by the Participant, it shall
furnish the Employee with the a written opinion that failure to report the
Excise Tax on the Employee's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company, the
Subsidiary and the Participant. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that the
reduction in the amount payable hereunder pursuant to Section 3(a) will not
have been made consistent with the calculations required to be made
hereunder. In that event the Participant thereafter shall promptly pay to
the Company the amount of the required reduction.
9. NONCOMPETITION. (a) Covenant Not to Compete. During the period of the
--------------
Participant's employment by the Company and for a period of one year
thereafter following a Qualifying Termination, except with the prior
written consent of the Board, a Participant:
(1) shall not engage in any activities whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of
the stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at
the date hereof by the Company or any of its subsidiaries or affiliates
over which he shall have exercised, directly or indirectly, any
supervisory, management, fiscal or operating control during the Employment
Period (the "Managed Companies"), or (ii) any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period;
(2) shall not solicit, in competition with the Managed Companies, any
person who is a customer of the businesses conducted by the Managed
Companies at the date hereof or of any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period; and
(3) shall not induce or attempt to persuade any employee of the
Managed Companies to terminate his employment relationship in order to
enter into competitive employment.
(b) Trade Secrets. No Participant shall, at any time during the
Employment Period or thereafter, make use of any bidding information (or
-7-
<PAGE>
computer programs thereof) of any of the Managed Companies, nor divulge any
trade secrets or other confidential information of any of the Managed
Companies, except to the extent that such information becomes a matter of
public record, is published in a newspaper, magazine or other periodical
available to the general public or as the Company CEO may so authorize in
writing; and when a Participant shall cease to be employed by the Company,
the Participant shall surrender to the Company all records and other
documents obtained by him or entrusted to him during the course of his
employment hereunder (together with all copies thereof) which pertain
specifically to any of the businesses covered by the covenants in Section
4.01 or which were paid for by any of the Managed Companies; provided,
however, that the Participant may retain copies of such documents as
necessary for the Participant's personal records for federal income tax
purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Participants contained in this Section:
(1) the covenants contained in paragraphs (1) and (2) of Section 10
(a) shall apply within all territories in which any of the Managed
Companies are actively engaged in the conduct of business during the
Employment Period, including, without limitation, the territories in which
customers are then being solicited;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by a Participant of
the covenants contained in Sections 10 (a) and 10 (b), including the
cessation and recovery of payments and benefits paid and provided under
this Plan, it is expressly agreed that such other remedies cannot fully
compensate the Company for any such violation and that the Company shall be
entitled to injunctive relief to prevent any such violation or any
continuing violation thereof;
(3) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 10 (a) and 10 (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
(4) the covenants contained in Sections 10 (a) and 10 (b) shall
survive the conclusion of the Participant's employment by the Company.
10. SCOPE OF PLAN. Nothing in this Plan shall be deemed to entitle the
-------------
Participant to continued employment with any Employer, and if the
-8-
<PAGE>
Participant's employment with the Employers shall terminate prior to a
Change in Control, then the Participant shall have no further rights under
this Plan; provided, however, that any termination of the Participant's
employment following a Change in Control shall be subject to all of the
provisions of this Plan.
11. SUCCESSORS; BINDING PLAN. (a) This Plan shall not be terminated by any
------------------------
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such
merger, consolidation or transfer of assets, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or the person
or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer of assets referred to in paragraph (a) of this Section 11, it will
cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Participant (or his beneficiary or estate), all
of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Plan and
shall entitle the Participant to compensation and other benefits from the
Company in the same amount and on the same terms as the Participant would
be entitled hereunder if the Participant's employment were terminated
following a Change in Control other than by reason of a Nonqualifying
Termination. For purposes of implementing the foregoing, the date on which
any such merger, consolidation or transfer becomes effective shall be
deemed the Date of Termination.
(c) This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Participant
shall die while any amounts would be payable to the Participant hereunder
had the Participant continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Plan to
such person or persons appointed in writing by the Participant to receive
such amounts or, if no person is so appointed, to the Participant's estate.
12. NOTICE. For purposes of the Plan, all notices and other communications
------
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage
prepaid, addressed (1) if to the Participant, to the most recent address
then shown on the employment records of the Participant's Employer, and if
to the Company, to True North Communications Inc., 101 East Erie Street,
Chicago, Illinois 60611-2897, Attention: Secretary, or (2) to such other
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<PAGE>
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. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's obligation
---------------------------------------
to make any payments provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Employers may
have against the Participant or others. In no event shall the Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Participant under any of the
provisions of this Plan and, such amounts shall not be reduced whether or
not the Participant obtains other employment.
(b) If there shall be any dispute between the Employers and the
Participant in the event of any termination of the Participant's
employment, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that such termination was
for Cause, that the determination by the Participant of the existence of a
Qualifying Termination was not made in good faith, or that the Company is
not otherwise obligated to pay any amount or provide any benefit to the
Participant and his dependents or other beneficiaries, as the case may be,
under paragraphs (a) and (b) of Section 3, the Company shall pay all
amounts, and provide all benefits, to the Participant and his dependents or
other beneficiaries, as the case may be, that the Company would be required
to pay or provide pursuant to paragraphs (a) and (b) of Section 3 as though
such termination were by the Company without Cause or by the Participant as
a Qualifying Termination.
14. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of
----------------------------
this Plan shall include employment with any corporation or other entity in
which the Company has direct or indirect ownership interest of 50% or more
of the total combined voting power of the then outstanding securities of
such corporation or other entity entitled to vote generally in the election
of directors.
15. GOVERNING LAW; VALIDITY. The interpretation, construction and performance
-----------------------
of this Plan shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Plan shall not affect the validity or enforceability of
any other provision of this Plan, which other provisions shall remain in
full force and effect.
16. MISCELLANEOUS. Subject to the Company's power of amendment contained in
-------------
Section 7, no provision of this Plan may be modified or waived unless
-10-
<PAGE>
such modification or waiver is agreed to in writing and signed by the
Participant and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Plan to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
Failure by the Participant or the Company to insist upon strict compliance
with any provision of this Plan or to assert any right the Participant or
the Company may have hereunder, including, without limitation, the right of
the Participant to terminate employment for a Qualifying Termination, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Plan. The rights of, and benefits payable to,
the Participant, his estate or his beneficiaries pursuant to this Plan are
in addition to any rights of, or benefits payable to, the Participant, his
estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company, except benefits payable under the
Company's Severance Policy or for any payments that may be required by
statute by reason of termination of employment, except for Unemployment
Compensation, which are inclusive of the payments required under this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a
duly authorized officer of the Company on this 5TH day of JUNE, 1996.
--- ----
TRUE NORTH COMMUNICATIONS INC.
By: /S/ MITCHELL T. ENGEL
------------------------------------
Title: Executive VP, Dir. of Corp. Off.
--------------------------------
Employee:
/S/ GREGORY W. BLAINE
---------------------------------------
-11-
<PAGE>
EXHIBIT 10.15
[LOGO OF TRUE NORTH COMMUNICATIONS INC. APPEARS HERE]
TRUE NORTH COMMUNICATIONS INC.
ASSET PROTECTION PLAN
1. PURPOSE. The purpose of this Asset Protection Plan (the "Plan") is to
-------
secure continued services, dedication and objectivity of certain executive
employees of True North Communications Inc. (the "Company") and its
subsidiaries in the event of any threat or occurrence of, or negotiation or
other hostile action that could lead to, or create the possibility of, a
hostile Change in Control (as defined in Section 2) of the Company, without
concern as to whether such employees might be hindered or distracted by
personal uncertainties and risks created by any such possible hostile
Change in Control.
2. DEFINITIONS. As used in this Agreement, the following terms, when
-----------
capitalized, shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by a Participant of those duties
and responsibilities of the Participant which do not differ in any material
respect from the duties and responsibilities of the Participant during the
90-day period immediately prior to a Change in Control (other than as a
result of incapacity due to physical or mental illness), which is
demonstrably willful and deliberate on the Participant's part, which is
committed in bad faith or without reasonable belief that such breach is in
the best interests of the Company and which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying
such breach or (2) the commission by the Participant of a felony involving
moral turpitude.
(c) "Change in Control" means (i) an acquisition (other than directly from
the Company) of 15% or more of the beneficial interest in the voting stock
of the Company by a party other than the Company or a Company sponsored
benefit plan; or (ii) a change in the Board of Directors as a result of
which the current directors (together with the successors they nominate or
approve for nomination) cease to be a majority of the Board of Directors of
the Company; or (iii) a merger, reorganization or consolidation whereby the
existing shareholders of the Company do not own more than 66-2/3% of the
then outstanding shares resulting from such merger, reorganization
-1-
<PAGE>
or consolidation, provided, however, that none of the foregoing shall be
considered a Change in Control if it is a result of a direct action
initiated by the Company.
(d) "Company" means True North Communications Inc., a Delaware
corporation.
(e) "Compensation" means the Participant's annual rate of pay in effect
immediately before a Change in Control occurs, plus the amount of the
highest annual bonus awarded to the Participant in any of the three
calendar years preceding the year in which a Change in Control occurs.
(f) "Date of Termination" means (1) the effective date on which a
Participant's employment by the Company terminates or (2) if the
Participant's employment by the Company terminates by reason of death, the
date of death of the Participant.
(g) "Employee" means an individual whose relationship with an Employer is,
under common law, that of an employee and who performs services for one or
more Employers on a full-time basis.
(h) "Employer" means the Company and any of its affiliates which, with the
consent of the Company, has adopted this Plan.
(i) "Nonqualifying Termination" means a termination of the Participant's
employment (1) by the Participant's Employer for Cause, (2) as a result of
the Participant's death, (3) by the Company due to the Participant's
absence from his duties with the Company on a full-time basis for at least
180 consecutive days as a result of the Participant's incapacity due to
physical or mental illness as is consistent with Company policy and
programs or (4) by the Participant for any reason other than for a
Qualifying Termination.
(j) "Participant" shall mean an Employee who, at the time a Change in
Control occurs, is a member of the Company's Management Board.
(k) "Qualifying Termination" means a termination of the Participant's
employment due to the occurrence, without the Participant's expressed
written consent, of any of the following events after the occurrence of a
Change in Control:
(1) any of (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's position(s),
duties, responsibilities or status with the Company immediately prior to
such Change in Control, (ii) a change in the Participant's reporting
responsibilities, titles or offices with the Company as in effect
immediately prior to such Change in Control or (iii) any removal or
involuntary
-2-
<PAGE>
termination of the Participant from the Company otherwise than as expressly
permitted by this Agreement or any failure to re-elect the Participant to
any position with the Company held by the Participant immediately prior to
such Change in Control;
(2) a reduction by the Company in the Participant's rate of annual
base salary as in effect immediately prior to such Change in Control or as
the same may be increased from time to time thereafter;
(3) any requirement of the Company that the Participant (i) be based
anywhere other than at the facility where the Participant is located at the
time of the Change in Control or (ii) travel on Company business to an
extent substantially more burdensome than the travel obligations of the
Participant immediately prior to such Change in Control;
(4) the failure of any Employer to (i) continue in effect any
employee benefit plan or compensation plan in which the Participant is
participating immediately prior to such Change in Control, unless the
Participant is permitted to participate in other plans providing the
Participant with substantially comparable benefits, or the taking of any
action by the Company which would adversely affect the Participant's
participation in or materially reduce the Participant's benefits under any
such plan, (ii) provide the Participant and the Participant's dependents
welfare benefits including, without limitation, medical, dental,
disability, salary continuance, employee life, group life, and travel
accident insurance plans and programs in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Participant immediately prior to such Change in
Control or, if more favorable to the Participant, as in effect generally at
any time thereafter with respect to other peer Participants of the Company
and its affiliated companies, (iii) provide fringe benefits in accordance
with the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Participant
immediately prior to such Change in Control or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to
other peer Participants of the Company and its affiliated companies, (iv)
provide an office or offices of a size and with furnishings and other
appointments, together with exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Participant by the Company and its affiliated companies immediately
prior to such Change in Control or, if more favorable to the Participant,
as provided generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies, (v) provide the
Participant with paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies as in effect for the Participant immediately prior to such Change
in Control or, if more
-3-
<PAGE>
favorable to the Participant, as in effect generally at any time thereafter
with respect to other peer Participants of the Company and its affiliated
companies, or (vi) reimburse the Participant promptly for all reasonable
employment expenses incurred by the Participant in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Participant immediately prior to
such Change in Control, or if more favorable to the Participant, as in
effect generally at any time thereafter with respect to other peer
Participants of the Company and its affiliated companies; or
(5) the failure of the Company to obtain the assumption agreement
from any successor as contemplated in Section 11(b).
For purposes of the Agreement, any good faith determination of a
Qualifying Termination made by the Participant shall be conclusive;
provided, however, that an isolated, insubstantial and inadvertent action
taken by an Employer in good faith and which is remedied by such Employer
promptly after receipt of notice thereof given by the Participant shall not
constitute a Qualifying Termination.
(l) "Termination Period" means the period of time beginning with a Change
in Control and ending on the earliest to occur of (1) the Participant's
death, and (2) two years following such Change in Control.
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT. (a) If during the Termination
---------------------------------------
Period the employment of a Participant shall terminate, by reason of a
Qualifying Termination, then the Company shall pay to the Participant (or
the Participant's beneficiary or estate) within 30 days following the Date
of Termination, as compensation for services rendered to one or more
Employers:
(1) a cash amount equal to the sum of (i) the Participant's full
annual base salary from the Employers through the Date of Termination, to
the extent not theretofore paid, (ii) the Participant's annual bonus in an
amount at least equal to the highest annualized (for any fiscal year
consisting of less than 12 full months or with respect to which the
Participant has been employed by the Employers for less than 12 full
months) bonus paid or payable, including by reason of any deferral, to the
Participant by the Employers in respect of the three fiscal years of the
Employers (or such portion thereof during which the Participant performed
services for the Employers if the Participant shall have been employed by
the Employers for less than such three fiscal year period) immediately
preceding the fiscal year in which the Change in Control occurs, multiplied
by a fraction, the numerator of which is the number of days in the fiscal
year in which the Change in Control occurs through the Date of Termination
and the denominator of which is 365 or 366, as
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<PAGE>
applicable, and (iii) any compensation previously deferred by the
Participant (together with any interest and earnings thereon) to the extent
not theretofore paid; plus
(2) a lump-sum cash amount (subject to any applicable payroll or
other taxes required to be withheld pursuant to Section 4) in an amount
equal to three (3) times the Participant's Compensation.
(b) For a period of two years commencing on the Date of Termination, the
Company shall continue to keep in full force and effect all policies of
medical, dental, disability, salary continuance, employee life and group
life insurance with respect to the Participant and his dependents with the
same level of coverage, upon the same terms and otherwise to the same
extent as such policies shall have been in effect immediately prior to the
Date of Termination or, if more favorable to the Participant, as provided
generally with respect to other peer Participants of the Employers, and the
Employers and the Participant shall share the costs of the continuation of
such insurance coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination. At the end of the two year
period, the Participant shall be eligible to continued benefits as provided
in the Consolidated Omnibus Budget Reconciliation Act. In addition, for
purposes of determining the Participant's eligibility for participation in
the Employer's retiree medical plan, the Participant shall upon the
Participant's Date of Termination be treated as if he or she is five years
older (but not older than age 55) than on such date and as if he or she had
five additional years of service.
(c) If during the Termination Period the employment of a Participant shall
terminate by reason of a Nonqualifying Termination, then no compensation is
payable nor are benefits extended for the two-year period as provided in
(a) and (b) above.
4. WITHHOLDING TAXES. The Company may withhold from all payments due to the
-----------------
Participant (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise under
-------------------------
this Plan involving termination of a Participant's employment with the
Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Participant, on a current basis, for all legal fees and expenses, if any,
incurred by the Participant in connection with such contest or dispute,
together with interest in an amount equal to the prime rate of Citibank,
N.A. from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to
-5-
<PAGE>
accrue from the date the Company receives the Participant's statement for
such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Participant's claims in such
contest or dispute, the Participant shall be required to reimburse the
Company, over a period of 12 months from the date of such resolution, for
all sums advanced to the Participant pursuant to this Section 5.
6. OPERATIVE EVENT. Notwithstanding any provision herein to the contrary, no
---------------
amounts shall be payable hereunder unless and until there is a Change in
Control at a time when the Participant is employed by an Employer.
7. TERMINATION OF PLAN. This Plan shall be effective on the date hereof and
-------------------
shall continue until terminated by the Company as provided in this
paragraph. The Company shall have the right, prior to a Change in Control,
in its sole discretion, pursuant to action by the Board, to approve the
termination or amendment of this Plan; provided, however, that no such
action shall be taken by the Board during any period of time when the Board
has knowledge that any person has taken steps reasonably calculated to
effect a Change in Control until, in the opinion of the Board, such person
has abandoned or terminated its efforts to effect a Change in Control.
8. PROVISIONAL REDUCTION IN BENEFITS. (a) Notwithstanding anything in this
---------------------------------
Plan to the contrary, (i) if it shall be determined that any payment or
distribution by the Employers to or for the benefit of a Participant
(whether paid or payable or distributed or distributable pursuant to the
terms of this Plan or otherwise, but determined without regard to any
adjustment required under this Section 8) (in the aggregate, the "Total
Payments") would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), and (ii) if after reduction by the amount of
such Excise Tax the amount of the Total Payments would be less than the
maximum amount that could be paid to the Participant without the imposition
of such Excise Tax, then the payments due hereunder shall be reduced so
that the Total Payments are One Dollar ($1) less than such maximum amount.
(b) All determinations required to be made under this Section 8, including
whether and when a reduction in the amount payable hereunder pursuant to
Section 3(a) is required and the amount of any such reduction and the
assumptions to be utilized in arriving at such determination, shall be made
by the Company's public accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is
requested by the Company or the Participant. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
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<PAGE>
entity or group effecting the Change in Control, the Employee shall appoint
another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the
Accounting Firm determines that no Excise Tax is payable by the
Participant, it shall furnish the Employee with the a written opinion that
failure to report the Excise Tax on the Employee's applicable federal
income tax return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be binding
upon the Company, the Subsidiary and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that the reduction in the amount payable hereunder pursuant to Section 3(a)
will not have been made consistent with the calculations required to be
made hereunder. In that event the Participant thereafter shall promptly
pay to the Company the amount of the required reduction.
9. NONCOMPETITION. (a) Covenant Not to Compete. During the period of the
--------------
Participant's employment by the Company and for a period of one year
thereafter following a Qualifying Termination, except with the prior
written consent of the Board, a Participant:
(1) shall not engage in any activities whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of
the stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at
the date hereof by the Company or any of its subsidiaries or affiliates
over which he shall have exercised, directly or indirectly, any
supervisory, management, fiscal or operating control during the Employment
Period (the "Managed Companies"), or (ii) any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period;
(2) shall not solicit, in competition with the Managed Companies, any
person who is a customer of the businesses conducted by the Managed
Companies at the date hereof or of any business in which the Managed
Companies are substantially engaged at any time during the Employment
Period; and
(3) shall not induce or attempt to persuade any employee of the
Managed Companies to terminate his employment relationship in order to
enter into competitive employment.
(b) Trade Secrets. No Participant shall, at any time during the
Employment Period or thereafter, make use of any bidding information (or
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<PAGE>
computer programs thereof) of any of the Managed Companies, nor divulge any
trade secrets or other confidential information of any of the Managed
Companies, except to the extent that such information becomes a matter of
public record, is published in a newspaper, magazine or other periodical
available to the general public or as the Company CEO may so authorize in
writing; and when a Participant shall cease to be employed by the Company,
the Participant shall surrender to the Company all records and other
documents obtained by him or entrusted to him during the course of his
employment hereunder (together with all copies thereof) which pertain
specifically to any of the businesses covered by the covenants in Section
4.01 or which were paid for by any of the Managed Companies; provided,
however, that the Participant may retain copies of such documents as
necessary for the Participant's personal records for federal income tax
purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
apply to the covenants of the Participants contained in this Section:
(1) the covenants contained in paragraphs (1) and (2) of Section 10
(a) shall apply within all territories in which any of the Managed
Companies are actively engaged in the conduct of business during the
Employment Period, including, without limitation, the territories in which
customers are then being solicited;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by a Participant of
the covenants contained in Sections 10 (a) and 10 (b), including the
cessation and recovery of payments and benefits paid and provided under
this Plan, it is expressly agreed that such other remedies cannot fully
compensate the Company for any such violation and that the Company shall be
entitled to injunctive relief to prevent any such violation or any
continuing violation thereof;
(3) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 10 (a) and 10 (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
(4) the covenants contained in Sections 10 (a) and 10 (b) shall
survive the conclusion of the Participant's employment by the Company.
10. SCOPE OF PLAN. Nothing in this Plan shall be deemed to entitle the
-------------
Participant to continued employment with any Employer, and if the
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<PAGE>
Participant's employment with the Employers shall terminate prior to a
Change in Control, then the Participant shall have no further rights under
this Plan; provided, however, that any termination of the Participant's
employment following a Change in Control shall be subject to all of the
provisions of this Plan.
11. SUCCESSORS; BINDING PLAN. (a) This Plan shall not be terminated by any
------------------------
merger or consolidation of the Company whereby the Company is or is not the
surviving or resulting corporation or as a result of any transfer of all or
substantially all of the assets of the Company. In the event of any such
merger, consolidation or transfer of assets, the provisions of this Plan
shall be binding upon the surviving or resulting corporation or the person
or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer of assets referred to in paragraph (a) of this Section 11, it will
cause any successor or transferee unconditionally to assume, by written
instrument delivered to the Participant (or his beneficiary or estate), all
of the obligations of the Company hereunder. Failure of the Company to
obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall be a breach of this Plan and
shall entitle the Participant to compensation and other benefits from the
Company in the same amount and on the same terms as the Participant would
be entitled hereunder if the Participant's employment were terminated
following a Change in Control other than by reason of a Nonqualifying
Termination. For purposes of implementing the foregoing, the date on which
any such merger, consolidation or transfer becomes effective shall be
deemed the Date of Termination.
(c) This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Participant
shall die while any amounts would be payable to the Participant hereunder
had the Participant continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Plan to
such person or persons appointed in writing by the Participant to receive
such amounts or, if no person is so appointed, to the Participant's estate.
12. NOTICE. For purposes of the Plan, all notices and other communications
------
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage
prepaid, addressed (1) if to the Participant, to the most recent address
then shown on the employment records of the Participant's Employer, and if
to the Company, to True North Communications Inc., 101 East Erie Street,
Chicago, Illinois 60611-2897, Attention: Secretary, or (2) to such other
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<PAGE>
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. FULL SETTLEMENT; RESOLUTION OF DISPUTES. (a) The Company's obligation
----------------------------------------
to make any payments provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Employers may
have against the Participant or others. In no event shall the Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Participant under any of the
provisions of this Plan and, such amounts shall not be reduced whether or
not the Participant obtains other employment.
(b) If there shall be any dispute between the Employers and the
Participant in the event of any termination of the Participant's
employment, then, unless and until there is a final, nonappealable judgment
by a court of competent jurisdiction declaring that such termination was
for Cause, that the determination by the Participant of the existence of a
Qualifying Termination was not made in good faith, or that the Company is
not otherwise obligated to pay any amount or provide any benefit to the
Participant and his dependents or other beneficiaries, as the case may be,
under paragraphs (a) and (b) of Section 3, the Company shall pay all
amounts, and provide all benefits, to the Participant and his dependents or
other beneficiaries, as the case may be, that the Company would be required
to pay or provide pursuant to paragraphs (a) and (b) of Section 3 as though
such termination were by the Company without Cause or by the Participant as
a Qualifying Termination.
14. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of
----------------------------
this Plan shall include employment with any corporation or other entity in
which the Company has direct or indirect ownership interest of 50% or more
of the total combined voting power of the then outstanding securities of
such corporation or other entity entitled to vote generally in the election
of directors.
15. GOVERNING LAW; VALIDITY. The interpretation, construction and performance
-----------------------
of this Plan shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Plan shall not affect the validity or enforceability of
any other provision of this Plan, which other provisions shall remain in
full force and effect.
16. MISCELLANEOUS. Subject to the Company's power of amendment contained in
-------------
Section 7, no provision of this Plan may be modified or waived unless
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<PAGE>
such modification or waiver is agreed to in writing and signed by the
Participant and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Plan to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
Failure by the Participant or the Company to insist upon strict compliance
with any provision of this Plan or to assert any right the Participant or
the Company may have hereunder, including, without limitation, the right of
the Participant to terminate employment for a Qualifying Termination, shall
not be deemed to be a waiver of such provision or right or any other
provision or right of this Plan. The rights of, and benefits payable to,
the Participant, his estate or his beneficiaries pursuant to this Plan are
in addition to any rights of, or benefits payable to, the Participant, his
estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company, except benefits payable under the
Company's Severance Policy or for any payments that may be required by
statute by reason of termination of employment, except for Unemployment
Compensation, which are inclusive of the payments required under this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by a
duly authorized officer of the Company on this 18TH day of OCTOBER , 1996.
TRUE NORTH COMMUNICATIONS INC.
By:/S/ MITCHELL T. ENGEL
---------------------------------------
Title: President, Assoc. Cos & Corp. Ops.
------------------------------------
Employee:
/S/ THEODORE J. THEOPHILOS
------------------------------------------
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<PAGE>
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of December 31, 1996 between True
-----------------
North Communications Inc., a Delaware corporation (the "Company"), and J.
Brendan Ryan (the "Executive").
WHEREAS, the Company is a global communications holding company with
ownership interests in subsidiaries, affiliates and joint ventures that are
engaged in the advertising agency business, the multimedia production business,
the business of planning and buying of media time and space and related
businesses (the Company and the subsidiaries, affiliates and joint ventures in
which it from time to time has equity interests are hereinafter referred to
collectively as the "True North Group");
WHEREAS, the Executive currently serves the Company as Chairman/CEO,
Foote, Cone & Belding ("FCB"); 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. (Unless
expressly noted otherwise, all references to the Company shall include FCB.)
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive and the
----------
Executive hereby agrees to be employed by the Company upon the terms and subject
to the conditions contained in this Agreement. The 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 shall end on December
31, 2001; provided that the Full-Time Employment Period may be extended by the
Company as of December 31, 2001 and each December 31 thereafter for one
additional year upon mutual consent of the Executive and the Company; and
further provided that the Full-Time Employment Period may be terminated as
contemplated in Section 4.
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<PAGE>
2. POSITION AND DUTIES. The Company shall employ the Executive
-------------------
during the Full-Time Employment Period, with the title of Chairman/CEO, Foote,
Cone & Belding (or such other title as may be mutually agreed upon by the
Executive and the Company) and shall report to the Chairman of the Company.
Executive shall be the most senior executive of FCB. The Executive's duties and
responsibilities shall be those existing as of the date of this Agreement and
any other duties and responsibilities existing subsequent hereto if agreed to in
writing by the Executive. During the Full-Time Employment Period, the Executive
shall perform faithfully and loyally and to the best of the Executive's
abilities his duties hereunder, shall devote full business time, attention and
effort to the affairs of the True North Group and shall use reasonable best
efforts to promote the interests of the True North Group. During the Full-Time
Employment Period, the Executive shall be a member of both the TNC and FCB
Management Boards and the Company agrees to nominate the Executive to the
Company's Board of Directors as of each annual election of directors. The
Executive's principal place of business during the Full-Time Employment Period
shall be in New York City. 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 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 service does not
violate the terms of any of the covenants contained in Section 7.
3. COMPENSATION.
------------
(a) Annual Base Salary. With respect to the Full-Time Employment
------------------
Period, the Company shall pay to the Executive an annual salary not less than
the rate of $600,000, as adjusted herewith 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, but such review will not be less frequent than an interval
of 24 months with a guaranteed minimum salary increase of 10% in the 24-month
interval.
(b) Incentive Compensation. During the Full-Time Employment Period,
----------------------
the Executive shall participate in the VIC, DVIC and VISO components of the
Company's Performance Program as defined for the Executive's position, pursuant
to the terms of such plans as they may be amended from time to time. If the
Performance Program is terminated during the Full-Time Employment Period, a plan
providing comparable compensation elements will be instituted in its place on
behalf of the Executive. However, regardless of the terms of any incentive
compensation program which may be in effect during the Full-Time Employment
Period, the Executive is guaranteed that the combination of annual base salary
and cash incentive compensation will be no less than $1,000,000 in any calendar
year during the Full-Time Employment Period.
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<PAGE>
(c) Other Benefits. During the Full-Time Employment Period, the
--------------
Executive shall be entitled to participate in the Company's employee benefit
plans available to the five most senior executives of the Company, including
medical, dental, salary continuance, short-term disability, long-term
disability, employee life, group life, travel accident insurance plans, 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 the five most
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,
subject to modifications of general application to the five most senior
executives or all other employees. The Executive shall be entitled to take time
off for vacation or illness in accordance with the Company's policy for the five
most senior executives and to receive all other fringe benefits as are from time
to time made available to the five most 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. In addition, the Executive shall be reimbursed for
legal and other professional expenses incurred in connection with the
negotiation and preparation of this Agreement.
4. TERMINATION OF FULL-TIME EMPLOYMENT PERIOD; SUSPENSION.
------------------------------------------------------
(a) Qualifying Termination. For purposes of this Agreement,
----------------------
"Qualifying Termination" means (i) termination of the Executive's employment by
the Company without Cause, (ii) termination by the Company on account of the
Executive having become unable (as set forth below in this paragraph (a)) to
regularly perform his duties hereunder by reason of illness or incapacity for a
period of more than six consecutive months (such disability being referred to as
"Disability" and such termination being a "Termination for Disability"), (iii)
termination on account of the Executive's death or (iv) termination by the
Executive due to the occurrence, without the Executive's express written
consent, of any of the following events:
(1) any of (i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position(s), duties,
responsibilities or status with the Company at the date of this Agreement (or
subsequent hereto if such new position(s), duties, responsibilities or status
were agreed to in writing by the Executive), (ii) an adverse change in the
Executive's reporting lines, titles or offices with the Company, or (iii) any
removal or involuntary termination of the Executive from the Company otherwise
than as
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<PAGE>
expressly permitted by this Agreement or any failure to re-elect or re-appoint
the Executive to any position with the Company held by the Executive at the
date of this Agreement (or subsequent hereto if held pursuant to the written
agreement of the Executive); (iv) any material diminution in the Executive's
duties; or (v) any material change in the corporate organization or structure of
business of the Company;
(2) a reduction by the Company in the Executive's rate of annual base
salary in effect at the date of this Agreement, or, if greater, in effect at any
time subsequent hereto;
(3) any requirement of the Company that the Executive (i) be based
anywhere other than at the facility where the Executive is located at the date
of this Agreement (or subsequent hereto if agreed to by the Executive in
writing) or (ii) travel on Company business to an extent substantially more
burdensome than the extent of the Executive's travel during the twelve months
ending on the date of this Agreement;
(4) the failure of the Company to (i) continue in effect any employee
benefit plan, compensation plan or employee agreement (inclusive of this
Agreement) in which the Executive is participating, unless the Executive is
permitted to participate in other plans providing the Executive with
substantially comparable benefits, or the taking of any action by the Company
which would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such plan or agreement, (ii) provide
the Executive and the Executive's dependents welfare benefits including, without
limitation, medical, dental, disability, salary continuance, employee life,
group life, and travel accident insurance plans and programs in accordance with
the most favorable plans, practices, programs and policies of the True North
Group in effect for the Executive at the date of this Agreement or, if more
favorable to the Executive, as in effect generally at any time hereafter with
respect to the five most senior executives of the True North Group, (iii)
provide fringe benefits in accordance with the most favorable plans, practices,
programs and policies of the True North Group in effect for the Executive at the
date of this Agreement or, if more favorable to the Executive, as in effect
generally at any time hereafter with respect to the five most senior executives
of the True North Group, (iv) provide an office or offices of a size and with
furnishings and other appointments, together with exclusive personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive at the date of this Agreement by the True North Group
or, if more favorable to the Executive, as provided generally at any time
hereafter with respect to the five most senior executives of the True North
Group, (v) provide the Executive with paid vacation in accordance with the most
favorable plans, policies, programs and practices of the True North Group in
effect for the Executive at the date of this Agreement or, if more favorable to
the Executive, as in effect generally at any time hereafter with respect to the
five most senior executives of the True North
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<PAGE>
Group, or (vi) reimburse the Executive promptly for all reasonable employment
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the True North Group in effect for the
Executive at the date of this Agreement or, if more favorable to the Executive,
as in effect generally at any time hereafter with respect to the five most
senior executives of the True North Group;
(5) the failure of the Company to obtain an assumption agreement from
any successor or permitted assign as contemplated in Section 15; or
(6) any material breach of the Agreement by the Company.
In the case of a proposed Termination for Disability, the Company
shall provide the Executive with a notice of termination accompanied by the
written opinion of an independent and qualified medical doctor concluding (in
reasonable detail and based upon an examination of the Executive) that the
Executive has a Disability. The effective date of termination in such case
shall be the later of (i) the date that the Executive shall have had such
Disability for six consecutive months and (ii) sixty days after the date that
such notice is delivered to the Executive.
For purposes of this Agreement, (i) expiration of this Agreement at
the end of its stated term or any mutually consented to extension thereof shall
not constitute a Qualifying Termination and (ii) any good faith determination of
a Qualifying Termination made by the Executive shall be conclusive; provided,
however, that an isolated, insubstantial and inadvertent action taken by the
Company in good faith and which is remedied by the Company promptly (the earlier
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) Nonqualifying Termination. For purposes of this Agreement,
-------------------------
"Nonqualifying Termination" means a termination of the Executive's employment
(i) by the Company for Cause, or (ii) by the Executive for any reason other than
for a Qualifying Termination.
(c) Definition of Cause. For purposes of this Agreement, "Cause"
-------------------
means (i) a material breach by the Executive of the duties and responsibilities
of the Executive hereunder as now in effect or as may hereafter be agreed to
with the Executive's written consent (other than as a result of incapacity due
to physical or mental illness), which is demonstrably willful and deliberate on
the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Company and which is not
remedied within 30 days (or sooner, as specified in such written notice, if the
Company, in its good faith judgment, determines that the period must be shorter
to avoid harm to the
-5-
<PAGE>
Company) after receipt of written notice from the Company specifying such breach
or (ii) the commission by the Executive of a felony involving moral turpitude.
(d) Suspension. If the Company shall conclude 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 by the Company or arbitration with respect thereto.
5. CONSEQUENCES OF TERMINATION OF FULL-TIME EMPLOYMENT PERIOD.
----------------------------------------------------------
(a) Qualifying Termination, except for Death or Disability. If the
------------------------------------------------------
Full-Time Employment Period terminates for a reason set forth in clause (i) or
(iv) of Section 4(a):
(i) the Executive shall be entitled to receive (1) all
compensation described in Sections 3(a) and 3(b) payable with respect
to the period through the term of this Agreement as specified in
Section 1 and any mutually consented to extension thereof or, if
longer, the period of twelve months following such termination
(hereinafter referred to as the "Severance Period"), in accordance
with the Company's regular payroll practices, and (2) reimbursement of
proper expenses incurred through the date of such termination;
(ii) each stock option granted to the Executive by the Company
then held by the Executive shall on the date of such termination be
100% vested, and shall thereafter be exercisable in full by the
Executive 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. The Company covenants that the Compensation Committee of the
Board shall take such actions as necessary so that upon the
termination of the Executive's employment as provided in the
introduction to this Section 5(a), all current and future stock awards
are fully exercisable for the three-year period, or if shorter until a
date 10 years following the date of grant of such option;
(iii) the Executive shall be entitled to receive all vested and
unvested amounts, including all credited interest, in the Executive's
DVIC account. Such payment shall be made under the terms of the
Executive's DVIC Agreement and shall commence at the conclusion of the
Severance Period. The Company covenants that the Compensation
Committee of the Board shall take such action as necessary so that
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<PAGE>
upon termination of the Executive's employment as provided in the
introduction to this Section 5(a), all current and future DVIC awards
are fully vested.
(iv) during the Severance Period and continuing through to the
Executive's age 65, the Executive and his dependents shall be entitled
to participate in life insurance, medical and dental benefits on terms
no less favorable than on the termination date, subject to
modifications of general application to the five most senior
executives of the Company.
(v) after expiration of the Severance Period, the Executive shall
be entitled to compensation and benefits payable under the Directors
Part-Time Employment Agreement, with all age and service requirements
deemed to have been satisfied and with the benefit calculated at 45%
of final average annual compensation and assuming 30 years of credited
service regardless of actual service determined under the Directors
Part-Time Employment Agreement which is attached hereto and the terms
of which are incorporated herein.
(vi) the Executive shall be entitled to participate in all other
applicable benefit plans or programs in accordance with the provisions
thereof applicable to terminated employees.
(b) Qualifying Termination Due to Death or Disability. If the Full-
-------------------------------------------------
Time Employment Period terminates for a reason set forth in clause (ii) or (iii)
of Section 4(a):
(i) the Executive or the Executive's executor, administrator or
other legal representative, as the case may be, shall be entitled to
receive within 30 days after the amount in question is reasonably
determinable (1) all salary payable through the date of such
termination, (2) unpaid VIC and DVIC and VISO awarded, but not yet
granted, for the prior calendar year, (3) VIC and DVIC and VISO for
the then current calendar year, prorated through the date of such
termination based on actual results of operations for such full
calendar year, and (4) reimbursement of proper expenses incurred
through the date of such termination;
(ii) each stock option granted to the Executive by the Company
then held by the Executive shall be considered 100% vested, and
exercisable in full 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. The
Company covenants that the Compensation Committee of the Board shall
take
-7-
<PAGE>
such actions as necessary so that upon the termination of the
Executive's employment as provided in the introduction to this Section
5(b), all current and future stock awards are fully exercisable to
such extent for the three-year period, or if shorter until a date 10
years following the date of grant of such option;
(iii) the Executive or the Executive's executor, administrator or
other legal representative, as the case may be, shall be entitled to
receive all vested and unvested amounts, including all credited
interest, in the Executive's DVIC account. Such payment shall be made
under the terms of the Executive's DVIC Agreement. The Company
covenants that the Compensation Committee of the Board shall take such
actions as necessary so that upon the termination of the Executive's
employment as provided in the introduction to this Section 5(b), all
current and future DVIC awards are fully vested.
(iv) the Executive (if alive) or the Executive's executor,
administrator or other legal representative, as the case may be, shall
be entitled to the compensation and benefits payable under the
Directors Part-Time Employment Agreement, with all age and service
requirements deemed to have been satisfied and with the benefit
calculated at 45% of the final average annual compensation, assuming
30 years of credited service.
(v) the Executive (or the Executive's qualified dependents, as the
case may be), shall be entitled to participate at the Company's
expense in all other applicable benefit plans or programs in
accordance with the provisions until such time as the Executive is (or
would have been) 65 years of age or such later time as provided in
such plans.
(c) Nonqualifying Termination. (i) If the Full-Time Employment
-------------------------
Period terminates for a reason set forth in clause (i) Section 4(b):
(1) the Executive shall be entitled to receive within 30 days
after the amount in question is reasonably determinable (1) all salary
payable through the date of such termination, (2) unpaid VIC and DVIC
and VISO awarded, but not yet granted, for the prior calendar year,
and (3) reimbursement of proper expenses incurred through the date of
such termination;
(2) each stock option granted to the Executive by the Company then
held by the Executive shall be exercisable pursuant to the terms of
such option in accordance with the applicable stock option agreement
in effect at the time of such termination.
-8-
<PAGE>
(3) the Executive shall be entitled to receive the vested portion
of the amounts in the Executive's DVIC account. Such payments will be
made in accordance with the terms of the Executive's DVIC Agreement.
(4) the Executive shall be entitled to participate in all other
applicable benefit plans or programs in accordance with the provisions
thereof applicable to terminated employees.
(ii) If the Full-Time Employment Period terminates for a reason
set forth in clause (ii) of Section 4(b), in addition to the
entitlements specified in Section 5(c)(i), the Executive shall be
entitled to the compensation and benefits payable under the Directors
Part-Time Employment Agreement, with all age and service requirements
deemed to have been satisfied and with the benefit calculated at 45%
of the final average annual compensation, assuming 30 years of
credited service.
(d) After a Change in Control. In the event of a Qualifying
-------------------------
Termination as defined in the Company's Asset Protection Plan (which is attached
hereto and the terms of which are hereby incorporated except as otherwise
provided herein) after a "Change in Control" (as hereinafter defined), the
Executive shall be entitled to payments in accordance with the Company's Asset
Protection Plan, plus any applicable payments and benefits set forth in this
Section 5, provided that such payments and benefits are not duplicative, if any,
of the payments or benefits provided in the Asset Protection Plan. This
Agreement supersedes the Asset Protection Plan in the case of any conflicts or
inconsistency between such Agreements. Without limiting the foregoing, for
purposes hereof, a "Change in Control" shall have the meaning set forth in the
Asset Protection Plan except that the proviso thereto (", provided, however,
that none of the foregoing shall be considered a Change in Control if it is a
result of a direct action initiated by the Company") shall be deleted in its
entirety.
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 taxes.
7. NONCOMPETITION; NONSOLICITATION; CONFIDENTIALITY. (a) Covenant
------------------------------------------------ --------
Not to Compete. Notwithstanding any provision of the Asset Protection Plan to
- --------------
the contrary, during the Full-Time Employment Period, during the Severance
Period and during such time the Executive is receiving all payments when due
under the Company's Directors Part-Time Employment Agreement, except with the
prior written consent of the Board:
-9-
<PAGE>
(1) the Executive shall not engage in any activities whether as
employer, proprietor, partner, stockholder (other than the holder of less than
5% of the stock of a corporation the securities of which are traded on a
national securities exchange or in the over-the-counter market), director,
officer, employee or otherwise, in competition with (i) the businesses conducted
at the date hereof by the True North Group, or (ii) any business in which the
True North Group is substantially engaged at any time during the Full-Time
Employment Period;
(2) the Executive shall not solicit, directly or indirectly, any
existing business relationship of clients of the True North Group existing at
the end of the Full-Time Employment Period in which the True North Group is
substantially engaged at any time during the Full-Time Employment Period, the
Severance Period or the period during which the Executive is receiving all
payments when due under the Directors Part-Time Employment Agreement; and
(3) the Executive shall not induce or attempt to persuade any employee
of the True North Group to terminate the employment relationship with any of the
True North Group except for the Executive's executive assistant.
(b) Confidential Information and Trade Secrets. The Executive shall
------------------------------------------
not, at any time during the Full-Time Employment Period or thereafter, make use
of any bidding information (or computer programs thereof) of any of the True
North Group, nor divulge any trade secrets or other confidential information
("Confidential Information") of any of the True North Group, except to the
extent that such Confidential Information is publicly available, is published in
a newspaper, magazine or other periodical available to the general public 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
records and other documents obtained by him during the course of his employment
hereunder (together with all copies thereof constituting Confidential
Information) which pertain specifically to any of the businesses covered by the
covenants in Section 7(a)(1) or which were paid for by any of the True North
Group; provided, however, that the Executive may retain copies of such documents
as necessary for the Executive's personal records for federal income tax
purposes.
(c) Scope of Covenants; Remedies. The following provisions shall
----------------------------
apply to the covenants of the Executive contained in this Section:
(1) the covenants covered in Section 7(a)(1) and 7(a)(2) shall apply
within all territories in which any of the True North Group is actively engaged
in the conduct of business during the Full-Time Employment Period, including,
without limitation, the territories in which customers are then being solicited;
(2) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive of the
-10-
<PAGE>
covenants contained in Sections 7(a) and 7(b), it is expressly agreed that such
other remedies cannot fully compensate the Company for any such violation and
that the Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof;
(3) 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
(4) 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 the Full-Time Employment Period or the Severance Period or the
duration of the Company's Directors Part-Time Employment Agreement or
thereafter, make any statement, publicly or privately, which would disparage and
of the True North Group, any of their respective business or any director or
officer of any of them 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 of any 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 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 which 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 Full-Time Employment
Period or the Severance 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
any 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 materially
-11-
<PAGE>
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 of the Full-Time Employment Period.
11. ARBITRATION; CERTAIN COSTS. Any dispute or controversy between
--------------------------
the Company and the Executive, arising out of or relating to this Agreement, the
breach of this Agreement, or otherwise, shall be settled by arbitration in New
York, New York administered by the American Arbitration Association 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. 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. The Company shall reimburse the
Executive, upon demand, for all costs and expenses (including without limitation
attorneys' fees) reasonably incurred by the Executive in connection with any
such application undertaken by the Executive in good faith, as well as for all
such costs and expenses reasonably incurred by the Executive in connection with
entering and/or enforcing the award rendered by the arbitrator. Except as
necessary in court proceedings to enforce this arbitration provision or an award
rendered hereunder, or to obtain interim relief, neither a party nor an
arbitrator may disclose the existence, content or results of any arbitration
hereunder without the prior written consent of the Company and the Executive.
The Company and the Executive acknowledge that this Agreement
-12-
<PAGE>
evidences a transaction involving interstate commerce. Notwithstanding any
choice of law provision included in this Agreement, the United State 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 (1) 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:
Secretary, or (2) to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
13. SEVERABILITY. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is determined to be
invalid, illegal or unenforceable in any respect under applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of any other provision of this
Agreement or the validity, legality or enforceability of such provision in any
other jurisdiction, but this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
14. ENTIRE AGREEMENT. This Agreement, together with the Asset
----------------
Protection Plan and the Directors Part-Time Employment Agreement, to the extent
applicable, constitute 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.
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 in
form and substance satisfactory to the Executive 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.
-13-
<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TRUE NORTH COMMUNICATIONS INC.
By:
-----------------------------
William A. Schreyer
Chairman of the Compensation
Committee of the Board of Directors
-----------------------------
J. Brendan Ryan
-14-
<PAGE>
EXHIBIT 11
SUMMARY OF CALCULATIONS OF EARNINGS PER SHARE
For the Years Ended December 31, 1994, 1995 and 1996
I. EARNINGS PER SHARE--PRIMARY CALCULATION
<TABLE>
<CAPTION>
1994 1995 1996
------- -------- -------
<S> <C> <C> <C>
A. Net income (loss) $30,277 $19,653 $27,834
======= ======= =======
Weighted average common shares
outstanding 23,275 23,104 23,657
Average common share equivalents
outstanding:
Treasury share impact of Publicis
shares (1,176) (978) (978)
Stock options 579 416 575
Contingent issuances (Note 1) -- -- --
------- ------- -------
B. Weighted average common and common
equivalent shares outstanding 22,678 22,542 23,254
======= ======= =======
C. Net income (loss) per share $ 1.34 $ .87 $ 1.20
======= ======= =======
</TABLE>
General Note: All share and per share amounts have been restated to reflect
the two-for-one stock split which occurred on February 17, 1995.
Note 1 - There are no such common shares issuable for the years presented. As a
result, presentation of an earnings per share calculation on a fully diluted
basis is inapplicable.
<PAGE>
LOGO
1996 FINANCIAL REPORT
TRUE NORTH COMMUNICATIONS INC.
101 EAST ERIE STREET
CHICAGO, ILLINOIS
60611
312-425-6500
<PAGE>
ABOUT TRUE NORTH
In December 1994 True North Communications Inc. (True North) succeeded
Foote, Cone & Belding Communications, Inc. as the holding company for Foote,
Cone & Belding--America's largest advertising agency--and additional agency
brands, including Mojo, Borders Perrin Norrander, Bayer Bess Vanderwarker and
others. With these brands as the foundation, True North is building a new type
of architecture for a communications firm.
Through planned acquisitions and internal growth, True North has become a
communications company encompassing resources much broader in scope than any
existing advertising holding company. True North's architecture is unique and
includes three new business units:
. TN Technologies Holding Inc.--This company is a leader in digital
interactive marketing, having developed over 500 interactive/new media
marketing programs since 1987. The company combines traditional marketing
skills with capabilities in digital media and communications technologies
to enable clients to more effectively reach and interact with customers
and other key constitutents, including employees, stockholders, suppliers
and other business partners. The company delivers a complete range of
digital interactive marketing products and services including: customized
global intranets; creation, production, updating and maintenance of World
Wide Web sites and other interactive communications vehicles; analysis of
customer requests, purchases and behaviors; delivery of uniform and
updated sales tools for sales forces; and technical consulting. The
company was formed on December 31, 1996 through the combination of TN
Technologies Inc. and a new acquisition, Modem Media.
. TN Media Inc.--This business unit is a global network of the Company's
specialists in the planning and buying of media time and space.
. TN Services Inc.--True North has established this business unit to house
all of its agency support services around the globe, handling all
financial transactions including bill paying, payroll, and accounts
receivable collections; all human resource tasks from insurance to
employee stock purchase plans; and a broad range of other support
services in the areas of legal services, travel and management of leased
facilities.
The architecture of True North is designed to free local agency management
from administration of the media buying and back office support functions and
give them leading edge technology so they can devote their full energy and
creativity to True North's most important endeavor--growing our clients'
business.
In addition to designing and creating effective advertising campaigns for
radio, television and print media, the agency brands under the True North
banner offer clients such additional services as:
. digital and interactive communications
. sales promotion and direct marketing
. yellow pages directory advertising
. healthcare advertising
. public relations
. Hispanic marketing
. market and product research
. package design
. trademark and trade name development
True North agency brands operate fully staffed offices in the United States,
Canada, Latin America, Asia and the Pacific under a number of agency brands.
The Publicis.FCB joint venture, jointly owned by True North and Publicis
Communication, operates fully staffed offices throughout Europe. These offices
handle multinational advertising and national advertising assignments.
REVENUES: True North's principal source of revenues is from its agency
brands that receive:
. commissions and fees earned on advertising placed with the various media,
and,
. commissions and fees earned for the production and preparation of
advertising.
1
<PAGE>
In addition, True North's agency brands receive fees for various other
services performed in connection with advertising, research and marketing
studies.
The Company's client list includes many well-known national and
international advertisers of consumer and industrial goods and services.
During 1996, the ten largest clients accounted for approximately 40% of
consolidated revenues: no single client accounted for as much as 10% of
consolidated revenues.
PERSONNEL: The principal asset of any service company is its people. True
North has an array of employee benefit and training programs to attract and
retain personnel considered to be industry leaders. As of December 31, 1996,
True North employed 5,022 people in its majority-owned offices: 3,070 were
employed in its domestic offices and 1,952 in its international offices. Of
the 5,022 total employees, 1,915 were engaged in the creation and production
of advertising, 1,296 in account management, 844 in media and research
activities, and 967 in administrative and clerical functions.
MARKET PRICE OF STOCK AND DIVIDEND RECORD: True North's Common Stock is
listed on the New York Stock Exchange. Its trading symbol is TNO. The
following table shows the high and low stock price of its Common Stock and
dividends paid each quarter since January 1, 1995, adjusted for the two-for-
one stock split which occurred on February 17, 1995:
<TABLE>
<CAPTION>
PRICE RANGE
----------------- DIVIDENDS
HIGH LOW DECLARED
--------- ------- ---------
1995
<S> <C> <C> <C>
1st Quarter....................................... $21 13/16 $15 3/4 $.15
2nd Quarter....................................... 20 1/4 17 5/8 .15
3rd Quarter....................................... 21 1/2 19 .15
4th Quarter....................................... 20 5/8 18 .15
1996
1st Quarter....................................... $25 $16 3/8 $.15
2nd Quarter....................................... 27 22 1/4 .15
3rd Quarter....................................... 23 3/4 16 3/4 .15
4th Quarter....................................... 24 19 1/2 .15
</TABLE>
At December 31, 1996 True North had approximately 7,300 shareholders. True
North employees owned approximately 18% of the Company's outstanding Common
Stock as of that date, either directly or through various employee benefit
plans.
UNAUDITED QUARTERLY FINANCIAL DATA: Quarterly results (in thousands) and per
share data, adjusted for the two-for-one stock split which occurred on
February 17, 1995, are as follows:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
Revenues................................ $ 95,389 $110,857 $108,654 $124,153
Income (loss) before provision for
income taxes........................... (6,185) 8,117 6,136 6,683
Net income (loss)....................... (11,028) 11,356 4,194 15,131
Net income (loss) per share............. $ (.49) $ .51 $ .19 $ .67
1996
Revenues................................ $105,934 $118,429 $125,803 $142,884
Income (loss) before provision for
income taxes........................... (2,774) 94 10,475 11,419
Net income (loss)....................... (722) 6,049 6,033 16,474
Net income (loss) per share............. $ (.03) $ .26 $ .26 $ .71
</TABLE>
2
<PAGE>
FIVE-YEAR SELECTED FINANCIAL DATA: Select historical financial data (in
thousands, except per share amounts which have been adjusted for the two-for-
one stock split which occurred on February 17, 1995) are as follows:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
YEAR ENDED DECEMBER 31,
- -----------------------
<S> <C> <C> <C> <C> <C>
Revenues....................... $353,340 $372,666 $403,690 $439,053 $493,050
Net income (loss).............. 21,728 25,714 30,277 19,653 27,834
Net income (loss) per share.... 1.00 1.15 1.34 .87 1.20
Dividends per share............ .60 .60 .60 .60 .60
<CAPTION>
AT DECEMBER 31,
- ---------------
<S> <C> <C> <C> <C> <C>
Working capital................ 5,310 13,745 (16,809) (46,503) (48,945)
Total assets................... 589,359 637,887 673,744 766,102 932,660
Long-term debt (includes
current portion).............. 35,652 36,255 10,885 5,601 31,783
Total liabilities.............. 406,032 437,857 465,987 544,008 691,319
Stockholders' equity........... 183,327 200,030 207,757 222,094 241,341
Book value per share........... 7.95 8.62 9.10 9.51 10.20
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS--1996 COMPARED TO 1995
Revenues from True North's consolidated operations increased 12.3% to
$493,050 in 1996 from $439,053 in 1995. North American revenues increased
15.7% to $396,246 in 1996 while international revenues increased 0.2% to
$96,804.
During the latter part of 1995 and in 1996, True North purchased several
agencies in North America, Latin America and the Pacific Rim. These
acquisitions contributed $47,413 and $5,965 to True North's 1996 revenues and
pretax income respectively.
Salaries and benefits expenses increased 13.5% to $318,539 in 1996.
Excluding the impact of acquisitions, this category of expense increased
approximately 4% between years.
Office and general expenses increased $21,656 or 16.9% between years, higher
than the rate of revenue growth. Excluding acquisitions, the rate of growth
for this expense category was 6%. During the fourth quarter of 1996, True
North experienced high levels of legal and consulting costs related to its
continuing negotiations with Publicis (approximately $1.4 million higher than
1995). In addition, True North continued to invest in new digital advertising
technologies, resulting in higher levels of depreciation expense and
consulting costs.
As more fully explained in Note 14 to the consolidated financial statements,
True North recorded a net pretax charge of $1,356 in the fourth quarter of
1996 related to (1.) severance of two of its former executives and inside
Board members, and, (2.) the execution of a sublease for office space in Los
Angeles, (3.) offset by a gain related to the December 31, 1996 acquisition of
Modem Media.
The increase in interest expense between years is due to higher average
borrowings in 1996 primarily caused by the Company's investment spending
detailed on page 5.
The increase in other income, which primarily represents interest income, is
due to the fact that in 1996 other income includes gains recorded on an
investment in the common stock of a publicly held British public relations
agency. These gains are more fully explained in Note 2.
The effective tax rate was 50.5% in 1996 compared to 25.1% in 1995. As more
fully explained on page 5, the 1995 effective tax rate was impacted by the
favorable settlement of outstanding obligations in several tax
3
<PAGE>
jurisdictions. The 1996 effective tax rate was favorably impacted by the
reversal of $1,000 of valuation allowance related to net operating losses
previously incurred by the Company's Canadian operations. During 1996, the
Company was able to utilize these net operating loss carryforwards to offset
current taxable income. As a result, the related valuation allowance was no
longer required and so was reduced. The various elements of the tax provision
for both 1995 and 1996 are more fully explained in Note 13.
Equity income, which consists primarily of True North's share of European
operations, was $18,286 in 1996 compared to $9,165 in 1995. 1995 equity income
was depressed by the first quarter 1995 Italian restructuring provision of
$7,034. The fourth quarter of 1996 was benefited by the true-up of Italian
restructuring reserves as the Italian operations of the joint venture were
able to negotiate more favorable settlements on leases and other actions than
previously anticipated. This reserve true-up resulted in a one-time increase
in 1996 earnings of $5,759. Actual operating results for Europe were down
$3,862 primarily due to revenue declines and resultant severance actions taken
at several of the joint venture's German locations and also to the
strengthening of the U.S. dollar against European currencies.
RESULTS OF OPERATIONS--1995 COMPARED TO 1994
Revenues from True North's consolidated operations increased 8.8% from
$403,690 in 1994 to $439,053 in 1995. U.S. revenues increased 5.6% to $323,921
and foreign revenues increased 18.8% to $115,132. Excluding the impact of
acquisitions, consolidated revenues would have increased 3.2%.
During 1995, True North acquired the R/GA Digital Media Group and several
advertising agencies in North America, Latin America and the Pacific Rim.
These acquisitions contributed $22,333 and $3,628 to the Company's 1995
revenues and pretax income, respectively.
The 1995 percentage increases in salaries and employee benefit expenses and
office and general expenses were higher than the percentage increase in
consolidated revenues due to the following:
. During 1995, True North continued to build its competency in technology
by staffing new TN Technologies units in its offices and through the
acquisition of R/GA. The salaries and employee benefit expense to revenue
ratio for these units is higher than levels typical of the Company's
established advertising agencies.
. During 1995, True North embarked upon an aggressive program to upgrade
the staffing of its offices in the Asia-Pacific region. True North
believes that this region has the greatest opportunity for growth over
the next several years compared to other areas of the world. As a result,
1995 salaries and employee benefits expense include higher than normal
severance charges as the Company changed personnel and invested in new
management in several of its offices in this region.
. The rate of increase in office and general expense reflects the Company's
commitment to developing state of the art proprietary digital technology
to design and produce all forms of advertising. True North will continue
to invest in its TN Technologies units to maintain its competitive edge.
. Office and general expenses in 1995 were favorably impacted by the
reduction of $1,100 of accruals established in prior years which were no
longer deemed to be necessary.
The provision for doubtful accounts was a credit of $290 in 1995 due to the
favorable settlement of a $600 trade receivable which had previously been
fully reserved.
As more fully explained in Note 14, True North recorded a pretax charge of
$10,185 in the first quarter of 1995 related to the closure of an FCB
operation in the Pacific region and to accrue for charges related to its
disputes with Publicis. The majority of this amount was paid in 1995. The
remainder was paid in 1996.
The increase in interest expense between years is due to higher average
borrowings in 1995 as well as higher average interest rates.
4
<PAGE>
The decline in other income, which in 1995 primarily represents interest
income, is due to the fact that in 1994 other income includes gains recorded on
investments in an interest rate swap and the common stock of a publicly held
British public relations agency. These gains are more fully explained in Note
2.
The effective tax rate was 25.1% in 1995 compared to 44.6% in 1994. During
1995, the Company settled outstanding obligations in several tax jurisdictions
on a favorable basis. As a result, True North recorded a reversal of tax
reserves amounting to $6,214 in 1995. The various elements of the tax provision
for both 1994 and 1995 are more fully explained in Note 13.
Equity income, which consists primarily of True North's share of European
operations, was $9,165 in 1995 compared to $10,203 in 1994. In the first
quarter of 1995, Publicis.FCB Europe recorded a charge related to the
previously disclosed restructuring of its Italian operations. The restructuring
was substantially completed in 1996. True North's share of this charge, which
is reflected as a reduction of equity income, was $7,034. Equity income also
includes a reversal of a previously established estimation reserve related to
the Company's European investment amounting to $1,306. Excluding these one-time
items, True North's share of European operations increased by approximately
$4,700 between years: $1,500 of this improvement was due to favorable currency
exchange rates in 1995 as compared to 1994, and the remainder of this
improvement was due to improvements in the operating results of its Swiss,
British and French operating units.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities have historically represented the
Company's primary source of funding for investment activities. Over the past
five years True North has emphasized the timely collection of accounts
receivable and the careful management of its accounts receivable to accounts
payable ratio, resulting in an optimum accounts receivable to accounts payable
ratio at the end of 1994. During 1995 and 1996, True North experienced a shift
in client spending from media to production work. Media costs are typically
billed to and collected from clients before payment is due to the media. In
general, production work requires that the agency incur and pay costs that it
can bill to its clients once the related work is completed. As a result of this
shift in client spending patterns, over the last two years True North's
accounts receivable to accounts payable ratio increased as did its investment
in expenditures billable to clients, resulting in lower cash flows from
operating activities. True North continues to review its billing and payment
procedures and believes that this change in client spending patterns will not
result in further significant increases in its accounts receivable to accounts
payable ratio.
The pace of True North's investment spending continues to grow as the Company
has focused its efforts in two areas:
. Capital expenditures--the 1995 increase in capital expenditures was
driven by the relocation of True North's New York office and by the
Company's efforts to maintain its competitive edge in providing digital
marketing services. As anticipated, capital expenditures in 1996 declined
by $9,474 from 1995 levels because the New York office move was completed
in 1995. In the future the Company anticipates that capital expenditures
will be at levels comparable to 1996 due to True North's commitment to
maintain its competitive edge in providing digital marketing services.
. Purchase of subsidiaries and interests in affiliated companies--True
North continues to contemplate strategic acquisitions to enhance its
worldwide network. During the past three years, True North completed the
acquisition of several agencies in North America, Latin America and the
Pacific rim. These acquisitions were financed through a combination of
existing cash balances and the issuance of short-term borrowings. As
discussed in Note 16, on December 31, 1996 True North acquired a 64%
interest in Modem Media in exchange for 1,121 shares of its common stock,
a 36% interest in the assets and operations of TN Technologies Inc., and
a contingent obligation to pay $16 million in cash and $4 million in True
North common stock in the event that TN Technologies Holding Inc. (the
combined operations of Modem Media and TN Technologies Inc.) is able to
complete an initial public offering of its common stock. Future
acquisitions may be financed through a combination of cash from existing
operations, and the issuance of stock and long-term borrowings.
5
<PAGE>
True North liquidated the majority of its marketable securities portfolio
during 1995 and issued short-term borrowings during 1995 and 1996 to finance
its investment activities. In addition, as described in Note 6, it improved its
access to long-term financing by entering into a $90 million Revolving Credit
Agreement during 1995 and a $25 million three year term loan during 1996.
True North has paid cash dividends at an annual rate of $.60 per share over
the past nine years. Determination of the payment of dividends is made by the
Company'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 1997.
PUBLICIS RELATIONSHIP
As previously disclosed, during 1996 True North continued to negotiate a
resolution to its outstanding disputes with Publicis, its partner in their
European joint venture. These negotiations continued until mid-February 1997.
On February 19, 1997, True North and Publicis announced an amicable
settlement of their disputes through the signing of a Memorandum of Agreement
(the "MOA"). The intent of this document is to establish a new legal and
business relationship between the parties so that all disputes between the
parties are resolved and each is free to create its own separate, independent
agency network. A copy of this document is filed as an exhibit to True North's
1996 Form 10-K.
Pursuant to the MOA, Publicis has agreed to transfer its ownership of certain
agencies in France, the United Kingdom, Portugal and Greece to True North. In
exchange, True North has agreed to exchange its 49% interest in the joint
venture for a 26.5% ownership in an newly structured and larger Publicis (which
will, by the terms of the MOA, own 100% of the remaining agencies of the joint
venture). In addition, subject to terms to be agreed at a later date, True
North has agreed to offer to sell to Publicis its ownership in certain of its
second brand agencies in South Africa and Germany, at least a controlling
interest in certain of its second brand agencies in Australia and New Zealand,
and to use its best efforts to assist Publicis in its efforts to establish
agencies in Thailand, India and Argentina.
The MOA contains certain terms intended to provide True North with a means of
selling its resulting equity interest in Publicis either in a public offering
or based upon appraised market values and other specified formulas contained in
the MOA. Under the terms of the MOA, Publicis has agreed to use its best
efforts to cause its common stock to be listed on a major European stock
exchange by no later than December 31, 1998.
The MOA also contains certain provisions addressing several other issues
including, but not limited to: the termination of all adversarial proceedings
by both parties upon execution of a final definitive agreement referred to
below; the use and ownership of each agency's brandnames by the respective
parties; the payment of certain past and future costs incurred by each party to
service the clients of the other party; agreement to continue servicing clients
in markets where one party, but not the other, has established an office; and,
provisions related to the exchange of financial and other information.
Although the MOA provides that it is legally binding, it recognizes that
certain transactions and other provisions and terms contemplated in the MOA
will require execution of final definitive documents.
Income derived for its shareholdings in Publicis and the European joint
venture have represented a significant percentage of True North's net income in
recent years. The terms and provisions of the MOA are designed to minimize the
impact on ongoing earnings from operations of either party. True North believes
that, if all of the transactions contemplated by the MOA occur, the earnings
impact on its ongoing operations will not be material. In addition, based upon
internally developed valuations of the various operations and investments which
True North will acquire or sell under the terms of the MOA, the Company
believes that the consummation of all of these transactions will not result in
a material gain or loss except for possible tax consequences discussed below.
6
<PAGE>
However, the ultimate gain or loss recorded on these transactions will be
determined based upon the results of definitive valuation studies performed by
independent valuation experts. In addition, because the MOA contemplates the
restructuring of the legal investments of parties which are subject to
different tax jurisdictions it is impossible to predict, with any degree of
certainty, the potential tax consequences of these transactions because the
actual legal form of the transactions will be determined by the execution of
the final definitive documents referred to above. Even so, based upon
preliminary analysis of these transactions, True North believes that it may
record a material charge to its 1997 earnings related to tax payments arising
from the consummation of these transactions. True North also believes that
these tax consequences will not be material to its consolidated financial
position.
INCLUSION OF FORWARD-LOOKING INFORMATION
Certain statements under the captions "About True North" and "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 Exchange Act. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results of the Company 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 governmental regulation. In light of these and other
uncertainties, the forward-looking statements included in this document should
not be regarded as a representation by the Company that the Company's plans
and objectives will be achieved.
7
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues......................................... $403,690 $439,053 $493,050
Costs and Expenses:
Salaries and employee benefits................. $248,955 $280,619 $318,539
Office and general expenses.................... 116,903 128,459 150,115
Provision for doubtful accounts................ 781 (290) 625
Unusual transactions........................... -- 10,185 1,356
Interest expense............................... 7,027 8,087 8,585
Other (income) expense, net.................... (5,972) (2,758) (5,384)
-------- -------- --------
$367,694 $424,302 $473,836
-------- -------- --------
Income before Provision for Income Taxes......... $ 35,996 $ 14,751 $ 19,214
Provision for Federal, Foreign and State Income
Taxes........................................... 16,068 3,705 9,697
-------- -------- --------
$ 19,928 $ 11,046 $ 9,517
Minority Interest Income (Expense)............... 146 (558) 31
Equity in Net Earnings of Affiliated Companies... 10,203 9,165 18,286
-------- -------- --------
Net Income....................................... $ 30,277 $ 19,653 $ 27,834
======== ======== ========
Net Income Per Share............................. $ 1.34 $ .87 $ 1.20
======== ======== ========
Weighted Average Number of Common and Common
Equivalent Shares Outstanding................... 22,678 22,542 23,254
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1995 1996
------ -------- --------
<S> <C> <C>
Current Assets:
Cash..................................................... $ 48,408 $ 45,946
Short-term investments and marketable securities......... 8,573 11,050
Accounts receivable, net of reserve for doubtful accounts
of $4,657 in 1995 and $4,956 in 1996.................... 333,038 402,786
Other current assets..................................... 39,970 44,464
-------- --------
$429,989 $504,246
-------- --------
Property and Equipment:
Land and buildings....................................... $ 443 $ 412
Leasehold improvements................................... 37,872 38,447
Furniture and equipment.................................. 99,809 120,238
-------- --------
$138,124 $159,097
Less--Accumulated depreciation and amortization.......... (83,498) (97,728)
-------- --------
$ 54,626 $ 61,369
-------- --------
Other Assets:
Goodwill, net of accumulated amortization of $28,702 in
1995 and $34,149 in 1996................................ $ 84,934 $151,640
Investment in affiliated companies....................... 187,456 202,397
Other assets............................................. 9,097 13,008
-------- --------
$281,487 $367,045
-------- --------
$766,102 $932,660
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable......................................... $371,767 $417,054
Short-term bank borrowings............................... 49,982 79,698
Liability for federal and foreign taxes on income........ 1,810 2,312
Current portion of long-term debt........................ 199 270
Accrued expenses......................................... 52,734 53,857
-------- --------
$476,492 $553,191
-------- --------
Noncurrent Liabilities:
Long-term debt........................................... $ 5,402 $ 31,513
Liability for deferred compensation...................... 36,538 44,501
Other noncurrent liabilities............................. 25,576 37,727
Obligation to Modem Media partners....................... -- 24,387
-------- --------
$ 67,516 $138,128
-------- --------
Stockholders' Equity:
Preferred stock, $1.00 par value, authorized 100 shares,
none issued............................................. $ -- $ --
Common stock, 33 1/3c par value, authorized 50,000
shares, issued 23,490 in 1995 and 23,872 in 1996........ 7,830 7,957
Paid-in capital.......................................... 116,483 123,740
Retained earnings........................................ 105,800 119,399
Less--Treasury stock, at cost: 128 shares in 1995; 204 in
1996.................................................... (2,661) (4,553)
Cumulative translation adjustment........................ (5,358) (5,202)
-------- --------
$222,094 $241,341
-------- --------
$766,102 $932,660
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN 000'S)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON PAID-IN RETAINED TREASURY TRANSLATION
STOCK CAPITAL EARNINGS STOCK ADJUSTMENT
------ -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993.. $3,884 $118,525 $ 83,729 $ (1,021) $(5,087)
Net income.................. -- -- 30,277 -- --
Dividends................... -- -- (13,995) -- --
Common stock issued for
stock options.............. 31 2,049 -- 336 --
Common stock purchased by
Stock Purchase Plan........ -- 1,033 -- 3,306 --
Treasury stock purchased.... -- -- -- (16,281) --
Other common stock
issuances.................. -- 101 -- 7 --
Translation adjustment...... -- -- -- -- 863
------ -------- -------- -------- -------
Balance at December 31, 1994.. $3,915 $121,708 $100,011 $(13,653) $(4,224)
Net income.................. -- -- 19,653 -- --
Dividends................... -- -- (13,864) -- --
Two-for-one stock split..... 3,915 (3,915) -- -- --
Common stock issued for
stock options.............. -- (369) -- 1,301 --
Common stock purchased by
Stock Purchase Plan........ -- (941) -- 9,948 --
Treasury stock purchased.... -- -- -- (257) --
Other common stock
issuances.................. -- -- -- -- --
Translation adjustment...... -- -- -- -- (1,134)
------ -------- -------- -------- -------
Balance at December 31, 1995.. $7,830 $116,483 $105,800 $ (2,661) $(5,358)
Net income.................. -- -- 27,834 -- --
Dividends................... -- -- (14,235) -- --
Common stock issued for
stock options.............. 59 2,165 -- 859 --
Common stock purchased by
Stock Purchase Plan........ 68 5,092 -- 3,273 --
Treasury stock purchased.... -- -- -- (6,024) --
Translation adjustment...... -- -- -- -- 156
------ -------- -------- -------- -------
Balance at December 31, 1996.. $7,957 $123,740 $119,399 $ (4,553) $(5,202)
====== ======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
10
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000'S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES:
Net income..................................... $ 30,277 $ 19,653 $ 27,834
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Gain on sale of assets....................... -- -- (5,800)
Provision for doubtful accounts.............. 781 (290) 625
Depreciation and amortization................ 14,883 17,783 18,976
Unrealized (gain) loss on Shandwick
investment.................................. (1,877) 424 (1,440)
Deferred compensation expense................ 2,794 4,030 7,963
Deferred income taxes........................ 26 (4,583) (1,935)
Equity earnings of affiliates................ (10,203) (9,165) (18,286)
Decrease (increase) in accounts receivable... (19,498) (56,897) (53,338)
Increase (decrease) in accounts payable...... 51,232 43,185 15,794
Decrease (increase) in other current assets.. 2,494 (10,156) (1,387)
Increase (decrease) in accrued expenses...... 2,313 (6,559) 8,889
Dividends received from affiliated companies. 1,890 6,321 3,044
Other........................................ 741 5,721 (1,730)
-------- -------- --------
$ 75,853 $ 9,467 $ (791)
-------- -------- --------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Decrease (increase) in short-term investments
and marketable securities..................... $(11,452) $ 43,468 $ (661)
Increase (decrease) in liability for cash
overdrafts.................................... (764) 1,793 6,061
Increase (decrease) in short-term bank
borrowings.................................... 2,794 42,118 29,716
Additions to long-term debt.................... 34 -- 25,264
Repayments of long-term debt................... (25,904) (5,393) --
Common stock purchased by Stock Purchase Plan.. 4,339 9,007 8,433
Stock option exercises......................... 2,416 932 3,083
Cash dividends paid............................ (13,995) (13,864) (14,235)
Common stock purchased for treasury............ (16,281) (257) (6,024)
-------- -------- --------
$(58,813) $ 77,804 $ 51,637
-------- -------- --------
CASH PROVIDED BY (USED FOR) INVESTMENT
ACTIVITIES:
Purchase of interest in affiliated companies... $ (304) $ (8,114) $ (728)
Capital expenditures........................... (9,716) (27,169) (17,695)
Purchase of subsidiaries....................... (8,533) (28,178) (34,885)
-------- -------- --------
$(18,553) $(63,461) $(53,308)
-------- -------- --------
Increase (decrease) in cash...................... (1,513) 23,810 (2,462)
Balance at beginning of year..................... 26,111 24,598 48,408
-------- -------- --------
Balance at end of year........................... $ 24,598 $ 48,408 $45,946
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
11
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN 000'S, EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations--The Company (True North) is a global advertising and
communications business. Pages 1 and 2 of this Annual Report contain a more
comprehensive discussion of the nature of True North's operations.
Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and all wholly owned and majority-owned
subsidiaries. The Company uses the equity method of accounting to record its
investments in 20% to 49% owned affiliated companies.
Use of Estimates--The preparation of these financial statements required the
use of certain estimates by management in determining the Company's assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates.
Income Recognition--True North records revenue when media placements appear
and production costs are billable. Salaries and other agency costs are charged
to expense at the time incurred.
Property and Depreciation--True North computes depreciation principally
using the straight line method over the estimated useful life of the related
asset. The Company amortizes leasehold improvements over the lesser of the
estimated useful life of the asset or the life of the lease.
Income Taxes--Effective January 1, 1992, True North adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes".
At December 31, 1996, unremitted earnings of foreign subsidiaries and
affiliated companies were approximately $99,225. The Company does not provide
deferred taxes on these earnings because it permanently reinvests such
earnings in these operations.
Goodwill--True North amortizes goodwill over periods from ten to forty
years. Periodically, the Company reviews and, if necessary, adjusts the
carrying value for goodwill based upon current facts and circumstances and its
best estimate of undiscounted future operating earnings of the related
business. Amortization of goodwill, including goodwill of affiliated
companies, amounted to $5,422 in 1994, $6,336 in 1995, and $7,568 in 1996.
Stock Split--On February 17, 1995, the Company paid a 100% stock dividend to
stockholders of record as of January 6, 1995. All per share and share data in
the accompanying financial statements and footnotes have been adjusted to give
effect to this stock dividend.
Earnings Per Share--Earnings per share are computed using the weighted
average number of common shares outstanding during the year. The computation
also reflects the potential issuance of shares under True North's stock option
plans.
12
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
The Company's current investment portfolio consists of short-term
investments (principally time deposits and money-market funds) and marketable
securities. At December 31, 1995 and 1996, short-term investments and
marketable securities were:
<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Short-term investments.................................... $5,101 $ 6,556
5% investment in Shandwick, plc........................... 3,472 4,494
------ -------
$8,573 $11,050
====== =======
</TABLE>
During 1994, the Company converted its non-marketable preferred stock
investment in Shandwick, plc, a publicly-held global public relations company,
to common shares of this company. Management designated its investment in the
common shares of Shandwick, plc as "trading securities". In accordance with
the provisions of SFAS No. 115, "Accounting for Certain Debt Investments in
Debt and Equity Securities", this investment was reclassified to short-term
investments and marketable securities and gains of $1,877 and $1,440 in 1994
and 1996 and a loss of $424 in 1995 were recorded to reflect this investment
at quoted market value at each year-end.
During 1993, True North entered into an interest rate swap contract with a
bank which became effective in June 1994. Under this arrangement, the Company
receives LIBOR and pays a fixed rate of 6.1% on a notional amount of $25,000
from June 1994 to June 1999. Because this interest rate swap contract did not
operate as an interest rate hedge against the Company's debt at December 31,
1994, the Company recorded a gain of $1,600 on this instrument to record its
fair market value at that date. During 1995, the Company designated this
financial instrument as a hedge against $25,000 of its borrowings. As a
result, the recorded value of this financial instrument was reclassified to
other assets and is being amortized as an element of interest expense over the
remaining life of the contract. At December 31, 1996, the carrying and fair
market values of this investment were $538 and $(134), respectively.
3. OTHER CURRENT ASSETS
At December 31, 1995 and 1996, other current assets consisted of:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Expenditures billable to clients......................... $28,362 $31,573
Prepaid expenses......................................... 11,608 12,891
------- -------
$39,970 $44,464
======= =======
</TABLE>
4. INVESTMENT IN AFFILIATED COMPANIES
The Company's investment in affiliated companies consists of:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
21% interest in Publicis Communication................. $ 73,179 $ 76,495
49% interest in Publicis.FCB B.V....................... 103,247 114,861
Other.................................................. 11,030 11,041
-------- --------
$187,456 $202,397
======== ========
</TABLE>
13
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summarized financial information for affiliated companies is as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Current assets.......................................... $888,358 $898,847
Noncurrent assets....................................... 226,779 216,964
Current liabilities..................................... 808,996 791,672
Long-term debt.......................................... 24 16
Other noncurrent liabilities............................ 82,774 86,136
Shareholders' equity.................................... 223,343 237,987
Revenues................................................ 617,111 626,584
Pretax income........................................... 62,670 73,212
Net income.............................................. 28,945 39,915
</TABLE>
The Company's equity in the net tangible assets of these affiliated
companies was $123,692 at December 31, 1995 and $132,280 at December 31, 1996.
Publicis Conseil, a French advertising agency, is jointly owned by Publicis
Communication (80%) and Publicis.FCB B.V. (20%). Publicis Conseil had total
assets of $411,984 and $397,982 at December 31, 1995 and 1996, and total net
income of $10,913, $14,307 and $12,799 for the years ended December 31, 1994,
1995, and 1996. True North's total investment in Publicis Conseil was
approximately 3% of its assets at December 31, 1995 and 1996. True North's
share of the net earnings of Publicis Conseil was $2,959, $3,310 and $3,275 in
1994, 1995, and 1996.
5. ACCOUNTS PAYABLE
Accounts payable includes the liability for cash overdrafts which represents
checks outstanding in excess of balances maintained at the respective banks.
The liability for cash overdrafts was $35,042 and $44,856 at December 31, 1995
and 1996, respectively.
6. SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT
Short-term bank borrowings consist principally of amounts borrowed under
domestic and international bank overdraft facilities, lines of credit and
multicurrency credit arrangements. Average aggregate short-term borrowings
were $50,381 in 1995 and $71,122 in 1996, and the maximum amount outstanding
was $89,138 in 1995 and $124,558 in 1996. The weighted average interest rate
for short-term borrowings was 5.6%, 7.0% and 6.4% in 1994, 1995 and 1996,
respectively.
On December 21, 1995 the Company entered into a Revolving Credit Agreement
totaling $90,000 with several banks. This agreement, which expires on December
21, 1998, provides that True North may obtain loans bearing interest at a bid
rate (LIBOR or Fixed), a Reference Rate, or the Eurodollar rate plus a spread,
and requires a facility fee of .175% to .300%, depending upon the Company's
financial performance. During 1995, there were no borrowings under this
agreement. During 1996, the Company borrowed $12,000 under this agreement for
a six month period. These borrowings were repaid prior to December 31, 1996.
On May 24, 1996 the Company entered into a $25 million three year term loan
with two of its banks. The interest rate on this loan is fixed at 6.87%.
In addition to these agreements, the Company had available at various banks
uncommitted lines of credit aggregating approximately $118,688 at December 31,
1996, of which $38,990 was unused. These other lines of credit are subject to
annual renewal and may be withdrawn at the option of the various banks. There
are no commitment fees or compensating balance requirements under these
arrangements. Interest rates are negotiated at the time of each borrowing.
14
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-term debt consists of:
<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Three Year Term Loan..................................... $ -- $25,000
Other notes and obligations.............................. 5,601 6,783
------ -------
$5,601 $31,783
Less portions due within one year........................ (199) (270)
------ -------
$5,402 $31,513
====== =======
</TABLE>
Scheduled maturities of long-term debt are $270, $6,513, and $25,000 in
1997, 1998, and 1999, respectively.
The long-term debt agreements and Revolving Credit Agreement contain various
restrictive covenants and conditions which include, but are not limited to:
. The Company must maintain a minimum net worth of $165,000, plus 50% of
Adjusted Net Income (as defined) from June 30, 1995, a current ratio of
at least .75, an indebtedness (as defined) to capitalization ratio of no
greater than .4, and a fixed charge coverage ratio of at least 1.5.
At December 31, 1996, the Company was in compliance with all covenants and
conditions related to these agreements.
At December 31, 1996, the Company estimates that the market value of its
debt is not materially different from its financial statement carrying value.
The fair value of this debt was estimated using quoted market prices or
discounted future cash flows.
7. CONTINGENCIES
True North is a party to several lawsuits incidental to its business. It is
not possible at the present time to estimate the ultimate liability, if any,
of the Company with respect to such litigation; however, management believes
that any ultimate liability will not be material in relation to the Company's
consolidated results of operations or financial position.
8. STOCK-BASED COMPENSATION PLANS
The Company has established various stock option plans for officers and key
employees. These plans provide for the issuance of options to purchase common
shares at fair market value on the date of grant. Options vest immediately, or
after three or five years and expire after ten years. The Company may grant
options for up to 3,807 shares under these plans. The Company has granted
options on 3,343 shares through December 31, 1996.
The Company accounts for these plans under APB Opinion No. 25, under which
no compensation cost has been recognized. Had compensation cost for stock
options awarded under these plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share would have
been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1995 1996
------- -------
<C> <S> <C> <C>
Net Income: As Reported................................. $19,653 $27,834
Pro Forma................................... $19,164 $26,780
Primary EPS: As Reported................................. .87 1.20
Pro Forma................................... .85 1.15
</TABLE>
15
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
A summary of the status of the Company's stock option plans at December 31,
1994, 1995 and 1996 and changes during the years then ended is presented in
the following table and narrative:
<TABLE>
<CAPTION>
1994 1995 1996
---------------- ---------------- ----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year.......................... 1,659 $13.38 2,033 $16.37 2,592 $17.19
Granted........................ 651 22.57 759 19.09 632 19.49
Exercised...................... (202) 11.95 (62) 12.07 (205) 13.39
Forfeited...................... (75) 15.93 (138) 17.85 (169) 19.33
----- ----- -----
Outstanding at end of year..... 2,033 $16.37 2,592 $17.19 2,850 $17.85
===== ====== ===== ====== ===== ======
Exercisable at end of year..... 684 $12.87 959 $14.46 1,241 $16.14
===== ====== ===== ====== ===== ======
Weighted average fair value of
options granted............... $ 6.41 $ 5.79
====== ======
</TABLE>
1,223 of the 2,850 options outstanding at December 31, 1996 have exercise
prices between $9.44 and $19.13, with a weighted average exercise price of
$14.41 and a weighted average remaining contractual life of 5.22 years. 885 of
these options are exercisable. The remaining 1,627 options have exercise
prices between $19.25 and $25.38, with a weighted average price of $20.42 and
a weighted average remaining contractual life of 8.36 years. 356 of these
options are exercisable.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for 1995 and 1996: risk-free interest rates of 7.18%
and 5.67%; expected dividend yields of 2.9%; expected life of 10 years; and
expected volatility of 22.9% and 23.9%.
9. SHAREHOLDERS' RIGHTS PLAN
True North has a Shareholders' Rights Plan that is designed to protect
shareholders from unfair or coercive takeover practices. Under this plan, one
preferred stock purchase right exists for each outstanding share of common
stock. The rights, which expire in November 1998, are exercisable only if a
person or group (excluding True North) acquires 20% (25% in the case of
Publicis Communication and its affiliates) or more of True North's common
stock or announces a tender offer which would result in ownership of 30% or
more of True North's common stock. Each right entitles the holder to purchase
1/2,000 of a share of Series A Junior Participating Preferred Stock
("preferred stock") of the Company at a purchase price of $42.50, subject to
adjustment under certain conditions. At December 31, 1996, 30 shares of the
True North's unissued preferred stock were reserved for issuance upon exercise
of these rights.
Subject to certain conditions and limitations, in the event that True North
is acquired by a person or group, these rights (which have not otherwise been
exercised to acquire True North's preferred stock) entitle the holder to
acquire the common stock of the surviving entity at approximately 50% of fair
market value.
The Board of Directors has the flexibility to (i) redeem outstanding rights
at a rate of $.005 per right, (ii) adjust the thresholds at which these rights
become exercisable, and, (iii) exclude other persons or groups from triggering
the exercisability of these rights.
16
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. DISTRIBUTION OF EARNINGS AND ASSETS
Information about the Company's operations in different geographic areas for
1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
U.S...................................... $306,737 $323,921 $373,058
Foreign.................................. 96,953 115,132 119,992
-------- -------- --------
$403,690 $439,053 $493,050
======== ======== ========
Income (Loss) before Provision for Taxes:
U.S...................................... $ 40,018 $ 23,441 $ 26,195
Foreign.................................. (4,022) (8,690) (6,981)
-------- -------- --------
$ 35,996 $ 14,751 $ 19,214
======== ======== ========
Net Income:
U.S...................................... $ 23,236 $ 18,468 $ 16,007
Foreign.................................. 7,041 1,185 11,827
-------- -------- --------
$ 30,277 $ 19,653 $ 27,834
======== ======== ========
Identifiable Assets:
U.S...................................... $343,464 $395,676 $492,188
Foreign.................................. 330,280 370,426 440,472
-------- -------- --------
$673,744 $766,102 $932,660
======== ======== ========
</TABLE>
11. RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS
True North and participating U.S. subsidiaries have a profit sharing plan, a
supplemental pension plan, and a stock purchase plan.
The profit sharing and supplemental pension plans are integrated to provide,
for employees who retire at age 65 with 30 or more years of service, annual
retirement benefits of 45% of the highest five-year average compensation during
their last ten years of full-time employment. Under the integration formula,
the profit sharing plan provides the principal funding for employee retirement
benefits. If a retiring employee's profit sharing balance is not sufficient to
fund the minimum benefit described above, the pension plan provides the
necessary supplemental funding to bring the total benefit up to the level
guaranteed by the plans.
True North's annual contribution to the profit sharing plan is based upon
income, as defined in the plan, but may not exceed the amount permitted as
deductible expense under the Internal Revenue Code. Under the stock purchase
plan, True North matches 50% of employee contributions up to the individual
employee limits deductible under the Internal Revenue Code. The combined profit
sharing and stock purchase plan provisions were $10,660 in 1994, $9,264 in
1995, and $8,007 in 1996.
Net pension costs for the supplemental pension plan for 1994, 1995, and 1996
included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the year........... $104 $110 $152
Interest cost on projected benefit obligation........... 216 212 190
Actual return on plan assets............................ (143) (121) (150)
Net amortization and deferral........................... 38 40 39
---- ---- ----
Total pension cost...................................... $215 $241 $231
==== ==== ====
</TABLE>
17
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the supplemental pension plan at December 31, 1995 and
1996 is as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
(including vested benefits of $2,180 in 1995 and $2,063 in
1996)..................................................... $2,536 $2,224
Actuarial present value of projected benefit obligation.... 2,716 2,684
Plan assets at fair value.................................. 1,582 1,818
</TABLE>
A salary increase rate of 6% and an investment return rate of 8% were used in
1994, 1995, and 1996. Discount rates of 8%, 8%, and 7.25%, were used in 1994,
1995, and 1996, respectively.
The Company has entered into agreements whereby certain employee directors
and other employees are or will be eligible for part-time employment and/or
deferred compensation upon retirement from full-time employment. The provisions
for these agreements, which are charged to income over the employment period of
these individuals, were $5,949 in 1994, $6,913 in 1995, and $5,321 in 1996.
True North provides limited postretirement medical and life insurance
benefits to employees who retire with at least ten years of service prior to
age 65. Prior to January 1, 1993, the Company accounted for such benefits on
the cash basis. In 1993, the company adopted the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", on a
prospective basis. Under this method, the Company is amortizing the actuarial
present value of the accumulated postretirement benefit obligation at January
1, 1993 over a twenty year period. In addition, the Company provides for
current year service costs, interest costs and actuarially determined plan
gains and losses.
The components of expense for these postretirement benefits for 1994, 1995,
and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the year)............ $353 $294 $292
Interest costs on accumulated postretirement benefit
obligation............................................... 321 372 302
Net amortization and deferral............................. 247 147 84
---- ---- ----
$921 $813 $678
==== ==== ====
</TABLE>
The following table sets forth the funded status and amounts recognized for
True North's postretirement benefit plans in its consolidated balance sheet at
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees............................................... $1,494 $1,324
Fully eligible active participants..................... 498 1,902
Other active plan participants......................... 1,860 874
------ ------
Total accumulated postretirement benefit obligation.... $3,852 $4,100
Plan assets at fair value................................ -- --
------ ------
Accumulated postretirement benefit obligation in excess
of plan assets.......................................... $3,852 $4,100
Unrecognized net transition obligation................... (4,205) (3,958)
Unrecognized net gain.................................... 2,743 2,944
------ ------
Accrued postretirement benefit cost...................... $2,390 $3,086
====== ======
</TABLE>
18
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A discount rate of 7%, 8.5%, and 8% was used in 1994, 1995 and 1996,
respectively. The rate of increase in covered medical benefits used to
determine accumulated postretirement benefits was 12% in 1994, 11% in 1995,
and 10% in 1996. This rate is assumed to decrease by 1% per annum to 6% in
2000 and remain constant thereafter. The medical benefits cost trend rate
assumption does not have a significant effect on the amounts reported. For
example, a 1% increase in the medical benefits cost trend rate would increase
the accumulated postretirement benefit obligation at December 31, 1996 by $360
and 1996 expense by $76.
12. LEASE OBLIGATIONS
True North leases substantially all of its office facilities under operating
leases. Net rental expense on these leases was $40,219 in 1994, $40,279 in
1995 and $43,897 in 1996, after deducting sublease income of $6,476, $12,571,
and $12,494, respectively.
At December 31, 1996, the future minimum rental obligations for these leases
(net of sublease income of approximately $65,872) is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1997..................................... $ 34,015
1998..................................... 32,092
1999..................................... 26,259
2000..................................... 23,691
2001..................................... 21,970
Thereafter............................... 135,980
</TABLE>
13. FEDERAL, FOREIGN AND STATE INCOME TAXES
The domestic and foreign components of pretax income are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Domestic......................................... $35,344 $17,394 $18,255
Foreign.......................................... 652 (2,643) 959
------- ------- -------
$35,996 $14,751 $19,214
======= ======= =======
</TABLE>
The provision for taxes on income consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ -------
<S> <C> <C> <C>
U.S.--currently payable.......................... $10,674 $4,088 $ 8,284
--deferred..................................... 26 (4,583) (1,925)
Foreign.......................................... 913 875 2,127
State............................................ 4,455 3,325 1,211
------- ------ -------
$16,068 $3,705 $ 9,697
======= ====== =======
</TABLE>
Deferred and prepaid tax expense results from temporary differences in the
recognition of revenue and expense for tax and financial reporting purposes.
Deferred tax benefits (liabilities) as of December 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Deferred compensation.................................... $8,821 $ 9,752
Lease reserves........................................... 5,982 8,771
Depreciation and amortization............................ (1,360) (1,724)
Safe harbor leases....................................... (4,838) (4,453)
Tax loss carryforwards................................... 5,628 5,152
Other, net............................................... (5,851) (5,510)
Valuation allowances..................................... (2,412) (1,412)
------ -------
$5,970 $10,576
====== =======
</TABLE>
19
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net current deferred taxes as of December 31, 1995 and 1996 were $5,161 and
$3,751, respectively. Net non-current deferred taxes were $809 and $6,825,
respectively. Valuation allowances have been provided for potentially
unrealizable foreign tax loss carryforwards.
During 1995, True North settled outstanding obligations in several tax
jurisdictions on a favorable basis. As a result, True North recorded a
reversal of tax reserves amounting to $6,214 in 1995. The 1996 effective tax
rate was favorably impacted by the reversal of $1,000 of valuation allowance
related to net operating losses previously incurred by the Company's Canadian
operations. During 1996 True North was able to utilize these net operating
loss carryforwards to offset current taxable income. As a result, the related
valuation allowance was no longer required and so was reduced. The
reconciliation of the U.S. statutory rate to the effective income tax rate is
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ----- ----
<S> <C> <C> <C>
At statutory rate..................................... 35.0% 35.0% 35.0%
State taxes, net of federal tax benefit............... 8.0 14.6 4.1
Higher (lower) aggregate effective tax rate on foreign
operations........................................... (0.1) 6.5 5.2
Tax effect of nondeductible amortization.............. 3.3 10.3 10.2
Reversal of excess tax reserves....................... -- (42.1) --
Other................................................. (1.6) .8 (4.0)
---- ----- ----
44.6% 25.1% 50.5%
==== ===== ====
</TABLE>
14. UNUSUAL TRANSACTIONS
In the first quarter of 1995, the Company recorded a pretax charge of
$10,185. 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 disputes with Publicis. Additionally, included in the line, "Equity in Net
Earnings of Affiliated Companies", was a charge of $7,034 related to the
previously disclosed restructuring of the Italian operations of the
Publicis.FCB European joint venture.
In the fourth quarter of 1996, the Company recorded a net pretax charge of
$1,356. During the fourth quarter of 1996, the Company severed two of its
executives and Board members resulting in a pretax charge of $4,169.
Additionally, the Company executed a sublease for office space in Los Angeles
resulting in a pretax charge of $2,987. These charges were partially offset by
the $5,800 pretax gain which the Company recorded related to the acquisition
of Modem Media (see Note 16). Additionally, included in the line, "Equity in
Net Earnings of Affiliated Companies", is a credit of $5,759 related to the
true-up of Italian restructuring reserves, established in 1994 and 1995, as
the Italian operations of the joint venture were able to negotiate more
favorable settlements on leases other actions than previously anticipated.
This credit was partially offset by a charge against 1996 earnings of
approximately $1,900 related to severance actions taken at several of the
joint venture's German operations.
15. SUPPLEMENTAL CASHFLOW DATA
Interest and taxes paid in 1994, 1995, and 1996 were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Interest.......................................... $ 6,085 $ 6,507 $ 6,529
Taxes............................................. 13,919 10,868 14,588
</TABLE>
20
<PAGE>
TRUE NORTH COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
True North maintains only minimal cash balances in its foreign subsidiaries.
As a result, the impact of changes in currency rates on True North's cash
balances is insignificant.
16. ACQUISITIONS
During 1994, 1995 and 1996, True North purchased several agencies located in
North America, Latin America and the Pacific Rim. Agencies purchased during the
latter part of 1995 and in 1996 contributed $47,413 and $5,965 to True North's
1996 revenues and pretax income, respectively. Had these acquisitions taken
place on January 1 of the previous years, consolidated revenues and income
would not have been significantly different from reported amounts.
On December 31, 1996, True North acquired a 64% interest in Modem Media
Advertising Limited Partnership ("Modem Media"), a technology-based marketing
communications firm, in exchange for an absolute obligation to issue 1,121 of
its common shares (issued on January 7, 1997) valued at $24,387, and a 36%
interest in the assets and operations of TN Technologies Inc. valued by
appraisal experts at $8,203. In addition, True North is obligated to make a $16
million cash payment and a $4 million payment in shares of its common stock to
the former owners of this agency in the event that the combined operations of
Modem Media and TN Technologies Inc. (known as TN Technologies Holding Inc.)
are able to complete an initial public offering of its common stock. The
difference between the initial purchase price and the fair value of assets
acquired in this transaction amounting to $36,465 has been allocated to
goodwill and is being amortized over a twenty year period.
As a result of this transaction, True North recorded a pre-tax gain of $5,800
relating to the difference between the appraised fair value and the book value
of the 36% interest in the assets and operations of TN Technologies Inc. paid
to the former owners of Modem Media.
The following unaudited pro forma summary presents True North's consolidated
results of operations as if this business combination had occurred on January
1, 1996:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Revenues......................................................... $511,155
Net income....................................................... 27,450
Earnings per share............................................... $ 1.13
</TABLE>
The above amounts are based upon certain assumptions and estimates which True
North believes to be reasonable. The pro forma results do not necessarily
represent results which would have occurred if the business combination had
taken place at the date and on the basis assumed.
17. SUBSEQUENT EVENTS
As described in "Management's Discussion and Analysis--Publicis Relationship"
included in this Annual Report to Stockholders, on February 19, 1997 True North
agreed to an amicable restructuring of its relationship with Publicis S.A. and
certain of its affiliates.
During the first quarter of 1997 True North acquired Wilkens International, a
European advertising network with principal offices in Germany, Spain, Italy
and Eastern Europe. The total cost of this acquisition was approximately
$21,600 in cash plus the assumption of net liabilities (including the
assumption of short and long-term debt of approximately $12,000) totaling
approximately $18,694. True North financed this acquisition using existing debt
facilities.
21
<PAGE>
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The financial statements and related financial information included in this
annual report are the responsibility of management. They have been reported in
conformity with generally accepted accounting principles. In preparing these
financial statements, management has necessarily included some amounts which
are based on its best estimates and judgments. True North maintains systems of
internal accounting and financial control designed to provide reasonable
assurance that its assets are safeguarded against loss from unauthorized use or
disposition, and that transactions are executed and recorded in accordance with
established procedures. These systems of internal controls are reviewed,
modified and improved as changes occur in business conditions and operations.
Arthur Andersen LLP, our independent public accountants, are engaged to audit
and to report on our consolidated financial statements. In performing their
audit in accordance with generally accepted auditing standards, they evaluate
our systems of internal accounting control, review selected transactions, and
carry out other auditing procedures to the extent they consider necessary in
expressing their informed professional opinion on our financial statements.
The Audit Committee, composed of nonemployee members of the Board of
Directors, meets periodically with management, the independent certified public
accountants, and the internal auditors. This Committee reviews audit plans and
assesses the adequacy of internal controls and financial reporting. Both the
independent certified public accountants and internal auditors have direct
access to the Audit Committee.
Bruce Mason Dale F. Perona
Chairman/CEO Secretary and Treasurer
John J. Rezich
Controller
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of True North Communications Inc.:
We have audited the accompanying consolidated balance sheets of True North
Communications Inc. (a Delaware corporation) and Subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Publicis Conseil for each of the three years in the period ended
December 31, 1996, the investment in which is reflected in the accompanying
financial statements using the equity method of accounting. The investment in
Publicis Conseil represents approximately 3% of total assets as of December
31, 1996 and 1995. The equity in its net earnings was $3,275,000, $3,310,000,
and $2,959,000 for the years ended December 31, 1996, 1995, and 1994,
respectively. The financial statements of Publicis Conseil were audited by
other auditors whose reports have been furnished to us and our opinion,
insofar as it relates to the amounts included for Publicis Conseil, is based
solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of True North Communications Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 115--Accounting for
Certain Investments in Debt and Equity Securities, effective January 1, 1994.
Arthur Andersen LLP
Chicago, Illinois,
March 6, 1997.
23
<PAGE>
EXHIBIT 21
PARENT AND SIGNIFICANT SUBSIDIARIES OF REGISTRANT
JURISDICTION OF INCORPORATION
-----------------------------
True North Communications Inc. Delaware
Subsidiaries 100% owned by the Registrant and included in the consolidated
financial statements--
VICOM/FCB, Inc. Delaware
Foote, Cone & Belding of Pennsylvania, Inc. Delaware
Foote, Cone & Belding Advertising, Inc. Delaware
Foote, Cone & Belding, Inc. Delaware
FCB International, Inc. Delaware
Subsidiaries 100% owned by FCB International, Inc. and included in the
consolidated financial statements--
FCB/Ronalds-Reynolds, Ltd. Canada (Ontario)
FCB Australia Pty., Ltd. Australia
Less than 50% owned affiliates accounted for by the equity method--
Publicis Communication France
Publicis . FCB BV The Netherlands
NOTE: Other subsidiaries included in the consolidated financial statements are
excluded from this listing because in the aggregate they do not constitute a
significant subsidiary as defined by the Securities and Exchange Commission.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
True North Communications Inc.
As independent public accountants, we hereby consent to the incorporation by
reference of our reports included in or incorporated by reference to this Form
10-K, into the Company's previously filed Registration Statements on Form S-8
(File No.'s 33-15126, 33-41128, and 33-48523).
Arthur Andersen LLP
Chicago, Illinois,
March 28, 1997.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint each of Bruce Mason
and Terry M. Ashwill, severally, acting alone and without the other, his or her
attorney-in-fact for the purpose of signing in his or her name and on his or her
behalf as a director of True North Communications Inc. (the "Company"), (i) the
Company's Annual Report on Form 10-K pursuant to the Securities Exchange Act of
1934, (ii) any registration statement filed during 1997 for the registration
under the Securities Act of 1933 of Common Stock of the Company, including the
associated Preferred Stock Purchase Rights to be issued or sold in connection
with the Company's Stock Option of Stock Purchase Plans, and (iii) the
registration statement on Form S-3 to be filed in connection with the sale of
True North Communications Inc. Common Stock by certain stockholders of the
Company, and of signing any and all amendments to said Annual Report and
registration statements and all amendments thereto as each thereof is so signed
for filing with the Securities and Exchange Commission.
Dated: January 16, 1997
/s/ Gregory W. Blaine /s/ J. Brendan Ryan
- ------------------------ ------------------------
Gregory W. Blaine J. Brendan Ryan
/s/ Richard S. Braddock /s/ William A. Schreyer
- ------------------------ ------------------------
Richard S. Braddock William A. Schreyer
/s/ Laurel Cutler /s/ Louis E. Scott
- ------------------------ ------------------------
Laurel Cutler Louis E. Scott
/s/ Maurice Levy /s/ Stephen T. Vehslage
- ------------------------ ------------------------
Maurice Levy Stephen T. Vehslage
/s/ Newton N. Minow
- ------------------------
Newton N. Minow
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 45,946
<SECURITIES> 11,050
<RECEIVABLES> 407,742
<ALLOWANCES> 4,956
<INVENTORY> 0
<CURRENT-ASSETS> 504,246
<PP&E> 159,097
<DEPRECIATION> 97,728
<TOTAL-ASSETS> 932,660
<CURRENT-LIABILITIES> 553,191
<BONDS> 0
<COMMON> 127,144
0
0
<OTHER-SE> 114,197
<TOTAL-LIABILITY-AND-EQUITY> 932,660
<SALES> 493,050
<TOTAL-REVENUES> 493,050
<CGS> 0
<TOTAL-COSTS> 470,010
<OTHER-EXPENSES> (5,384)
<LOSS-PROVISION> 625
<INTEREST-EXPENSE> 8,585
<INCOME-PRETAX> 19,214
<INCOME-TAX> 9,697
<INCOME-CONTINUING> 27,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,834
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<PAGE>
Exhibit 99.1
[TRUE NORTH LETTERHEAD]
Date: February 19, 1997
Contact: U.S. Susan Geanuleas: 312/425-6570 NEWS
True North
Ed Orgon: 212/681-1700 ext. 102
The Torrenzano
Europe Harry Reid: 44-171/470-7101
True North
John Kiely: 44-171/353-9203
Lowe Bell Financial
FOR IMMEDIATE RELEASE
PUBLICIS AND TRUE NORTH SETTLE
ALL OUTSTANDING DIFFERENCES
CHICAGO, IL -- True North Communications Inc. (NYSE:TNO) and Publicis today
announced agreements to create independent global agency networks in a
settlement of all outstanding differences concerning their international
business alliance.
The boards of the two companies approved the following restructuring of the
ownership of their current joint operations:
. In Europe, Publicis will sell to True North the stand-alone FCB agencies in
Athens, Lisbon, London, and Paris, cities where Publicis agencies also exist, in
exchange for a portion of True North's shareholding in Publicis.FCB Europe. The
remaining interest will be converted to an increased True North shareholding in
Publicis Communications, the advertising operating unit of Publicis S.A. The
four FCB stand-alone agencies will be combined with the recently acquired
Wilkens network to form a separate wholly-owned FCB network in Europe with
representation in 19 countries.
-more-
<PAGE>
2/PUBLICIS AND TRUE NORTH SETTLE ALL OUTSTANDING DIFFERENCES
. The Publicis.FCB European network will take the name of Publicis Europe and
will be wholly owned by Publicis Communication, of which Publicis S.A. will
hold 73.5 percent and True North will hold 26.5 percent, compared to the
20.8 percent it currently holds. Publicis will maintain its 20 percent
shareholding in True North. Each company will continue to hold a seat on
the other's board of directors.
. In other parts of the world, True North will sell to Publicis its interest
in the South African agency, The Partnership. In Argentina, Australia and
New Zealand, India and Thailand, True North will assist Publicis in
establishing its own separate operations, with details announced shortly.
. Publicis and FCB will enter into long-term service agreements to serve each
other's clients in countries where it is not practical for both to have an
agency.
. Publicis and FCB have agreed to facilitate alignment of multinational
clients within their respective agency networks in accordance with client
wishes.
. Publicis and True North will seek ways to cooperate on media-buying on a
global basis.
. Both companies will withdraw their respective legal claims against each
other.
Bruce Mason, chairman and chief executive officer of True North said, "Our
management team and our outside directors, working in tandem, never lost sight
of the primary objective: strike an agreement that provided the best results
for our clients. With Maurice Levy sharing the same vision, we clearly
accomplished that objective. With these agreements, and our recent acquisition
of the Wilkens network in Europe, FCB will have complete control of its own
global network, with strong representation in every region of the world."
Maurice Levy, chairman of Publicis, said, "I am delighted that we have been able
to settle our differences in ways that satisfy the fundamental needs of our
clients. Publicis, with the leading presence in Europe, as well as agencies on
all continents, will continue its worldwide expansion through a strong new
global network that offers a fresh alternative for multinational advertisers.
I wish True North all good luck in the future."
###
<PAGE>
Exhibit 99.2
MEMORANDUM OF AGREEMENT
This is a Memorandum of Agreement (this "Agreement") dated February 19, 1997
among Publicis S.A., Publicis Communication, and Publicis.FCB Europe
(collectively, "Publicis"), on the one hand and True North Communications Inc.,
Foote, Cone & Belding Communications Inc. and FCB International, Inc.
(collectively, "True North"), on the other hand, with respect to the following
matters:
1. Publicis and True North agree to resolve all of the outstanding disputes
between them upon the terms set forth in this Agreement.
2. (a) Publicis and True North agree to create two separate agency networks,
one owned and controlled by Publicis and the other owned and
controlled by True North. The two networks would each have the
capacity to offer to their respective clients top quality service and
would each have the ability to function globally and independently of
one another.
(b) As between Publicis and True North, True North will be the sole owner
of and have the sole right to use the names "Foote, Cone and Belding"
and "FCB" throughout the world, and Publicis will be the sole owner of
and have the sole right to use the name "Publicis" throughout the
world.
<PAGE>
Page 2
3. (a) Within sixty days following the execution of this Agreement, Publicis
agrees to sell, transfer and assign to True North all of the interests
held by Publicis in the following four agencies: FCB London, FCB Paris,
FCB Lisbon and Gnomi FCB Athens. In 1996, these four agencies represented
approximately US$42 million in revenue and US$4.8 million in net profit
(after tax and management fees).
(b) Simultaneously with the transactions described in the immediately
preceding paragraph 3(a) Publicis agrees to merge or otherwise combine
the operations of Publicis.FCB Europe and Publicis Communication.
(c) Following that merger and the transfer of the FCB Agencies, True North
will no longer have a direct interest in Publicis.FCB Europe and will
own 26.5 per cent of the combined entity.
4. (a) True North authorizes and consents to any and all transactions designed
to combined or merge Publicis Communication with Publicis.FCB Europe
under the terms of this Agreement, and to any and all transactions
designed to transfer the Publicis global agency network owned by Publicis
S.A. so that such global network is owned by Publicis Communication. In
connection with the current restructuring, it is agreed that all of the
material transactions between Publicis Communication and Publicis S.A.
will be done on an arm's length basis.
(b) After this restructuring, Publicis Communication will be the holding
company of the worldwide network for Publicis, and all other agencies
already owned by Publicis S.A. will be merged with Publicis
Communication. True North authorizes and consents to any and all
transactions intended to achieve that objective.
<PAGE>
Page 3.
(c) If, at any time, Publicis Communication issues equity in a
transaction that results in True North's owning less than 20 per
cent of Publicis Communication, and the shares of Publicis
Communication are not then listed on a major European stock
exchange, Publicis agrees that it shall use its best efforts to
cause to be listed (within 120 days following the date on which
True North owns less than 20 per cent of Publicis Communication)
on a major European stock exchange the equity of Publicis
Communication.
The offering and listing, if any, of Publicis Communication
shares shall be carried out such that True North shall be
permitted to sell at least 50 per cent of the shares of Publicis
Communication held by it immediately prior to the consummation of
the offering.
If the listing of Publicis Communication has not occurred on or
prior to the 120th day following the date on which True North
owned less than 20 per cent of Publicis Communication, True North
will have the right, at its sole discretion, to sell 100 per cent
of the shares of Publicis Communication then owned by it to
Publicis S.A. Of those shares, 75 per cent shall be purchased at
the fair market value of the block of shares sought to be sold by
True North, as established pursuant to the procedures set forth
in the last two sentences of the first paragraph of Section 12 of
this Agreement, and 25 per cent shall be purchased at the formula
set forth in the second paragraph of Section 12 of this
Agreement.
<PAGE>
Page 4.
(d) If the listing of Publicis Communication has not yet occured as of
the date that True North's ownership of Publicis Communication is
diluted below 20 per cent, True North may, in its sole discretion
notify Publicis that it elects to maintain its 20 per cent
ownership of Publicis Communication rather than sell in a public
offering (or to Publicis) as contemplated by paragraph 4(c) of
this Agreement. If True North so notifies Publicis, the provisions
of paragraph 4(c) of this Agreement shall not apply as to the
particular event that would have diluted True North's ownership of
Publicis Communication below 20 per cent, and True North shall
have the right to purchase sufficient additional shares of
Publicis Communication so that it maintains its 20 percent
ownership thereof. If the listing of Publicis Communication has
not yet occurred as of the date that True North's ownership of
Publicis Communication is diluted below 20 per cent, True North's
discretion to elect either paragraph 4(c) or 4(d) under this
Agreement shall apply to successive subsequent events that would
dilute True North's interest in Publicis Communication below 20
per cent.
The per share price to be paid by True North for such additional
shares shall be the fair value of the per share consideration
received by Publicis in connection with the event that caused True
North's ownership to be diluted below 20 per cent.
(e) As long as True North owns 10 per cent or more of Publicis
Communication, Publicis Communication will provide all financial
and other information reasonably requested by True North for
purposes of True North's compliance with U.S. income tax laws and
other U.S. regulatory requirements, will cause its independent
auditors to complete their annual audit and provide the resuls to
True North before February 15 each year, and will provide True
North with unaudited quarterly consolidated financial results
before April 30, July 30, and October 30 each year.
<PAGE>
Page 5.
(f) As long as Publicis owns 10 per cent or more of True North, True
North will provide all financial and other information reasonably
requested by Publicis for purposes of Publicis' compliance with
French and European income tax laws and other French and European
regulatory requirements, will cause its independent auditors to
complete their annual audit and provide the results to Publicis
before February 15 each year, and will provide Publicis with
unaudited quarterly consolidated financial results before April
30, July 30, and October 30 each year.
5. Publicis authorizes and consents to any and all transactions by True North
in Europe designed to establish an independent True North network in
Europe.
6. Subject to controlling local law and existing contractual obligations, True
North agrees to sell, transfer and assign to Publicis its entire 6 per cent
equity stake in "Park Advertising Pty" which owns 100 per cent of the
"Partnership" agency in South Africa, and True North will use its best
efforts to assist in the transfer of Park Advertising Pty shares to
Publicis by third parties.
7. Subject to controlling local law and existing contractual obligations and
within sixty days following the execution of this Agreement, True North
agrees to use its best efforts to create, or to enter into agreements to
create, separate agencies (which shall be spun-off from existing True North
agencies) which will handle the Nestle and L'Oreal accounts in Thailand,
India and Argentina. These new agencies shall be spun-off fro the Prakit
agency in Thailand, the Ulka agency in India and the Pragma agency in
Argentina. Immediately following the spin-off of these newly-created
agencies, True North will exercise its best efforts to have the other
shareholders in these agencies sell, transfer and assign to Publicis not
less than a controlling stake in each spun-off agency.
<PAGE>
Page 6.
8. Within sixty days following the execution of this Agreement, True North
agrees to sell, transfer and assign to Publicis not less than a majority
stake in the Mojo agency in each of Australia and New Zealand. True North
also agrees to sell, transfer and assign to Publicis all the shares that
True North owns in BMZ Germany.
9. The sale of stakes agreed in paragraphs 6,7 and 8 of this Agreement will be
made by True North (or other shareholders) in exchange for payments by
Publicis. For each stake so purchased, Publicis agrees to pay True North
the appropriate pro rata share of (i) the net equity of the entity being
purchased as at December 31, 1996 and (ii) a negotiated amount not
exceeding 75 per cent of the revenue of each such entity in fiscal year
1996. The sale price for the spun-off agencies contemplated by Section 7 of
this Agreement shall be based on pro forma net equity and revenue amounts
for fiscal year 1996.
10. (a) Although the amount of any fees due and owing is in dispute, as a
demonstration of goodwill, as a condition to closing the transaction
contemplated in paragraph 3 herein, True North agrees to pay to
Publicis all amounts due to Publicis with respect to "coordination and
development fees". Such amounts accrued to date for the years 1992,
1993, 1994 and 1995 total US$2.3 million.
(b) True North and Publicis further agree to pay regularly when due all
future coordination fees of one per cent of billings for qualified
international accounts.
11. Publicis agrees to use its use its best efforts to cause to be listed on a
major European stock exchange the equity of Publicis Communication prior to
December 31, 1998. Publicis agrees to seek to cause such listing to occur
in 1997. The offering and listing of Publicis Communication shares shall be
carried out such that True North shall be permitted to sell in any such
offering at least 50 per cent of the shares of Publicis Communication held
by it immediately prior to the consummation of the offering. The intention
of the parties is to provide True North with a means of selling its stake
in Publicis Communication in a public market.
<PAGE>
Page 7.
12. If the listing of Publicis Communication has not occurred on or prior to
December 31, 1998, True North will have the right, at its sole discretion,
to sell up to 20 per cent of the shares of Publicis Communication to
Publicis S.A. at the fair market value of the block of shares sought to be
sold by True North. The fair market value to be paid by Publicis S.A. will
be established within 60 days of True North's requesting an appraisal by a
panel consisting of three globally-recognized investment banks. One of said
banks shall be appointed by Publicis, one by True North and the third shall
be agreed and appointed by the two banks previously selected by each of the
parties.
For the remaining shares held by True North (6.5 per cent) in Publicis
Communication, a put and call option exercisable at any time up to March
31, 1999 will be granted to True North and Publicis respectively at a price
that would result from the application of the following formula for
determining the total value of Publicis Communication: the sum of (1) the
average of (a) 60 percent of the revenue for the immediately preceding two
full calendar years and (b) eleven times net income (after tax and before
goodwill amortization) for the immediately preceding two full calendar
years and (2) net tangible assets (net equity less intangible assets).
13. Both parties agree to continue their collaboration by entering into an
agreement to service their respective clients in the countries where either
of the parties is not yet established. This agreement will have a three-
year term, and will be renewable by either party for one additional three-
year term.
14. Those clients of one of the parties handled by the other party in the prior
"spheres of influence" under the Alliance, will be transferred to the party
having the worldwide agreement with the clients concerned. Such transfer
will be effected as promptly as possible after the relevant party has at
its disposal agencies capable of serving the transferred clients. The
relevant employees will be given the opportunity to move to the other
agency.
<PAGE>
Page 8.
15. The two parties agree to explore the possibility of creating a common
media-buying company on a global basis or some other means of cooperating
on the buying of media space worldwide, which would provide media-buying
services for Publicis in the United States and for True North in Europe.
16. Simultaneously with the execution of the definitive agreements, both
parties agree to irrevocably terminate any adversarial proceedings between
them, including any present or future litigation or arbitration which
arises out of events occurring prior to the date of such definitive
agreements.
17. This Agreement is subject to the approval of the Boards of Directors of
each Publicis S.A. and True North Communications Inc. No public
announcement or other disclosure of this Agreement or the terms hereof will
be made until the Boards of Directors of each Publicis S.A. and True North
Communications Inc. shall have approved this Agreement.
18. Except as to those public disclosures required by law, the parties shall
agree in advance on any and all communication or release of information
concerning this Agreement to third parties. The parties will use best
efforts to coordinate and exchange in advance proposed communications
required by law. After execution of this Agreement, neither party will
publicly criticize the other and/or any actions taken by the other party.
19. Due to the complexities of the transactions contemplated in this Agreement
it is not possible at this time for the parties to prepare and execute the
definitive documentation concerning all the agreements set forth herein.
The parties understand and agree that
<PAGE>
Page 9.
the transactions referred to herein are mutually dependent on each other
and that certain of such transactions will require the execution of
definitive legal documents. The parties intend, nonetheless, that (x) the
agreements set forth in paragraphs 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 17,
18, 21, 22 and 24 hereof shall constitute binding legally enforceable
agreements of each of Publicis and True North, and (y) that the definitive
legal documents will be negotiated in good faith and will be based on the
agreed principles set forth herein.
20. The parties acknowledge and agree that the transactions contemplated by
paragraphs 3, 6, 7, 8, 9 and 10(a) of this Agreement shall, to the extent
practicable, be consummated simultaneously. If such transactions cannot
reasonably be completed contemporaneously, the parties agree that they will
enter into escrow or other similar arrangements intended to effect a
simultaneous closing.
21. So long as True North is a 10 per cent or greater stockholder of Publicis
Communication any significant transactions effected by Publicis
Communication shall be on an arm's length basis, except for the merger or
other combination of Publicis.FCB Europe and Publicis Communication.
As soon as practicable, but no later than sixty days after execution of the
definitive documentation concerning the agreements set forth herein, as
long as True North owns 10 per cent or more of Publicis Communication, and
before any transaction to transfer Publicis S.A. agencies to Publicis
Communication, Publicis Communication will have three members of its Board
of Directors who have no prior significant relationship with Publicis, True
North or the directors or senior officers of either. Publicis Communication
will consult with True North prior to the appointment of the three
independent directors. A majority of the three independent directors must
approve any transaction (other than those specifically contemplated by this
Agreement) of Publicis Communication, including transactions with Publicis
S.A. or affiliates of Publicis S.A. that a majority of them deem
significant.
<PAGE>
Page 10.
A party owning 18 per cent or more of the outstanding voting
stock of the other party shall be entitled to be represented on
the board of the other party under circumstances that recognize
that each may have information that should be kept confidential
from the other.
22. With respect to any transaction preceding the completion of the
initial public offering, concerning the acquisition by Publicis
Communication of any entity or interest therein presently owned
by Publicis S.A. or acquired by Publicis S.A. before the
formation of the entity combining Publicis.FCB Europe and
Publicis Communication, True North shall have the right to
maintain its 26.5 per cent interest in such entity by
contributing 26.5 per cent of Publicis Communication actual cost
of any such acquisitions financed through the issuance of
Publicis Communication stock by purchasing Publicis Communication
stock for cash on the same valuation basis as in the transaction
that resulted in the dilution of such 26.5 per cent interest.
23. It is the parties' understanding that the concurrence of a client
to a transfer of its account from one agency to another is the
way the advertising business works (and it is the parties'
assumption that neither party will attempt to obstruct such
concurrence.)
24. For a period of three years after the signing of the definitive
documentation concerning the agreements set forth herein, as long
as Publicis owns 10 per cent or more of True North's stock,
Publicis, within thirty days after receiving a written request
form True North, will furnish True North with a pooling letter,
in a conventional form, and, if reasonable requested, will take
such other action in support of the transaction (other than a
commitment to vote for the transaction) as would be customary
with respect to an acquisition or other similar business
transaction in which True North may participate, provided that
the pooling letter may be withdrawn if any of the following
conditions is not met within ninety days after the pooling letter
has been furnished:
<PAGE>
Page 11.
(a) True North has obtained a fairness opinion from a
nationally-recognized investment bank with regard to the
contemplated transaction;
(b) A majority of the outside directors of True North has voted
to approve the terms and conditions of the contemplated
transaction; and
(c) True North has obtaianed pooling letters (or similar
action) by all other non-deminimis affiliates of True
North.
Not later than ninety days after Publicis has furnished the
pooling letter, True North shall call a meeting of the True
North shareholders, to be held within a futher sixty days, to
vote on the contemplated transaction. If a majority vote of the
outstanding shares of True North in favor of the contemplated
transaction is not obtained at such meeting, Publicis may
withdraw its pooling letter.
The obligation of Publicis to furnish a pooling letter pursuant
to this paragraph shall expire at the end of the earlier of (a)
True North's successful completion of a significant transaction
involving the pooling method of accounting or (b) three years
after the signing of the definitive documentation concerning the
agreements set forth herein.
TRUE NORTH COMMUNICATIONS INC. PUBLICIS S.A.
By: /s/ Bruce Mason By: /s/ Maurice Levy
---------------- ----------------
Bruce Mason Maurice Levy
By: /s/ Stephen T. Vehslage
-----------------------
Stephen T. Vehslage
